Search For Tomorrow

It was the summer of 1998 when GoTo.com launched its pay-per-click (PPC) program in a fairly straightforward way. Back then, there were few competitors and the bids were low. Often a top slot could be had for a penny a click, and the reporting was bare bones.

It was morning in paid search country.

Six years later, the paid search landscape has gotten a lot more crowded. According to PayPerClickSearchEngines.com, there are now about 600 PPC engines. It has also gotten a lot more expensive, with the minimum of a dime per click at Overture. And all that has made things a lot more complicated.

If you want to know what the future holds for the fusion of paid search and affiliate marketing, strap in and hold on tight.

The typical affiliate program is heavy on affiliates utilizing either natural optimization or paid placement. A third of all affiliates promote their links in PPCs, according to a survey in the AffStat 2004 Report. Additionally, 16 percent cite data feeds as their preferred method for promoting an affiliate program.

When CAN-SPAM (Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003) took effect on Jan. 1, 2004, the email affiliates were significantly bridled. This has resulted in a seismic shift by affiliate programs and their growing reliance on search engine affiliates.

According to Kevin Lee, CEO of the search marketing technology firm Did-it .com, paid search is moving toward more personalization, automation and the greater emergence of vertical portals. There are also some changes on the horizon with regard to use of company trademarks by affiliates, says Lee.

Personalization Per Click

Affiliates using Google AdWords can now target regionally and locally, so they can reach the prospects who are most appropriate for the affiliate program they are promoting. For instance, if an affiliate is running a fan site for the New York Jets, it wouldn’t make a whole lot of sense for them to use paid search to push a Jets banner to a national audience. But with regional, city-level and IP targeting (using the address uniquely identifying a certain computer on the Internet), affiliates may focus on specific cities and metropolitan areas to market Jets goods. Google even enables affiliates to define their own target area by choosing a point and a surrounding radius of 20 or more miles or by picking points in order to define a border.

Personalization could be focused on regions or interests. “Rich media search, image search and news search will gain in popularity, and paid results will become available within these areas,” says Did-it’s Lee. “All the search engines will roll out some kind of personalization or personalized search where the engine remembers things about you. This will help with targeting ads better as well as algorithmic results.”

You can expect affiliates to begin using this option more extensively, bringing in a more attractive and effective CPM (cost per thousand advertising impressions) and CPC (cost per click).

Automate To Elevate

Affiliates have long relied on spreadsheets to manage all of their keyword bid campaigns, but as the paid search space matures, the administration and tracking of PPC campaigns is getting more advanced.

“In order to continue participating in the ever-increasingly competitive marketplaces for keyword bids, marketers will be forced to use marketing automation techniques that take into account order profit values and lifetime value, not just simple ROAS (return on advertising spending) or immediate ROI (return on investment),” according to Kevin Lee.

Some of the more popular tools for automating paid search processes are Atlas OnePoint (formerly Go Toast), the Maestro Client from Did-it.com, and PPC Track from KowaBunga Technologies. Additionally, search engine marketing firm iProspect unveiled iProspect Search Engine Bidding Agent (iSEBA) in the summer of 2004. ISEBA manages the keyword bidding process for pay-per-click advertising campaigns on both Google and Overture’s paid search programs.

Making A Vertical Leap

As affiliates get deeper into personalization, it’s natural that they’d also gravitate to vertical portals that serve the channels for the affiliate programs they promote. While search engines do not generally define themselves as servicing certain types of users, the MarketingSherpa Search Marketing Metrics Guide reveals that just like any other media property, each search engine has a remarkably distinct type of user.

This MarketingSherpa report, which surveyed 3,007 marketers in July, reveals that highly educated men with an interest in technology tend to use Google. Kids are more likely to Ask Jeeves for their search results. Older teens rebel by making MyWay their way. Moms tend to prefer MSN search.

So for affiliates trying to reach the men and kids, Google AdWords is the way to go to get your ads on Ask Jeeves, MyWay, and of course, on Google itself. But if you want to hawk wares to moms, you’d better be using Overture to place your targeted ads on MSN. Bear in mind that things may change due to consolidation and new business arrangements, so keep an eye on who’s serving whom.

Lee expects that vertical portals will become hotter, including the shopping portals, as well as portals within specific industries or customer segments.

On Your Mark. Get Rules. Go!

In the early days of affiliates bidding on keywords, there were no regulations being enforced by the affiliate programs. This can be attributed to a number of issues, including good old-fashioned ignorance; many affiliate managers have never been affiliates and don’t know how they do what they do. However, you could also attribute it to self-preservation. Affiliate managers are aware of activity that’s not particularly beneficial to their company, but it makes the affiliate program look better. This resulted in an environment where multiple affiliates, and the trademark owner, were competing for ad placement on trademarked terms.

The bad news for affiliates is that things are changing. Over the past year, there’s been a significant shift. In a poll of affiliate managers on the AffiliateManager.net Forum in August 2004, 65 percent said they were no longer allowing affiliates to bid on their trademarks.

And why wouldn’t they feel that way? It’s a low hanging fruit that converts well, and if the company isn’t in a bidding war with their affiliate, it’s a cheap cash outlay. Why outsource that sort of thing to affiliates and pay exponentially more for it?

Don’t Jerk That Knee

But all things considered, merchants ought to be most concerned about controlling what’s above the fold. At least that’s the contention of David Lewis, president of 77Blue, which operates private- label shopping portals and coupon sites with more than 800 merchants in three countries. “There are unintended consequences to restricting trademark bidding. It’s not all about ROI. You have to consider PR,” says Lewis.

Lewis’ view is decidedly merchant-centric, which is surprising for an affiliate. According to Lewis, “Advertising on a merchant’s trademarks is a privilege and not an affiliate’s right. Merchants should consider creating a separate agreement with two or three affiliates they trust, and allow them to bid on the trademark,” he says. “This gives the merchant control that is forfeited when banning trademark bidding.”

By banning affiliates from bidding on trademarked terms, Lewis argues, “merchants are giving management of their brand to Google and Yahoo, with whom they may have no relationship. I would want to control the results that come up when a user searches on my trademarks, especially knowing that most users click predominantly on the first 10 results.”

While the majority of merchants are currently banning their affiliates from bidding on trademarks, Lewis’ view is gaining ground. Beth Kirsch, the affiliate manager for Audible.com, had a policy against affiliates bidding on her company’s trademark. But after taking Lewis’ thoughts into consideration, Kirsch did something of an about-face.

She says, “While Audible is our trademark, it’s also an everyday word. No affiliate PPC bidding left room for other companies to promote ‘audible’ products. It clearly damaged the brand. David’s input made us change our policy, where we now allow a couple of trusted affiliates to bid on our trademark,” she says. “What’s a few bucks, when we have spent millions to build a brand?”

Another affiliate, Steve White, sounds a similar note. “Affiliates have an incentive to apply creativity to the bidding and keyword selection process. That incentive is more commissions,” he says. “Therefore, a dedicated group of affiliates can far outweigh the internal efforts of a program, unless that program has the resources to hire full-time search engine experts, as well as the capital to bankroll the campaigns. The affiliates bring both to the table at no cost (to the merchant), and the results are almost instantly calculable.”

The Other Trademark Issue

Even though affiliates may not be able to bid on the trademark for Company X, they can bid on the trademark of Company Y (the chief competitor to Company X). The bids on Company Y can then direct traffic to Company X. This is an escalating problem, says Lee of Did-it.com.

“There may be some significant litigation regarding trademarks and search engine marketing (SEM),” he says. “Some marketers may try to encourage affiliates into bidding on competitive trademarks (not their own) in an attempt to shield themselves from litigation.”

In the past, Google granted requests from advertisers to bar competitors from bidding on their trademarked names. However, Google will now only review trademark complaints that relate to text appearing in sponsored listings on its Web site and those of its partners. So affiliates cannot mention a company in copy for their competitor, but they can bid on the trademarked name of that company, and that could be a liability for the affiliate program they are promoting.

Trademarks aside, the bulk of affiliate programs permit bidding on most keywords, and there are still bidding bargains to be had. Communication between affiliate managers and affiliates is essential, and the well-informed affiliate is the most efficient affiliate.

Audible’s Kirsch knows this, and she makes a “keyword kit” available to her affiliates. It’s a document outlining which keywords affiliates cannot bid on, as well as a list of suggested keywords for affiliates to use that convert well.

It’s The Brand, Stupid!

In some cases, affiliate programs have forbidden SEM outright for their affiliates. For instance, the fund-raising affiliate program for the Republican National Committee doesn’t mince words when it comes to how their affiliates may promote them. The description of their program states: “Please note that search marketing is NOT allowed. Affiliates will NOT be paid for donations generated through search engine marketing.”

Often, the reason that companies will ban affiliates from utilizing search engines in their promotion efforts is that they are concerned about the way affiliates will represent them if left to their own devices.

“We’re seeing some increased dissatisfaction from consumers who are clicking on paid search ads and being directed to an affiliate site,” commented Rob Key, president and CEO of Converseon, a communications agency. “Companies need to think very carefully about how they allow affiliates to bid on their brand names. For brand-sensitive companies, we recommend they own their brand names and derivatives. With inflation expected to grow in paid placement, finding efficiencies is absolutely critical. A merchant’s affiliate network cannot afford to work at cross purposes.”

One cautionary tale, or marketing parable, depending on where you are sitting, was on a popular marketing message board. As affiliates debated whether it was okay to use pay-per-click search to promote affiliate programs, one affiliate comments, “If in doubt, just do it!” This was followed by another affiliate who commented “It’s always easier to get forgiveness than permission in anything … just do it.”

It may come as little surprise that when affiliates were asked in the AffStat survey, “When signing up for an affiliate program, do you read the affiliate agreement?” only 45 percent responded that they always read it.

Ignorance of the affiliate program terms is bliss for some affiliates. And when an affiliate program is on autopilot, it makes it that much simpler for affiliates to game the system.

So where are we headed with all of these changes? Well, we have seen the future of affiliate marketing and paid search, and with all of the personalization, automation, verticalization and gate keeping, we will be better equipped than ever before to measure ROI.

Gone are the days of pray-per-click.

SHAWN COLLINS is CEO of Shawn Collins Consulting, an affiliate program management agency; webmaster of the AffiliateTip.com affiliate program directory; and a founder of the Affiliate Summit conference. He authored the book Successful Affiliate Marketing for Merchants and the AffStat affiliate marketing benchmark reports cited in this story.