Over-the-Counter Advice for a Healthier Home Page

A double dose of design is not nearly as potent as performance for a site that needs a checkup.

What does design mean to you? Since the goal of this column is to teach website owners, Internet marketers and developers how to design home pages and landing pages that meet business objectives, it’s important that we are on the same page, the same line – the same word – as we explore our latest makeover. So let me just begin this month’s column by defining the term design.

I actually have an issue with the word design. The problem is that most people automatically associate design with art. Too many website owners mistakenly assume that the definition of a well-designed website is one that looks good. Let me set the record straight: A well-designed website is one that performs. Making the site look good is often part of the process of developing a site that performs – but aesthetics are only a piece of the puzzle.

I use the phrase conversion design to describe what I do. I’ve defined conversion design as the deliberate arrangement of elements such as salesmanship, copywriting and visuals to produce an intended outcome. The idea is to encourage users to take a desired action, and the end result is always the same – increased conversions.

That leads me to a second reason for defining design. You may notice that this issue’s makeover isn’t as visually dramatic as previous columns. That’s because we wanted to focus on how simple changes (as opposed to complete visual makeovers) can go a long way toward making your home page more effective. The step-by-step changes we review in this edition of By Design are improvements that any website owner can implement. Now on to the show.

For this issue, we chose to redesign StudentDoc.com, a resource website for medical students that generates the majority of its income from CPA and CPC placements. Naoum Issa started StudentDoc.com shortly after graduating medical school because he recognized a lack of online venues dedicated to helping medical students find the information and resources they need. Naoum has developed a website full of useful resources and is generating a fair amount of traffic and income. Now what? Eventually, every successful website owner wants to take their site to the next level.

Heal Thy Site

StudentDoc.com currently provides salary information, medical test preparation and advice, a medical industry job search and a host of other features that harried med students would find essential. While most of the traffic goes directly to the lower-level pages through organic search, Naoum wants StudentDoc.com to be imprinted in the minds of young medical students. Unfortunately, his current home page just isn’t having that effect. Instead, it functions more like a site map for search engine spiders.

The challenge is to redesign the home page so that it accommodates both the visitor and the search engines. As with any website, the home page should inspire confidence and make the site’s purpose immediately clear. In this case it should also encourage return visitors so that med students who may not have an immediate need for the content offerings will be inspired to return later, like when they need to prepare for their MCAT exam or when they’re ready to look for a job to pay off those student loans.

When we showed the site to our team members, the initial reaction was, “What do they do?” When a group of people looks at your website and has to ask that question, you’re in trouble. At first glance, our group thought the site offered some sort of document services for students. Since the site has no tagline and lacks the imagery to convey that it serves the medical industry, our group assumed that doc was short for documents, not doctors; hence the name StudentDoc.

Next, the site didn’t offer much in terms of encouraging users to come back for a second or third visit. There’s no way to bookmark it, register for updates, send it to a friend or any other tool that might encourage that type of action. Adding these elements will help increase the repeat traffic the site receives.

So let’s get to our step-by-step review of the changes we made:

First, we added a nice photo of medical students. Imagery can quickly set the tone for a website. Since our brains can process images faster than text, the photo makes it clear that the site is targeting medical industry students and recent grads.

Next, we updated the logo by changing the mark. We chose an image that people will readily identify as medically oriented and added a simple, yet clear tagline under the logo: “The Medical Student’s Resource Guide.” These steps solidify the messaging and prevent any confusion about the site’s purpose.

Naoum informed us that his banners weren’t particularly strong income generators. To remedy that issue we pulled them and added text links in the top banner area and forum excerpts in place of the skyscraper (728×90) ad. These text links are a quick way for users to find popular content within the site. The potential downside to this is that it seems to make the site slightly more cluttered. In this case, however, it works because the site is highly targeted so users aren’t as quick to leave. That is a good example of how conversion design chooses performance over looks.

We kept the same general color scheme, but removed the unnecessary traces of red and made the blues a little darker. The lighter, brighter blues gave the site a fun and playful emotion, whereas the new colors give the site a stronger feeling and add to the site’s credibility.

Finally, we added a row at the top of the page to house the “get people to come back” links like Bookmark Us, Register for Updates, etc. We also added a more prominent search function. These changes will encourage one-time visitors to become regular visitors and ultimately increase site traffic and sales.

While we did make some minor graphical updates, all of our changes are simple enough for any website owner to implement. These basic elements are important to keep in mind when designing a site because they will build the foundation for further tweaks and improvements. Remember, design doesn’t have to put fashion over form. Conversion design is about bottom- line results.

Would you like to get a free home page or landing page design for your website and see it featured in this column? To be considered, send your name, company, contact information (phone, email, etc.), a brief description of your business and its goals, and, of course, your URL to bydesign@sostreassoc.com. Please put “Revenue’s By Design Makeover” in the subject header.

PEDRO SOSTRE is principal and creative director at Sostre & Associates, an Internet consulting, design and development firm, which also promotes affiliate programs on its network of websites. Pedro is currently working on a book about his new concept of conversion design. For more information, visit SellNowBook.com.

Mistakes Lead to Success

Learn from your missteps and the path to affiliate success will be paved with opportunity.

Lurk around any affiliate marketing forum for more than a few minutes, and you will surely encounter a post that reads much like this: “Affiliate marketing sucks! I’m not making ANY money and I’ve tried EVERYTHING – Google AdWords, AdSense and affiliate programs. NOTHING works. My sites have loads of content and I even started a blog. I get a ton of traffic, but for every dime I spend on PPC, I’m lucky if I make a penny. More often than not I earn squat.

I followed the advice of those so-called affiliate marketing ‘gurus’ and coaches, but at this point I don’t believe ANYONE is really making money as an affiliate. Those success stories are a total scam. ~Disgruntled FORMER Affiliate”

Affiliate marketing success stories are a “total scam”? No one is making money? Our disgruntled former affiliate must have missed the keynote address at Affiliate Summit 2006 West last January by Anne Holland of Marketing Sherpa, and failed to get the information from any one of about 100 blog entries.

Here’s a brief recap. Ms. Holland said affiliate marketing bounties and commissions will reach $6.5 billion in 2006 – and that figure didn’t include projected earnings from contextual ad networks such as Google AdSense.

Although it may be hard to believe that thousands of affiliates will share $6.5 billion dollars in earnings when your ROI is in the red – believe it. The affiliate commissions’ pie gets bigger every year and anyone who is willing to learn what it takes to be a professional affiliate can take a slice.

If you really want a piece of that pie, review your site and ask yourself the following questions. Determine whether your site needs improvement. Success could be as simple as making one or two of the changes recommended below.

Do you lack knowledge or experience in your niche market?

Just because your auntie had a double hip replacement 10 years ago does not qualify you to give advice on that topic, unless you are an orthopedic surgeon.

Anyone searching for “hip replacement surgery” on Google wants and deserves information published by medical professionals. If your credibility isn’t immediately shot by that double-hip-replacement-4-you.com domain address, it will be as soon as your visitor attempts to confirm your identity and credentials on your “About Us” page.

People buy from people they like and trust. Build credibility with your visitors by working with topics about which you are knowledgeable, or about which you are willing to gain expertise.

Does your site’s appearance or lack of order turn people away?

Does that olive-on-pink color scheme really appeal to the Prada crowd? If visitors can look beyond the amateur “look and feel,” will they find what they want easily from amongst the 50 banner ads on your home page?

You have approximately three seconds to engage your visitor. Greet them with a pleasing appearance. Also make sure that your site’s theme and objective are congruent and immediately apparent. Navigation should be categorical and consistent throughout your site.

If you find it difficult to make an objective assessment, ask for a brutally honest review of your site from an experienced webmaster, preferably a super-affiliate.

Do you rely on a single source of income?

Affiliate programs can and do change their terms of agreement. I’ve seen commission rates cut in half and some affiliate programs shut down with no advance warning. “Google AdSensers” should also beware. Many experienced surfers now click Back buttons rather than support sites whose only purpose is to promote Google’s advertisers.

Hedge your bets. Successful affiliates build comparison or review sites that help visitors make informed choices about a variety of products offered by different merchants.

Do you sell rather than endorse products?

“ABC Widget is the BEST-ever widget in the whole history of widgets! No other widget even comes close. Buy ABC Widget NOW!!!!!”

You wouldn’t buy in to that kind of hype and neither will your visitors. Give your visitors credit for knowing that no product or service is ever perfect. Be honest. Endorse your merchants’ products with informative and balanced product reviews.

Do you waste time promoting two-tier programs to other affiliates?

For every $1,000 dollars I earn promoting a merchant’s products as an affiliate, I may earn a buck through the efforts of webmasters I referred to the program.

Invest your time and effort relative to your earnings. Promote those products and services that make you money and let other affiliates find their own programs.

Are you burning up rent or grocery money on pay-per-click campaigns?

The fastest way to the PPC poorhouse is to use generic ad copy that sends all traffic to your home page.

Prequalify visitors by mentioning a specific product or type of product in your ad title, then send them to a landing page that promotes that product. Test your campaigns by sending 250 to 1,000 clicks to the page. Determine your conversion rate then, set your maximum cost per click. Control advertising expenditures by setting daily budget, keyword targeting and negative keywords options.

Are you wasting good traffic?

Do you want to quintuple your earnings and your conversion rate? Then build a list.

Create an auto-responder series and encourage visitors to sign up for a free downloadable report or weekly tips. Invite subscribers to revisit your site by following up with topical information, new product and discount offers.

Invest an hour or two each week to communicate with your current subscribers. It is cheaper, more valuable and more fun than building new PPC campaigns to attract more nameless traffic.

Does your site fail to stack up against the competition?

What sets super-affiliates – the 5 percent of affiliates who sell 95 percent of a program’s products – apart from their peers?

Low-earning affiliates use the same old merchant copy or private-label rights articles to save time and energy; super-affiliates write their own articles, reviews and endorsements. Super-affiliates provide contact information and answer visitors’ questions. They create forums to build community and improve visitor retention rates. Super-affiliates survey their visitors and then give them what they want.

Give your visitors more than they expect and they’ll return the favor.

Do your visitors know you? Although your site may be hugely informative, it may lack repeat visitors because it fails to entertain or provoke curiosity.

The remedy is simple: Brand yourself. Stand apart from the vast majority of sites on the Web, which are completely boring and anonymous. Inject your humorous, witty or even curmudgeonly personality.

Are you working from a plan? Are you patient and persistent?

As the old saying goes, “Fail to plan, plan to fail.” Plan your site from the ground up before registering a domain or opening your HTML editor. Act on and stick with your plan.

Also, when you give up on a project too soon, you guarantee failure. So, put any unrealistic expectations of overnight riches aside, accept that there is work to do and stay with your project for the long haul.

Use the points above to determine whether your site hits or misses the mark. Implement the recommended solutions if required.

Don’t be afraid to make mistakes. It’s a safe bet that you will make some along the way. It’s not likely that any one mistake will kill your affiliate business. Simply correct the error and go on. The worst mistake a new affiliate can make is not to learn from their mistakes. The best thing that you can do, however, is to learn from the mistakes of others.

All mistakes are just opportunities in disguise.

ROSALIND GARDNER is a super-affiliate who’s been in the business since 1998. She’s also the author of The Super Affiliate Handbook: How I Made $436,797 in One Year Selling Other People’s Stuff Online. Her bestselling book is available on Amazon and SuperAffiliateHandbook.com.

Search Marketers Target iPod Users

Discover how your business can leverage podcasts before it’s too late.

Everyone’s talking about podcasts, those audio files downloaded from the Web and played on demand using an Apple iPod or any MP3 media player. Many podcasts are just for fun, but marketers are discovering they’re also a promising new way to deliver advertising.

In a sense, there’s no difference in what you can do with a podcast than with radio airtime. You can record a speech, an interview, a commercial or any other audio. But podcasts are used differently than radio because of their immediacy, low cost and flexible time duration.

First off, podcasts can cover the most unusual subjects. If, for example, you want to target a few hundred people, it’s cheap enough to do with a podcast, whereas a radio broadcast or a mailed CD would be unaffordable. Go ahead and record a podcast interview with a famous photographer about digital cameras. Mention your company a few times as the sponsor. Maybe you’ll sell a few cameras to serious photographers.

Many marketers use podcasts to reach the seemingly unreachable. Folks listening to iPods are walking around or stealing time they’d otherwise use to sleep on the train – time when they are beyond the access of most advertising media. Podcasts are also favored by those under 30 years old, who are becoming harder to reach through traditional print and broadcast advertising.

In addition, podcasts provide longform messages that were previously possible only with infomercials or public relations opportunities. And you can make one fast: Record it today and stick it on your website and your message is out there. For these and many other reasons, podcasts are the cool new way to deliver your marketing message.

The Search Marketing Angle

By now you may be asking, “What does all this have to do with search marketing?” Sure, podcasts broadcast your message, reach market segments that are tough to access, help your company seem trendy and keep your teeth flossed and pearly white, but they don’t benefit your search marketing, right? Wrong.

Podcasts are a great way to get links to your site, and search engines just love links. They especially love one-way links – links from websites to your pages that are not reciprocated. Those links seem to be the most unbiased votes for the quality of your content, telling the search engines to rank those linked pages highly for searches that match the pages’ words.

To get those precious one-way links, you need to offer content that causes other sites to voluntarily link to yours. Podcasts are a great way to do so. Audio is naturally more engaging than text and your podcast can contain up-to-the-minute, fresh information from experts with a strong point of view. Done well, podcasts act as link magnets for your site.

You can also use podcasts to give yourself a link. If you submit your podcasts to specialized directories, such as Podcast.net, you’ll automatically get a link back to your website. Every little link adds up to help your search ranking.

Podcasts and Search Engines

Podcasts attract links as we’ve seen, but that is just one of their many talents. Podcasts are also full-fledged members of the content community, so why can’t searchers find your podcast and discover your site that way? After all, you create Web pages to attract links, but search engines easily find those pages. Unfortunately, Google doesn’t really “see” your podcasts yet.

You’re probably familiar with Google’s image search, in which you can enter a keyword and find pictures that match that word. Enter “zebra” and see pictures of zebras, but Google does not truly recognize those pictures as containing zebras. In fact, Google is using occurrences of the word “zebra” to find the pictures. So it will find pictures stored in files named “zebra.gif” and it will find pictures that are described with alternate text that contains the word “zebra,” but Google has no clue whether the picture is truly that of a zebra. That’s why you can sometimes see weird-looking results in image search.

For Google and many mainstream search engines, searching for podcasts is much like searching for images. Google can find a searcher’s keywords on the Web page that describes a podcast, but can’t find podcasts that contain those same words in the spoken audio. That means that a searcher will find your podcast from words in the title or the description that you place on your landing page, but not from any other words said inside the podcast audio file.

Some podcast search facilities, such as Podcast.net, allow you to provide a title and description to their directory. Similarly, Odeo.com lets you claim your podcast and offer a description. No matter the mechanism, make sure you provide the right search keywords so that search engines find the landing page for your podcast. You do that the same way you’d choose which words to use when optimizing any Web page: by choosing the most popular relevant keywords and ensuring they appear.

Audio Search Engines

You might suspect that trying to find 15- to 20-minute podcasts using only the words in their titles and descriptions would leave a lot to be desired. Search engines are just beginning to expand their bag of tricks to look for the actual words spoken in the podcast audio. To do so, the engines translate those spoken words into text.

Nexidia.com company executives claim that the best way to make speech searchable is to convert it to phonemes, the speech sounds that correspond to each syllable spoken. While experts agree that the phonemic approach can be useful for proper names, many believe that true speech recognition (converting audio speech into the actual textual words) provides far better searchability.

One of these experts, Marie Meteer, the vice president of commercial speech for BBN.com, says searching for the name “Stern” might match the phonemes for the words “best earnings,” even though searchers would find this a strange result (it occurs because combining the end of “best” and the beginning of “earnings” results in a sound similar to “Stern”). Speech recognition techniques avoid this kind of error by matching the audio to the words “best” and “earnings.” Nothing is ever 100 percent accurate, but useful audio search engines based on speech recognition technology are beginning to appear.

Podzinger.com is a new search engine that uses the BBN speech recognition technology to find the words inside the podcast audio (for a full interview with the BBN crew behind Podzinger, visit MikeMoran.com and check out the June issue of my newsletter).

SingingFish.com, owned by AOL, also uses speech recognition techniques to find words spoken in audio and video files, including podcasts. Despite this interesting technology, however, none of these audio search engines draws many searchers.

What are the mainstream search engines doing? Yahoo Podcasts is a beta offering that searches explicitly for podcasts, but offers no speech recognition capability yet. Reports are rampant that both Google and Yahoo are hiring speech recognition experts, so stay tuned. Before long, the major search engines may be finding the words inside your podcasts just as they find the words on your Web pages. When they do, expect your podcasts to require the same attention to search optimization that you provide your Web pages today.

So get ahead of the game now. Perform keyword research before your podcast so that you use titles and descriptions on your search landing page that reflect what searchers are seeking. Moreover, carefully choose the vocabulary of the podcast to reflect searchers’ keywords. That way you’ll be ready for the speech recognition techniques from audio search engines as they become mainstream.

MIKE MORAN is an IBM Distinguished Engineer and the manager of IBM.com Web Experience. Mike is also the co-author of the book Search Engine Marketing, Inc. and can be reached through his website MikeMoran.com.

Follow Up or Fall on Your Face

Guerrilla affiliates know well the importance of customer followup and prospect follow-up because they know what it takes to succeed in business.

Why do most businesses lose customers? Poor service? Nope. Poor quality? Nope. Well, then why? I say, it’s apathy after the sale. Most businesses lose customers by ignoring them to death. A numbing 68 percent of all business lost in America is lost due to apathy after the sale.

Misguided business owners and affiliates think that marketing is over once they’ve made the sale. Wrong, wrong, wrong. Marketing begins once you’ve made the sale. It’s of momentous importance to you and your company that you understand this. I’m sure you will by the time you’ve come to the end of this article.

The Guerrilla Way to Follow Up

First of all, you need to understand how guerrilla affiliates view follow-up. Although, affiliates are not actually making the sale, the merchant they promote is; often the customer doesn’t really understand that. So, a good affiliate makes it part of their DNA to have good follow-up because they know it costs 10 times more to sell something to a new customer than to an existing customer.

They have a follow-up strategy, just as they have a marketing strategy. That follow-up strategy dictates what they’ll do in the way of follow-up and how often they’ll do it. It helps them stay on track. It helps them remember that follow-up is part of their day-to-day business.

When a guerrilla affiliate makes a sale, the customer receives a followup thank-you note within 48 hours. When’s the last time a business sent you a thank-you note within 48 hours? Maybe once? Maybe never? Probably never. Now that email is part of business, the answer should be “always” because email follow-up is so easy. I buy things online and usually get a thank-you email not in two days, not in one day, not even in two hours, but often in two minutes. Technology makes that possible. Your customers know it, so they’re learning to expect it.

The guerrilla affiliate sends another note or email or perhaps makes a phone call 30 days after the sale. This contact is to see if everything is going well with the purchase and if the customer has any questions. It is also to help solidify the relationship. Guerrillas know that the way to develop relationships – the key to survival in an increasingly entrepreneurial society – is through tenacious customer follow-up (and prospect follow-up, which we haven’t even addressed yet).

Guerrilla affiliates send their customers another note within 90 days, this time informing them of a new and related product or service. Possibly it’s a new offering that the guerrilla business now provides. And maybe it’s a product or service offered by one of the guerrilla’s fusion marketing partners (those who enter into business agreements such as mutual links and advertisements).

Guerrilla affiliates are very big on forging marketing alliances with businesses throughout the community and – using the Internet – throughout the world. These tie-ins enable them to increase their marketing exposure while reducing their marketing costs, a noble goal. More marketing, less expense. That’s a pretty healthy formula to follow.

After six months, the customer hears from the guerrilla again, this time with the preview announcement of an upcoming sale. Nine months after the sale, the guerrilla sends a note asking the customer for the names of three people who might benefit from being included on the guerrilla’s mailing list. If the company chooses to use surface mail for this, a postpaid envelope is provided. Because the guerrilla has been keeping in touch with the customer – and because only three names are requested – the customer often supplies the names.

After one year, the customer receives an anniversary card celebrating the one-year anniversary of the first sale. Perhaps a coupon for a discount is snuggled in the envelope or attached to the email.

Fifteen months after the sale, the guerrilla sends the customer a questionnaire, filled with questions designed to provide insights into the customer. The questionnaire has a paragraph at the start that reads, “We know your time is valuable, but the reason we’re asking so many questions is because the more we know about you, the better service we can provide you.” This makes sense. The customer completes and returns the questionnaire.

Perhaps after 18 months, the customer receives an announcement of still more new products and services that tie in with the original purchase. And the beat goes on. The customer, rather than being a one-time buyer, becomes a repeat buyer – the kind of person who refers others to the guerrilla’s business. A bond is formed. The bond intensifies with time and follow-up.

Let me put this in numeric terms to burn it into your mind. Let’s say you earn a $200 profit every time you send a customer to a merchant and they make a big sale. If you send the customer a thank-you note, the one-month note, the three-month note, the six-month note, the nine-month note, the anniversary card, the questionnaire, the constant alerting of new offerings, the customer, instead of making one purchase during the course of a year, might make three purchases. That same customer refers your business to four other people. Your bond is not merely for the length of the transaction but for as long as say, 20 years.

Because of your follow-up, that one customer is worth $400,000 to you (assuming three purchases per year and the referred sales, both initial and repeat). So that’s your choice: $200 with no follow-up or $400,000 with follow-up. And the cost of follow-up is not high because you already have the name of the people with whom you’ll be following up.

Following Up With Prospects

Some wise affiliates have already figured out the crucial importance of customer follow-up but still haven’t got a clue about prospect follow-up. Heed the words of author Harvey Mackay, who wrote, Swim with The Sharks Without Being Eaten Alive. At a 1992 presentation in Calgary, Harvey faced the audience of more than 1,000 people and claimed, “We have never failed to close the sale with a person we have identified as a prospect.”

I admit that I was shocked to hear that. A 100 percent close rate. I knew that Harvey was a great closer, but 100 percent? Then I heard what he said next: “Sometimes, we close that prospect within two weeks. Other times, it may take as long as seven years.” Seven years?

Prospect follow-up is not a single act, but a process that goes on and on. That proves to prospects that you really care, that you really will work hard satisfying them because you’re working so darned hard to get their business. The truth is that prospect follow-up is lush terrain for guerrilla affiliates. Prospects who have been contacted by others and then ignored are ripe and ready for the company that will contact them and stay in touch. They know when they are being ignored and they know when their favor is being curried.

The cost of prospect follow-up is also not high – for the same reason as with customers. Prospect follow- up, however, is different from customer followup. For one thing, you can’t send a thank-you note – yet. But you can consistently follow up, never giving up and realizing that if you’re second in line, you’ll get the business when the business that’s first in line messes up. And they will foul up. Know how? Of course you do. They’ll fail to follow up enough.

JAY CONRAD LEVINSON is the acknowledged father of guerrilla marketing with more than 14 million books sold in his Guerrilla Marketing series, now in 41 languages. His website is guerrillamarketingassociation.com.

The Lure of Youth

They’re wired, they’re affluent and they are a largely untapped market. This prized group is teens. They are often referred to by a variety of different monikers including Echo Boomers, Millennials, Netizens, Generation Y, Trophy Children (because of the strong impact that parents have in their decision-making process) and Generation N (for Net).

When analyzing this group, market researchers often slice and dice things in slightly different ways, but one common thread among all the facts and figures is that the group’s size is on the rise and its spending power is awesome and undeniable.

Northbrook, IL,-based Teenage Research Unlimited (TRU) put the current U.S. population of teens (age 12 to 19) at 31.6 million. TRU says this population, which has increased steadily since 1992 as children of baby boomers entered their teen years, spent $155 billion in 2005.

Alloy Media says 10-to-24-year-olds are a demographic said to be 60 million strong with annual spending power of as much as $250 billion. Alloy expects the number of teens to reach 35 million by 2010, while Forrester Research says there are 73 million people under the age of 18 in the U.S.

JupiterResearch reports that teenagers spent over $158 billion in 2005 and are expected to spend $205 billion in 2008.

A recent Harris study reports that American kids, teenagers and young adults, aged 8 to 21 years old, have annual incomes totaling $211 billion and they are spending 81.5 percent of their earned income – a whopping $172 billion per year.

Younger kids, the so-called “tween” set between ages 8 and 12, spend $51 billion per year, according to Alloy (see sidebar, page 58).

Futurist Jim Taylor, vice chairman of the Harrison Group, says boys under 18 have an average of $525 to spend each month, while girls have $430.

U.S. teens controlled an estimated $169 billion in disposable income last year – or $91 per week per teen – according to a study by TRU.

So where do these kids get their money? The major sources of teens’ income are: parents on an as-needed basis (47 percent); odd jobs (41 percent); gifts (41 percent); parttime jobs (28 percent); regular allowance (25 percent); and full-time jobs (11 percent), according to TRU. The average young consumer spent $84 per week. Some $57 of that was their own money, while they received the remaining $27 from their parents.

And unlike kids of the past, they are free to spend; 22 percent of U.S. teens have credit cards while in high school.

Getting Hip to the Kids

But this group is hard to get a handle on. Maybe that’s why researchers have devoted a lot of effort to trying to understand this highly coveted group. Here are some basic things you need to know about teens.

  • They are very wired and likely to stay online for longer periods than adults.
  • They are more likely to access the Internet from different locations.
  • They participate in a wider range of online activities.
  • They are more likely to adapt quickly to new technology, and embrace its changes.
  • They multitask while online.
  • They are fickle and not necessarily brand loyal.
  • They are savvy and often distrustful of traditional advertising methods.

No other age group matches teens’ enthusiasm for the Web or their use of broadband connections. About 21 million or nearly 87 percent of the 12-17 age group is online, many at least twice a day, according to a recent Pew Internet & American Life study. That’s more than the activity of 25-to-29 year olds, which have an 85 percent penetration. And 49 percent of teens have high-speed connections at home. That’s more than any other age group.

A Burst Media survey from June of 2006 reports that 69 percent of Web users (13 to 17 years of age) said if they had no Internet access outside of school it would “ruin” or make their day “not as good.” Bummer, dude. Among teens who go online from home, friends’ homes, libraries and other locations outside of school, more than one-third (37.4 percent) say they spend three or more hours per day on the Internet.

Teen males are more likely than teen females to say they spend three or more hours per day on the Internet – 39.9 percent versus 34.7 percent. Additionally, nearly one in five (17.9 percent) say they spend between two and three hours online; one-quarter (25.1 percent) say they spend one to two hours online; and 19.6 percent say they spend less than one hour per day online outside of school.

What Teens Are Doing Online

And while spending all this time online kids are multitasking – Web surfing, watching TV, sending emails, listening to music, sending instant messages and doing homework (see sidebar, page 54).

“Corralling these distractions to minimize their disruption is a significant challenge for marketers,” Chuck Moran, Manager of Market Research for Burst Media, says. “Marketers should use the Internet to create a central content point for teens on a variety of subjects and interests. By doing so marketers can then develop integrated marketing campaigns with advertising creative and programs referencing a central platform and working in tandem to get teens’ attention.”

One way to do that might be look to the growing popularity of social networking sites. Three out of five (61.4 percent) respondents in the Burst Media study had visited a social networking website. Of those, 60.7 percent joined the site and created a profile. Teen females are significantly more likely than teen males to say they have visited and joined a social networking site (67.5 percent versus 53.7 percent).

And MySpace leads the pack when it comes to social networking. From April 2005 to April 2006, the overall number of teen visitors (between the ages of 12 and 17) to MySpace grew from roughly 3 million to 7.8 million. That was up 162 percent, according to comScore Media Metrix. MySpace currently has approximately 85 million members.

Like Google, MySpace has spawned a cottage industry of sites that provide support and services to teen subscribers. Sites like MyGen.com.uk, Coshed.com and Poqbum.com, help kids create profiles, layouts, graphics, games, icons and quizzes for MySpace blogs.

But once something gains popularity there is usually some backlash – MySpace has drawn fire from parents and teachers – and now many teens are looking to newer, edgier social networks, such as Bebo.com, Tagged.com and MyYearbook.com. Tagged.com grew to half a million teen visitors in April 2006, from a virtual unknown, according to Nielsen//NetRatings. Also a newcomer, MyYearbook.com blossomed to 1 million visitors over the last year.

Marketers value these virtual communities for a number of reasons: They attract a very specific target audience; visitors return again and again; they provide a place to promote and sell products; it’s fairly easy to collect demographic and product- use information; and they provide a place to interact one-on-one with teens.

However, it’s not going to be easy for affiliates to crack.

“It’s an interesting market opportunity that has everyone salivating,” Blagica Stefanovski, affiliate program director at PartnerCentric, says. “But it’s difficult for affiliates to make headway on those social networking sites like MySpace or FaceBook. I think an affiliate would need to have a niche site that caters to teens or be a MySpace superstar with a large network of friends. It’s going to be hard for affiliates to get credit for driving registration and sales in that environment.”

She adds that there is significant opportunity for merchants on social networking sites as long as the merchant can get all 0f its divisions on the same page to drive success.

Consultant Shawn Collins agrees that it’s difficult to acquire teen-centric affiliates. He found this out in his role as the affiliate manager for Payless Shoes, which has several lines of shoes geared toward young women and teens.

“I tried to reach out but there were not a lot of savvy affiliates for the market,” he says. “Most teens aren’t serious affiliates or aren’t taking it as seriously as people who do it for income. They are not as diligent and business like. Also it’s a hard market to crack according to Collins, because it’s so community oriented and many of the popular online communities don’t do performance ads just CPM ads.

Teens also use such social gathering spots like MySpace to talk music. That means the social network is ripe with independent bands promoting free MP3s. But other music sites are also feeling the beat. Apple.com, for example, increased its teen visitor base by 68 percent to 3 million from April 2005 to April 2006, according to ComScore. A study by the Pew Internet & American Life Project reports 47.1 percent of teens download music (see Music story, page 68).

That same study from Pew also reports nearly half (49.3 percent) of the respondents play online games, which provide marketers with a great vehicle for keeping kids in the marketing loop with integrated product promotions called “advergames” (See video gaming story, page 74).

Another thing that teens love to do is talk, and online communication reigns as the preferred method of chat. A recent Lycos survey showed that once the school day ends, 45 percent of the teens surveyed preferred to communicate via Instant Messenger (IM) outside of school. Although public teenage chat rooms have become stomping ground for spammers and other unscrupulous prowlers, legitimate marketers can still be heard above the din.

And when they are not chatting online, teens are talking on their cell phones. In fact, 70 percent of teens own a cell phone. Many claim that creating online branded content for teens or reaching young buyers through their cell phones is the way of the future.

“Seen as the next frontier, mobile marketing appears to infiltrate teens at a rate much higher than adults,” a Forrester report says. In addition to buying ringtones, Web-enabled phones will make it possible to watch video clips and shop via cell phone.

And while the average teen spends seven hours a week on the Net, they spend 10 hours a week watching TV, a difference more pronounced than for online adults, according to JupiterResearch. Many suggest that a multichannel mix of online and television would likely reach the teen population.

Blogging is also something that has captured the attention of teens. More than half of all teens and 57 percent of teens who use the Internet have created a blog or Web page, according to Pew Internet & American Life Project. The most active segment among teenage bloggers is girls aged 15 to 17. One-quarter of online girls in that age group blog, compared to 15 percent of online boys of the same age, the study says.

But blogs can be tricky territory for online marketers because many blog sites are owned or run by individual users. These sites are often highly personal journal- based pages that are updated with no regular schedule and subject to the whims and opinions of the users. Many don’t even accept advertising. All this combines to make them a less attractive opportunity for marketers.

Hook, Line and Sinker

Many industry watchers characterized teens as fickle, cynical and not particularly brand loyal.

That’s a claim Forrester Research analysts dispute. “Although they admit to shopping around before making a purchase, more than half of both younger and older teens agree that when they find a brand they like, they stick with it,” the Forrester report says.

However, when it comes to trends and what’s new – the brand is not the issue – it’s all about what’s hot at the moment.

Still, for the most part, teens are incredibly marketing savvy and by the age of 19 the average teen has seen roughly 300,000 advertising messages, according to Peter Zollo, author of Getting Wiser to Teens: More Insights into Marketing to Teenagers. Zollo is also co-founder and president of market researcher TRU.

To cut through the clutter-marketers need to develop marketing that doesn’t seem like marketing, according to Boston College sociology professor Juliet Schor, author of Born to Buy: The Commercialized Child and the New Consumer Culture.

And while there are some common traits among teens, observers note that teens are profoundly accustomed to marketing and they can easily detect messages that are less credible. Most say resorting to stereotypical images will backfire. There needs to be a keen understanding of teen culture to develop messages that resonate with them. Marketing to teens is all about inspiring positive involvement. That takes clever creative and a commitment to delivering value.

“It’s important to speak the right language and use the right people,” Ron Vos, founder and CEO of Hi-Frequency Marketing, a street marketing company, says. “If you stay true to their culture, it can be very effective.”

Parry Aftab, executive director of WiredSafety.org says marketers tend to approach teens in one of two ways. “Either they treat teens as kids, in that they should do what they’re told, or they treat them like smaller versions of adults, in that they assume kids have the same values as adults,” Aftab says. “Neither approach works with teens.”

Because teens are especially adept at avoiding advertising through the use of pop-up blockers, marketers have gotten more creative in their delivery of their messages to this younger audience, according to a report by Forrester Research that highlights advergames, instant-win games, online coupons, streaming video ads and cell phone promotions as things that work with teens.

Under the Influence

 Teens have already been identified as music influencers and often the primary decision makers for consumer electronics purchases within their family’s household, according to Jupiter Research. But the real key to connecting with teens is to find the influencers within their peer community. The Jupiter report revealed that 17 percent of the online teens would qualify as highly active online “influencers” who spend roughly eight hours per week on the Internet, engaging in the broadest range of activities. More than half (53 percent) of the influencers are girls who actively shop and spread the word to friends about trends and products.

That’s why viral marketing and word of mouth seem to be working. A recent study from eMarketer says, “For the most part, it works. Teens are active users of viral marketing tools like forwarding video clips to friends, using ‘e-mail a friend’ links, and sending e-greetings. They use tools like ‘e-mail a friend’ links on retail sites, wish lists, and IM when shopping to get purchasing help from friends.”

Often marketing companies, such as Hi Frequency Marketing, will use an extensive network of teen influencers who are rewarded for promoting brands to their friends and acquaintances. But that can backfire if the promotion is uncovered or deemed fake.

Still some claim too many teens exhibited concerns that companies would steal their friend’s emails if they used a “forward to a friend” feature common in many viral marketing campaigns. Teens have also expressed concern about cluttering up friend’s inboxes as well as a reluctance to waste their friends’ time by forwarding jokes and other things found on the Net.

Instead, Vikram Sehgal, research director for JupiterResearch, recommends search engine marketing as an effective tool in reaching this age group.

Google is already part of teens’ online routine. According to comScore, Google got a rise from teens in the last year as the number of teen visitors to Google jumped 24 percent to 10.7 million from April 2005 to April 2006 (see sidebar, page 54).

The comScore report states “it’s clear that there are benefits to providing realtime inventory information to sites like Google when it comes to capturing young consumers. They’re three times more likely to use Google to find local businesses than online yellow pages from a phone company.”

According to a study by A Couple of Chicks Marketing firm, the younger generation is very patient when searching. Fifty-three percent of those surveyed by A Couple of Chicks say they go to as many pages as they need until they find the answer, with only 18 percent sticking to the first page. With 79 percent of the teens stating they have never clicked on a sponsored ad, most said they believe most of what they see on the first page is some sort of advertising – whether it is not.

Other findings from that report showed Expedia has clearly done the best job of building their brand with Gen Y. Over 56 percent of the respondents said their families had booked a vacation on Expedia. Hotels.com came in second at 28 percent. Identical statistics were cited when asked if they had ever visited any travel sites. From a marketing perspective, teens were not at all familiar with Travelocity, Priceline, Hotwire or even the ability to book travel on Brand sites. The survey concluded these habits will have an influence on future purchases as this group ages and begins to book their own travel.

Getting to customers early is what many are shooting for. In April, Toyota started a campaign to promote its Scion car in an unusual place – Whyville.net an online community that caters to 8-to-15 year olds. These kids can’t reach the pedals, let alone buy the car. The hope is that they will influence their parents’ purchase or grow up and have some brand loyalty to Toyota.

Toyota claims that just 10 days into the campaign, the word “Scion” was used in Whyville.com’s online chats more than 78,000 times; hundreds of virtual Scions were purchased, using “clams,” the currency of Whyville; and the community meeting place “Club Scion” was visited 33,741 times. These online Scion owners customized their cars, drove around the virtual Whyville and picked up their Scion-less friends for a ride. Cadillac has used similar tactics and incorporated its cars in a game for Microsoft’s Xbox.

What some say works is to reverse the marketing process from aiming for awareness to achieving shared network respect. Let teens have an influence in shaping your brand’s identity. Build trust with teens by using words and images that make your website feel like a place (a destination or world); create friendly characters that encourage kids to identify with products and companies; develop Interactive games and activities that get kids to return; develop clubs that teens can join; offer contests, quizzes and brand-related games; and use bold graphics.

Just remember there are a host of issues to consider when dealing with highly impressionable teens. Parents are clearly worried about internet access exposing their children to sexual predators, to values they do not agree with or to ideas that their children are not ready to see or understand.

A nationwide poll conducted by Common Sense Media in 2006 found the No. 1 media concern for parents has shifted from television to the Internet. Currently, 85 percent of parents say the Internet poses the greatest risk to their children among all forms of media, compared to 13 percent who consider television the biggest risk.

So, if you don’t want parents to use parental controls to block your site, be sensitive to what might be considered parental concerns and that way you’ll keep the parents happy and the kids coming back.

Jeremy Palmer: The Million Dollar Man

Jeremy Palmer knew he had the entrepreneurial spirit. He just hadn’t found the right thing to let it soar.

He knew there was more to life than his mid-level job at a small financial services company. As a Web developer, in 2002 he launched website MeetYourMatch.com in hopes that it could generate a little extra cash for his wife and two kids in Utah and give him an outlet to pursue his independent business ideas.

He sold things on eBay. He sold some of his possessions just to get his affiliate sites off the ground. He wasn’t exactly sure of what he was doing. That was 2001. Fast forward to his current life as an affiliate marketer and he would say his wings are no longer clipped – in fact, in 2005 he made $1 million in commissions.

He will be the first to say that he had never envisioned this life for he and his family. In the beginning, he worked part time at night and on weekends on a dating site but it wasn’t making much money. He loved building websites but didn’t see a lot of cash in assembling other people’s sites. His original dating site went up in 2002, a time when dating on the Internet was just about to explode and Palmer felt like he had a killer domain name – with MeetYourMatch.com. “I was naive to think I could compete with Yahoo personals,” he says. “It was a great failure for me.”

Meanwhile, his wife had a good career in the financial services industry – had her own office and at one point was the breadwinner for the family. The company he was doing Web design for had an affiliate program through Commission Junction – but he wasn’t involved in that part of the business. The guy who ran it, though, started to tell him the numbers. Some of these people were making up to six figures a month. “So I threw up some links on my site,” he says, and in six months he was matching his salary in commissions.

He had finally touched that entrepreneurial magic and he dove into it head first. Today Palmer has a network of more than 100 websites (he doesn’t even know the exact number), an e-book on how he made it and is Commission Junction’s 2005 Horizon Award Winner and a Yahoo Search Marketing Ambassador. His domains include FreeBudgetingSoftware.com, DatingSiteCritic.com, CreditRepairGuy.org and, of course, the site for his e-book: QuitYourDayJob.com (see page 44).

How does he do it with so many sites? The key, he says, is to work with templates that need very little manual tweaking. He has 50 dating sites that are virtually the same – they are just targeted by geography. But, Palmer says, it’s not about how many websites you have or following a more-is-more philosophy. “Each page should do just one thing,” he says. “You don’t want to overwhelm the customer with choices. You know, like when you go to call Dell and the first thing you hear is 30 options to direct your call. It takes you forever or you hang up before you get an answer.”

The other main reason Palmer claims he’s successful is because he goes the extra yard to reach out to the merchants. It satisfies his social nature, he says. He typically spends a few hours a day just talking to the merchant reps.

“I have their cell phone numbers and they have mine.” He says that just talking to people is crucial to getting help and getting what you want from a merchant. Sometimes Palmer will fly out to see the merchant or the company will send someone to meet with him. Of course, Palmer admits merchants don’t do this for everyone, but, then again, he makes six figure commissions – that puts him in the upper stratosphere of earners. It’s no wonder merchants will roll out the red carpet for him, especially when 80 percent of most merchant’s affiliates are not earning enough to register a blip.

He says being a big earner just takes hard work. His day really isn’t much different from most affiliates. Typically, Palmer starts his day by viewing his stats on CJ, LinkShare, etc. Then, he logs into Google AdWords to check on his costs. “I do have some spreadsheet systems that I made up to make it easier on myself and this way I can make bidding decisions based on that and see where my ROI from the previous day was.” All of this, he says, is a way of tailoring your existing sites to make them better. “It is far easier to improve on existing websites than to launch a brand new site.”

He’s always looking for ways to improve things. “I probably differ from most in that I will build a website around a merchant’s product and services instead of just throwing a link on my site – then throw a couple of hundred keywords at it.”

Once traffic looks promising, he will expand. It could take few days to a few weeks to see if it is worth it. He claims that he’s got more patience than most affiliates and he believes that’s what helps him to see if ROI kicks in and to wait for the results.

Palmer then spends the rest of his work time building relationships – over chat, email or by phone talking to the merchants. It’s his favorite part of the job.

“You want to know the dirty little secret of affiliate marketing?” he says conspiratorially. “I gained 30 pounds because you don’t get a lot of exercise just sitting, building websites.” He says it took a lot of hard work and sacrifice. He says he sold a favorite – and very expensive – racing bike and some of his personal gadgets – a road bike, Palm Pilot and cell phone – to get the business started.

“People buy into the hype and hope. I want to retire by the time I’m 30. So, in the beginning I was doing 20-hour days and still do some of those sometimes.” The reason so many affiliates don’t turn over the big numbers, according to Palmer, is because they are unwilling to do the tough work. He says you have to put in the labor on optimizing your site and making it eye-catching. He’s constantly experimenting – putting up a site and throwing a few hundred keywords at it to see if it can bring numbers. It’s fun for him.

Palmer proudly states he still has no employees on his payroll. His wife doesn’t receive a paycheck, although he can count on her to give him advice on design and the content. “She’s kind of my quality assurance person and will say she doesn’t like a graphic or will brainstorm on keywords.” Sometimes she even reads his emails before he sends them to make sure he’s being coherent.

He keeps an office about 10 minutes from home but goes in when he needs to concentrate on something or make important calls – otherwise he’s pretty content working from the home office. Plus, they live near a great park and ball field where he loves to take his two kids, who are 5 and 3 years old.

“I can spend all day there.” Currently, he does a kind of week on, week off. Works on the sites for a week and then spends a week riding his bike, going to the park, reading business books and magazines – Forbes or Fortune. “I can read those like some would read Harry Potter.”

It sounds idyllic and it is, but the journey wasn’t without emotional bumps. The hardest decisions he and his wife made about quitting their day jobs was what to do about his wife’s career. She had been a full-time worker since she was 16 years old, Palmer says, and changing to a stay-at home mom was jarring. It was a big step for her to quit her job but the decision was made easier by the fact that the income from the affiliate sites mandated they convert to full-time affiliates.

“The sites were growing so much,” Palmer says, “that the only thing holding them back was our time investment. So, we had to spend more time.”

Quitting their jobs was the no-brainer – it was clear on paper that the commissions were paying way more than their day jobs.

Equally unsettling was what to do with their success.

“Some guys get a little cash and they go out and buy a Mercedes or a new house,” he says. But in the end, quality of life won out. As a born and raised Utahan, Palmer is definitely very family-oriented just as they teach in the Mormon church, even though Palmer says they don’t go to temple as much as he did when he was young. But the luxury of having more free time now allows him to get more involved in the kids’ extracurricular activities like sports and gymnastics.

While Palmer did upgrade his home and put the kids in private school, he and his wife thought pretty rationally about what to do about their new-found wealth. They kind of played a spinning globe game – if we could live anywhere, where would it be? They thought Austin, Texas, looked attractive and the San Francisco Bay Area certainly was a consideration. But in the end they decided to stay right where they were in a suburb of Salt Lake City. They knew it to be family-friendly and the pace of life was perfect for them.

Things have been so idyllic, in fact, that Palmer decided to share his secrets. His recently available e-book, High Performance Affiliate Marketing, pretty much recounts how he did it and with the right elbow grease, anyone can do it.

He says the book is practical and not one of those “get-rich” books. “I basically wrote it because I think there was a need for it,” he says. Most of the books on the market, he adds, seem so dated even when they are only a year or two old. “I wanted to know if my knowledge was transferable. I led this internship with five other affiliates and they are doing Ok. I just sat down with them for five hours and two of them have quit their day jobs.” He says one even worked for NASA, surely a dream job for many, and yet this guy gave it all up to become an affiliate.

One of the unique things about the book – available at QuitYourDayJob.com – is that when you buy it you get all the updates for free in perpetuity. As Palmer adds revisions to the book as the markets dictate, all buyers get those revisions too.

Why essentially give away his secrets? “I think the Internet is a big place,” he says, “and lots of people wonder why I give the secrets away but I believe in karma. Since if I give something to the community I will benefit from it.” He even offers a free support forum for the book so that if readers have questions, they just email him directly to his personal email account.

“As an affiliate I just build websites and go over numbers,” he says. “But I really enjoy the face-to-face, so that’s why I reach out to the merchants. And as I operate on an island over here, the book feeds my social needs.”

While he said he wants to retire at 30, his version of retirement would be to only work a few hours a day. “I’ve always had the entrepreneurial spirit,” he says proudly. “You know, I had worked at a huge call center here and was answering tech support calls for Microsoft. By the end of my stay there I was overseeing 80 employees but was really turned off by the red tape of big companies. I said I would only work for small companies from then on, where I could make an impact. You see, there is always a ceiling and I figured if I worked for myself, there would be no ceiling.”

Full Steam Ahead: Q & A with Chris Henger

Performics’ new VP of affiliate marketing claims the industry is still growing and is fueled by performance-based marketing.

Earlier this year Chris Henger, a veteran of affiliate network Performics since 2002, took the helm of the company’s affiliate marketing business unit. As vice president, affiliate marketing, Henger is charged with representing publisher interests to advertisers, a role he takes very seriously. In his former position as senior vice president of marketing and development with Performics, Henger dealt with affiliate issues from a different and broader perspective. Prior to joining Performics he was senior vice president/general manager at Emusic.com, which was acquired by Vivendi Universal. Revenue editor-in-chief Lisa Picarille spoke with Henger about his new role at Performics, some short-term goals for the Chicago-based affiliate network and where the online marketing space is headed.

Lisa Picarille: You recently took on some additional responsibilities; can you outline your new duties?
Chris Henger: Running our affiliate business unit for Performics is a responsibility that I took on with great enthusiasm. I am passionate about this industry and about Performics’ opportunity to take it to the next level. I represent the affiliate business within DoubleClick’s management team and manage a talented team of affiliate marketing professionals. In my role I am responsible for the growth and prosperity of our affiliate operations and that means making sure clients are satisfied and that publishers are productive and well-compensated. The possibilities for improved publisher productivity are endless and that is an area that receives a great deal of my attention and Performics’ resources.

LP: That sort of makes you the face of Performics, at least for affiliates. That can be a tough position with some very vocal critics. Talk about how you plan to interact with the affiliate community.
I am proud to take on the responsibility of Performics’ leadership for the affiliate community. I am active at industry events like Ad:Tech and Affiliate Summit and I am always looking for ways to have more direct contact with publishers. We recently established a Publisher Advisory Board and this group has already proven to be an honest and insightful sounding board for ideas. I also represent our publisher interests to our advertiser clients. It is important that they understand the implications of the decisions they make, and I spend a lot of time talking to advertisers about publishers. There are tough critics in our industry but they have good ideas and the key is to absorb the feedback and use it to make sound decisions.

LP: Do you have mechanisms in place for addressing negative comments and effecting change?
Monitoring and addressing comments are a shared responsibility at Performics. The affiliate marketing director keeps careful track of the media, blogs and other forums, and the product manager is active in the community. Our publisher services team fields inquiries from publishers and they are the first line of support to quickly address comments and effect change on behalf of our publishers. I meet with these teams on a regular basis to anticipate changes we need to make. We also have an internal blog that we rely on to get the word out to the program managers if there is a particular issue or change in the marketplace that needs attention.

LP: What are some of the goals you have for Performics in the next 12 months?
The next 12 months are going to be very exciting for Performics. We have an aggressive growth plan in place and a lot of innovation coming with our product road map. Personally it is my goal to ensure that our employees continue to feel good about what we are building and I want to deliver the message to our publishers that I care about their needs and about growing their businesses. Actions speak louder than words. We are a heads-down team that is always striving to do right by our employees, advertisers and publishers.

LP: Performics recently announced it is providing network-level data for advertisers in the ConnectCommerceSM interface. What other functionality is planned?
Performics is committed to continuous improvement and we have an aggressive product development road map for the next 12 months. One significant feature in development has been in beta with a small group of about 25 publishers for several months. The product feature, now called OrangeLinks, was integrated into our ConnectCommerce platform in June. This feature enables publishers to sign up to receive all updated links via email or FTP and eventually via RSS. The links are pre-generated and ready to be added to the publisher’s site. We saw a phenomenal increase in sales from the beta group, and other publishers should be able to increase their commissions with OrangeLinks.
Another important feature that will be released this summer is the availability of publisher contact information within ConnectCommerce. Performics and DoubleClick have recently adopted a new product development methodology called SCRUM. With this methodology in place we are working on short “sprints” to accomplish bite-sized feature improvements or components of larger enhancements. We have dramatically reduced the development cycle and improved deliverability. You are going to see seven or eight small releases a year, instead of one or two large releases.

LP: Why does Performics work with so many catalog retailers?
We do have a very strong catalog client base that goes back to Performics’ roots as the first full-service affiliate provider. When the company was founded in 1998, the vision was to fill a gap in the marketplace for affiliate marketing services. Traditional direct marketers didn’t have the in-house expertise to tap what was the wild world of online marketing in the late nineties. The full-service value proposition really resonated with catalogers in the late ’90s, and the unique agency approach we take to affiliate marketing still resonates today.
Performics is also headquartered in Chicago, the birthplace of direct marketing and the home of large traditional catalogers like Sears and Spiegel. As a matter of fact, Spiegel was one of Performics’ original clients and we continue to manage the affiliate program with the new management at Spiegel. The other aspect is that affiliate marketing is nirvana for a direct marketer; catalogers “get it.” They really understand the power of performance- based marketing. Because of our roots in direct marketing we are pushing the envelope for catalogers today and helping them understand the dynamics of multichannel marketing.

LP: I know that Performics doesn’t accept affiliates from religious-related organizations; why?
Performics has a comprehensive, quality affiliate network and we ensure that quality through editorial review. Just like major search engines, we have human screening of all affiliate applications and we have to provide that group of screeners with a set of criteria. To date, we have not allowed applications for sites with religious content and the policy is meant to minimize subjectivity from our editorial review process. Performics’ policy is not to allow sites that are focused on a particular faith. We don’t want our staff to have to make a judgment on whether or not a site with content from one faith or another is appropriate for advertisers. Recently I have seen some church-specific sites that are doing some very interesting things with affiliate links and using the commissions as a fundraising effort. This is certainly an example of innovation and we are willing to reconsider the policy.

LP: Are there any other types of affiliates that you don’t accept, and why?
Yes, we do screen each application and there are many, actually thousands of applications that we reject each month. The most common reason we have to reject an application is that the publisher’s website is not available for review. But upon review of the site we do have criteria about content that we evaluate. The policy is posted on our website and available to any affiliate:
Websites or publishers engaging in online activity that contains, promotes or has links to any one of the following will not be accepted into the network:

  • Pornographic, obscene or offensive content
  • Violence or hate-oriented speech
  • Extensive religious commentary or attempts to preach or solicit members for a particular church or faith
  • Gambling
  • Libel or defamation
  • Illegal substances
  • Unsolicited commercial email (spam) or trademark infringement
  • Any type of misleading, fraudulent or illegal activity

LP: Are there segments you believe are ripe for affiliate expansion?
Blogs are certainly one segment that we expect to drive increasing volume. In recent years the affiliate channel has moved heavily toward commerce-driven sites. Coupons, discounts and shopping-related publishers garner a substantial chunk of sales volume and we have seen phenomenal growth from loyalty and reward sites. We’ll continue to see the bulk of the volume come from those categories. Publishers in those categories have grown increasingly sophisticated and many consumers have come to rely on shopping-related affiliates as an intermediary, as they are perceived to add value to the transaction chain. As for new expansion, we are likely going to see affiliate marketing go back to its roots and witness growth in the area of content. AdSense and programs like it are geared toward content- driven sites, and a lot of people talk about small publishers monetizing content as if it’s a new initiative. Monetizing content is what affiliate marketing is all about and that segment is ripe for expansion.

LP: You have a deep background in online music and music-related businesses. Are there any initiatives at Performics related to online music merchants or affiliates?
I often rely on my experience in the early days of interactive marketing. Our business model back then is not far removed from effective affiliate marketing – build a loyal audience of consumers and at the same time attract advertisers that wish to engage those consumers with products and services. There was no question the promise of digital music was going to drastically change music distribution; the question was when. One of the core things that was lacking was a ubiquitous device, and obviously the iPod has solved that, and now the companies in the online music business are flourishing. A lesson I learned was it is critically important to stay focused around the core value proposition you provide your customer. This certainly applies to how we manage at Performics, as we stay focused on our two core businesses: affiliate marketing and search marketing.

LP: You attended the MSN Strategic Account Summit recently. What was the most important message you took away from that event?
One of the underlying messages I took from the event was the importance of having aspirations and high standards. Creating an environment where people are held accountable for high performance often has a multiplier effect on the satisfaction they derive. At the end of the day, people want to feel they are contributors to the overall success of the business – that what they do day in and day out matters. I want to surround myself with the very best people, and share in our collective successes. I jotted down this quote, which rings especially true at Performics: “You strive to create excited, high-energy environments, but not exhausted ones.” In today’s fast-paced marketplace, it’s easy to get exhausted.
You need to have a definition of success so that when you get there it will be meaningful to reflect on the accomplishment. These types of moments are often understated because really, who has the time to laud achievement? The MSN Strategic Account Summit represented one of those instances. I left the event proud in the knowledge that Performics was out in front as the only SEM to share the stage with Steve Ballmer.

LP: Is Performics looking to leverage a more strategic relationship with MSN?
Our long-standing relationship with MSN is certainly an asset that we value. We have been optimizing data feeds for MSN Shopping for years, and were the first to adopt the MSN adCenter API for Search. We work very closely with MSN, and strongly believe there are many opportunities for advertisers within that platform.

LP: Can you give us an idea of just what role search plays at Performics?
Search plays a critical role at Performics and within DoubleClick. Performics was a pioneer in search engine marketing and among the first to realize the power of paid search. We are the leading SEM globally, and have a thriving natural search optimization practice. The affiliate and search channels are inextricably linked for Performics – affiliates use search to drive traffic, and we share many cross-channel clients. And more importantly for our advertisers, the Performics business model aligns our interests with our advertisers. A consumer who transacts with our advertiser through either channel benefits the Performics business model, whereas this is a differentiator between us and other affiliate providers.

LP: Is the reign of the “Big Three” (CJ, LinkShare and Performics) over?
Absolutely not. Performics and our two industry peers are still growing by leaps and bounds. While there will always be changing dynamics in the marketplace, our target clients – retailers – are going to continue to look for affiliate marketing solutions. Multichannel marketers and other advertisers need a proven solution, a comprehensive network and reliable technology, which is core to the Performics offering.

LP: What is the biggest competitive threat to Performics’ business?
We stay competitive by thoughtfully thinking and planning for the future. We recently completed an extensive three-year strategic planning process across Performics and DoubleClick. There is a very clear plan and set of priorities that the entire company shares on where we want to drive our business. Ultimately, business comes down to customer loyalty. If a company loses sight of the needs and wants of its customers, then it opens the door. We are fanatically focused on servicing the needs of our customers. Through strategic leadership, proactive service and sustained innovation we control our own destiny in creating loyalty with our customers.

LP: Talk about where ad networks and subnetworks fit in the performance marketing landscape and how they impact Performics.
Ad networks sure are plentiful nowadays. They can provide value in increasing reach through one media buy, and most campaigns are on a performance-based pricing model which has similarities to affiliate marketing as well. In some cases we work with ad networks for select clients, and in other cases we produce leads for our customers directly through our affiliate network.

LP: How important is it for leaders in the online marketing space to be global companies?
The Internet is a global medium and the barriers between nations, languages and communities are virtually invisible. DoubleClick is the world leader in online advertising solutions and that provides tremendous insight for our clients and employees. We are working to improve our interactions and payment processes for international affiliates because that segment is increasingly important.

LP: What are Performics’ global plans?
We have an office in London that predates our integration with DoubleClick and we now have 21 offices around the world. We will certainly use that foundation as a platform for further expansion. Currently we license our affiliate marketing technology platform internationally but do not have plans to set up affiliate networks in other markets. Never say never, but we have a huge growth opportunity in the U.S. and that’s where we are concentrating today.

LP: Give me an idea of what you think the performance marketing space will look like in three years.
It is going to look even better than it does today – more growth, new and different distribution and better data across the performance-based channels. In the next three years we as an industry will have answers to many of the questions we face today. I think there will be a recognized distinction between adware and spyware. We are going to have an industry-wide resolution of ad blocking. I think we’ll see more sophisticated compensation for publishers that are tied directly to delivering on advertiser goals. We are going to have a larger pool of talent to expand with because the industry will be further developed. Performance-based marketing is a key driver in the evolution of online advertising and in three years we’ll see an industry that is taking a larger piece of the overall media pie.

Domain Reign

Domains are the undeveloped land on which e-commerce properties are built and like real estate, it’s about location, location, location.

Gary Kremen is driving along I-5 in San Diego. He’s talking on his cell phone and sounds like he’s just had a pot of coffee he talks fast and furiously. Kremen is not from Southern California, but he seems to relish his newfound role as alien resident, an East Coast boy playing the part of the laid-back, easygoing renegade entrepreneur.

“I’m even more of a disgrace here than the Heaven’s Gate cult was,” proclaims Kremen, who is living in a mansion in the tony enclave of Rancho Santa Fe, a neighborhood known for its wealthy residents, in a six-bedroom, Spanish-style spread that he received as a result of a court ruling.

He may be a disgrace, but divine grace smiled on him when the court gave Kremen the beautiful property, a luxurious villa once occupied by Stephen Michael Cohen, a con man who forged documents in order to take away Kremen’s money-making cyber-property – that of the domain Sex.com. Cohen now owes Kremen $65 million and is out of the country and on the lam. But Kremen is still hopeful he’ll recover some of what he’s owed. Even if he doesn’t, he’ll be OK – in addition to the real estate, he had another windfall earlier this year, when the Sex.com domain sold for a cool $13 million.

Kremen’s experience was a harrowing ordeal; he paid investigators to track Cohen’s whereabouts and he endured long-fought battles in court. But Kremen’s experience is also an object lesson in how trading in the domain-name space can prove lucrative. The stakes are high, and counting on fortunes to be made isn’t a sure bet. It takes a tough constitution to weather the ups and downs of playing the domain-name game.


Kremen says that when he originally registered names (in the mid-90s), he snapped up Jobs.com, Housing.com and Autos.com. He also bought a site you may have heard of – Match.com. He paid $2,500 for Match.com; when he left Match.com, his payday was in the tens of thousands. (He was asked to leave because he refused to sell Match.com to Cendant for $7 million; after he left, the sale went through and Cendant later sold the name for $50 million.)

Fresh out of business school, Kremen thought the domain game was fun. On a lark, he bought Sex.com. Then he largely forgot about the site and focused on other pursuits.

But Cohen noticed the domain, and forged documents to take advantage of the cyber real estate. Kremen got lucky and found out that Cohen had fleeced his way into Sex.com. Kremen wrested back control of the site in 2001; Cohen had bilked so many others that Kremen had other litigants to back him up.

Even before selling Sex.com for millions, Kremen made a mint; it’s been reported that ad revenue for Sex.com was bringing in $8 million a year, a nexus of adult-entertainment websites offering products and services. His story shows that marketing geniuses can clean up if they know what they’re doing in the domain space, even if they don’t own domains with as flashy a name as Sex.com.

Easy Street

Plenty of other domainers are laughing all the way to the bank. Mike Bahlitzanakis sold Cellphones.com for $4.2 million in cash, a domain he paid $90 for in 1996. And others are profiting from the fact that today’s technology makes it easy to set up a revenue stream. According to Ron Jackson, publisher of DNJournal.com, “It’s such an easy process. In two minutes, I can set up a thousand domain names. I know quite a few guys making over a million dollars a year from advertising on their domains. It’s like a 24-hour money-printing machine.”

And it seems like easy money. With operations like GoDaddy offering a domain name – and a potential chance at untold riches – for less than seven bucks, the allure is rather appealing. It’s like playing the lottery; in this case, pick the right name, wait the right amount of time, play your cards right, utilize the name wisely or sell to the highest bidder and boom, you’re a winner.

Ad Dollars

Domainers, as they call themselves, are living as if it’s the dot-com heyday all over again. In the ’90s it was all about buying a name and then selling it to some sucker for a mint. Some domainers still approach it that way. But now, many prospectors are buying names in order to cash in on the riches that are freely flowing into online advertising.

Various winners view the idea of using their domain names wisely in different ways. Take Dan Warner, the COO of Fabulous.com and Dark Blue Sea Limited in Australia. His companies own thousands of websites and manage another 500,000 for other people. According to Warner, 4 million websites are owned by only a few hundred professional domain owners: “These domains attract $750 million in search advertising spend each year, and are actively traded as real estate.”

People are snagging scads of domains, like DigitalCameras.com, for example, and loading them with pay-per-click advertisements using services from Google and Yahoo. If you happen to visit one of these sites, you might see a review or two but you’re certain to be overloaded with text ads for products or services related to the domain name.

News of a New Boom

Pay-per-click advertising is prompting increases in the number of domain-name sales and the dollar value of deals. The space is red hot, and recent news underlines this fact. GoDaddy, with a $250 million market cap, has been reported to be going public. eNom merged with eHow and was bought by Demand, run by a former MySpace exec.

Cambridge, Mass.-based Sedo managed the sale of $17 million worth of domains in the first 10 months of 2005, up from $8 million in the same period in 2004 and $3.1 million three years ago. Domain sellers pay Sedo a 10 percent commission. Afternic Inc., of Orlando, Fla., brokered the sale of $5 million of domains last year. In 2004, the firm managed the sale of $2.2 million of domains, and in 2003 it did less than $1 million. Its standard commission is also 10 percent.

The domain-name market is also attracting new investors. It used to be for Internet entrepreneurs only, but now public companies and venture capitalists want a piece of the action. Domain aggregator Internet REIT is raising $250 million to buy domains, because Web addresses can be long-term investments that provide a steady stream of revenue.

Sedo managed the sale of Website.com for $750,000 this year, and according to Matt Bentley, CEO of Sedo, the business is shifting: “The fact that it is moving from individuals to larger corporations ” represents a legitimization of the domain-name industry.” For years, many in the industry had a bad rep for “cyber squatting,” registering names associated with famous brands in hopes of selling them to a big company at a hefty price, which fueled trademark legal feuds. But now that there are legitimate domainers and not just squatters, that is changing.


Rick Schwartz is another prominent name in the business. He owns thousands of names (some are in the “adult” category and some are not). It has been reported that he wears a $65,000 Rolex on his left wrist and lives in a waterfront house in Boca Raton. Other people have invested in smart names – Candy.com, CellPhones.com, AthletesFoot.com – and can bring in hundreds of dollars a day, while the owner does little work to bring home the bacon.

Schwartz, for instance, directs his traffic to one of the many small companies that serve as go-betweens with Google and Yahoo, the two behemoths that have revolutionized online advertising and marketing. The middlemen aggregators do the major work, creating the sites, buying keywords and tapping into one or the other of the search engines’ advertising networks to add the best-paying links. Some other big domainers cut out the middlemen completely and work directly with the search giants themselves.

A Domain by Any Other Name

So what’s in a name? “Domains are the undeveloped land on which e-commerce properties are built, and like real estate, it’s about location, location, location,” says Dark Blue Sea’s Warner. “They can be bought, sold or leased and there is a limited amount of valuable property.”

While many Web-address purchases are motivated by investors looking to earn money from ads, some aren’t. Last summer, the owner of Dog.com bought Fish.com for $1 million. The buyer plans to grow an online pet supply store.

Pets United CEO Alex Tabibi wanted to expand his firm’s list of pet-related domains, which include Horse.com and Bird.com. He says the new site will sell fish food, fish tanks and accessories.

Pets United LLC, parent of Dog.com, acquired Fish.com from Dan Farmer, a tech exec. Afternic Inc. brokered the deal. Farmer, CTO and founder of computer security firm Elemental Security Inc., bought Fish.com in the early ’90s and used it for a personal website. He had multiple offers for the domain over the years. “I glibly decided that if anyone offered me a million dollars that I’d sell,” he told the Wall Street Journal. He said he used the after-tax proceeds to pay off the mortgage on his condo and “gave a bunch to charity.”

Large Portfolios

Several firms have quickly amassed huge portfolios of thousands of domains. A single site may get relatively little traffic, but aggregators aim to earn enough ad income across their network of sites to cover the expense of buying existing domains and registering new ones.

Houston-based Internet REIT, launched last year, has quickly acquired tens of thousands of domains, including MutualFunds.com. The company’s lead investor is Jacobson Family Investments Inc., an investment vehicle for a wealthy New York family.

Internet REIT’s president and cofounder Marc Ostrofsky purchased Business.com in 1995 for $150,000, and sold it four years later for $7.5 million. He also had the smarts to snap up Bachelor.com and Consulting.com. Internet REIT takes its name from real estate investment trust, a legal term for a company that buys, sells and operates properties. CEO Bob Martin compares it to owning and developing real estate: “Rather than having a speculative approach to what a domain name could be worth, you can now generate cash flow from these assets and value them like securities.”

Internet REIT wants to buy domains from hobbyists and retain them, rather than resell them. It uses “Google AdSense for domains,” a variation on Google’s popular search-ad network. Owners of large numbers of domains, those that generate more than 750,000 page views a month, get ads for their sites. The companies and Google share the revenue.

Other big domain buyers are looking to make money with pay-per-click ads without ruling out the possibility of selling their domains to other businesses. BuyDomains Holdings has 500,000 domains, like JobFinder.com and TravelChoices.com. Highland Capital Partners Inc., a venture capital firm in Lexington, Mass., bought a stake in the closely held company, which has advertising- oriented domains in 90 “verticals,” including travel, music and finance.

Marchex wants its portfolio of 200,000 domains to become destination sites filled with relevant content, but the sites mostly sport ads right now. The company paid $164 million to get domains such as Debts.com and Camcorders.com. Ad revenue from Marchex’s direct navigation sites totaled $7.7 million in the third quarter, up from $6.4 million in the second quarter.

The Future

The enormous growth means new businesses. A handful of companies now sell “domain parking” services. You can pay a parking service to create a page filled with pay-per-click ads so you draw revenue, which is distributed among the domain owner, the parking company and the advertising broker, like Google or Kanoodle.

The surge in online ads is also contributing to a big increase in the number of registered Web addresses. VeriSign estimates that about 10 percent of all .com and .net domains being registered are created to host pay-per-click advertising. The risks? Consumers could hate being deluged by ads and advertisers could shy away if the backlash gets too great.

DIANE ANDERSON is a senior editor at Yoga Journal. She previously worked for Brandweek, the Industry Standard, HotWired and Wired News. She lives in San Francisco.

Fair Game

In-game advertising offers geotargeting of a captive and highly lucrative audience.

National advertisers looking to reach mass audiences have had few choices online. The highly fragmented Web lacks properties that can match the millions of viewers who routinely view network TV.

However, online gaming (not to be confused with online gambling) sites are now accruing the millions of eyeballs that advertisers such as Ford, Procter & Gamble and Coca-Cola salivate over. Game publishers can offer interactivity and target marketing that is not possible through broadcast channels, and advertisers are now redirecting portions of their ad spends from broadcast to video games.

In-game advertising provides access to a rapidly growing audience of gamers of all ages that spend the equivalent of two workdays per week (often in three- to five-hour bursts) dealing, driving and detonating through consoles, PCs and Internet-only games. During December 2005, more than 27 million people visited game site MiniClip.com, which features casual games (trivia, cards), shooters and role-playing games, according to comScore Media Metrix.

Unlike content or search sites where visitors routinely look at a few pages before moving on, game sites often retain a visitor for as long as it takes to watch a miniseries, enabling advertisers to repeatedly pitch their brands to consumers. According to Nielsen//NetRatings, people playing games on the Electronic Arts site spent more than four hours and ten minutes per session on average during February 2006. In 2005, the ratings service gave further legitimacy to video game advertising by beginning to measure its audience reach.

Delivering a Focused Audience

Ads delivered to video games (via PCs or connected consoles such as the Xbox) will have greater retention because unlike TV viewers, game players tend not to multitask, according to Nicholas Longano, president of new media at online gaming company Massive, Inc. Players who are being chased through the galaxy by aliens or are racing their fellow avatars to capture booty aren’t likely to be simultaneously talking on their cell phones or surfing the Web.

Unlike television ads that viewers with digital video recorders are increasingly skipping over, gaming ads are always seen, according to Longano. “Advertising in video games is TiVo-proof,” he says. Longano says the ads that are displayed on Massive’s network of 137 games are guaranteed to be onscreen for a minimum of 10 seconds. The company’s network features ads from “65 blue chip” advertisers, he says, and features games from Acclaim Entertainment, Ubisoft, and Vivendi Universal Games.

In May, Microsoft acquired Massive, and said that it would integrate Massive’s technology into its adCenter advertising platform.

Advertisers go where the people are, and the masses playing games online are an attractive audience to pitch. While the dominant demographic of gamers is the desirable 18- to 34-year-old male audience, the wide variety of games are attracting a diverse membership, according to Alexis Madrigal, a research analyst with DFC Intelligence.

Action games tend to attract younger male players while casual playing of puzzle, card and word games have made females over 30 the fastest-growing segment of the online gaming world. Casual game sites are also increasing the titles aimed at mature adults and children.

Game enthusiasts are also more likely to interact with what they see online than the average Web surfer, according to Alex Kakoyiannis, managing partner of consulting firm Navigame. “Gamers are a participatory group … the whole game experience is based on interaction and participation, [so they exhibit a] different behavior.”

Revenue from advertisements delivered online to video games is expected to rise from $192 million in 2005 to $248 million this year, according to Madrigal, who says ads in offline games were not included in his calculations. The majority of ad dollars are spent on casual games and PC-based titles played online, according to Madrigal, as the more sophisticated console games have yet to fully exploit connected game play.

Ads at Every Turn

Unlike commercial television that displays ads after several minutes of programming, game sites can almost continually interject ads before, during and after gaming. In-game ads are woven within the game to appear natural to the environment, showing up on virtual billboards, posters and video screens on the online world. Navigame’s Kakoyiannis says the ads have to be contextually relevant to the game and the audience. “You shouldn’t see a product targeted to women in a shooter,” he says.

For example, Tycoon City from Atari features an ad for Toys”R”Us in downtown Manhattan, where the company has a real-life presence. Similarly, Take-Two Interactive Software’s Major League Baseball 2K6 will feature rotating ads behind the backstop and on the facades, just as they appear in the real ballparks.

Jonathan Epstein, a member of the board of directors of Double Fusion, which develops technologies for online advertisers, says in-game ads are tracked to verify their delivery. Data is collected to show how many times and for how long within a game session an impression (for example an ad in the form of a virtual billboard) is served.

Epstein says it’s also important that the ad-serving system prevents competing products (such as Coke and Pepsi) from being advertised within close proximity or time frame within a game. The typical CPM for in-game ads is between $20 and $25 for one-dimensional ads, and from $40 to $50 for three-dimensional ads, according to Epstein.

In-game advertising does not disrupt game play and limits interactivity to before and after a game, says Epstein, who has collaborated with publishers including Midway Games and Crave Entertainment. For example, clickable video ads called “level-stitials” can run after a level of a game is completed, or static ads can be placed on exit screens or leaderboards at the conclusion of a game, he says.

The various formats and locations for displaying ads provide vast inventories. With an average of 20 to 30 ads displayed per game-hour, according to Epstein, games that average 90 million hours of game play per month could potentially display 2 billion ads per month. Most game companies have their own formats for ads, but there is an interest in developing sizes compatible with the standards set by the Interactive Advertising Bureau.

Product placement within games is becoming a popular method for game developers to offset some of the development cost. For example, makers of racing games will partner with an auto manufacturer to make their vehicles the default car. However, sometimes (as with the rhetorical question about the chicken and the egg), it is difficult for gamers to determine whether game development proceeds product placement, or whether the prominent display of well-known brands is the genesis of the game itself.

Another example of a product being placed within games includes Ubisoft’s upcoming title CSI: 3 Dimensions of Murder, which will feature credit card company Visa’s fraud-monitoring system to track down the bad guys.

“Advergaming” is the term given to games that are developed specifically to showcase a product, and where the advertiser subsidizes the development cost. Atom Entertainment created Hemi Highway to showcase the Dodge Charger, and the company recently launched the Shockwave.com Game Studios division to focus on advergame development.

Advergaming finances the creation of casual arcade-style games where the graphics and story are not as sophisticated as console games, but the often-humorous game play can nonetheless become addictive. “Building a custom game is a minimum of a $200,000 investment,” Lee Uniacke, vice president of sales for Atom Entertainment, says.

Atom Entertainment’s advergaming group links advertisers with game developers who create titles around a product. “It forces them to be creative within a structure, and this enables their true creativity to come out,” says Uniacke, of the game development process.

Uniacke says the amount of revenue the company is generating from advertising has tripled this year over last, thanks in part to the Shockwave In-Game Network (SIGN), which launched in November. SIGN games includes five titles such as Circuit Racer and H2Overdose that display in-game advertisements and require a minimum of a $30,000 spend from advertisers, according to Uniacke.

Online gaming sites generally require users to register to play, giving publishers the ability to target ads to specific demographics. Shockwave.com’s ad-serving system can control ad campaigns so that they only appear before 13- to 21-year-old males, and the company also can geotarget campaigns to specific regions, according to Uniacke.

Uniacke says advertisers can test-market campaigns online and get instant data on their effectiveness before rolling out a national campaign through broadcast. “Instead of spending four months on a campaign, you can get feedback within a day,” he says, adding that the cost is analogous to an $8 CPM.

Displaying ads around the games (on login screens and on the borders of online games) can also be lucrative for publishers. For example, casual game site Pogo.com served nearly 950 million ads during February 2006, according to Nielsen//NetRatings.

Gaming company WildTangent offers advertiser sponsorships of casual games such as Polar Bowler and Tornado Jockey, according to Bill Clifford, general manager of advertising platforms. Sponsors receive a 15- or 30-second pregame video advertisement, Clifford says.

To get developers interested in creating games that feature advertising, WildTangent shares the ad revenue with the game’s creators, says Clifford. Typically developers would get paid when a consumer chooses to pay to download a game, but receive no compensation when gamers play the free trial version online. WildTangent’s program can increase the developer’s compensation “by 10 times over what they were receiving,” he says.

Earlier this year WildTangent announced a program where gamers can earn virtual incentives by watching ads. The companies’ virtual “WildCoins” can be used to purchase additional game play time with the company’s pay-for games, or they can be redeemed within games for health points or weapons.

WildTangent is extending the virtual booty offering offline, as consumers who purchase real goods from partners including Coca-Cola will receive WildCoins coupons that can be used online, according to Clifford.

Ads Cut Game Costs

Many online casual games and massively multiplayer online (MMO) games are financed by subscription fees, but in-gaming advertising is likely to supplement or even replace this revenue stream.

Worldwide online game subscription revenue grew 43 percent to $1.84 billion in 2005 and could reach $6.8 billion by 2011; according to video-gaming market research firm DFC Intelligence. Once games reach more than a million registered users, publishers could lower the subscription fees or make the games free by attracting national advertisers.

Popular MMOs Shadowbane and Anarchy Online now offer free levels of the game that are ad-supported. DFC Intelligence’s Alexis Madrigal says games such as Runescape 4, which currently has 4 million subscribers who each pay $5 a month, could increase reach and revenue if advertising were integrated. “You could squeeze $5 worth of advertising out of each user easily,” says Madrigal.

However, fantasy role-playing games located in alien worlds or occurring during the days of yore aren’t natural locations for conventional ads. Madrigal also warns that publishers that display online ads through console or PC games risk alienating their audience. “If you are paying $50 for a game and then $15 a month for a subscription, the tolerance for ads is pretty low,” he says.

The increase in broadband adoption and console games that can be played online will grow the virtual communities of game enthusiasts who log in for hours at a time. As long as the ads are prevented from overwhelming game play, game companies will continue to capture advertising dollars from broadcast.

JOHN GARTNER is a freelance writer in Portland, Ore. He is a former editor at Wired News and CMP. His articles regularly appear on Wired.com, AlterNet.org and in MIT’s TechnologyReview.com.

Music Needs Tuning

The complex space needs some harmony before online marketers start to sing.

Imagine you’re a publisher trying to parlay your expertise and passion for vacuum cleaners into a performance- based business. You are shocked to learn that sellers don’t compete on price, that you aren’t allowed to see what is in the manufacturers’ catalogs and that if you want to sell in volume, there’s only one partner.

Although this scenario seems somewhat over the top, it approximates what publishers looking to participate in the market for digital music downloads and subscription services now face. While online music sales are rapidly rising, the companies with distribution rights will have to revamp the way music is marketed to reach its revenue potential.

The sales of digital tracks rose by more than 150 percent from 2004 to 2005 (to 353 million songs), according to Nielsen SoundScan. That is a growth rate that any industry would be proud to have. Global revenue to the record companies from digital music sales nearly tripled, from $400 million to $1.1 billion in 2005, according to the International Federation of the Phonographic Industry (IFPI).

Great news, right? Almost. From a glass-is-half-empty perspective, however, the total sales of recorded music (both physical and digital) fell by 3 percent last year, or not in the direction that the folks at Sony BMG, EMI or the other major labels want things to go.

Apple at the Core

Most of the growth in music download sales can be attributed to Apple’s iPod player and iTunes store. The two most visited online music sites for the final week of January 2006 according to Nielsen//NetRatings NetView, were Apple’s iTunes store, and AOL Music, which also sells iTunes. Depending on which analyst you ask, Apple’s share of music download sales is between 75 and 90 percent. “If you want to be successful [selling downloads], you have to partner with Apple,” says Tim Bajarin, president of analyst firm Creative Strategies.

iTunes may be delivering sizable revenue for Apple and the major music labels, but publishers aren’t getting much of the action. Apple, which has sold more than 1 billion tracks via iTunes, pays its affiliates a 5 percent commission on the sales of its $0.99 tracks. The company does not have a subscription service.

Bajarin says the status quo is likely to continue in music downloads for the foreseeable future. “I don’t see anyone touching [Apple],” says Bajarin, adding that the company has created a “digital ecosystem to acquire, manage and distribute digital content” to iPods that is without competition.

Apple declined to be interviewed for this article.

AOL Music offers iTunes downloads and a subscription service (AOL Music Now) that is billed separately, according to Erik Flannigan, vice president and general manager of AOL Music, Movies and Television.

The confusing structure has AOL Music (music.aol.com) sending traffic to the iTunes store for download purchases, while AOL Music Now (aol.musicnow.com), which will officially launch this summer, is the home of its $9.95-per-month subscription service. AOL Music Now also sells Windows Media format downloads.

The company hopes to someday have a single service. “We believe in both models, and would love to see them both together,” Flannigan says. He is hopeful that Apple will someday enable subscription service listeners to enjoy music on their iPods.

Affiliates aren’t jumping at the opportunity to earn a nickel per sale for downloads when they are accustomed to earning just as much from mere clicks in other industries. Lisa Riolo, senior vice president of business development at Commission Junction, says few affiliates have contacted the company looking to partner with download sites. “We haven’t heard a lot of demand from affiliates for downloads,” she says.

Subscription services, which can pay between $5 and $15 commissions when a consumer signs up for a trial, can be much more lucrative for publishers, Riolo says. Commission Junction manages the affiliate programs for subscription-based RealNetworks, Yahoo and eMusic, which all offer subscriptions and downloads.

Subscription service revenues may not be growing as fast as music download sites, but the number of consumers paying a few dollars per month to listen to catalogs online almost doubled, from 1.5 million to 2.8 million globally in 2005, according to the IFPI.

Like Apple, RealNetworks sells tracks for $0.99 each, but the company does not offer affiliate incentives on downloads, instead paying commissions for trial subscriptions, according to Rachel Lazar, the director of consumer marketing for RealNetworks.

Focusing on subscriptions provides a better opportunity for publishers to generate revenue than making a few cents per download, Lazar says. RealNetworks recently raised its bounty for trial subscriptions secured by a credit card, from $12 to $15. “It would take a huge volume to make up the money they could do with subscriptions,” she says.

Although she would not disclose how many affiliates RealNetworks has, Lazar says that during a few recent quarters the number of affiliates doubled.

Subscription services have been hampered by a lack of consumer understanding about how they work and the lack of a solution for mobile users. Subscription services allow access to a catalog of music through channels or stations that focus on genres. If consumers want to access music after a subscription is terminated, they must purchase tracks separately.

“There is a lot of education that is yet to be done when it comes to subscription music services,” and publishers could aid in clarifying that, RealNetworks’ Lazar says. Publishers who are involved in marketing other media, such as movies or audio books, are a good match for promoting music, according to Lazar.

Creative Strategies’ Bajarin says consumers aren’t accustomed to paying to listen to music and are more comfortable with owning music. “When you quit [RealNetworks Rhapsody service], your music is gone,” he says.

“The problem with the subscription model is portability,” music industry consultant Barry Sosnick, president of Earful.info, says. Consumers have a “strong desire to have ownership when it comes to music,” so having access to songs end with a subscription is a “critical shortcoming,” he says.

However, music publishers including Napster and AOL Music have addressed this concern with higher fee services that allow consumers to listen on portable devices during the time that they are subscribers.

Publishers also have an opportunity to help distinguish competing music subscription services. While services like Rhapsody, EMusic and Napster all claim to have catalogs of more than 1.5 million tracks, identifying which if any service has a majority of an individual’s favorite artists can be a challenge. For example, Rhapsody has an extensive collection of tracks from Indie singer-songwriter Bob Mould, but no albums from classic rock stalwart Bob Seger.

The subscription services only permit consumers to search their catalogs after they have subscribed, but affiliates are now getting tools to differentiate the subscription services. Services such as RealNetworks and Yahoo Music are now working with affiliates to promote artists as a method of marketing their catalogs.

RealNetworks’ Lazar said the company is now allowing “select publishers” to see the data feed so that they can incorporate track information and album art on their websites. However, Lazar says affiliates cannot publish all of the data online or make it searchable.

Similarly, Yahoo Music recently made its product catalog data feed available to affiliates to “allow affiliates to link directly to individual song pages on our music pages from either a search engine or their website,” according to Eva Hung, who manages Yahoo’s affiliate programs. “We think this will significantly improve conversions …,” she says.

For example, publishers can now create collections, such as the best grunge rock tracks, to showcase the depth of Yahoo’s catalog.

Earful.info’s Sosnick says publishers can aid the purchasing process by acting as a filter, recommending artists and “separating the wheat from the chaff.” He says consumers don’t want to scroll through pages and pages of artists, but prefer to be guided. “If consumers have too many choices, they revolt.”

Subscription services are attempting to increase their reach by encouraging publishers to participate in search marketing. Both Yahoo and RealNetworks support publishers’ acquiring traffic by purchasing artists’ names or genres on search engines.

RealNetworks also encourages publishers to bid on Google for its branded terms such as Rhapsody, according to Lazar. The company works with publishers to build custom landing pages from paid search ads that showcase genres or artists, she says.

One Price Gives Fits to All

Most online music services have followed the lead of Apple (and its CEO Steve Jobs) in offering the majority of music tracks for $0.99 and albums for $9.99. The rigid pricing strategy has frustrated music executives who prefer a tiered structure, and limited the ability of publishers and marketers to differentiate the services.

The “coincidental” pricing across services also has the attention of New York Attorney General Eliot Spitzer and the U.S. Department of Justice, so a change in pricing strategy may occur this year.

The $0.99-per-track standard has also prompted inconsistencies in the value of albums versus individual songs. While some albums with 15 or more tracks are a bargain at $9.99, it is sometimes cheaper to buy tracks individually (as in the case of the six-track album Animals from Pink Floyd) than it is to buy the entire album.

According to the Online Publishers Association, the percentage of music downloaded as individual tracks rose from 15.4 percent in 2004 to 21.6 percent.

While music industry executives would like to raise the ceiling on tracks above $0.99 and lower the prices of other tracks, Earful.info’s Sosnick says consumers would be willing to pay $0.99 for less-in-demand tracks too.

“If a consumer is looking for a niche product, chances are they are willing to pay for it,” Sosnick says. However, variable pricing would enable publishers to promote related songs as less expensive “impulse buys,” according to Sosnick.

Publishers are also generating revenue by creating content related to digital music distribution. AOL Music is videorecording concert performances of artists including the Rolling Stones to generate advertising revenue and traffic. Social networking sites such as MySpace, while not selling music directly, have greatly increased their ad revenue by allowing music enthusiasts to create websites and playlists about their favorite artists.

Yahoo’s Hung says that music is critical to the company’s affiliate program, so the company consolidated all of the programs to simplify cross-promotion with other services including personals and instant messaging. For example, if a publisher is successful in getting a consumer to try the music subscription service, when consumers download the Yahoo Music Engine and also download Yahoo Messenger or the Yahoo Toolbar, publishers can earn additional commissions.

The next musical horizon for publishers is to promote unsigned artists, according to Commission Junction’s Riolo. User-generated videos and commentary are attracting large audiences online, and Riolo says music is a likely progression. She says affiliate programs could generate considerable revenue if they can figure out how to market music from amateurs to a mass audience.

JOHN GARTNER is a freelance writer in Portland, Ore. He is a former editor at Wired News and CMP. His articles regularly appear on Wired.com, AlterNet.org and in MIT’s TechnologyReview.com.