Affiliate Marketing Blog - a Traffic Junction Blog

The last couple of weeks have been a period of major announcements from both Google and Yahoo. First up,Google declared some outsanding financial results while Yahoo, by its own admission, performed below the levels it aspires to. But beyond financials, it was the much anticipated announcement from Yahoo that is really important– the phased roll out of its new search marketing platform. A revamp of Yahoo’s existing search system was long overdue; this report by Heather Paulson on Revenews gives the impression that the new platform does have some of the nifty features that search marketers expect.

There were two other noteworthy developments from Google– one is the beta launch (by invitation only) of Google’s website optimizer, a tool that will allow marketers to carry out multi-variate testing of their web pages and optimize them accordingly. There are several other tools out there offering various kinds of testing and optimization, but Google’s product (when it gets more widely available) is expected to be free and therefore can be used by a much wider audience. A demo of the website optimizer is available here.

A couple of days ago, Google announced the launch of a “custom search engine” capability that allows anyone to build a custom search engine. Based on the Google Co-op that was announced a few months ago, users can select the sites from which they want the results to be pulled out from. We could probably see many more “niche search engines” now — here’s one on Affiliate Marketing that’s already out. How many end users actually begin using such search engines is questionable; Google’s objective, I believe, is to really use the idea of people contributing bto create “search from selected sites” to enhance their own results. While Co-op was founded on that same premise, it seemed too techy; the custom search engine concept seems much less so.

According to Jupiter Research, Europeans’ usage of the Inernet has surpassed usage of the print medium. Average time spent online by Internet users is about 19 hours a week, compared to 15 hours in 2003. TV still continues to be the dominant medium.

As is to be expected, the two main factors driving the increase in online media consumption are age and increased broadband penetration. The greater the broadband penetration, greater is the online media consumption: France leads Europe on both these counts.
These changing usage patterns have an obvious impact on how companies spend their marketing dollars, something that website publishers of all kinds should be ready to take advantage of, irrespective of the monetization model they opt for.

More online shopping this year; one third of online shoppers shopping less
Sounds rather contradictory, doesn’t it? On the one hand, Jupiter Research is predicting that the online holiday shopping will reach $32 billion this year, an increase of 18% compared to last year, while the number of people shopping online will rise by about 6%. That seems to indicate that the amount of shopping per user is going up.

At the same time, another study (reported on Revenews by Jimmy Daniels) claims that almost one-third of people who shopped online last year are spending less this year due to concerns on security and Internet fraud. That Internet security is still such a limiting factor can be seen by the approx. 80 million Internet users (I believe these are US figures) who haven’t bought anything online.

While the opportunity is great, it is also a reminder that so much more needs to be done to get more converts to join the fold of online shoppers.

The recent clamp down on online gambling sites in the US with strict legislation has these sites and savvy affiliate marketers (who have raked in some serious moolah marketing these sites) scurrying for cover. All of a sudden, their businesses have been jolted and the implications could be pretty serious.
An article on ClickZ predicts that the implications can infact be quite serious for “mainstream” affiliate marketers, as those specialized in promoting gambling sites look at alternatives. A similar sentiment was expressed elsewhere as well; something which I find a bit irritating, because the message that comes across from these articles is that these “gambling affiliates” (I don’t quite like the stereotyping either) will simply roll over the other affiliates with their knowledge and expertise.

True, affiliate marketers in the gambling or the adult content (read porn) space have a reputation for being at the cutting edge of online marketing– they seem to know how to “game” the systems to attract customers and generate revenues. But to be honest, I don’t think mainstream affiliate marketers today really lag behind– they know their domains, the techonology and the application of marketing strategies and technologies as well as anybody else. This is not to say that we cannot learn anything from these domains– there’s certainly a lot we could, but to think that these folks will have a cakewalk when they enter the mainstream niches is grossly underestimating the expertise of mainstream affiliates who have carved a niche for themselves.

P.S: With regulations in place in the US, I wonder what kind of changes are in store for the online gambling industry in the UK, or Europe for that matter. Would it be long before we can expect to see greater controls on this industry in our part of the world as well?

Is CJ really on sale? The way the rumour mill is abuzz, seems like it. Somehow these news items almost always seem to find their way out a few days before something actually happens (see how Google’s plans to buy YouTube was discussed at much length before the D-day?). Beth Kirsch wrote a fairly long piece on the rumour that ValueClick is trying to sell off its affiliate marketing business (CJ). In a related post, Peter Figureredo mentioned that ValueClick investors are concerned with Google’s (on-off-on) plans with the CPA model.

I am not sure why ValueClick would really want to let go of the CJ property. True there are risks associated with the model and the dynamics of the search marketing industry, but I’d have thought that having affiliate marketing under its portfolio is an asset (the “one-stop-shop” pitch… ).

Nevertheless, a lot of talk has centered around Yahoo or MSN buying the CJ business if it was really on offer, mainly to counter any threat from Google in this area. Are we looking too narrowly here? My gut feeling is that any one of the European players (Zanox? TradeDoubler?) could be interested– they have the expertise and the people to run the business effectively. For that matter, how about Rakuten buying CJ ? I am inclined to believe that if CJ were to be sold, it will be bought by another player with an existing footprint in the affiliate marketing arena. Or, then…. it could be Google..:).

According to the Affiliate Marketing Networks Buyer’s Guide from e-Consultancy, the UK market for this niche marketing segment will record a growth of 60% this year to about £2.16 billion, compared to the £1.35 bilion in 2005. The market size figure here refers to the total sales generated for merchants through affiliate networks and affiliate publishers in the UK. It also reports that “commissions and fees paid out to affiliate networks (covering payments for both networks and affiliates) amounted to an esimated £83 million in 2005, and it is forecast that this figure will have risen to £133m million by the end of this year.”

I do have some doubts on the commission figure — because it is said to be the total commissions paid to both networks and affiliate publishers. Doesn’t 6% paid out in total commissions seem a bit on the lower side? My perception is that the percentage of commissions paid is higher than that. Of course, the vast chunk of commissions will likely be generated by a small bunch of super affiliates which could skew the numbers a bit.

Another important aspect to remember is that a number of UK affiliates may be generating revenues through networks & advertisers outside of the UK, which I think is beyond the scope of this report. So, the commissions earned by UK affiliates will likely be much higher than the figure mentioned above.

Interestingly, the paid search market in the UK was forecast by e-Consultancy to reach £1.26 billion this year. A portion of this comes from the affiliate marketing industry for sure– how much exactly, I don’t think we know. But it’s certainly one heck of a vicious circle..

Shortly after I posted this piece on Revenews last week, pointing out to a MarketingSherpa study showing greater ROI from SEO campaigns, I chanced upon this release from WebSideStory, which reports a marginally better conversion rate from paid search advertising clickthroughs vis-a-vis organic search clicktrhroughs.

The problem with stats is that it can confuse instead of clarify; putting the two studies above together has the potential to do the same at first glance. Conversions and ROI don’t mean the same thing, though it is so easy to mistake one for the other. Conversions only take into account the desired outcome without the cost of obtaining that outcome; ROI factors in both.

By emphasing on this distinction, I am by no means questioning the ROI from paid search advertising or advocating that folks go the SEO route. This is a choice that businesses will have to make depending on their objectives, the budgets that can be allocated and their own expertise in managing these traffic streams. We rely pretty heavily on paid search and therefore have built up considerable expertise in that stream to generate good returns; but may be SEO works better for marketing products from other industries. In an ideal world, the rate of conversion and return on investment from both these marketing channels will be equally high — but that’s a scenario with low likeihood of occurence.
Figure out what works best (or may be engage experts to identify the gaps) and optimize that channel first..

P.S: With the holiday shopping season, there is a bit of apprehension if there will be one of those Google quakes —-the algo update which sends the e-retailing industry haywire. Have you made your site Google quake proof or have you left it far too late?