Andreas Reiffen, who recently joined the Clicks2Customers team in Cape Town, and who hails from Germany, has done some very interesting research in the field of Performance Marketing, something that I have been a huge advocate of. It’s been the founding belief of Clicks2Customers that search marketing can only exist in a performance metric driven environment and that we see ourselves as an extension of the merchant themselves, as we invest in people, technology and infrastructure, and then leverage that investment across multiple clients on a pure risk basis. The amount of money we spend on R&D around search is not easily covered by all but the largest of merchants. By leveraging this cost across multiple clients, we are able to deliver a superior service, at cost incidental to the revenues.
Those in the know will agree that Search Marketing is infinitely more complex than what 99% of search marketers will agree to – and often this is just to massage their already fragile egos as this industry advances and becomes too complex for them. In most cases it’s their own ignorance which does not allow them to see the true complexities of the situation, and instead, rely on common thinking to solve complex problems around search, to the detriment of their clients. For example, the typical agency will tell the client how they manage keyword bidding effectively over thousands of keywords – keyword bidding is NOT search marketing.
To this end, we have established that the best way for a service provider and a merchant to co-exist is in the performance marketing space, where profit share is ultimately the goal, but an interim measure like revenue share can be a good proxy for profit share, if structured correctly.
When I speak to all but the most sophisticated of search marketers, including merchants themselves, the single biggest issue is that CMO’s, Marketing Managers & others within an organisation do not understand the channel, worry themselves with things like Brand bidding & display URL’s, when in actual fact, they have no real understanding on the impact of decisions made regarding these, but they think they do. And if these are their biggest issues, then they’re doomed to mediocrity in the search world. This reality is that search marketing is in it’s infancy, and during this period of time, education is very important. We’re trying to push the envelope and build the industry by releasing research like the cookie report that we released last month, as well as the profit sharing report mentioned in this post.
Profit shares bring along its own levels of complexity (which is detailed in the report), but suffice it to say that search marketing models with fees based on a either % of spend, hours or fixed fees are becoming as ancient as the Dodo.
Andreas has done a remarkable job of putting together fact, assumption and raw data to establish the argument as to why performance marketing works. Traditional & New Media agencies that offer paid search marketing services are on the backfoot with regard to search, as their metrics are not in line with the search engines themselves and their performance is not linked with their remuneration. I have been to many meetings where all I hear are complaints about their search providers, but they won’t change them, due to fear that the new provider might do even worse. It’s a sorry state of affairs. Often the agency has such a grip on the client due to the fact that they handle more than just search, the opportunity to expand the search side of the business is neglected. This is where affiliates & performance marketers often perform the best, which leads to even more insecurity from the agency standpoint.
What makes our business unique is our relentless belief that satisfying the search end user is of paramount importance and all other metrics will eventually revolve around this. This is the reason why we advocate performance based search marketing as a channel within search marketing. Search engines are platforms for marketing to end users and satisfying the needs of searchers – you still need a partner that is focused on understanding what the user wants, how each engine attempts to satisfy their users, and how to align the merchant’s interests with them. Focusing on the searcher will make any Search Engine Marketers (SEM) successful. Google have done a remarkable job of keeping their eye on this goal, and given their success, it would be a good idea to take a lesson out of their book.
I highly recommend that you read the Clicks2Customers Profit Sharing report!
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Comments On This Post
October 12, 2006 at 4:21 am
Hi Vinny,
thanks for your comment at my blog at ReveNews. Very good post regarding the problem. I wrote actually a series of posts related to the issue.
I addressed several of the ulcers that grew in this industry creating problems for merchants and affiliates in the various marketing channels.that shouldn’t be there.
I don’t like the phrase Affiliate Marketing either. The meaning in the offline world is quite different than online . How did Beth Kirsch put it so nicely (repeated in my own words): A lot of smart people in the internet marketing industry are not getting it, what affiliate marketing is really about and how it works.
A lot of issues are caused by dangerous “half/incomplete” knowledge or complete misunderstanding of the matter altogether (without realizing or admitting it).
I agree that Performance Marketing is the better term. It is for years the “tag line” for Affiliate Marketing already so lets make the tag line to the headline
Affiliate, excuse me, Performance Marketing works only well and long term, if a strong relationship between Advertiser and Publisher was established which gets continuously reinforced and strengthened.
A relationship that is profitable and beneficial for both parties alike and not just one-sided. Clear defined goals that are openly addressed and discussed between affiliate and advertiser is important and the establishment of trust is absolutely vital.
Everything else is predatorily business practice or competitive marketing, which brings two parties together that are actually enemies, only to fight a mutual (and bigger) enemy of both of them.
This does not make them friends. Both sides are secretly waiting and preparing for the day that the mutual enemy is defeated in the hope to be able to then turn around to the previous “partner” to slaughter him in cold blood, while he is the least expecting it.
Well, the one thing we can do about this issue is educating the one that want to be educated and to seek open dialog and discussion like done here via Blogging about it and not leaving things sitting and rotting in the back of the closet until it becomes a problem that is not solvable anymore.
Cheers,
October 12, 2006 at 2:21 am
Hi Vinny,
thanks for your comment at my blog at ReveNews. Very good post regarding the problem. I wrote actually a series of posts related to the issue.
I addressed several of the ulcers that grew in this industry creating problems for merchants and affiliates in the various marketing channels.that shouldn’t be there.
I don’t like the phrase Affiliate Marketing either. The meaning in the offline world is quite different than online . How did Beth Kirsch put it so nicely (repeated in my own words): A lot of smart people in the internet marketing industry are not getting it, what affiliate marketing is really about and how it works.
A lot of issues are caused by dangerous “half/incomplete” knowledge or complete misunderstanding of the matter altogether (without realizing or admitting it).
I agree that Performance Marketing is the better term. It is for years the “tag line” for Affiliate Marketing already so lets make the tag line to the headline
Affiliate, excuse me, Performance Marketing works only well and long term, if a strong relationship between Advertiser and Publisher was established which gets continuously reinforced and strengthened.
A relationship that is profitable and beneficial for both parties alike and not just one-sided. Clear defined goals that are openly addressed and discussed between affiliate and advertiser is important and the establishment of trust is absolutely vital.
Everything else is predatorily business practice or competitive marketing, which brings two parties together that are actually enemies, only to fight a mutual (and bigger) enemy of both of them.
This does not make them friends. Both sides are secretly waiting and preparing for the day that the mutual enemy is defeated in the hope to be able to then turn around to the previous “partner” to slaughter him in cold blood, while he is the least expecting it.
Well, the one thing we can do about this issue is educating the one that want to be educated and to seek open dialog and discussion like done here via Blogging about it and not leaving things sitting and rotting in the back of the closet until it becomes a problem that is not solvable anymore.
Cheers,
October 12, 2006 at 10:02 am
Hi Vinny,
interesting thoughts, this is something i have been waiting to come up for some time already. However, i still miss that you credit more than one marketing partner (the one with the last click) with a profit share. Only this will ultimately show the tail’s real weight. Andreas (and other german speakers) might want to read a discussion (in german) i tried to bring up about this issue some while ago:
https://www.openbc.com/cgi-bin/forum.fpl?op=showarticles&id=1915264
Would bei interesting to know if somebody shares any of these ideas.
Cheers, Ralf
October 12, 2006 at 10:19 am
Hey Vinny. I guess my long comment to this post ended up in the trash bin. I have my comment saved on my computer in the case it got lost. :Let me know and I will repost it. Thanks.
October 12, 2006 at 11:01 am
Hi Vinny,
Really good thoughts indeed, but reading it my belief is that search marketing as you describe it is reserved only for big corporates with large budgets. So if you were asked to quantify the necessary investment budget for SMEs, what would be your estimatation about?
Jean-Marie
October 12, 2006 at 8:02 am
Hi Vinny,
interesting thoughts, this is something i have been waiting to come up for some time already. However, i still miss that you credit more than one marketing partner (the one with the last click) with a profit share. Only this will ultimately show the tail’s real weight. Andreas (and other german speakers) might want to read a discussion (in german) i tried to bring up about this issue some while ago:
https://www.openbc.com/cgi-bin/forum.fpl?op=sho...
Would bei interesting to know if somebody shares any of these ideas.
Cheers, Ralf
October 12, 2006 at 8:19 am
Hey Vinny. I guess my long comment to this post ended up in the trash bin. I have my comment saved on my computer in the case it got lost. :Let me know and I will repost it. Thanks.
October 12, 2006 at 3:41 pm
Sorry about that Carsten – my comment spam filter caught it – it’s been released, above. Thanks.
October 12, 2006 at 3:44 pm
Don’t get me wrong, managing a small keyword set for an average SME (10,000 keyword +-) is easily achieved by using the Google interface, and will most likely be about 80% efficient if there is at least 1 person dedicated to the campaign. The issue is managing hundreds of thousands of keywords. Also, if a merchant sells more than 1000 items, it no longer becomes feasible to have only 1 person in-house. We find that our best campaigns are ones where the merchants have either under-resourced their paid search team, or allocated to an agency that does not have enough people or their own technology to manage the load. That’s where performance marketing becomes supplemental..
October 12, 2006 at 9:01 am
Hi Vinny,
Really good thoughts indeed, but reading it my belief is that search marketing as you describe it is reserved only for big corporates with large budgets. So if you were asked to quantify the necessary investment budget for SMEs, what would be your estimatation about?
Jean-Marie
October 12, 2006 at 1:41 pm
Sorry about that Carsten – my comment spam filter caught it – it’s been released, above. Thanks.
October 12, 2006 at 1:44 pm
Don’t get me wrong, managing a small keyword set for an average SME (10,000 keyword +-) is easily achieved by using the Google interface, and will most likely be about 80% efficient if there is at least 1 person dedicated to the campaign. The issue is managing hundreds of thousands of keywords. Also, if a merchant sells more than 1000 items, it no longer becomes feasible to have only 1 person in-house. We find that our best campaigns are ones where the merchants have either under-resourced their paid search team, or allocated to an agency that does not have enough people or their own technology to manage the load. That’s where performance marketing becomes supplemental..
October 14, 2006 at 1:54 am
Vinny,
Your endorsement (i.e. you wrote: “I have been a huge advocate of …”) as “an extension of the merchant themselves …” is in contrast to Carsten Cumbrowski’s Affiliates are not an extended Sales Force
Both opinions are interesting and worthy of consideration.
I believe that Affiliates whether part of a larger, organized group, or whether independent thrive on an independent freedom that could not exist if the Affiliates were an extension of a merchant’s sales force. Being an extension of a merchant’s sales force also implies exclusivity but one Affiliate may promote and market a merchant and that merchant’s competition. As an independent (small) marketer through the websites I create and maintain, I like to sell “gizmos” and as long as I sell a “gizmo” from one of my sites, it doesn’t matter to me what merchant is selling the “gizmo” as long as I get the commission. There are times when I will put two links for a certain item or 2 links for separate but similar items on the same web page — it doesn’t really matter to me whether Merchant A makes the ultimate sale or Merchant B unless one of those merchants has a track record for paying me more (in that case, I usually focus my energy on the merchant who pays more).
In terms of Clicks2Customers search marketing, would your company really wish to be an “extension of the merchant themselves” to the extent that the merchant has control over your company? Do you see your company as a Franchise of the Merchant exisitng underneath a Merchant’s umbrella? Probably not, but I wonder how eager Merchants will be to engage in a contract of profit sharing when they are used to paying a stated fee/commission?
I enjoyed reading all the comments & the links embedded in the comments!
Andreas Reiffen produced a fine study
October 13, 2006 at 11:54 pm
Vinny,
Your endorsement (i.e. you wrote: “I have been a huge advocate of …”) as “an extension of the merchant themselves …” is in contrast to Carsten Cumbrowski’s Affiliates are not an extended Sales Force
Both opinions are interesting and worthy of consideration.
I believe that Affiliates whether part of a larger, organized group, or whether independent thrive on an independent freedom that could not exist if the Affiliates were an extension of a merchant’s sales force. Being an extension of a merchant’s sales force also implies exclusivity but one Affiliate may promote and market a merchant and that merchant’s competition. As an independent (small) marketer through the websites I create and maintain, I like to sell “gizmos” and as long as I sell a “gizmo” from one of my sites, it doesn’t matter to me what merchant is selling the “gizmo” as long as I get the commission. There are times when I will put two links for a certain item or 2 links for separate but similar items on the same web page — it doesn’t really matter to me whether Merchant A makes the ultimate sale or Merchant B unless one of those merchants has a track record for paying me more (in that case, I usually focus my energy on the merchant who pays more).
In terms of Clicks2Customers search marketing, would your company really wish to be an “extension of the merchant themselves” to the extent that the merchant has control over your company? Do you see your company as a Franchise of the Merchant exisitng underneath a Merchant’s umbrella? Probably not, but I wonder how eager Merchants will be to engage in a contract of profit sharing when they are used to paying a stated fee/commission?
I enjoyed reading all the comments & the links embedded in the comments!
Andreas Reiffen produced a fine study
November 13, 2006 at 10:28 pm
[...] Special Report: Profit Share – Performance Marketing Model of the Future [...]
January 22, 2007 at 9:03 pm
[...] This talk reminds me a lot of the work we have published around Performance Marketing Profit Share. [...]
June 5, 2007 at 10:01 am
[...] often quote a research paper that we produced, on Profit Sharing (read: Affiliate Marketing) as the model of the future for managing paid search. We have used some very sound economic & mathematical calculations to derive at these [...]
September 11, 2007 at 8:06 pm
[...] with the founder of a UK based SEM company, and asked him why he didn’t change his model to performance marketing, and not % of spend – his answer was that he simply would not make as much money. Ok – so instead, [...]
September 26, 2007 at 5:50 am
[...] Profit share is slightly different to revenue share. With profit share, it also requires great amount of trust in the relationship between both parties. The client will have to reveal not only the actual revenues but also the actual profits. Another benefit of the profit share model can be supported by one of the researches on Vinny Lingham’s blog. [...]
October 8, 2008 at 6:05 pm
Thanks for post. It is an interesting thought that search marketing can only exist in a performance metric driven environment and that we see ourselves as an extension of the merchant themselves, as we invest in people, technology and infrastructure, and then leverage that investment across multiple clients on a pure risk basis.
October 27, 2008 at 7:45 am
I think that you have touched a really important thing in today’s marketing world. You know I liked your article very much and I see that you have found a good way for the development in this area. Search marketing is something really new.
November 23, 2008 at 2:36 am
I agree with most of what has been said here. Also, the narrower you define your defination of what a blog is, the narrower your results are going to be.
Seems like you are focused on simply the Web-Journal defination. I would argue, that even ReveNews doesn’t fit into the narrow defination of a blog you have defined for yourselves…
Sometimes you have to think outside of the Blox..
January 26, 2009 at 7:09 am
Where the search provider is involved in delivering more than just search it takes a real level of diplomacy to get in the door without causing ripples that may well undermine a campaign further down the line. I would say that its best to know that this company is on side before you start and that if they are responsible for management of the website that they will give you all you need. If there's already bad feeling before you've even secrued the contract then its often best to walk away.
April 2, 2009 at 7:43 am
i think this is very interesting article.I would say that its best to know that this company is on side before you start and that if they are responsible for management of the website that they will give you all you need.
April 3, 2009 at 6:00 pm
Well, the one thing we can do about this issue is educating the one that want to be educated and to seek open dialog and discussion like done here via Blogging about it and not leaving things sitting and rotting in the back of the closet until it becomes a problem that is not solvable anymore.
April 6, 2009 at 2:58 pm
Yes Search Marketing is very complicated! I have been working on the same project for over a year now and let me tell you, it doesnt get any easier. I prefer writing my own SM applications though because you get more flexibility that way.
April 6, 2009 at 2:59 pm
Hey Vinny. Great info Thanks for sharing.
April 8, 2009 at 2:16 pm
I believe that Affiliates whether part of a larger, organized group, or whether independent thrive on an independent freedom that could not exist if the Affiliates were an extension of a merchant's sales force
April 10, 2009 at 1:56 am
Really good thoughts indeed, but reading it my belief is that search marketing as you describe it is reserved only for big corporate with large budgets.
April 14, 2009 at 5:19 am
Nice article!! Search marketing as you describe it is reserved only for big corporates with large budgets…Affiliate may promote and market a merchant and that merchant's competition..
April 17, 2009 at 2:18 pm
Affiliates sometimes use less orthodox techniques, such as publishing reviews of products or services offered by a partner… Affiliate marketing is often confused with either network marketing or multi-level marketing. ..
April 18, 2009 at 4:23 pm
The amount of money we spend on R&D around search is not easily covered by all but the largest of merchants. By leveraging this cost across multiple clients, we are able to deliver a superior service, at cost incidental to the revenues.
April 21, 2009 at 6:00 pm
A relationship that is profitable and beneficial for both parties alike and not just one-sided. Clear defined goals that are openly addressed and discussed between affiliate and advertiser is important and the establishment of trust is absolutely vital.
May 4, 2009 at 6:18 pm
Affiliate marketing now is one of the hottest subject online and offline especially in this economical state. I think more will direct to it in the near months
May 6, 2009 at 8:26 pm
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May 10, 2009 at 9:29 am
I agree with most of what has been said here. Also, the narrower you define your definition of what a blog is, the narrower your results are going to be.
I would say that its best to know that this company is on side before you start and that if they are responsible for management of the website that they will give you all you need.
May 19, 2009 at 11:21 pm
Bro, i always wonder how did you you get all this good info and resources. You feeds me very well..keep it up bro
May 20, 2009 at 11:38 pm
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May 22, 2009 at 10:36 pm
What a great style. Very informative one, I hope you will continue your research.
I will even buy an essay on this subject.
Thanks
May 24, 2009 at 3:02 pm
Affiliates are an extended sales force for your business… Affiliates are not employed by the advertiser whose products or services they promote, but the compensation models applied to affiliate marketing are very similar to the ones used for people in the advertisers' internal sales department…
May 26, 2009 at 6:09 am
Good article regarding the problem. Thanks for sharing this info.
June 3, 2009 at 8:58 am
Does this marketing masters degree would help graduates to learn emarketing?
June 3, 2009 at 8:58 am
I am looking forward to read more on "Private Labeling". Unfortunately I am new to affiliate marketing, and as I was reaserching one particular company I made a test purchase and little do you kow my purchase was not registered by tracking system. Turnes out that computer I was using had blcked all cookies
June 3, 2009 at 8:20 pm
Thanks for the post !
June 10, 2009 at 6:54 pm
thank for the post good read on search marketing
June 11, 2009 at 9:10 am
This is something i have been waiting to come up for some time already. However, i still miss that you credit more than one marketing partner the one with the last click with a profit share. Only this will ultimately show the tail's real weight.
June 11, 2009 at 8:48 pm
Vinny, thanks for your article. I have also just read your clicks2Customers Profit Sharing report. I particularly liked your views on the current PPC affiliate marketing business model.
June 22, 2009 at 5:33 pm
.Affiliate may promote and market a merchant and that merchant's competition..
June 23, 2009 at 4:40 am
have also just read your clicks2Customers Profit Sharing report. I particularly liked your views on the occupational safety program & fire science degrees current PPC affiliate marketing business model.
June 23, 2009 at 4:42 am
or marketing to end users and satisfying the needs of searchers – you still need a partner that is focused on understanding what the user wants, how each engine attempts to satisfy their users, and how to align the merchant’s interests with them.
online counseling degrees Focusing on the searcher will make any Search Engine Marketers (SEM) successful. Google have done a remarkable job of keeping their eye on this goal, and given their success, it would be a good idea to take a lesson out of their book.
June 26, 2009 at 10:59 am
i always wonder how did you you get all this good info and resources. how to choose the best camera You feeds me very well..keep it up bro.
July 3, 2009 at 6:08 am
Vinny what a great marketing model. We can really use this in out business thank you for sharing it.
July 9, 2009 at 7:35 am
I am researching B2B now.Thanks for sharing…
July 9, 2009 at 7:41 am
Good question! It is an great thought that search marketing can only exist in a performance metric, as we invest in people, technology and infrastructure, and then leverage.
July 12, 2009 at 9:20 am
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July 14, 2009 at 7:54 am
Thank you for your special report…It has tons of information…thanks for posting this blog…
July 17, 2009 at 8:24 am
Nice blog!! Search marketing as you describe it is reserved only for big corporates with large budgets…Affiliate may promote and market a merchant and that merchant's competition..
July 21, 2009 at 10:34 am
marketing is not about clicks and clicks.. its about actually making the buyers want to buy your products… the affiliates often cause only disorder and confusions… i am not a big fan of this concept
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July 22, 2009 at 10:25 pm
I like very much the writings and pictures and explanations in your adress so I look forward to see your next writings.
July 24, 2009 at 7:16 am
It made all the difference in the world to me. That was 5 years ago though. Since then I have attended over 60 various industry events and I would say the 2 that have stuck out in my mind the biggest was that first one and then last year at the techcrunch40 conference.
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July 28, 2009 at 10:39 am
Hey Vinny. Great info! Really good thoughts indeed, but reading it my belief is that search marketing as you describe it is reserved only for big corporates with large budgets.
July 30, 2009 at 12:30 am
Hi Vinny,
Great post. I have read many of your post and i enjoy reading it. It's so nice to be here.. It's a pleasure. I'll definitely gonna bookmark your site.
August 1, 2009 at 12:18 pm
it's been released, above. Thanks.
August 5, 2009 at 2:53 pm
Amazing article on Profit Sharing. The Performance Marketing Model of the Future looks promising
August 8, 2009 at 6:53 pm
A great post and some great comments. This tells it how it is. For those of you not in know… Read this post… Search Marketing (Search Engine Marketing or simply Internet Marketing) is infinitely more complex than most of think.
August 16, 2009 at 3:15 pm
nice post. thank you for sharing
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August 17, 2009 at 2:20 am
thank you for sharing
August 26, 2009 at 7:44 am
What can I say, I don’t know much about profit sharing but your article gives a great insight on it. Thanks
August 31, 2009 at 11:47 pm
Nice blog!! Search marketing as you describe it is reserved only for big corporates with large budgets… It made all the difference in the world to me. That was 5 years ago though.
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