John Andrews is a Competitive Webmaster and Search Engine Optimization Consultant in Seattle, Washington. This is John Andrews blog on issues of interest to the SEO community and competitive webmasters. Want to know more?  Competitive Web & SEO
January 12th, 2009 by john andrews

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 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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January 6th, 2009 by john andrews

Why is GoDaddy Hawking Domains that are Unavailable?

I got an email from GoDaddy offering me for 25% off. That’s right, if I act now, I can get 25% off that wonderful domain name. Problem is, is not for sale. It is an active web far as I can tell. See for yourself

I guess this is just an automated sales scam to incite interest in vanity domains in general, but I would have expected smarter behavior out of GoDaddy. Seems pretty lame to be pitching to 6 million plus customers if the majority of the surnames are already owned, operated, or otherwise in play outside of any domain marketplace available to GoDaddy.

Of course I could be wrong. Maybe millions of people get these emails and say “well, looks like I can’t get but look! is still available! And only $10.99! Woot!

But then, what do I know, except it is spam in my book and it quickly prompted me to opt out of any further mailings from GoDaddy. I know… I’ve always been a little different.

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January 5th, 2009 by john andrews

Retail Store Closings : You’re Not Surprised, Are You?

The Doom and Gloom Media has been busy announcing the impact of the EvilEconomy on retail. Stores are closing. Retailers are going bankrupt. Blah blah blah. The question I have is, are YOU surprised to hear this?

We are web entrepreneurs. In a down economy, we do well. In an up economy, we do well. There are different reasons in each case, but over the past 10 years the Internet retail economy has grown. Are you surprised to hear that offline retail is having trouble? Where did you think the sales were coming from?

Black Friday comes in late November. Think about that. From January until late November, off line retailers run a loss. They recover in late November, and turn a profit during the holiday shopping season. The credit system crashed and now those retailers are closing because, well, because they need someone else’s cash to keep them afloat for the first 11 months of the year. About that “surprise” thing…

We are on the web because it is profitable. We enjoy the web because the infrastructure supports business. Our efforts marketing on the web can be compounded. We can build momentum. Companies like Zappos can start with shoes and move on to clothing or eyewear or salt grinders as it tests positive. Smart business is possible on the web. I don’t know a single web entrepreneur who would sit back and lose money from January until November, confident of catching up and turning a profit based on November-December holiday sales. Necessity is the mother of invention. Monetization models have evolved in response to that need to turn a profit and monetize the potential.

So when an industry research group says to expect 70,000 retail store closings in 2009 (or 150,000), where is the surprise? Where is the opportunity?

Everywhere around you, provided you are on the web.

I chose those words carefully. If you are on the web, you understand the web retail model. That might give you the smarts you need to succeed in the down economy off the web as well as on the web. That’s right… being on the web gave you what you need to succeed off the web. Sucks to be an offline retailer right about now, right? No clue about surviving on the web? I think it always sucked to be a business that accepted a late November break even point. Or it should have. And now that the piper has to be paid, those retailers get the bill.

Web entrepreneurs can go after the markets formerly served by offline retail, as it makes sense to do so. If 150,000 retail stores shutter in 2009, society will see some changes. Some things are still broke, and given new needs waiting to be filled, someone will fix them.

A few observations:

The Credit Card System is Broken: too few players are taking too much of the profits. It supports too much fraud. It stifles innovation (such as in the area of micropayments). It’s too complex (for merchants) and too expensive (for merchants) while being too restrictive (to consumers) while supporting abusive, irresponsible behavior (e.g. banks). We need to throw it out.

The Shipping System is Broken: Whatever you want, you can buy it online as long as you pay shipping fees, which are set any number of ways by multiple profit-sharing partners, using a few often dysfunctional shippers. My small box from Gary’s Wine in New Jersey to Seattle was quoted at $5 using Fedex. It took 20 days to arrive. A check was sent from Texas to Seattle (again via Fedex) with a tracking priority. The FedEx driver noted it was delivered to “other than the addressee” and surprise – I never got it. An “investigation” by FedEx resulted in an assurance to me that the driver had in fact delivered it to the right address, despite his own initial admission, and despite the name of the signature not matching anyone working at the true destination address. FedEx doesn’t care. It doesn’t have to. The consumer has no choice but use the shipper the merchant offers. There are only two. The merchant has no choice but accept the promise of the shipper. Would I have accepted a $15 shipping cost added to my little box of wine accessories? Gary’s would much rather worry about shipping cases of premium wine all around the country than my $30 order for wine gadgets.

Quality Brands are Poorly Represented on the Web: Would you buy a Rolex watch from a web vendor? Would you pay full price for a Louis Vuitton handbag over the web? What about a high-quality leather belt? Or perhaps a better question for today might be, is it more likely that a $90 black belt sold at Macy’s today is actually worth $90, or that a $90 black belt purchased from a web site is actually worth $90? Target that issue.. it’s a need waiting to be filled. The best we can do today is ask the consumer to either travel to Macy’s on the one day per year that belt is marked down from $150 to $90, or place a bet that the $70 belt seen in a picture on a web site is actually a good belt, accept the associated online purchasing risks, pay the $10 shipping charge, and accept the risk of an additional $12 return shipping cost if it isn’t what we wanted. The time we actually get a great $90 belt for a total cost of $80, we wish we had ordered two for $150 (but alas… it is too late). Is that efficient commerce?

I could go on. I won’t, but some industry analysts should. Stop predicting that stores running a debt 11 months of the year are likely to close, and start working on analyzing the support systems for the NewCommerce we are left with. We need to better understand how it will evolve to fill needs. How it needs to evolve to satisfy us.

There is so much room for innovation on the web. We’ve barely begun to tap into the potential. Stop marveling at the mystique of the “long tail” theory and get to work as a merchant. What happens when the local store can’t compete on anything that actually is-as-it-appears-to-be (because it is a safe, discounted sale over the web), but does well selling everything that is likely-not-what-it-appears-to-be when viewed online? Mitigate risk offline. Mitigate risk online. Serve a need. And if you can’t think of any of my needs except my need to buy holiday gifts, well, then you probably don’t deserve to be a merchant.

Expand that collapsing retail economy to the landlords passing on market rates because they still hope to find tenants willing to pay bankruptcy-inspiring retail rates per square foot. Expand that collapsing retail economy to the New Jersey malls who insist on $6000 per month for a powerless aisle cart, with a reservation on the months of November and December (so they can still bid it out for the holiday season). A whole collection of misguided players in the established retail industry are in for a surprise if this credit crunch holds out long enough for the rest of us to innovate without the help of the banks, credit card vendors and politicians.

By the way, why are we still trading decimal dollars through a corrupt banking system, paying high fees for the privilege? Why can’t my buying power, transferred across the web to me from others, and subsequently put to work by me (on the web) in similar trade, avoid moving in and out of that corrupt, expensive banking system? Why oh why are we so willing to hand a portion of the proceeds to Visa or MasterCard or Bank of Whatever? Don’t answer that.. re-ask it of your local congresswoman. And re-ask it again every time they nickel and dime you on currency conversions, late fees, shortened grace periods, rising default interest rates, and annual fees.

Sometimes change is good. Stop marveling at it and get busy riding the wave. Ask yourself, what have you go to lose?

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