Vinny Lingham’s Blog

Given the fact that I just had a feature interview in the GQ Magazine this month, I can totally relate with the article from Internet Retailer on how affiliate marketing is becoming sexier (Just kidding!! )

First of all: What is Affiliate Marketing? My definition of it is: The use of third party specialists who are capable of targeting audiences on behalf of advertisers/merchants and who are also willing to take financial risks in the delivery & performance of the traffic, in the form of no/low upfront fees and instead higher backend/success payments (commission).

This applies to both offline and online environments, incidentally, as I notice that many affiliate marketers are now even using TV ads, with unique URL’s, to drive traffic to merchants (I saw this in the USA).

Some quotes from Internet Retailer:

Affiliates also are beginning to change the way they operate, moving to nontraditional venues such as social networks and customer reviews, says Kerri Pollard, vice president of client development at Commission Junction, a unit of ValueClick Inc.

“They’re really following wherever the consumer may be,” she says. “We’ve seen a lot of change in the consumer with the onset of Web 2.0 and user-generated content. We’re seeing publishers going in that direction.”

I must disagree with Kerri’s quote (sorry Kerri!), as I believe that affiliate marketers have always “Followed the money!”, and what we’re seeing now with respect to affiliates moving into non-traditional venues, is not a change in the way they operate - this has always been the case! The only difference is that now the volumes and access to the audience is becoming worthwhile for affiliates to operate there, whereas 18 months ago, it was not.

I’m typically a Jerry McGuire/”Show Me The Money” type of guy, and I believe that the reason that Clicks2Customers became a highly successful Paid Search Marketing company, is that we always followed the money! Many affiliates tried to diversify with alternative search engines, etc - and in some cases they were successful - but we just followed Google (and Yahoo to a lesser degree), as they grew (and still have!) the lion’s share of the search market and gave us the best Return on Effort (which is a good read!).

One of the things that drives the affiliate marketing industry, is the fact that most affiliates understand online marketing far better than any merchants do - bust mostly only in their specific niches (PPC, Email, Display, SEO, etc), and given their willingness to take risks and test new avenues for reaching audiences, affiliates will find pockets of traffic that most merchants are unaware even existed.

Back in early 2003, when Google started taking off with Adwords, most of the growth was initially through affiliates, as evidenced by all the ads with “Aff” (which was subsequently made redundant), that Google actually had to lay down affiliate policies in order to reduce the amount of affiliate advertising displayed on a set of results at any point in time! Merchants suddenly figured out where the affiliate traffic was coming from, and followed suit by launching direct campaigns on Google. This is why Adwords really took off so quickly, in my admittedly biased opinion

However, some online retailers are hesitant about using nontraditional venues, Pollard says.

“Right now, the Web 2.0 world and the user-generated content side are a little scary, especially for some of the bigger brands,” she says. “As they look at the affiliate as an extension of their customer acquisition efforts, they’re making sure as they’re reaching this new consumer that they’re also keeping their brand management guidelines in mind.”

The bigger brands tend to be the most concerned about the possible downside of affiliate marketing in social networks and other nontraditional venues, she says. “There’s a little more dipping the toe in the water with the bigger brands,” she says. “But a lot of them are on the innovator side and willing to see the positive and negative.”

Web 2.0 is going to open up a realm of possibilities for affiliate marketers. Here Kerri is quite right - in that merchants are quite scared of how to tackle Social Networks and Web 2.0 - affiliates are certainly not! The number of avenues for online marketing in general is increasing daily, with Yahoo announcing today that they have just launched SmartAds, and even the most sophisticated merchants will argue that they cannot keep up, or even have the budgets to test everything.

I’m written many posts in the past, and even spoken at conferences proclaiming how affiliates are (and will be) making a lot of money through widgets, desktop/web applications & the like. Affiliate revenue driven applications will certainly be a major driver, and even in Synthasite, we’re looking to enable developers to make money by creating widgets for other users - and if they find a way to make money out of it through affiliate links - then good for them!

Jamie Birch, over at Revenews, wrote a piece on video newcomer, Nuuvy.com, and how it will allow affiliates to use video in order to promote product!

The future certainly bodes well for Affiliate Marketing…

The following question was posed recently to me by a merchant:

Last month we announced we are closing our in-house Affiliate program and migrating everyone to Affiliate Network X. I was shocked at the outcry of our community who are under the impression Network X is full of parasites. This camp of unhappy people glean most of their information from AbestWeb which has a lot of posts on this issue and they are now debating the issues on our (The Merchant) forums which is stirring loads of panic. Assuming we can control the true *bad* parasites, we still want to partner with companies like Upromise and eBates - but even some of their methods of come under fire. I was wondering how you view their shopping toolbars? Do you believe they in any way hijack commissions from your company? My understanding is the number of people using this applications is very low, but who knows.

My response:

Good question! The simple answer is that we factor in any losses like this into our ROI calculations, so even if they do affect us, we maintain margin. I know that this doesn’t answer your question, but it helps explain why we don’t feel the heat. Also, I find that affiliates are often the most paranoid people around (which is what makes them so good!). We even did studies on anti-spyware cookie crunching which showed that the whole thing is blown out of proportion, once you actually run the numbers through the revenue loss calculator the effective loss of revenue is negligible at worst. That said, all networks have their pro’s & con’s and no single network, like Network X can be singled out as a problem.

I would suggest being creative and offering things like extended cookies for SEM affiliates and shorter persistent cookies for Toolbar distribution companies like Upromise - that would even things out quite a bit in the minds of the affiliates. At the end of the day, the market share that those individual companies have is not big enough to impact any one affiliate’s campaigns, unless they’re fighting over branded head terms - in which case, it’s probably not the affiliates that you want in any case!

These are my view… what are yours?

If you’re wondering why I’m so quiet all of a sudden, other than the fact that I had to fly from Vegas to London, only to fly back to Washington D.C., where I am right now - it’s that my Powerbook’s internal power adaptor is faulty. This was probably the biggest reported issue with the Powerbook generation, but thankfully, it has been repaired with a new adaptor port in the Macbook generation.

My powerbook is literally dead, and all the information on it is safe, however, my blog notes are there - so I’ll try to give a roundup of Affiliate Summit Day 2 when I’m able to access those notes later this week!

To all those of you who made it to Affiliate Summit - hope you had a great show, and it was fun shooting the breeze with all of you!

See you at the next one!

I thought that I’d just give a left field post on what the impact or opportunity might be for affiliate marketers. Remember that top merchants are already using enterprise software like Omniture and WebSideStory, and these merchants are unlikely to be directly affected by Google’s latest move.

Before I continue, you may want to also check out my recent post on Revenews today, on this topic as well.

Assuming that Urchin is implemented, one or more of the following after effects will occur:

1. Prices rise, forcing out affiliates and marginal merchants

The reason for this would be that merchants begin to find more flaws and issues with the website that affected conversions, by repairing these items, they begin to buy more traffic, and given that the number of searches are not increasing at the same pace, due to demand and supply constraints, prices can and will rise.

2. Prices on poor converting keyword start to fall and become less competitive

Those not monitoring their traffic at a keyword level will be hit by surges in poor traffic due to advertisers ending their bids on those keywords.

3. Smaller merchants grow faster

Those who previously could not afford Urchin now start understanding their traffic better and start pushing prices across the board, due to newly increased demand.

4. More Private/White Label Websites (I personally think that this is the way to go, but I’m biased because of synthaSite)

Affiliates start producing more and more white label websites with transactional capabilities (ala Priority Click, in order to have more understanding of the traffic.

5. The Tail become Visible

The long tail of search marketing will become more visible to those who previously did not access their server logs. This will assist small websites in finding keywords that convert very well, but were not obvious from their Google Adwords accounts.

In my experience with data analytics, the key is not the gathering of the data, which is what Google is now providing a tool for, it’s in the analysis of it. Most small companies who are the targets for Urchin, do not have the knowledge, skills or resources to dedicate to analyze their data.

All-in-all, I think that the move is great for the web, and will ultimately improve the user experience and hopefully combat SEO spam (as per my prior post).

This is a very interesting move. Mediapost has a nice article about it (click the title). What’s interesting is that Rakuten could now become a Yahoo! acquisition target.