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Affiliate Summit West Live Blogging

Gonna give this a try and see if the 3G connection enables me to blog some thoughts from the Affiliate Summit session on “the Future of Performance Marketing (Part 1).

Part 1: Session focused on “Performance Marketing” or CPA (cost per action) going forward

I hope it’s not all about subscription scams (that was sarcasm, folks).

See shop.org data avg order size in aff channel $12.44 is much less than what 2008’s online banners paid ($84). Why? Summary includes that retailers spend more for new customers in other channels than aff or perform channel. Also, CPA doesn’t pay on returns or cancellations, where CPM etc. can’t separate that out as easily.

Note: aff marketers have a relatively low profile in the marketplace of advertising…. seems there is an opportunity for this channel to grow by raising that profile, getting more attention in the space where merchants/advertisers/marketers are considering available channels for generating leads/sales/conversions.

Why merchants like CPA? Merchants like CPA because merchants get to set how much a transaction is worth. They get to set the payout.. the value per acquisition, which means they can budget, they can build upon a stated expectation for value. Can better manage an ROI target using CPA than other available means.

(the way I hear that, ever more important to  have a real person-person relationship with your CPA network reps).

Larry Adams (Google) says not seen many good quality discussions of the value of a consumer yet, behind the scenes. Some advertisers have perspective that money spent in other channels to raise awareness of product benefits the CPA process so not unusual for CPA payouts to be lower (by their perspective) since it benefits from spend elsewhere. Also says CPA buyers are spending MORE with the merchant overall, be more sohpisticated consumers, better educated, so maybe worth more overall once all that gets properly considered.

Panel discussion: “historically” the aff channel has been paid less. $20 for a search acquisition but $5 for the affiliate payout is common historical example…merchants want to pay less and can pay affiliates less, but have to compete in search and pay more accordingly. Should change going forward (?)

Q: Where is most growth coming from today, and where will it be in the future? Larger publishers play a larger role, or smaller publishers? More direct linking? More loyalty programs, coupon sites?

A: G hasn’t seen a bunch of new players “rocket onto the scene” and become powerful players. More like incremental growth of publishers in the space. Expects publishers to come in with new business models different from today.. social networks are example, still not being tapped efficiently. Someone will figure out how to “appropriately monetize” social networks. Might be individuals (people with big influence), developers (new apps enabling monetization)… nobody knows yet but expect it to happen. Hope to see balance of cost start to equalize… those with adequate ROI migh start to pay more in aff channel since they see opportunity they want.. expect to see other market verticals participate in affiliate space. Problems include existing contracts with distribution channels (interfering with getting into aff channel), lack of understanding of aff marketplace inside agencies.

Q: In this more challenging financial marketplace, what matters/shows promise? Google continues it’s emphasis on the value of creative… isn’t seeing “great creative” in the space, yet many publishers are giving freedoms for the creative, is anyone kickin’ it making awesome creative in the aff channel and if yes, is it working?

A: Some still more interested in ROI tracking and solid control of content than putting more emphasis on “creative” creative. More money in the long run if drive the creative process of ROI measures (creative that converts over “great creative”.

So great question and good answers… look how Google wants/expects “awesome creative” added to the web, yet the business process is looking for more efficient creative. We see this “conflict” all the time in SEO world… Google wants to grow the web along the creative edge, which impacts SEO, while monetization seeks a different sort of “optimization”. Interesting.

Yahoo! uses Ogilvy as creative agency… updates creative about quarterly… affiliates ask for something “different” sometimes, so they use a j.i.t. agency for that, too.

Q: Looking at “How the (afiliate Progam is Managed”. Sometimes marketing, sometimes a search group overseas, etc. What works/does not work?
A: Google says some advertisers have almost no staff and need full support, others have mult staff assigned just to affiliate. Note those who do more affiliate have more staff assigned and do better, and tend to “get better yield out of it”. Notes most challenging interplay is the conflict between people who are responsible for affiliate and people responsible for search. If different bosses, problem. Aff manager and search manager have different ideas on how liberal to allow the affiliate channel in use of search etc as source of traffic. Many 1,2,3 person shops  with people wearing many hats… would be best to split to have someone focused on affiliate.

Aff is performance based and should be a cost-of-sales model, not a marketing spend model like it is in many places. Silly to shut down aff campaigns because monthly marketing budget has been spent, when cost per sale is the real success metric. About half of the audience that acknowledged being an advertiser also acknowledged running spend as a cost of sales. Move more of the money to cost-of-sale line of the budget instead of advertising expense, and things will improve. Panel notes FINANCE people don’t understand affiliate marketing. They are getting used to online marketing spend, where increasing search traffic leads to increased marketing costs, often unrelated to planned advertising or marketing.

Yahoo guy says shift $$ from SEM to affiliate for short term funding… makes sense when cash flow concerns come up at year end etc.

Q: Does affiliate marketing have “incremental value”?

A: Responsibility of those who run the channel to educate others about value and lifetime value. Concerns that SEM affiliates would cannibalize SEO, for example, were solved after running and looking at data. Had NOT cannibalized SEO but in fact added volume via the affiliate channel. Issue was difficult politically until data was viewed by all.

Fact is some affiliates don’t add value. Merchants in aff network space find it hard to separte individual affiliates… they view the network aggregate not the individual publishers. Industry needs to provide better tools to merchants so they can see individuals or at least segments of affiliate channel. Don’t make decisions on value of affiliates based on hunches… look at publishers.

(Note that this supports the idea of better merchant-affilaite communications across the board.. it’s better for everyone. But it costs money… can someone prove it’s worth it? )

How do you calculate the value of a consumer? What is the conversion? Still have case that some count presence on site as success, while others look for sale etc. Break free from days of the catalog and move to better metrics.

Panel told a story of a merchant with big aff network who “studied data” and then decided to join second, big network. When asked if they had looked to do more with the poeple they already had in the first network, they were surprisaed at the idea. Had not considered looking more closely at individuals in first network and doing more thru the successful ones, instead of adding another bunch via a second network. (Sounded dumb to me, but if that’s a true story, there’s lots of inefficiency in the networks that yes, should be targeted for removal early in the “let’s make this more profitable” process. Sounds like networks need to offer better merchant tools…)

QnA from audience: Affiliates on panel note data feeds are often broken, dirty… Overstock has “out of stock” items in data feeds “all the time” for example. Want merchants to focus more on ROI issues rather than fastest growing affiliate contests or 1000 new banners per month. Audience member says having hard time getting feedback from affiliates on what matters. If these top affiluate people are complaining about not getting freedoms they want (deep linking, creative freedoms, etc), the audience member merchant is concerned cause he says he’s trying hard to listen/hear such concerns but not getting the feedback from the affiliates.

Who do merchants not allow deep linking?

  1. marketing agreements exist that prevent promoting specific products with advertising spend, brand agreements with manufacturers subject to fines. Artificat of old school marketing.
  2. Technical issues, like tracking won’t work unless routed through one page (e.g. no deep linking). Fix those problems please.
  3. Trust issues. Advertisers not comfortable giving publishers free reign… lessening over time, but still there. Suggest advertisers allow deep linking for specific publishers, expresses trust to affiliate as partner in marketing.

Second half.. looking more at the future.

Part II: The Future of Performance/Affiliate Marketing

Lost 80% of the audience in the break, by my quick estimate.

Interesting discussion of the various incoming “channels” competing within the affiliate space, when it comes to crediting an aff link with a sale. Coupon sites stepping in late, sometimes 4 or 5 successive coupon sites cookie prior to sale. Expect affiliate to advance further, movng closer and closer to the transaction. In a perfect world, the aff who “made the sale happen” should get the commission, but….

(what  I’m hearing is the merchant side (Yahoo! and Google reps here) y don’t really care how deep in some affiliate steps in to take credit, but the aff guys on the panel do care and want the merchants to track the sale back to the channel even if it is via 800 number, house ads, etc. Steve Schaffer wants to see credit given to afiliate channel first, and then look into that to reward affiliates with what they delivered to you. The Yahoo!/Google guys obviously aren';t so concerned about fairness in the assignment of success metric to affiliate).

Larry Adams (Google) wants to poll audience.. who is a merchant, who does not de-dupe paid search from affiliate etc. (Sorry.. it’s so small an audience I can’t believe these audience polls)

Interesting discussion of the various incoming “channels” competitng within the affiliate space, when it comes to crediting an aff link with a sale. Coupon sites stepping in late, sometimes 4 or 5 successive coupon sites cookie prior to sale. Expect affiliate to advance further, moving closer and closer to the transaction. In a perfect world, the aff who “made the sale happen” should get the commission, but….

(what  I’m hearing is the merchant side (Yahoo! and Google reps here) y don’t really care how deep in some affiliate steps in to take credit, but the aff guys on the panel do care and want the merchants to track the sale back to the channel even if it is via 800 number, house ads, etc. Steve Schaffer wants to see credit given to afiliate channel first, and then look into that to reward affiliates with what they delivered to you. The Yahoo!/Google guys obviously aren';t so concerned about fairness in the assignment of success metric to affiliate).

Audience: says he’s setting up tracking that shows who assisted in a sale, to get data on this and understand it better. All marketing efforts contributing to the log of traffic stream that led to a sale. Aff IDs and network IDs, plus whatever they have available to them within the networks. Looking at using 90 cookie, hoping to roll out end Q1. Q: How will they communicate with aff channel how they are assigning commission? A: not sure.. this is research to see data, not yet a plan to change things. (he didn’t say what merchant or network he was with?)

According to one known merchant, watched coupon affiliates and lowered the payout to 2% for coupon affiliate, keeping 3% of the total 5% for the prior affiliate. Took a lot of work on part of merchant to do this, but demonstrates at least one merchant system trying to do this. Steve Schaffer ads he knows of one merchant network that broke its tracking trying the same thing, only to punish the whole channel for 60 days while they sorted out the problem. (Ouch!)

Google: Aff industry grew up out of dot com bubble, so it will be interesting to see what happens with the latest financial situation. Most innovative have been publishers, who have pushed advertisers and networks to change. Publishers is biggest group w/loudest voice. Af marketing is a grass roots channel, and publishers are actively thinking on these issues. Expects innovation to come from publishers, not advertisers (tend to be least innovative) or networks unless prompted. Notes publishers should battle advertisers every day to get improvements.

Jim Jessup agrees… sophisticated search marketers are in publishers group, expect it to continue. Disagrees about merchants, expects more $$ shifted to performance channel so they can see more info around their spend, and then push to help make the affiliates more productive. Google thinks technoloy budgets at advertisers are dropping, not increasing.

Steve follows up asking if networks will follow up with tool development…Google says struggling with data warehousing problem. Even if Google gave data to networks/tool vendors, they don’t yet know how to handle the data. (Obviously Google enjoys tremendous data, but it sounds like they don’t have a lot of faith in other’s ability to utilize that data. Interesting).

Q: Wat is the future trend for outside US affiliate programs? Question comes from citizen of China… big market, without many solutions.
A; Google says good question, expects International to be source of new growth. Publishers, merchants, and marketers are there in other countries, and their is an equivalent amount of spend as well. Affiliate is dependent on the ability to transact commerce online, which makes a difference. China can’t do CPA/rev share because in China people don’t buy things online. Lead gen is definitely growing, and Google is going there (very interested). If they don’t buy online with credit cards, it won’t be the affiliate model. (think abut that one…. think a lot about that one)

Canadian example where shipping and provincial taxes etc. made an online shipping purchase $75 higher than in store for a single pair of shoes. No, the sale didn’t happen.

(Discussion of looking forward and wow…sure sounds like the future belongs to those able to exploit market inefficiencies with new tools and techniques. Sounds like figuring out how major affiliates are getting their credited traffic and how the merchant should reward that is WAY TOO MUCH WORK to expect from merchants. That leaves the spoils with the winners. Down market, less tech spend by merchants, less demand on networks to answer such problems, equals opportunity for innovative publishers to work to win more of the lion’s share.)

Larry at Google notes that Google’s AdSense people looked at their accounts a found many publishers not using AdSense. They didn’t understand how many good publishers with solid histories were no longer using AdSense. They didn’t “get” that the publishers were making more elsewhere. Panel asks “why would someone use AdSense if higher conversion for CPA? Larry notes that asymmetry between payout via CPC and payout via CPA… CPC payout is higher on average.

(now we’re back to the need for publishers to educate everyone about the value of affiliate, to raise that CPA payout). Steve notes that CPC is a crap shoot.. why take a chance on a $50 click if it might also be $0.50 – choose to take a negotiated CPA payout. Google looking to get more distribution for its advertisers by offering, for example, more CPA-like opportunities in the Google network.

Scott Shaffer says he asked merchants what they wanted from publishers, and many said “new customers”. But rewards were not tracking new customers and the merchants had not incentivized the affiliates to send “new customers”. He advocates individual attention.. networks can’t achieve the specifics of what merchants actually want.

im Jessup notes complication is the enemy… merchants can’t handle complexity. Improvement ideas all sound more complex. Merchants need to get more involved and understand better their channel. Scott says merchants need to push networks.. push them HARD because otherwise it has no incentive to change.

Where is the future heading?

Larry (Google): Social Networks .. it’s where consumers are, no one has figured out how to get the value out of the social networks. ComcastCares twitter guy is example.. responding to complains posted in twitter. Instead of “I hate comcast too” the conversation becomes “wow Comcast is trying to help me”. Using the power of the people is something to see in the next few years.. especially how to measure it. Also mobile.. will we see enough adoptions and support from publishers and merchants to make mobile a real transactional channel? Has potential… in Japan mobile commerce is huge… affiliate networks in Japan are seeing 40-50% of their sales via mobile.

Jim Jessup (Yahoo!): potential and risk associatd with ruining platforms like email got ruined, or text messaging which has not been killed yet by spam by could easily be ruined. Suggests consider carefully before ruining the media we are all benefiting from.

Scott Jangro : there’s a big value proposition in lookin more closely at affiliate marketing channel, which is opportunity to grow up, but it is a difficult financial environment so not sure when it can happen.

Steve Shaffer: the next network that brings the enabling tools will do well and get adopted. Make sure publishers know the payment is safe… if they are sure they are going to get paid, they will build momentum into the channel.

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2 Responses to “Affiliate Summit West Live Blogging”

  1. aaron wall Says:

    thanks John

    I wonder from Google’s comments what there next moves will be
    – broaden the adwords ad system to allow room for more CPA deals / lead gen inside the SERP
    – offer free hosting and CMS for Google AdWords customers (& track inventory)
    – offer credit cards
    – offer their own “goog” currency system

    @Aaron: Since the Google person mentioned Google would be increasing the CPA activity in AdSense, I spent some time with the performics affiliate booth (re-branded Google Affiliate Program).  Not a good experience… I walked away with a strong sense of FYIV, that Google would absorb this unit into AdSense very quickly, and that it was risky to participate at the very least rightnow, and probably forever.

    CPA is all about letting the merchant set the price… under Google’s watch, that is especially attractive  when there is information asymmetry — Google’s special gift.

  2. Gabriel Goldenberg Says:

    (Note that this supports the idea of better merchant-affilaite communications across the board.. it’s better for everyone. But it costs money… can someone prove it’s worth it? )

    In theory, the value would work like this: QUality publishers get bigger payouts, shite ones get it cut. This rewards good work and the only problem is for those crap affs who succeed in turning a profit by blending in with everyone else.

    @gabriel  theory only works in a perfect world. First, define quality because Google’s definition of quality (for example) has little to do with my (publisher’s) definition of quality. Second, the middlemen need to be paid for whatever they do… let them start measuring quality and you’ll also start giving them a bigger piece of the pie.

    Finally (for me paying attention to this post), lots of excellent affiliates sign up for a new program and watch for a while, or run it on lesser properties while evaluating it… I rarely implement a merchants program until I have tested it, considered it etc.  During that time period, am I “shite”? No doubt performers should be paid commensurate, but we should first require the grader to be qualified.