Affiliate Marketing Blog - a Traffic Junction Blog

eMarketer has released its UK Internet: Users and usage report that shows some very positive numbers for businesses that can benefit from people going online. Highlights include:

• Last year, about 37 million people or roughly 60% of the population went online in a month; this figure is expected to rise to about 42.8 million (roughly 70%) of the population by 2011.
• Online sales in the UK will almost triple to reach about GBP 84 billion by 2011 from about GBP 30 billion in 2006.
• Almost 40% of online sales in Western Europe will come from the UK; while UK’s share of the overall online sales will continue to drop over the next few years as e-commerce takes off in other parts of Europe, it will continue to be the leader in online sales for some time to come.
• Books, grocery and travel are probably the three biggest categories that shoppers spend their money on (at least based on the top online shops they are seen to visit).
• The average spend per e-buyer is likely to be close to GBP2000 this year, which is a 20% growth compared to 2007. This figure should be exciting to affiliates who are more likely to be interested in the near-term possibilities.
  Of course, as I said in a recent post related to the projections for affiliate marketing from e-consultancy, I would be a bit wary of being too optimistic this year.

Interestingly, the eMarketer report points out that online shoppers seem to be very satisified with their online buying experiences. Security also seems to be less of an issue. Both of these contradict most other studies that have come out in recent times, related to security of online transactions and the satisfaction levels of online buyers.

What does that mean? Your answer is as good as mine..

Last week Commission Junction announced the change that Yahoo! Search Marketing has made to its editorial policy regarding affiliate marketers (publishers) sending traffic directly to advertiser (merchant) sites. Here’s the announcement from the latest issue of the CJ Wire.
Yahoo! Search Marketing Becomes More Publisher Friendly
After more than six months in the making and much customer feedback and testing, we are pleased to announce that Yahoo! Search Marketing (YSM) has recently updated its editorial policies and will now allow U.S. publishers to direct link to their advertisers. In the past, YSM’s editorial policy prevented publishers from linking directly to their advertiser partners and required that traffic be sent first to the publisher’s Web site. The new policy eliminates this restriction and opens a much broader search marketing opportunity for publishers.

This YSM policy change is the result of a strong relationship between Commission Junction and YSM. We have spent more than six months working with YSM to enact the new editorial policy and are very pleased that this effort has resulted in changes that are sure to create opportunities for our publishers and advertisers.

We find this policy change exciting on several levels. First, this is a significant shift for YSM and could be a great opportunity for your search marketing campaigns. Second, you heard it here first – YSM has asked us to communicate this change to the affiliate community. Third, the work we’ve done with YSM on this policy change is just another example of our commitment to listening to and speaking up for our publishers.

So, if you’re running search marketing campaigns but have left YSM out of your marketing mix, now is a great time to expand your efforts.

I read this announcement with some excitement initially- implementation of this meant one step less in the conversion funnel, which will most likely increase the conversion rate. It’s one obstacle less to the commision cheque. Affiliates that are smart at playing the PPC game ie. the ability to buy better quality traffic at lower costs than the competition can certainly benefit.
However, some questions immediately cropped up:
Is the change in policy another attempt by YSM to get a bigger share of the spend from affiliate marketers? The big affiliate publishers are known to spend significant amounts in buying search engine traffic and could it be that Yahoo reckons it is losing out on some of this traffic? Does YSM believe that the new policy increase competition amongst affiliates and thus boost the cost per click?

While YSM may allow publishers to drive traffic directly to merchant websites, what about the advertisers/merchants themselves? Several adverisers prohibit affiliates from sending PPC traffic directly to their sites due to competitive considerations, and that situation still doesn’t change.

All in all, I feel we could see affiliates allocating a bit more PPC spend to YSM ; and we should soon be hearing about some results from actual end users.

AOL has bought UK affiliate marketing business buy.at for an undisclosed price to boost its online advertising business. This is the fifth acquisition for the Internet media giant in the past year; it had also made a failed attempt at acquiring TradeDoubler.

Even while there is talk of splitting up AOL into two, with much greater focus on the content/media/advertising side of the business, the company has beefed up its online advertising portfolio with contextual advertising, behavioral advertising and affiliate marketing. The latest acquisition provides considerable synergy to their business, especially with the rapid growth that buy.at has been experiencing in the past few years. The latter earns about GBP 25-30 million revenues annually and has been profitable for the last three years according to its CEO, Kevin Cornils.

buy.at had made its foray into the US towards the end of last year. Being part of such a large parent organization, it will have the opportunity to not only further its reach in the US market, but also jointly look at expanding its presence in the European market.

The news of this acquisition will undoubtedly be overshadowed by all the talk about the Yahoo-Microsoft merger and the impact on the online advertising business. While it is certainly not in the same league, the significance of this acquisition shouldn’t be underestimated, particularly when it is viewed in light of AOL’s other purchases during the past year.

Despite the continuous and often unbelievable growth rates experienced by the online retail sector in the UK, it continues to face threats from online fraud. Cybersource has released its Fourth Annual UK Online Fraud Report, based on a survey of about 165 UK merchants of varying sizes.

The report says that merchants are having to invest heavily to ward off the threat of online fraud, with annual expenditure in the vicinity of GBP160,000 for mid-sized companies! The main issue seems to be the lack of a coherent effeort to tackle this problem. Currently, the responsibility for overcoming the problem seems to rest with the retailers, ISPs and card schemes, with very little proactive assistance from the regulators or the police. The need for a single, independent body to track organized fraud and handle it appropriately is very obvious; question is when and if it would happen.

As affiliates are mainly dependent on successful online transactions, anything that impedes e-commerce is an issue. The last thing affiliates need is a lack of confidence or doubts amongst online shoppers about security of their credit card information; unfortunately there is very ittle in their control to prevent or reduce these fraudulent activities.

According to the annoual Affiliate Marketing Buyer’s Guide from e-Consultancy, the affiliate marketing industry in the UK generated more than £3 billion in sales last year. The industry is reported to have grown by about 45% . The commisions and fees paid out by merchants [to networks and affiliates] also grew 40% in 2007 to about £186 million compared to £133 million in 2006. Effectively, the commisions and fees account for a little over 6% of sales generated by the affiliate channel.

Four vertical segments drive the affiliate marketing channel- financial services, retail, telecoms and mobile phones and travel. Hardly surprising, since these are among the most active verticals where e-commerce is quite common. One of the trends noticed in 2007 that the report points out is that cashback and reward sites have tended to be more effective for affiliate marketers compared to “paid search” affiliates.

The growth in affiliate marketing is in line with the growth overall in e-commerce in the UK. Online sales in 2007 were over £46 billion, a whopping 54% more than in 2006, according to stats from IMRG. If we were to look at these two sets of stats which have come from different sources and put the two together, it looks like the affiliate channel is still a very small piece of the online sales pie. Question is, can affiliate marketing begin to take a bigger share?

I saw another news report that is already projecting another 50% growth in online sales in the UK next Christmas. Too early to make such a forecast, isn’t it? While I’d love for that to be the case, I prefer to be conservative for 2008. There are a bit too many dark clouds looming over the global economy this year to be overly bullish at this time….

Looks like the quest for the perfect paid search marketing optimization tool [I’ve conscioulsy chosen to use something broader than a bid management tool] is still going on, by the number of players coming up with such tools. Even as Google’s conversion optimizer got out of beta in the past few days, TradeDoubler has announced its own search management tool, td Searchware 4. The product is an evolution of BidBuddy which was a key offering from The Technology Works that TradeDoubler had acquired mid-last year.

Excerpts from company press release about the tool here

The new, market-influenced features of td Searchware 4 include: instant access to key information; navigation to most functions within two to three clicks; an end-to-end editorial process enabling more time to be spent on creative optimisation and analysis; enhanced reporting which provides key information on the customer journey for use when optimising campaigns; and a new Strategy Groups feature allowing the optimisation of key terms regardless of where they sit in engine account structure.

The new Strategy Groups functionality in td Searchware 4 enables users to fine-tune their search campaigns to achieve a higher return. Historically, users have been unable to group or isolate priority keywords in order to apply strategies targeting a particular metric. The Strategy Groups feature will allow users to apply such targeted approaches by identifying and grouping collections of keywords from any number of campaigns.
Perhaps more significant is the company’s move into Asia with the launch of TD Technology in Japan. The company has already made a couple of senior level appointments to kickstart activity in the Japanese market, which is one of Asia’s largest and most developed/advanced in terms of Internet usage and online marketing. No less significant is that Japan is the home of Rakuten, the parent company of Linkshare. Looks like more than an interesting coincidence that just as Rakuten/Linkshare is making aggressive forays into European/UK market, TradeDoubler is moving East…..

Leading up to the holiday season, there were a couple of announcements from the affiliate networks that might be of interest to the community.

First up, LinkShare reported a successful completion of its first year in the UK market, having signed up about 40 advertisers, 25 of which are exclusive relationships. The new advertisers include names like Net-A-Porter, Laura Ashley, House of Fraser and Gold Smiths in the retail segment besides properties such as Kayak and Radisson in the travel segment.

40 may not be a huge number, but it is a good start nonetheless; the coming year will most likely see a lot more activity from Linkshare as it makes its aggressive push to penetrate the UK & European market.

Meanwhile, homegrown affiliate network — and one of the first in the UK, in fact– dgm has completed a management buyout (MBO) from the parent company Deal Group Media plc. The buyout was effected by the current Chairman and the CTO of Deal Group Media plc., with the latter continuing to remain a shareholder in the affiliate network. With this buyout, the new entity dgm UK is likely to focus on expanding its affiliate business in the UK and Europe, while the parent company will focus on developing newer markets such as those in the Far East, as reported in the Netimperative article.

Both of these announcements further point to the potential of the European online advertising/ pay-for-performance market. With some dark economic clouds hovering over the US the consequent doubts on growth in the short term, the big players will only be too keen to tap into the European opportunity.

Amidst all the excitement about booming online shopping in the US following Thanksgiving [Black Friday & CyberMonday], Yahoo Stores’ outage for almost the entire day on CyberMonday (about 12-14 hours, depending on who you hear the news from) generated quite some news.

Yahoo was left with a lot of ill-will from the tens of thousands of merchants that were affected at the worst possible time as far as these retailers were concerned and considerably negative PR, not just for the outage but also the manner in which the entire episode was handled.I believe that the outage may not have affected affiliate marketers significantly, though some of these merchants have been running their own affiliate programs. Yet, it is a good enough reminder/ warning for affiliates that send traffic to merchant sites to be fully aware of what is happening on their merchant sites, detect anything undesirable and take appropriate action accordingly. If it can happen to the best of Internet companies with top-notch infrastructure, and fairly robust systems and processes, the probability of something like this happening to other merchants that may not have capabilities anywhere close to that Yahoo possesses is only greater.

More often than not, instances such as these are exceptions over which an affiliate has very little control. However, precautions can and must be taken– the least of which would be to monitor the merchant site regularly and watch one’s conversion rates. While conversions can drop due to any number of reasons, at least the number should trigger some alarm for a closer look.

Another thought that occurs to me is: what kind of performance guarantees can merchants offer their affiliates? What kind of compensation can they offer to affiliates if the site falls below a certain performance level. Definining these key performance indicators and benchmarks may not be easy, but the merchants could certainly consider compensating affiliates for potential loss of commissions proportional to their past traffic volumes and conversion rates? There may be other fool-proof solutions available, which I’d be interested to know about. The idea is to have a fair mechanism that will ensure that affiliates who incur significant costs to drive traffic to merchant sites do not end up paying a heavy price for no fault of theirs.

Of course, the easy option for affiliates would be to move on to another merchant whose website is not facing problems, but my suggestion is in the spirit of building checks and balances and an environment in which both the merchants and affiliates feel the stake in ensuring success of their affiliate marketing program.

In a span of two weeks, LinkShare made two important announcements: a) the launch of LinkShare Lead Advantage, a lead generation service and b) the availability of ‘Flex Links’, Link Locator and Mobile Links.

With Lead Advantage, LinkShare wants to take advantage of the emergence of online lead generation into one of the hottest and fastest growing areas of online marketing. LinkShare had acquired lead generation firm TrafficStrategies.com just a few months ago.
According to the company press release announcing the launch of the new service:
“This new service enables our customers to develop, implement and manage their lead generation campaigns with a focus on driving results, while managing the risks and complexities across multiple online marketing channels,” said Steve Denton, LinkShare’s President. “Lead generation is one of the fastest growing segments of online marketing, but advertisers are discovering quality matters as much as volume.”

“LinkShare designed Lead Advantage to target, track and optimize leads in a way that delivers those that are most likely to convert for our customers, in whatever vertical they work in,” said Kelli Beougher, Vice President, LinkShare Lead Advantage.

The second announcement, which is more relevant to affiliates/ publishers, is an indication of LinkShare preparing for the future (some might say, it is already the present). While Link Locator 2.0 is for more advanced publishers who use web services, Flex links gives publishers the option to post a video, widget, flash or other forms of clickable objects and earn revenues on a pay-per-action basis. As more and more advertisers look at using video for their marketing, this is bound to be a useful addition to the mix. Even though use of video and the other types of “creative” / “marketing material” from advertisers may have their own issues, I believe these forms should get traction sooner rather than later.

At the same time, I am sceptical about “mobile links”, which allows advertisers to take advantage of the anticipated boom in mobile commerce. Even though it is touted as the “next disruptive force” in e-commerce, I feel that mobile commerce will probably take a bit longer to get good traction. Either way, it is commendable that LinkShare has taken steps to be prepared for that time, rather than being a ‘innovation-less’ follower– a tag the network has carried with it for some time.

Last month, the IAB UK updated its search marketing best practice charter with guidelines related to affiliate marketing. While the guidelines are mainly aimed at search engine marketing companies, the update to the charter is aimed at providing some broad guidelines to these companies to work well with their clients that may also be carrying out affiliate marketing.

One of the first guidelines is that a SEM company must disclose to a client whether they do affiliate work for any of their accounts. A fair point, considering the potential conflict of interest issues that a SEM company might have.

The other key point is related to keywords — often the most contentious issue between brands (clients) and affiliates. If a SEM agency is handling the search marketing efforts for a client, the agency has an important role to play in formulating and implementing guidelines pertaining to keyword use, brand names, messaging/ communication. Effective communication of these with the affiliates is extremely important; while enforcement of these guidelines will ultimately be the responsibility of the client, the SEM company can and must play a proactive role in helping the client with this.
As can be expected, some of these guidelines are very broadly [or loosely] defined. For example, one of them is “SEMCo will encourage / facilitate client and affiliate communication.” Words like “encourage/ facilitate” are open to all kinds of interpretation.

Of course, this is not to criticise these efforts at standardisation in an industry that is still very much evolving— as I recognize the challenges with such an endeavour and getting the different players to change to adopt a common set of rules/ accepted best-practices. I just wish that we are able to evolve the various guidelines to minimize the number of possible interpretations, which as we all know, can get used as per each company’s convenience, defeating the purpose of the whole excercise.