The Social Security

Sites that rely on user-generated content are altering the human fabric of the Internet and the way that performance marketers reach out to customers and merchants and communicate with each other. Online marketers are testing all of the new communication methods – blogs, social networking sites, wikis, and photo and video-sharing sites – to see if these platforms can help them drum up business.

And with good reason. The popularity of many of these emerging areas is seeing steady, if not explosive, growth. Blogs, which allow users to easily post new content to their site as well as effortlessly link to other sites, are on fire. Forty-four percent of American Internet users read and post on blogs, discussion boards and other consumer-generated media outlets according to a February 2006 Pew Internet & American Life project study. Technorati reports that approximately 70,000 new blogs are created every day and that the total number of blogs doubles at least twice a year.

But it’s not just blogs. Social networks, such as Bebo and MySpace, are communities in which an initial set of founders sends out messages inviting members of their own personal networks to join the site, and new members repeat the process, are a new national phenomenon. As of July, MySpace has 72 million members, Bebo has more than 57 million members and hi5 has more than 40 million.

In addition, there are single-use social networks where people share one type of topic such as YouTube.com for video, Flickr.com for photos, Digg.com for news stories, Del.icio.us.com for links and Wikipedia.com for encyclopedia articles.

All these types of collaborative platforms are the crux of the Web 2.0 model where the ease-of-use technology allows anyone the ability to contribute.

These sites are built to harness the breadth of experiences so everyone can benefit from the collective wisdom – they have the advantages of collaborative group input but because these services are online and can be anonymous (through aliases), users are not afraid to dissent, according to Jim Nail, a former analyst at Forrester covering the social networking space, who is now the chief marketing officer of Cymfony. “Therefore there is not concern about the dangers of ‘groupthink,’ when individuals intentionally conform to what they perceive to be the consensus of the group.”

And when it comes to growing social groups MySpace.com leads the pack. In July, Hitwise announced that MySpace.com, for the first time, was the No. 1-ranked website in the United States based on the number of visits. MySpace.com accounted for 4.46 percent of all Internet visits in the U.S. for the week ending July 8, 2006 and has propelled past Yahoo Mail. Bebo increased its market share of visits by 21 percent from May 2006, the largest percentage increase among the social networking websites.

THE SOCIAL BUTTERFLIES

So who’s hanging out at these social networking sites?

Nielsen has identified a group, called “My.Internet,” that’s especially likely to visit networking sites. Sixteen percent of Web users belong to this group, which has a median age of 32. Nearly all members of this group – 99 percent – visit blogs; 84 percent are members of an online community; 57 percent have their own blogs; and 22 percent use RSS feeds. Nielsen reported that “My.Internet” users tend to be highly engaged with most of the websites they visit, as measured by 10 factors, including whether they “liked” the site and were likely to return.

With all of the promising information about traffic and demographics, advertisers are eager to get their messages in front of the young and wired demographic that favors the social networking sites. Combined spending on blog, podcasts and RSS advertising skyrocketed 198.4 percent to $20.4 million in 2005. It is expected to grow another 144.9 percent to $49.8 million in 2006, according to an April 2006 report from PQ Media, a custom media research firm.

But advertising on social networking sites can be tricky, and marketers need to take strategic and creative approaches. The audiences skew younger, and often these younger audiences are exceptionally adept at tuning out traditional banner advertising – therefore pushing ads no longer works.

Mark Brooks, an analyst for OPW.com, says, “Interruption marketing is old school and not appreciated by the younger audience. Marketers wanting to use social networks need to put their thinking caps on and get creative.Case in point: Burger King is sponsoring downloads of episodes of 24. Very cool and very viral and plays to the MySpace demographic perfectly.”

In addition to advertisements and sponsorships, marketers know that the buzz generated on social networks is much more of a powerful endorsement than any form of promotion. In fact word of mouth is widely considered the most powerful form of marketing and the wave of the future for influencing sales. According to a December 2005 McKinsey report, approximately two-thirds of all economic activity in the U.S. is influenced by shared opinions about a product, brand or service.

Forrester Research’s 2004 study showed that over 60 percent of consumers trust product recommendations found in online sources like discussion boards. A 2004 RoperASW report, now part of GfK Group, found that over 90 percent of Americans cite word of mouth as one of the best sources of ideas and information. Further, they rate word of mouth twice as important as advertising or editorial content and put one-and-a-half times more value on it today than they did 25 years ago.

Dave Evans, moderator of the social networking panel at Ad:Tech San Francisco in May and co-founder of Digital Voodoo, along with Dave Ellett, CEO of Powered, examined the purchasing funnel of ACP (awareness, consideration, purchase). They saw that the majority of traditional advertising dollars, such as interruptive efforts like television commercials, is applied at the awareness point in the ACP. But because consumers are increasingly finding ways to block advertising through TiVo, spam filters and do-not-call lists, the impact of these types of traditional advertising has diminished. Now marketers are not only tasked with how to get their messages through to potential customers, but they must also worry that their potential customers are increasingly talking with each other and “comparing notes.”

To counter this problem, Evans says that, “When marketers reach out in the consideration phase, they contact consumers at the precise moments that they are thinking about a product or service. Through consumer-generated media and word of mouth, evangelists can actively impact consideration processes.”

The advantage of social networking for marketers is that it does not involve interrupting like an advertisement (which is in the awareness phase) does.

LEVERAGING SOCIAL NETWORKS

There are a variety of ways marketers are taking advantage of consumer-generated media and word of mouth. Social networks are having an incredible influence on how business is getting done. Organizations, ranging from movie studios to sneaker manufacturers, are changing the way they make decisions, connect with customers and market products because of the increase of new tools that enable people to express themselves more easily online.

“There is a new paradigm where consumers drive the conversation and have the control. Companies have to let go of the marketing speak and let people communicate with each other in an unfettered environment,” Geoff Ramsey, CEO of eMarketer, says.

One opportunity is for marketers to take ideas from social networking sites and apply it to their own business, he says. For example, GlaxoSmithKline is working on a social networking site for the weight loss community that lets users talk with each other and answer each other’s questions about how to lose weight, such as diet and exercise. GlaxoSmithKline is doing it for two reasons:

  1. To gain learning from these affinity groups – marketers can find out a great deal about how this group of people define and express themselves. They can use the language or phrases observed for purchasing keywords for search campaigns. They can apply the learning to sales copy in magazines, radio campaigns or on the Web.
  2. To participate at the site, the visitors must register there and provide some demographic information. Now GlaxoSmithKline has a list of consumers to market to when the weight loss product launches.

By listening in, marketers have an opportunity to hear how people really feel about their brand or product. With such learning, they could correct misperceptions in the marketplace or make effective changes to their products or customer service.

“Until you have demonstrated that you listened and responded accordingly, you cannot deliver hard-core messages to people,” Ramsey says. For this reason, there are many natural language processing companies that can determine what users are saying.

One company, Cymfony, offers a product that follows the flow of the message, tracks the positive and negative reactions to it and measures its influence on the audience. It scans and interprets the voices of users in blogs and social networks to determine how these discussions are impacting potential customers.

Nail points out, “In Web.1.0, the marketers’ job was to appear adjacent to that content but now that users are generating the content and are looking for a social engagement, marketers’ messages need to be part of the content.” To do this, companies need to know what their customers are saying.

Another way that companies can use social networks is to create profiles on the sites. For example, MySpace is currently charging upwards of $50,000 per month for big brands such as Pepsi, Adidas, Dell and Ford to build and promote profiles. Although this seems like something that members would dismiss as sheer commercial promotion – a quick look on MySpace shows that Jack Box, the character behind the Jack in the Box restaurants, has 130,989 friends (meaning that these MySpace members intentionally linked to the Jack Box profile). Of course, MySpace must be careful that selling these types of member profiles does not cause a mass exodus of its members.

Another way that marketers are leveraging user-generated content is by having consumers create their advertisements. The benefits are multifold: It gets consumers involved in the brand; the ads feel more authentic; it saves marketers money because they don’t have to hire an advertising agency; and if the ads are funny or interesting, they propagate themselves by being sent around on platforms such as YouTube.com or GoogleVideo. Companies like Volkswagen and MasterCard have harnessed the affection that some customers have for their specific brand by asking them to create and vote on ads, and created successful campaigns and tremendous buzz in the process.

AFFILIATES GOING SOCIAL

When it comes to testing the waters in burgeoning areas, affiliates are usually eager to dive in headfirst.

Rosalind Gardner has a blog called Net Profits Today, which she updates daily. She says: “I love my blog. They make posting new content to the web such a breeze. No uploading required. Just write and publish. It doesn’t take much to copy and paste a merchant offer and add a few of your own editorial comments. Another advantage is the free search engine traffic that blogs invite. Search engines love fresh content, so I’d highly recommend that any affiliate who isn’t blogging yet, start ASAP! Of course, the best benefit is that blogs are yet another way to enhance the relationship you definitely want to build with your visitors as an affiliate, especially in light of how difficult it is becoming to make sure the mail gets through nowadays.”

One social network specifically for affiliates is the Affiliate Summit Social Network. Consultant Shawn Collins, the Affiliate Summit co-organizer, says the network “helped Affiliate Summit by enabling attendees to network in advance of the conference, as well as to brand themselves through posts to their journals, sharing bookmarks, etc. This value-add assisted us in selling Affiliate Summit, and I think it is conducive to our goal of bringing the community closer together.”

He adds, “Now that the [July] show has ended, I will be focusing on getting more attendees to register after the fact. The ongoing network will benefit them, and we will be using it as a retention tool that ties to our mission of creating a unique educational environment and networking opportunity that facilitates the exchange of information about affiliate marketing.”

Affiliates are also testing the waters of mainstream social networks, such as MySpace. Collins has created a profile on MySpace, with the user name affiliate manager, and posts the content of his blog, AffiliateTip.com, on his MySpace blog. “My goal is to get more eyeballs for my blog. The goal is awareness – to get incremental readers – the ultimate goal is to recruit managers for affiliate programs. The first thing I talk about in my profile is that I am running these two programs and I have banners up to join them – PayLess Shoes and Snapfish.”

One clever affiliate whose social networking site has garnered lots of media in the past six months, including spots on CBS Early Show and Good Morning America, is 23-year-old IT manager Kevin McCormick. Six months ago he started DressKevin.com, a site that is a graphical database of his wardrobe, where users vote on what Kevin should wear on a daily basis and later comment on it. DressKevin.com inspired a second site, MyDrobe.com, a wardrobe management system for users. Both sites keep track of the last time an item of clothing was worn, the size, brand and style details.

On DressKevin.com, the clothes descriptions sometimes include a link to the merchant or affiliate program where it can be purchased – but not for every item. “If affiliate marketing did not exist, I would be providing uncompensated referral links anyway. I am trying to maximize it without comprising the integrity of the site. That is why affiliate marketing works well for me. I have Old Navy shirts on my site and they have links to Old Navy through Commission Junction. But I also have descriptions of my shirts from Hollister and Express with no compensation because I like their shirts.”

He attributes this growth and popularity to the credibility and authenticity of his site. McCormick says he started his site not to make money but to see if it would catch on and people would pass it on to their friends. “I was uninformed about CPC advertising, media, PR, affiliate marketing or even making a website.”

McCormick does not actively seek out affiliate agreements with merchants. He signed up to participate with some retailers such as Old Navy and Macy’s through Commission Junction. He appreciates the convenience that the network offers in terms of finding him appropriate merchants to sign up with, and the tracking and processing of commission paychecks.

McCormick’s other site, MyDrobe.com, offers more opportunity for generating revenue. It is a wardrobe management system that is a database for clothing, and enables users to manage their wardrobe and create a profile as well as enabling people look through other people’s clothes and to see what they are wearing. MyDrobe.com has 4,900 registered members and the demographic is heavily female, with a significant amount of girls between the ages of 13 to 16, followed by a concentration of girls in the 16-to-20 age range.

“Any website that focuses closely on brand-name products like clothing is a great candidate for utilizing affiliate marketing channels that will pay a commission on referral sales. MyDrobe’s clothing descriptions have ‘click here to buy this shirt online now’ for those who see a particular item of clothing that they like in someone else’s wardrobe and would like to buy it for themselves as well,” he says.

The site offers complete product catalogs that are provided by affiliate networks in “vendor showcases,” which are made for a single clothing company. For example, at the vendor showcase at MyDrobe.com/gap, users can browse through clothes currently for sale at Gap. Users can add clothing to a wish list, post comments and provide ratings and click on links that will bring them to Gap.com.

“Product feeds make this possible because MyDrobe will automatically update these vendor profiles based on what is currently for sale, so that my site does not need to continually manually enter new clothing into the site. XML technology makes this easy to implement for both the clothes manufacturer and site operators,” McCormick says.

Another property exploring how much social networks affect e-commerce is the brainchild of Lisa and Brian Sugar in San Francisco. In March 2005, they started a blog devoted to celebrity news called PopSugar and a community developed rapidly around it. By June 2006 they had 4,000 registered users chiming in about Jennifer Aniston’s new YSL bag or Britney’s second pregnancy.

In June 2006, they launched TeamSugar, which offers its readers a service similar to MySpace, providing registered users with their own profile, Web page, blog and the ability to send messages to one another. FabSugar, a fashion blog, launched in July with other sites devoted to topics like technology, home decor, and fitness to come subsequently. Brian Sugar, who previously was the chief Web officer at Bluelight.com and vice president of e-commerce at J.Crew, explains that “eventually, we will have 12 categories that sit on top of your social network which is called TeamSugar.”

Sugar’s goal is to get 100 million page views and 25 million unique users per month from the combined sites that will target trendsetting women between the ages of 18 and 35 and the advertisers that seek to reach them. He points out that, “TechCrunch and MySpace cater to guys, and DailyCandy is about fashion but without the celebrity gossip component. There is a massive crossover between InStyle and RealSimple and Allure and I don’t think the readers are getting served online from social networking and an editorial standpoint.”

FabSugar blogs about style and beauty products; for example, it contains an entry about the flats that Kate Bosworth and Sarah Jessica Parker are wearing, with links to two sites that sell them. Right now the site has text links with no merchant agreements yet but Sugar thinks that, “We definitely will be linking at Sephora and J.Crew. If they offer an affiliate program, we will sign up. If they don’t use affiliate programs, I think we will be able to broker the deals,” he says. “We have always believed that the majority of revenue would be from our advertisers.”

LOTS OF BUZZ

Another site that drives word-of-mouth commerce by leveraging the community aspects of a social network is MyPickList.com. The effort integrates a user’s profile and his or her favorite product recommendations into a networked community.

It works like this: Users create a list of their favorite items from multiple categories, called a pick list. They add the product, choose a preferred merchant for product sale, write a short product review and tag it. Only products that are sold through a retailer in the MyPickList network are eligible for a product commission. Once the pick list is created there are four ways to get a pick list viewed/distributed: Send to a userdefined buddy/email list; RSS feed; a banner ad creation (MyPickList.com badge/widget) that allows users to create custom ads to promote their pick list on websites and blogs and MySpace page; and direct from the MyPickList.com website.

Jeff Eichel, CEO of MyPickList, says it helps users become affiliates “by allowing them to recommend products and services under their MyPickList account. If a product that a user recommends gets purchased from the pick list, that user will earn a commission ranging from 1 percent to 10 percent. Most of these people would never get approved for affiliate programs on their own, but because they are under MyPickList there is no approval needed.”

Another social media platform for affiliates is Affilipedia, which, like Wikipedia.com, uses Wiki software to allow users to contribute articles and edit entries. Novices to experts can submit new information on affiliate marketing as well as edit the existing pages in the affiliate marketing encyclopedia if they disagree with the explanations of affiliate, merchant, commission or other affiliate marketing terms.

This egalitarian collaboration works – Cymfony’s Nail points out “Wiki in general is a collaborative platform and therefore they don’t have [to have] a centralized editorial staff. They are not limited to how much you can afford to pay.”

Although the sharp increase in content presents more prospects, it can be risky to be associated with some of the uncensored and often-critical material of user-generated content.

“You might come to the conclusion that this is not a ‘safe’ environment for advertising your product or service,” says eMarketer’s Ramsey.

If affiliates do decide to invest their time and effort into a specific social network, they should be aware that although members can be loyal to their favorite sites – studies find that users are driven to return often by ever-changing content and membership – audiences (especially young audiences) can be fickle and move on to the next great thing and online marketers need to be ready to move on as well.

ALEXANDRA WHARTON is an editor at Montgomery Research Inc., Revenue’s parent company. During her four years at MRI, she’s edited publications about CRM, supply chain, human performance and healthcare technology. Previously she worked at Internet consulting firm marchFIRST (formerly USWeb/CKS).

Santa in September

Kathy Eickenberg, who runs PurpleBearsShopnEarn.com, knows exactly what she is going to do this holiday season to ramp up her Christmas sales. One is start early; another is she has started a newsletter. She’s hopeful her Christmas ideas will help her move the teddy bears, arts and crafts, toys, children’s clothes and other collectibles and party supplies she carries on her site.

“I do try to read up on things and pay attention to various sources to find out what are considered the ‘hot’ products for the holidays and will definitely spend more time on the electronics, jewelry and toys sites since I assume they’re natural shopper favorites,” she says. She adds that she probably stands in the shadow of the “really successful” affiliates, but she’s proud and determined to learn as she goes. “I’m not really sure what to expect this year,” she says. “Sales have been improving, so we’ll see. Virtually all of my toy sales are around the holidays. It will be interesting to see how many toy sales will remain with Amazon or be done through Toys R Us, since they’re now separate.”

She also knows that any affiliate – with one site or one hundred – who sells gifts, clothes, electronics, books, toys and other retail goods is tested in the fourth quarter of the year when holiday sales could mean as much as 90 percent of an affiliate’s income for that year. Mostly, affiliates like Eickenberg are catching on to the techniques they need to rank higher in searches and keep the visitor interested – whether through content, coupons or presentation. What they want is to start as early as they can – for some, July is when they gear up – and to have the merchant weigh in, too.

There is do doubt holiday sales are big business – especially online. In 2005, holiday shoppers in the U.S. spent $30.1 billion online (that’s excluding travel) during the period of roughly mid-November to Dec. 25, according to a study by Goldman Sachs & Co., Nielsen//NetRatings and Harris Interactive. That spending is actually up 30 percent over the previous year. A separate report by comScore Networks put the Nov. 1 through Dec. 25 spending number at $19.6 billion (excluding travel, auctions and large business gifts) – a lower amount but still 25 percent more than its previous year’s total.

The Goldman Sachs & Co., Harris Interactive , Nielsen//NetRatings, study stated shoppers spent the most money on clothes, at $5.3 billion, followed by computer hardware and other peripherals at $4.8 billion. The ubiquitous iPod and consumer electronics in general made for a very fastgrowing category at 109 percent year-overyear, according to the study. This, they say, was due to demand for the iPod but also the lower prices in 2005 on laptops, printers and plasma televisions. The study also said shoppers bought $3 billion in books and $2.3 billion in toys and video games. And purchases didn’t necessarily stop the day after Christmas. Nielsen//NetRatings says while the number of unique visitors to websites in the week leading up to Dec. 25 totaled 60.2 million, the week after Dec. 25 to Jan. 1, 2006 totaled 61.2 million, as recipients proceeded to promptly spend their holiday gift cards.

AFFILIATES EMBRACE THE SEASON

Joel Bevil also knows the holiday season is an important period, but unlike Eickenberg, isn’t quite sure how to approach it. His BeachCombersCove.biz, DreamJewelry.biz, RoadTripVacations.net, and VarsitySportsStore.com will be experiencing their first Christmas this year. He says he plans to look into how to best market his sites in the next few months but that right now he’s actually just finished some back-to-school sales that did rather well for him. He says he primarily goes to ABestWeb.com forums on the Internet two or three times per week to seek out advice and to gather helpful hints.

Marilyn Olsen with American- Luxury.com has recently started a blog to help her sales. She also runs World- Luxury.com and French-Luxury.com, where she sells higher-end apparel, furniture, baby clothes and accessories, interior decorating ideas, gardening essentials and dog and cat gifts. “The fourth quarter is more a difference of magnitude rather than a change in what I offer to my clients,” she says. “Very special, handmade items, both decorating and gifts, sell as soon as they become available, which is usually in October.” For her the holiday season means working long hours to update the Web pages, which she does individually. “Since I carry everything at an individual item level, both image and text, this represents extra hours to add SKUs, and because of the faster sellthrough, I spend much more time checking for broken links or out-of-stock conditions,” she says.

Olsen says the blog adds a personal touch, which her buyers appreciate. She says the blog acts as a kind of newsletter to alert clients to “developing trends and to provide information about specialized luxury products to help them make informed buying decisions that meet their lifestyle needs.” She’d rather do it that way than to send email, which she says is too obtrusive. She does allow clients to set up an RSS feed to get only the information they want.

Marilynn Ferguson of GoodBulbs.com knows seasonal cycles. (Can you think of anything more seasonal than flower bulbs?) “I’m going to be promoting GoodBulbs with some brick-and-mortar advertising,” she says, “and some online ads, working to get the branding up … things like that. During the bulb-selling season, I’m going to fire up several ad campaigns. I’m quite excited about advertising on the merchant side, because I can go for branding and such and can afford to take a longer view when it comes to the ROI. Plus, a merchant site is a natural destination site.” She says that although she’s all for gearing up about two months before a high-selling season, “on the affiliate side, September is early enough for me,” she says. “Any earlier, and the ‘newly updated’ SE rank bonus dies before the season starts.” She adds that even with marketing pushes that some retailers start offering before Halloween, she doesn’t believe the selling season in actual sales numbers has changed in “20 years.”

What she calls the “actual” buying season for Christmas products should be anticipated by “SEOing” those items a couple of months in advance so that they get ranked at the right time. This is a different approach than any “regular” items you may have on your site, she adds. “Just tweaking the pages to show up in the SEs will do,” Ferguson says. “And if it’s a summertime item, they can pretty much forget it for Christmas; the ‘holiday’ for most summer items is Memorial Day – if there’s any holiday for them at all. There are some July 4 items, but other than that, summer stuff seems to not be connected to a particular day.”

As much as Ferguson is aware of the product life of her goods throughout the year, people like Bevil and Eickenberg want – and may need – more guidance from an affiliate manager. Fortunately, there are some who know they need to help make the sale, too. John Walter, affiliate coordinator at outdoor apparel and gear sites DogFunk.com, BackCountry.com, Tramdock.com and Explore64.com, knows that teaching affiliates a little SEO isn’t going to cut it. He says his sites do 50 percent of their sales in the fourth quarter and that he actively goes to the forum sites and advises affiliates to start their holiday work early – like August.

“We have a clear-the-warehouse sale then to get ready for the holiday season.” He says the 120-day cookie on his sites helps, as does the bi-weekly banners through Commission Junction so that affiliates don’t have to change that link. This year, they are gathering all the programs under one “mega-program” in CJ – so that will “diminish tracking errors across sites,” he says. “That’s less painful for affiliates.”

MAKE IT SIMPLE

Gary Marcoccia, co-founder of network AvantLink.com, says they go the extra yard for affiliates who need massive site updating for the holidays. They offer an automated data feed management tool that comes in handy when pages and pages of your site may need the necessary customizing to get them ready. Marcoccia says he noticed a fundamental difference in the kinds of online traffic some time ago.

“We recognized there were people either surfing or shopping,” he says. “We found out that we get a 10 times greater conversion rate from those shopping online. Those people are in buying mode. That said, we help affiliates make the sale by offering spiderable content. This way you don’t have to pay too much attention to it. It can take two to four hours per week customizing content manually.” This automation can be completed a few weeks before the beginning of the season so that spiders are sure to find it.

“We are focused on a shorter tail,” Marcoccia says, “not the thousands of affiliates who are just throwing up banners.” He says that while their affiliate selection process is very rigid, their platform can allow an affiliate to promote a feed so specifically that it is essentially syndicating affiliate creative. Even so, Marcoccia actively goes to forum boards and campaigns for early preparedness. He says affiliates have to go to their merchant sites in September to make sure the merchant inventory is still in stock and the price hasn’t changed. He says the best success is to devote one page to one item. But if summertime comes and the link stays up, then you have to go back to the static page, he says. And no one wants to manually check hundreds or even thousands of items.

For many, instinct and manual techniques are all they have at their disposal, especially if you’ve maxed out your SEO budget. To this end, the National Retail Federation’s Shop.org recently released a best practices and holiday trends study for holiday retailing 2006. The study’s highest-ranked advice is to start early. About a third of consumers plan to start their online shopping earlier than they did in 2005, so that means marketing campaigns will have to start earlier, too.

Secondly, the study found that the other two-thirds of online shoppers are waiting to shop later and later – 20 percent wait until 13 days before Christmas to start the bulk of their online shopping (compared to the 9 percent who leap in on the day after Thanksgiving). To facilitate the late shoppers, more than half of all online retailers were still offering free shipping during the last six days before Christmas. The study also commented that savvy online shoppers were expecting big online sales and promotions as early as Nov. 26.

With the ease of shopping online now a nonissue, customer satisfaction just keeps rising. Shop.org’s study cites an 11 percent jump in “very satisfied” online shoppers from the previous year. While 29 percent of online merchants began markdowns even before Thanksgiving, an equal 29 percent offered no markdowns all season and both groups came out ahead – 87 percent of merchants saw the same or improved profit margins.

SHOP + SEARCH = SALES

The Shop.org study also reiterated a basic truism: Search is still king. Even though some retailers were wary of spending so much money on paid search, the majority are still allocating budget moneys to it and even increasing their efforts in paid search this season. Affiliates also put search high on their list of effective seasonal strategies. Some will use search this year for the first time.

Ferguson at GoodBulbs.com would love to see the timing even up over at some merchants. They may want to help for the holidays, but she says sometimes the promotions are ill-timed. “It would be nice to start seeing the offers and new links and banners in September and October,” she says, “when there’s still time to do something with them, but not so darned soon that putting them up would give a reasonable person the idea that the ad was left over from last year.” She adds that some merchants email her the week before Christmas shipping ends (or even closer to the deadline) with some deal, “as if I’m going to be able to do a thing with it then.”

Her standard operations are to “fire up the PPC campaigns and tweak the SEO for my affiliate sites. Affiliate-wise, I aim for products that aren’t limited to Christmas interest, so rather than a ‘now or never’ type of cycle, the holidays just cause increased interest all around. A lot more buyers come out at the holidays, so sales rise accordingly. So, for me, it’s just a matter of making sure my pages are getting seen at that time.”

This year, Eickenberg says she will put “more emphasis on the gift cards that are available. I have only started to experiment with some pay per click and am still very much learning about it. I may devote some effort into that this coming holiday season. Probably everybody else will be, too, so not sure how effective that will be.”

Marcoccia at AvantLink loves to say that removing all the manual labor for the affiliate helps them execute “best practices.” It isn’t all just feeds; he says he lets affiliates know what feeds will be holiday-related and communicates that to them. In his network, though, the learning curve is a bit steeper. “With us,” he says, “if you’re not a little bit savvy, you are going to be challenged.”

Olsen of American-Luxury.com lauds the whole retail industry for embracing the online world. They may still be learning how to do things but clearly are in for the long haul. “I applaud online merchants who realize that truly unique items for which inventory could not be supported in brick-and-mortar [stores] can be offered successfully online to an audience that may be a small niche but is willing to pay full retail early,” she says. “This not only can give them important information on trends, but is also profitable.”

Big Brands Believe

TV commercials and print ads aren’t dead yet. Major brands still believe in traditional media. After all, a blockbuster commercial with a catchy jingle can positively boost brand equity. No one cares to dispute the power of a well-placed Madison Avenue ad. But nowadays, marketing teams are increasingly feeling pressure to account for the dollars they spend; they need to show the hard results for money in a real way.

No wonder many marketers are starting to expand their ideas about what constitutes the best-spend blend. While dollars spent on old-fashioned media can positively impact brand image, many major marketers are frustrated by the paucity of accountability in that arena.

Enter the Internet. A decade ago, it was a way to blast banners and burn through a huge amount of cash. Now with access to high-speed connections the norm, and rich-media taken for granted, marketers believe more and more that the low cost, high measurement and constant tweakability make the Internet a magic formula for marketing.

The growth of online ads isn’t showing signs of slowing down and traditional commercial markets are feeling the loss. For example, the up-front market, the time period during which TV networks show their fall lineups and try to sell ad space, is losing its luster. This year the Walt Disney Co. network did well during the up-front, selling $2.3 billion in airtime, a $200 million increase over last year. But the final network TV up-front haul came out to only $9.05 billion, compared with $9.1 billion last year.

“This year the interesting thing is it isn’t just about TV anymore; there are a lot of other places to be worked into these TV buying deals,” says Stacey Shepatin, senior vice president and director of national broadcast at agency Hill Holiday in Boston.

She points out that CBS put the NCAA games on the Web and drew a huge audience. “Content is on the Web, on iTunes and on cell phones. Clients want to be able to reach consumers wherever they are getting their content and for some clients, mobile phone and the Internet make more sense than network TV.” Shepatin says the networks will be aware of this shift and work out up-front packages to please marketers.

AD SPEND UP

Beyond anecdotal evidence of the trend, data backs up the new reality. While many industry observers like to speculate, few have actually pinned down hard numbers. But Universal McCann’s forecaster, Bob Coen, recently revised his estimates for overall U.S. ad spend downward. However, he’s bullish on Internet ad spending and has revised those particular estimates upward. Coen now forecasts that Internet ad spend (excluding search) will amount to $9.705 billion this year, which is a 25 percent increase over 2005.

In December, Coen predicted that online advertising spending would total $8.7 billion in 2006, or an increase of 10 percent over 2004. But in the first quarter of this year online advertising spend increased more than 19 percent from the first quarter of 2005, according to Coen. To give you an idea of the contrast, he now predicts that overall ad spending will increase to $286.4 billion in 2006, a 5.6 percent increase from 2005. In December, he had forecast 5.8 percent growth. The Internet numbers are enough to leave even skeptics believing that this online ad thing has real momentum.

Other numbers also prove the point. The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers announced that Internet advertising revenues reached a new record of $3.9 billion for the first quarter of 2006. The 2006 first quarter revenues represent a 38 percent increase over the first quarter 2005 at $2.8 billion and a 6 percent increase over the fourth quarter of 2005 total at $3.6 billion.

Some types of companies are quicker to catch on than others. Not surprisingly, high tech companies are among the first to get hip to trending their ad spends toward the online universe. Yahoo’s chief marketing officer Cammie Dunaway agrees that a commitment to “performance- based marketing,” like the Internet, is more effective than just doing branding on network TV alone. Yahoo has also ventured into getting its brand seen in off-line environments, with a Sheraton hotel deal in which Yahoo sponsors the wi-fi lobby Internet connections. Yahoo plans to continue its much-lauded street marketing stunts but will also continue to refine its online and search efforts.

“I really believe in interactive. Soho Square [New York] is our overall agency that pulls in WPP partners,” Dunaway says. Yahoo did a lot of promotion for its music product and in addition to buying TV spots on the broadcast of the Grammy’s and throwing parties in Miami, it did a lot of online work.

“We had great online creative as well; you could throw Green Day’s equipment with your cursor – we had a fun, engaging online element. OgilvyOne [also in New York] handles online, and ours is very extensive. We do so many online campaigns! Great branding makes your search work harder. In 2006, our marketing will be a blend. We’re do search engine marketing as well as branding – ad campaigns, buzz marketing and partnerships like Sheraton,” Dunaway adds.

Those looking to reach a youth demographic, including large brand advertisers, are spending billions online. Sprite was an early blog advertiser and trailblazed IM ads featuring a hip-hop cartoon personality known as Miles Thirst.

John Vail, director of the interactive marketing group for Pepsi-Cola North America, says the company isn’t as much about clickthroughs. To gauge effectiveness, the soda giant is participating in an experiment run by Yahoo and market research company ACNielsen that tracks the online behavior and offline purchases of about 36,000 U.S. families. PepsiCo Inc. doubled its online display advertising spend in 2005, allocating just 2 percent of its total U.S. spending. But Americans spend close to 20 percent of their time online, so there is a gap.

Advertisers aren’t really taking advantage of the fact that a fifth of our time is spent online. So there’s a great opportunity for even more expansion.

PRINT IS NO LONGER THE KEY

But at least one advertiser has woken up to the reality of the way consumers are currently choosing to view media. Absolut vodka, known for its iconic print ads, is at the cutting edge. It has radically altered its marketing strategy away from print to the Internet. The company says it changed directions because consumers’ tastes were changing and many competitors were entering the marketing.

“Online plays a more important role than print. Print is not the key media anymore,” according to Patric Blixt, communications manager for new media at Absolut in Stockholm. “Our consumer is more focused on the Internet and mobile communication so we’re shifting also. We’re evolving the iconic advertising, making it more inclusive and modern with the same wit and creativity we used in our off-line advertising.”

While Absolut won’t abandon print, outdoor and TV advertising, those media will take a back seat to the Web. “Even if the print media budgets remain larger, the print is now much more seen as the first window into the Absolut world, driving interested users to the whole brand experience online,” Blixt says.

Absolut will increase its online spend to about 20 percent of its media budget. This would account for about an $8 million outlay in the U.S. as the brand spends upwards of $40 million annually.

And Absolut is probably smart to target consumers online. But marketers of electronics would be wise to follow suit. More than 50 percent of Americans were ready to upgrade their home electronics this summer, according to research from Pioneer and Roper. Before they hit the stores, however, 90.2 percent of them went online for product research.

A survey from the Pew Internet & American Life Project finds that 45 percent of American Internet users have turned to the Web for help with a purchase in the past two years and that 57 percent considered the Internet “the most important source of information,” so many marketers know the Internet is a smart place to be.

Automakers are another group that is riding the wave of the sea change. Ford Motor also dropped its magazine ad allotment from 23.5 percent to 21 percent last year but increased its spending on the Internet to 3.5 percent from 3 percent, according to AdAge.com. The company’s overall ad budget remains flat. General Motors also plans to spend 20 percent of its marketing budgets online this year. Automakers, like Audi and Lexus for example, have been quick to champion emerging media and buy advertising on blogs and podcasts.

TECH TALK

You’d think that technology companies would be at the forefront of parlaying their expertise into taking advantage of the way media is developing. While guerrilla marketing and sponsorships are becoming more popular with tech companies, Internet ad buys are also a big part of their focus. Microsoft is also keen to take advantage of online ads. This year it will spend a hefty $500 million to promote its new “People-Ready” message. However, the long-awaited release of its new operating system (“Longhorn” which was later renamed “Vista”) isn’t slated until 2007, and a new version of Office might not see corporate offices for some time. The company hasn’t announced when it will air ads for either product. But vice president Mich Matthews says Microsoft will spend a nice chunk of its “People-Ready” budget across more ROIeffective media, namely the Internet.

Google has begun selling advertiser image ads, which are displayed on its publisher partner sites. And according to Sheryl Sandberg, vice president of global online sales and operations for Google, the search giant recently introduced a “click to play” advertising service that lets brand advertisers pay fees when visitors click to play video ads, which are often construed as brand ads.

Ad options in the online universe will continue to grow. The variety of newfangled online ads is proliferating. Blog spending increased in 2005, with over $16 million reportedly spent. Podcast advertising earned more than $3 million last year and is forecast to grow, with a projected 2010 revenue of more than $300 million, per research from PQ Media in Stamford, Conn. Companies such as EarthLink, for one, are experimenting with ads on Internet video blogs. And mainstream household names like Whirlpool are testing the waters of podcastlandia.

Meanwhile, traditional media is far from dead. Instead, it is adapting. TV is beginning to mimic the Internet. Not only is it becoming a more on-demand media format (along with TiVO), but it’s also shaping up to be more measurable, too. Several media buyers, such as Zenith and Starcom, have signed on to receive Nielsen’s minute-by-minute ratings data, which will show exactly what viewers are watching. They’ll be able to find out which commercial breaks viewers actually watch. Some agencies are expected to also negotiate prices based on where a commercial falls within a program, or within a commercial break.

eMarketer data shows that large projected increases amount to 24.4 percent in online ad spend, compared with much smaller growth (4.2 percent) for all media.

Things have changed since the late ’90s as advertisers have become more comfortable with the Internet as an advertising medium. It was very easy for them to pull dollars from the Web or ignore it completely, but you just can’t do that today.

During the previous boom, “traditional advertisers hadn’t yet embraced the medium, so growth slowed,” says Denise Garcia, an analyst at WR Hambrecht + Co. “That’s not going to happen again because Procter & Gamble, large auto manufacturers and other companies have said they are decreasing spending on traditional media, like television, in favor of online media.”

Despite frequent reports of its demise, TV advertising is far from dead. JWT, in fact, has bought up all the front-page ads on the news blog site HuffingtonPost.com for one week, inviting users to view, comment on and share some of the agency’s best TV ads. The ads invite users to view JWT commercials for clients such as Ford, HSBC and JetBlue. After clicking, visitors are taken to a separate section where they can see nine different JWT spots, leave comments and forward the link to a friend. Jonah Peretti, a partner at HuffingtonPost.com, said the effort is a joint experiment to see if social media sites are fertile ground for TV ad messages to enjoy a viral effect: “If you make excellent advertising, good content and put it in an environment [where] it can be shared, you can learn a lot about how to improve what you’re doing.”

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

Special Order

News of the death of the catalog is greatly exaggerated. It’s no secret that the catalog retail universe is a big one. Brands that started as paper catalogs sent in the mail go back more than 100 years to the Sears & Roebuck catalog sent to families in rural parts of the country. In its pages people could order everything from bars of soap to do-it-yourself homes delivered right to the doorstep.

Catalogs in general have gone through a sea change of sorts and nowadays the best-known ones sell mostly apparel, kitchen and bath goods, electronics and other home and gift items. Many of the brand names are nearly ubiquitous: L.L.Bean, Eddie Bauer, Chadwick’s, Patagonia, Harry & David, Spiegel, The Sharper Image, Brookstone, Crate & Barrel, Hammacher Schlemmer, Pottery Barn, Williams-Sonoma, Land’s End, Lillian Vernon and Victoria’s Secret.

Some of these brands are, of course, multichannel marketers now – be it Web sales, catalog, physical store or telemarketing. The printed catalog may be how the brand is recognized, but it’s the various channels that keep sales humming.

In fact, multichannel marketers are very big participants in the $2 trillion U.S. retail market, according to the Direct Marketing Association (DMA). About 40 percent of retailers sell through three or more channels, 42 percent through two. That’s almost a quarter of all retail sales generated through direct marketing efforts and that direct mail (such as paper catalogs) accounts for half of that revenue, according to the DMA.

Smooth Transition

When e-commerce came along many predicted that the pick-up-the-phone-and-order-from-a-paper-catalog model would die out. It hasn’t and is in fact thriving, especially as affiliates for these catalog businesses do extremely well.

Like the overall affiliate cosmos, the top 20 percent of affiliates for catalog retailers bring in the heaviest sales. Contrary to their fears, catalogers, as they are known, have transferred the catalog model to the Web rather well.

Online catalog and call center revenues reached $9.87 billion last year, and online sales through retail chains brought in $27.75 billion in 2005, according to Internet Retailer. Eighty-two percent of multichannel retailers who have a catalog component run profitable Web operations, according to Internet Retailer/WebSurveyor. This is actually ahead of the virtual-only merchants – only 75 percent of them are profitable.

Contrary to what might be suspected, the Web presence does not take away from the overall catalog brand. All catalogers believe in e-commerce, says Chris Henger, vice president of affiliate marketing at Performics. He says the days of catalogs asking if they should invest in the Web are over. “There may not yet be best practices in what channels get the credit for sales, but they are learning. Sending a catalog is a tremendous vehicle and so what better time to be omnipresent with an interactive message,” says Henger.

Performics manages affiliate marketing programs for more than 300 advertisers, including more than 100 catalogers. Catalogers are kind of its specialty, he says. Some of its top catalog clients include Blair, Cabela’s, Eddie Bauer, Brylane, Chadwick’s, Patagonia, L.L.Bean, Harry & David, Spiegel, Newport News, Sears, and Sportsman’s Guide.

According to Henger, the message from consumers is loud and clear: The customer needs to touch the brand the way it wants to – whether that is on the Web, over the phone or walking into a store. The good news is that those channels all help each other.

“Customers are seeing growing sales on the Web – 30 to 60 percent of sales,” Henger says. “They have all come to the conclusion that [mailing] catalogs is not going to go away. It builds brand equity and there is a balance to the push and pull.”

Others agree.

“Going online in general has benefited us greatly,” Chris Park, affiliate and partnerships manager at Blair, the men’s and women’s apparel seller, says. “We may drop catalogs all the time and [customers] may look at a catalog a few times but they go to the website many times.”

Teamwork

He says there’s really no choice anymore: The print catalog and online have to work together. Many customers look through the catalog and then come online when it’s time to buy, Park says. Blair can then promote a $0.99 shipping offer once customers come to the website.

Some catalogers take the time to look at the affiliates themselves and measure their value in a more granular way instead of just heaping together all affiliates into one category.

“Before we were just looking at the sale and now we are looking at the affiliates themselves and putting them in different buckets,” Park says.

Knowing so much of their sales are now attached to the Web and by extension, affiliates, some catalogers believe they need to go the extra yard for their earners. Brad Sockloff, vice president of e-commerce at Lillian Vernon, says he works personally with top affiliates every day.

“We do special promotions with the top 20 percent and we do monthly meetings with them,” he says. The top earners get to know when Lillian Vernon has overstocks prior to the holiday season. “Why sit on it for another year?” Sockloff says. The company also produces a newsletter exclusively for affiliates.

Lillian Vernon additionally has a link to find out about their affiliate program prominently displayed on their home page, as does Brookstone, The Sharper Image, Eddie Bauer, Hammacher Schlemmer, and Chadwick’s of Boston. None of that personalization is too surprising from Lillian Vernon, who markets gifts, housewares, gardening, seasonal and children’s products among other gift-related items – most of which can be personalized with a name or monogram.

As far as helping affiliates, you might not get any better than at Sierra Trading Post. They were named Innovative Merchant of the Year by LinkShare in 2005. The tools on the company’s site to help affiliates are plenty, more so than most of the other cataloger affiliate Web areas. Sierra has available on its site an extensive guide for affiliates, website templates in three different styles, a product data feed and tools for easier product showcasing on your site. In beta are two new tools: Synonymizer, for maintaining your search engine rankings even with a data feed; and Linkwrapper, an automated linking tool.

Justin Johnson, affiliate manager at Sierra Trading Post, says if he makes the affiliate’s job easier they will make more money. “Help them fill the hole,” he says. “Data feed sites give visitors a good idea what they are looking for and we automate some of that for those that don’t know. I try to figure out what affiliates are struggling with” and base a tool on that.

Sierra also posts sales contests for affiliates where they can compete for prizes. Johnson says while making the sale is great, he loves to learn something from the contests, such as finding out an elusive metric like numbers of new customers. He says Sierra’s recent Summer Camp contest will try to get the affiliates to communicate with each other and learn from each other. “I ask myself, what affiliates do not know,” Johnson says. “It benefits us all. Customers profit because they find what they are looking for and affiliates profit because they get high conversions.”

On A Shoestring

While catalogers restate their commitment to affiliates, there are still the somewhat- tight budgets driving an affiliate manager’s workload. Recent DMA statistics say about 9 percent of catalog/Internet marketing budgets go to affiliate marketing. That’s in line with about 8 percent of affiliate budgets for all retailers.

And JupiterResearch recently determined that search engine marketing managers also did five other jobs on average, including Web design, IT staffing, email marketing and e-commerce management. Or in the case of Andrew Dunn, online advertising manager for Vermont Teddy Bear Company, you manage stuffed bears, pajamas, flowers and mail-order gourmet foods. He agrees he could be doing more to reach out to affiliates. “We’re such a multichannel brand,” Dunn says. “The affiliate is a smaller channel for us, but we will broaden things as much as we can.” He says less than 5 percent of overall sales come from affiliates.

The Vermont Teddy Bear Company began selling personalized stuffed bears on the radio in 1981. The company’s other catalog brands include Pajama Gram, Calyx & Corolla, Gift Bag Boutique and Tasty Gram (which is online only). Dunn says he considers any business in the “gift” category to be his competition, so he admits he is often too busy to attend to all affiliates. Paying more attention to the big earners is just “physics,” he says.

While staying in contact with affiliates keeps him very busy, he finds ways to steer everyone somewhere. He says if an affiliate emails him with a simple html question, he may refer them to an online tutorial. He says he will refuse entry to affiliate applicants whose Web address is a provider name with a tilde denoting their personal site. A person who isn’t going to spend the money for a unique Web address is probably not going to be an earner, he says. Blair’s Park says that some affiliates never want extra emails or phone calls, preferring to be left alone. Some, he says, want all the details – “They IM me, call me and I know who they are. I’ve got to keep those people happy.”

Search Sells

In the performance marketing world, catalogers and other e-commerce sites – whether they sell through multi-channels or not – can’t deny the effectiveness of search engine marketing. While a DMA study stated that 58 percent of catalogers said they use affiliate marketing as an advertising strategy, 65 percent said they used search engine advertising or the buying of search keywords. Interestingly, both pay-per-performance and shopping aggregators have a decent presence among retailers with catalogs, at 41 percent and 24 percent respectively. And it is good to see that the annoyance of pop-ups and adware keep their numbers low, at 9 percent and 4 percent respectively. Up-and-coming strategies still in the beginnings of a groundswell are Flash ads and video ads, at 8 percent and 3 percent respectively.

Park agrees that catalogers will employ better conversion methods as they get more used to the possibilities. “Search is definitely the big thing,” he says. “Aggregators will also get big.” He says he would like to see more of an understanding of adware. He says he won’t work with anyone where software attaches to your computer. He publicly speaks out against adware when he can.

While some catalogers have put a ban on bidding of brand keywords, search may be the only thing catalogers have a certain control over. Some catalogers would rather not lose control over the brand. If you have, say, 50,000 affiliates, all with a different Web address, you don’t know what’s being done to your brand, says Sierra Trading Post’s Johnson.

A high-profile catalog such as Crate & Barrel chooses to have no affiliate program whatsoever. “We wouldn’t have anything like that here,” a spokesperson says.

The more affiliates contribute to your online sales, the more time and investment you’re going to give to an affiliate program, says Johnson.

“There’s lots of pressure more and more in the affiliate channel,” Vermont Teddy Bear’s Dunn says. “There is more competition for ad space, and from a search perspective, contextual ads-wise. I can pick and choose as a marketer but if I’m an affiliate marketer there is more work involved.” He says in his year and a half as online ad manager, “We are growing up with it and see what works and what doesn’t.”

Unlike Vermont and its relatively small 5 percent of online sales that come through affiliates, Lillian Vernon’s Sockloff says affiliates bring between 10 and 15 percent of their online sales. Not only is it a fairly large percentage as far as affiliate involvement in sales figures goes but for Lillian Vernon, half of their overall sales come in the fourth quarter since the holiday season is its busiest. Sockloff says the affiliates really begin to ramp up in early September for the holidays. While he says that increases the incremental customers they get – buyers who wouldn’t otherwise come to Lillian Vernon – those customers are used to looking for items on the Web and the self-serve aspect is a “perfect fit,” he says.

Dunn says that at the end of the day, he sees themselves as multichannel marketers and not just catalog retailers anymore. “If our transactions are online, we have to ask, Would we have gotten that order anyway? The multichannel challenge is what we have every day,” he says. Does it make him think the paper catalog is dying out? He points to the radio market – where Vermont got its start – as an example. With satellite radio now in the picture, he says, the market just evolves.

Henger at Performics is more than optimistic about catalogers’ longevity in the business. “[Catalogs] capitalize off e-commerce growth,” he says. “We [at Performics] see continued growth in the sector. They often need something like us – they don’t typically have a full ad marketing dept. Target [stores] has it and has a history of keeping it in-house. Most catalog retailers, however, are budget-challenged and need us.”

Budget-challenged or not, the benefits for consumers have only multiplied with the choice of sell channels and that means catalogers continue to grow with the rest of the affiliate world – one innovation, one sale, one page at a time.