Performance Marketing Prognostication

It’s that time of year again when we ask industry movers and shakers to look back at the past 12 months and forward to the next year in performance marketing. Here’s what those in the know have to say.

Looking back, what do you think were among the most significant themes to emerge in 2006 in the performance marketing space?

“There has been a huge shift in traffic sources – with two main groups – the first being PPC, which has been a major source of affiliate traffic in 2006 and has brought with it significant issues such as “Brand Bidding.” The second being blogs, which I believe will be a major driving force in the coming years.”
– Brian Littleton, founder and CEO, ShareASale

“When the situation calls for it, affiliates and affiliate managers can band together and stand their ground on an issue.”
– Scott Hazard, president, Brightside Media

“No truly new themes emerged. We saw click fraud penetrate the consciousness of the mainstream media at the same time there is a growing sense of animosity (possibly jealousy?) towards Google inside and outside our industry. Some merchants are reviewing their trademark bidding terms and looking to accommodate affiliates. Finally, you did see a lot of affiliates publicly say they were moving away from black hat and toward white hat activities.”
– Brook Schaaf, principal, Schaaf Consulting

“The desire to achieve better scale (less overhead, more revenue) drove every major corporate merger as well as CJ’s failed LMI project. It’s what makes Adwords attractive and successful.”
– Jeff Molander, CEO, Molander & Associates

“Just how vibrant and powerful the performance marketing community is. This can be seen in the response to LMI, the upward trend in budgets for performance marketing by advertisers and the growth in publications, events and forums serving the community.”
– John Grosshandler, event director, eComXpo

“The re-emergence of brand as an important part of the marketing equation after years of focus on ROI and search.”
– John Battelle, founder and chairman, Federated Media Publishing

“Google actively trying to squash private-label PPC arbitrage affiliates in the name of ‘better user search experience.'”
– Tim Ash, president, SiteTuners.com

“Cooperation. 2006 displayed greater willingness by merchants, publishers and networks alike to adopt ‘cooperative selling’ strategies.”
– Kurt Lohse, founder and CEO, KeyCode.com

“New trends such as the use of video and advertainment continued to grow in 2006 but pose challenges for strict ROI/CPA advertisers.”
– Joshua Sloan, director of online marketing, 1and1.com

“Search is a bigger part of affiliate marketing than many people thought.”
– David Lewis, president, 77 Blue

“Clearly 2006 will be marked by what some are calling ‘The Affiliate Massacre of 2006’ where Google updated their quality score rankings in Adwords and started placing penalties on affiliate landing pages. In many cases this caused minimum cost-per-click fees to go from 10 cents to $5 or $10 on many keywords. This effectively shut down PPC advertising for many affiliate landing pages. This change is causing many merchant advertisers to rethink their policies for PPC marketing since publishers who were running large-scale campaigns and linking directly to the merchant’s site using the merchant display URL and an affiliate link were largely unaffected by the recent change.”
– Adam Viener, president, imwave.com

“A few years ago, you could quickly tell whether or not an online marketer ‘got’ affiliate marketing by discussing affiliates. Those that ‘got it’ conveyed respect for the affiliates. Those that didn’t, well, they tended to use adjectives like ‘little’ or ‘questionable’ when describing their role in the model. In 2006 the performance marketing community witnessed affiliates asserting their right to be treated respectfully. It is no longer acceptable to be a participant in this space and not get it.”
– Lisa Riolo, online marketing professional

“Affiliates/publishers are in the driver’s seat now, not merchants/advertisers. Affiliates have money, power and traffic and their requirements; business practices and needs dominate the relationship. Merchants need them more than they need merchants who are unable to comply or cooperate with terms. They can deliver the goods; can merchants respond adequately to their demands? If not, NEXT!”
– Linda Woods, president, PartnerCentric

“Behavior targeting seemed to be a popular buzzword but I never heard too many real success stories. Online marketers are actually getting comfortable with the basics and are now casting an eye toward testing and optimization to squeeze out better results.”
– Greg Schraff, director of strategy and business development, Brooks Bell Interactive

What will be the ‘big thing’ that we can expect to happen in 2007 in online marketing?

“A return to the importance of new-traffic- generating affiliate marketers.”
– Brian Littleton, founder and CEO, ShareASale

“Yahoo and Microsoft will debut new products to compete with Google.”
– John Battelle, founder and chairman, Federated Media Publishing

“I expect to see many more super-affiliates stepping up to the plate and saying, look, we need to take responsibility for engaging in upright business practices. You’ll see them become open to educating newcomers in the industry. It won’t be about cutting out your competition, but developing a bigger and more powerful affiliate workforce. And I expect to see managers becoming excited about the possibilities of capturing the loyalty of those affiliates by becoming truly affiliate-friendly.”
– Anik Singal, CEO, Affiliate Classroom

“Performance models such as CPO and CPA are the main driver. Advertisers as well as networks/providers realize that success-based commission models are king and key for success. Globalization is the most important issue. Globalize or die.”
– Holger Kamin, executive account director, Zanox

“There is no doubt in my mind that user-generated content will really start to take fire – especially around video. Still, merchants will have to be innovative to get beyond the sheer volume of media – music, podcasts, pictures and now video in circulation.”
– Wayne Porter, senior director special research, Facetime Security Labs

“User-generated content such as short online videos will proliferate at an even larger scale and pace and show that it can convert as advertisements.”
– Jim Kukral, publisher, ReveNews

“Video ads will continue to grow in popularity as traditional marketing agencies attempt to maintain their grip on ‘their’ industry as they gripe all the way to Congress.”
– Todd Taylor, manager business development, TaxBrain.com

“2007 will bring far more practical offline marketing applications online. It will also signify the beginning of the ‘big shift’ to correct the disproportional ad spend on the traditional mediums.”
– Kurt Lohse, founder and CEO, KeyCode.com

“Social e-commerce will emerge with innovations focusing on peer group favorites and recommendations. The ‘wisdom of crowds’ will begin to drive serious transaction volume in niche markets.”
– Jeff Molander, CEO, Molander & Associates

“Social media marketing strategies that spawn, leverage and influence consumer- generated media are the hot thing at the moment. Companies and affiliates that create environments where their target audiences can gather, share useful information – and don’t overtly interfere with the experience – are those that will be the most successful.”
– Rob Key, founder and CEO, Converseon

“More off-line ad channels (print/radio/ TV) will wake up to the growing importance and measurability of online advertising while more online advertisers will wake up to the branding potential of online marketing despite confusion and difficulties with performance tracking.”
– Joshua Sloan, director of online marketing, 1and1.com

“I think the launch of Microsoft Vista may change the landscape of search marketing and make Microsoft AdCenter more important than it is today. I also think that Yahoo’s Panama project will be a big shift for search marketers. There will be a lot of adjustments as platforms change and traffic starts flowing more towards Microsoft.”
– Adam Viener, president, imwave.com

“The emergence of mobile phone marketing in the U.S. It’s just a matter of time before affiliates worldwide are able to promote affiliate links via digital and print signage. Consumers will then utilize their video-capable mobile phones to transact with merchants.”
– Shawn Collins, president, Shawn Collins Consulting

“I expect Google will continue to morph into other non-search areas. Under this scenario, Google will begin to offer tools that very much resemble an affiliate marketing or CPA network. This will put many traditional affiliate marketers directly in competition with Google for customers. Those non-branded entities relying solely on search will be hurt the most. Such a move is likely to trigger a rash of online mergers and acquisitions as big names and even traditional brands circumvent the search engines and buy their way into bigger pieces of the pie.”
– Mike Allen, president and chief executive shopper, Shopping-Bargains.com

“Technological innovation will become even more important in 2007. Between the growth in online video, broadband adoption and new tools for contextual advertising, behavioral marketing and detecting fraud, the gulf between those who leverage the newest trends and tools and those who rely on yesterday’s approaches will widen.”
– John Grosshandler, event director, eComXpo

“Video, video and more video.”
– Matt Ranta, affiliate manager, Vanns.com

“Continued decline in the effectiveness of current search engine optimization methods. Traffic building through social networking media will continue in effectiveness and popularity throughout 2007.”
– Rosalind Gardner, super-affiliate and author

What are the major challenges in the performance marketing space moving forward?

“Still getting online marketers beyond just keeping their heads above water, for example, just running the actual marketing< campaigns so that they have the bandwidth to concentrate on performance factors and tactics they can employ to improve performance.”
– Greg Schraff, director of strategy and business development,
Brooks Bell Interactive

“Volume. How to sift through the masses to identify the diamonds in the rough, whether they are advertisers, affiliates or partners. Emails and newsletters no longer get through, and when they do, are seldom read.”
– John Grosshandler, event director, eComXpo

“Effectively and ethically integrating the use of video ads into affiliate marketing.”
– Matt Ranta, affiliate manager, Vanns.com

“Keeping up with the speed of innovation on the Internet!”
– Linda Woods, president, PartnerCentric

“Globalization and multichannel approach to reach each and every possible market on this globe.”
– Holger Kamin, executive account director, Zanox

“It boils down to an emphasis on quality and restraint and the need to mature beyond the ‘growth at all costs’ mentality as well as adjusting merchants’ expectations and teaching them to think long term so that system pollution doesn’t kill the environment in which we all do commerce, operate and converse.”
– Wayne Porter, senior director special research, Facetime Security Labs

“Consolidation and intense competition due to a changing marketplace where search engines no longer do only search. With shareholder pressures on the ‘big 3’ engines to continually grow revenues at nontraditional paces, there will be new efforts to go after non-search money wherever it can be found.”
– Mike Allen, president and chief executive shopper, Shopping-Bargains.com

“The need for improved accountability. It’s all well and good for affiliates to have considerable discretion to find novel and creative ways to promote merchants’ offers. Indeed, that independence is the essence of affiliate marketing. But how can a merchant make sure its offer is presented appropriately, ethically, lawfully and in a way that offers fair value to the merchant as well as to users? At present many affiliates keep their methods secret, and affiliate networks don’t do as much as they could to tell merchants what their affiliates are doing. Increased transparency would improve affiliate accountability, helping merchants feel confident that affiliates’ behavior is appropriate and lawful.”
– Ben Edelman, anti-spyware consultant

“The affiliate industry can no longer rely on arbitraged search traffic. It’s a diminishing resource. Instead, it’s absolutely incumbent upon smart affiliates to morph rapidly into the new frontier of online marketing – word of mouth, viral, social media, blogging and other consumer-generated approaches that companies are only now beginning to grapple with. There are myriad opportunities for those that embrace the Web 2.0 world.”
– Rob Key, founder and CEO, Converseon

“Self-regulation is key in 2007. It’s not in our best interest to have the federal government legislate issues for us. Instead, we must band together and squash the bad actors.”
– Shawn Collins, president, Shawn Collins Consulting

“I see all the Web 2.0 trends making a huge impact on not just performance marketing, but all online marketing.”
– Anik Singal, CEO, Affiliate Classroom

“The two sides – affiliates and merchants – have different goals. It is a constant challenge for both parties to try to find a common goal which isn’t always as simple as just “sell more stuff.”
– Brian Littleton, founder and CEO, ShareASale

“Keeping links from being whacked by ad blockers and trying to set our sites apart from those in the space which
give the space a bad name.”
– Scott Hazard, president, Brightside Media

“The biggest challenge moving forward is Sarbanes Oxley and the network aggregators. There has to be absolute tracking integrity within all the affiliate networks – or the model will ultimately become extinct and be replaced with direct (and auditable) relationships.”
– Mary Beth Padian, senior director, Upromise

“Brands will attempt ‘ubiquitous messaging’ regardless of whether the focus is to increase awareness or generate sales. I think a big part of this stems from the promise of behavioral targeting. Look at the popularity of MyYahoo or Netvibes – and how, with respect to content, the users’ ability to bring preferred publishers’ material to them changes their online navigation. Users can browse in the comfort of their own home page. What does this mean for advertisers? I think you’ll see increased effort by the advertisers to create a presence within user-generated content. Subtle or otherwise, ethical or not, the marketers will not settle for a possible ad to appear over on the right margin in the Google AdSense block. No, they’ll be pushing for coverage in blog posts or a logo in a video.”
– Lisa Riolo, online marketing professional

What’s the one word you would use to describe the current state of online marketing?

“Irrelevant”
– David Lewis, president, 77 Blue

“Burgeoning”
– Greg Schraff, director of strategy and business development, Brooks Bell Interactive

“Transitory”
– Lisa Riolo, online marketing professional

“Disconnected”
– Matt Ranta, affiliate manager, Vanns.com

“Fabulous!”
– Rosalind Gardner, super-affiliate and author

“Turbulent – as always.”
– Tim Ash, president, SiteTuners.com

“Exciting”
– Joshua Sloan, director of online marketing, 1and1.com

“Evolving”
– Shawn Collins, president, Shawn Collins Consulting

“Important”
– Adam Viener, president, imwave.com

“Heretical”
– Rob Key, founder and CEO, Converseon

“Immature”
– Jeff Molander, CEO, Molander & Associates

“Vibrant”
– Todd Taylor, manager business development, TaxBrain.com

“Crowded”
– Mike Allen, president and chief executive shopper, Shopping-Bargains.com

“Momentous”
– Kurt Lohse, founder & CEO, Keycode.com

“Nascent”
– Wayne Porter, senior director special research, Facetime Security Labs

“Rocketing”
– Anik Singal, CEO, Affiliate Classroom

“Flux”
– John Battelle, founder and chairman, Federated Media Publishing

“Growing”
– Brook Schaaf, principal, Schaaf Consulting

“Fast”
– Brian Littleton, founder and CEO, ShareASale

“Dynamic”
– Scott Hazard, president, Brightside Media

We asked a wide range of industry gurus, experts, affiliates, consultants, program managers and industry watchers four seemingly simple questions about the state of online marketing.

  1. Looking back, what do you think were among the most significant themes to emerge in 2006 in the performance marketing space?
  2. What will be the big thing that we can expect to happen in 2007 in online marketing?
  3. What are the major challenges in the performance marketing space moving forward?
  4. What’s the one word you would use to describe the current state of online marketing?

Here’s a look at what each one of them had to say, in no particular order:

 

Joshua Sloan, director of online marketing, 1and1.com

  1. New trends such as the use of video and advertainment continued to grow in 2006 but pose challenges for strict ROI/CPA advertisers.
  2. More offline ad channels (print/radio/TV) will wake up to the growing importance and measurability of online advertising while more online advertisers will wake up to the branding potential of online marketing despite confusion and difficulties with performance tracking.
  3. Fighting over trademark PPC bidding continued and continues to keep advertisers and affiliates on their toes. What’s legal in one country isn’t necessarily so in others. Ethical and legal dilemmas for companies and affiliates still exist. Click fraud and other forms of online fraud do not seem to be getting better.
  4. Exciting.
 

Shawn Collins, president, Shawn Collins Consulting

  1. Affiliate 2.0, the next generation of affiliate marketing tactics and technologies, was a predominate theme in 2006.
  2. The emergence of mobile phone marketing in the U.S. It’s just a matter of time before affiliates worldwide are able to promote affiliate links via digital and print signage. Consumers will then utilize their video-capable mobile phones to transact with merchants.
  3. Self-regulation is key in 2007. It’s not in our best interest to have the federal government legislate issues for us. Instead, we must band together and squash the bad actors.
  4. Evolving.
 

Adam Viener, president, imwave.com

  1. Clearly 2006 will be marked by what some are calling “The Affiliate Massacre of 2006” where Google updated their quality score rankings in Adwords and started placing penalties on affiliate landing pages. In many cases this caused minimum cost-per-click fees to go from 10 cents to $5 or $10 on many keywords. This effectively shut down PPC advertising for many affiliate landing pages. This change is causing many merchant advertisers to rethink their policies for PPC marketing since publishers who were running large-scale campaigns and linking directly to the merchant’s site using the merchant display URL and an affiliate link were largely unaffected by the recent change.
  2. I think the launch of Microsoft Vista may change the landscape of search marketing and make Microsoft AdCenter more important than it is today. I also think that Yahoo’s Panama project will be a big shift for search marketers. There will be a lot of adjustments as platforms change and traffic starts flowing more toward Microsoft.
  3. From the affiliate’s perspective, performance marketing companies are maturing, and dealing with the growth of the business while keeping up with the constant changes in the marketplace will continue to provide major challenges for performance marketing entrepreneurs.

    Setting the right policies for their programs that will enable them to continue to attract the talented performers who can make a difference in their campaigns. To do this a good affiliate manager needs to understand the numbers, the cost per acquisition of a new customer or sale from ALL of their channels, and craft policies that will enable the company to maximize sales at the best possible cost. In today’s market the old decisions to not allow affiliates to use the company’s display URL in search engine ads needs to be reanalyzed.

  4. Important.
 

Rob Key, founder and CEO, Converseon

  1. Performance marketing is growing up and morphing, although perhaps a bit too slowly. LinkShare’s vision, ValueClick’s growth and Google’s new forays demonstrate that performance marketing is going mainstream and can no longer be seen as a stepchild of the overall media efforts. Performance marketing has always meant accountability. We’re seeing our approaches becoming increasingly adopted by more mainstream media entities. The issue for the traditional affiliate marketing world is how to play with the more mainstream media, and how to get a seat at the table so that it’s taken as seriously as possible to ensure integrated efforts and minimize channel cannibalization. Affiliates has to become fully integrated with search strategies, word-of-mouth initiatives and CPM media buys. With a few exceptions, the big media entities are still slow to embrace affiliate marketing as part of their mix. Part of this is simply terminology and lexicon. It’s time that affiliate and media started speaking more of the same language.
  2. Social media marketing strategies that spawn, leverage and influence consumer-generated media are the hot thing at the moment. They’re also the strategies that many companies are grappling with most. Consumers want to hear from consumers, not traditional marketers. Businesses want to hear from other businesses. Companies and affiliates that create environments where their target audiences can gather, share useful information – and don’t overtly interfere with the experience – are those that will be the most successful. But this world is moving fast. Discrete content communities, social networks, blogs and other CGM venues are emerging daily. These venues are becoming micro-media properties, and like much media, those that get the audience first and provide ongoing compelling content, will be difficult to dislodge. I expect a land grab for these long tail communities by companies and affiliates alike. Both have equal opportunity to spawn these communities. The question is, who will be the quickest and most effective?

    Essential to success here is the ability to listen and map to this consumer-generated media conversation. New technologies, like Converseon’s Conversation Miner that scour and analyze this CGM conversation, are becoming essential elements to any online marketing campaign. After all, if you can’t understand the landscape and listen, as well as talk, you’re going to be talking past audiences, and perhaps overlook the most important constituents. Companies will indeed have to “join the conversation.”

  3. Affiliate marketing has historically been successful because it provided services and capabilities that companies themselves were either unable, unwilling or ill-prepared to tackle. But as merchants becoming increasingly sophisticated, especially with natural and paid search strategies (including long tail search, the affiliate industry can no longer rely on arbitraged search traffic. It’s a diminishing resource. Instead, it’s absolutely incumbent that smart affiliates morph rapidly into the new frontier of online marketing – word of mouth, viral, social media, blogging and other consumer-generated approaches that companies are only now beginning to grapple with. These online strategies are where search marketing was two to three years ago. My advice to affiliates who want to flourish in this environment: Evolve rapidly, now. Darwinism won’t be kind to those who rely on the same old tactics for success. On the other hand, those affiliates who do dive successfully into this new world will provide that value-added marketing dimension that companies are hungry to embrace. There are myriad opportunities for those that embrace the Web 2.0 world.
  4. Heretical. Nothing is sacred. We’re in a state of incredibly accelerated evolution. What can be demolished probably will be. And like in all evolution, there will likely be several mutated states before new stabilized species emerge.
 

Jeff Molander, CEO, Molander & Associates

  1. Scale: The desire to achieve better scale (less overhead, more revenue) drove every major corporate merger as well as ValueClick/CJ’s failed LMI project. It’s what makes Adwords so attractive and wildly successful. Reduction of inventory: Ad inventory is becoming even more scarce and prices are rising, especially in search.
  2. CPA will trump CPC pricing models. Innovative product search players like Jellyfish.com and Snap.com will cash in. Google and Yahoo Search will manage to enter the game although success will be limited and hindered by class action lawsuits focused on click fraud and “bad clicks sold” arising from failure to disclose (and reprice clicks from) low-quality distribution partners.

    Driven by the popularity of MySpace, Facebook and social media, affiliate managers will rush to tap into the long tail of affiliate-related transactions. Social e-commerce will emerge with innovations focusing on peer group favorites and recommendations. The “wisdom of crowds” will begin to drive serious transaction volume in niche markets.

  3. Scale: Retailers experienced in performance marketing are aching to figure out how affiliate marketing can be scaled upward (more leads, more transactions) while concurrently generating a better return on customer retention spending (repeat sales via affiliates) at a fair cost.
  4. Immature.
 

Todd Taylor, manager business development, TaxBrain.com

  1. Even more large companies have entered or are considering performance marketing and Revenue magazine went bimonthly and most importantly there was actually enough slush money in the industry to have a golf tourney at AS06 East – therefore, it must be real!
  2. Video ads will continue to grow in popularity as traditional marketing agencies attempt to maintain their grip on “their” industry as they gripe all the way to Congress.
  3. Second-tier advertiser merchants who enter the industry may have trouble creating affiliate brand awareness for their program, as they must compete for mind-share and visibility against the larger or more established programs.
  4. Vibrant.
 

Mike Allen, president and chief executive shopper, Shopping-Bargains.com

  1. Affiliate marketing went mainstream in 2006 in that major brands and media companies are now willing to invest in and support the pay-for-performance model. After demonstrating strong Q4 successes in 2005, many traditional retailers now see affiliate marketing as what it is – pay for performance – and a way to maximize their advertising dollars with predictable expenditures and results. No traditional media buy can deliver a guaranteed minimum ROI. In 2006, the skeptics of performance marketing began to have a change of heart.
  2. I expect Google will continue to morph into other non-search areas. Under this scenario, Google will begin to offer tools that very much resemble an affiliate marketing or CPA network. This will put many traditional affiliate marketers directly in competition with Google for customers. Those non-branded entities relying solely on search will be hurt the most. Such a move is likely to trigger a rash of online mergers and acquisitions as big names and even traditional brands circumvent the search engines and buy their way into bigger pieces of the pie.
  3. Consolidation and intense competition due to a changing marketplace where search engines no longer do only search. With shareholder pressures on the “big 3” engines to continually grow revenues at nontraditional paces, there will be new efforts to go after non-search money wherever it can be found. Google Checkout is only the beginning. I predict search engines will find new ways to become intimately involved in the performance marketing space themselves.
  4. Crowded.
 

Kurt Lohse, founder and CEO, KeyCode.com

  1. Cooperation. 2006 displayed greater willingness by merchants, publishers and networks alike to adopt cooperative selling strategies.
  2. 2007 will bring far more practical off-line marketing applications online. It will also signify the beginning of the big shift to correct the disproportional ad spend on the traditional mediums.
  3. The major short-term challenges are search engine bias against online marketers and net neutrality laws.
  4. Momentous.
 

Tim Ash, president, SiteTuners.com

  1. Google is actively trying to squash private-label PPC arbitrage affiliates in the name of better user search experience.
  2. International affiliate programs. There is now Internet critical mass in many other countries.
  3. Improving the conversion rates of offer landing pages. If you don’t, you’re dead.
  4. Turbulent – as always.
 

Ben Edelman, anti-spyware consultant

  1. What I hear most from affiliate merchants – not to mention attorneys and even regulators – is the need for improved accountability. It’s all well and good for affiliates to have considerable discretion to find novel and creative ways to promote merchants’ offers. Indeed, that independence is the essence of affiliate marketing. But how can a merchant make sure its offer is presented appropriately, ethically, lawfully and in a way that offers fair value to the merchant as well as to users? At present many affiliates keep their methods secret, and affiliate networks don’t do as much as they could, to tell merchants what their affiliates are doing. Increased transparency would improve affiliate accountability, helping merchants feel confident that affiliates’ behavior is appropriate and lawful.
 

Jim Kukral, publisher, ReveNews

  1. User-generated content such as short online videos will proliferate at an even larger scale and pace and show that it can convert as advertisements.
  2. Supercalafragalisticexpialadocious.
 

Wayne Porter, senior director special research, Facetime Security Labs

  1. Oddly enough a few years ago the answer to that question is whether or not enough people would even bother to shop online. Clearly they have no problems doing so.

    Merchants are beginning to pick up on how sophisticated the fraud issues really are. The key for the winner will be the ability to balance scalability and click/lead quality. Players like Google have relied heavily on being able to machine scale, but have had increasing trouble with quality control and rogue elements that grow more sophisticated all the time; nor are they alone. It is a bit ironic that PPCSEs are not held to as high a standard as traditional affiliate networks.

    I look for Yahoo and MSN to attack this front heavily next year as click fraud control becomes a differentiator. We should also reflect on revenue and technology risk. ValueClick via CJ had to rush the LMI issue to provide an alternative to the patent wars, and clearly from Google’s filings there is an extreme concentration risk via JavaScript, which usually is benign. However, there has been increasing hostile attacks on legitimate networks and through an array of vectors – even IM.

    If you coupled that with the frailty of cookies either through malware scanners removing them, users actively deleting them or natural cache attrition as surfers are more active – the performance marketing industry faces some severe risks on multiple fronts moving forward.

  2. There is no doubt in my mind that user-generated content (UGC) will really start to take fire – especially around video. We already see this happening with the popularity of YouTube, Google Video, click-based Revver and innovations like community-powered video such as Magnify.net which can offer large brands the messaging in a format they are accustomed to. Still, merchants will have to be innovative to get beyond the sheer volume of media – music, podcasts, pictures and now video in circulation.

    The indie film thought shapers have been waiting for this inflection point for a long time and they are poised and ready with rifles raised. The traditional gatekeepers still remain in place, but there are now powerful forces to be reckoned with in terms of UGC disrupting the traditional top-down communication stream – much like blogs have done. In addition the emphasis will be on interactive, immersive ad campaigns that cross between the real world and the virtual one. From Second Life grids to the Web to a dead drop on a country road. Users want to be entertained and they want it to be sophisticated.

    This does provide an opportunity for enterprising affiliates who often have better creative DNA than merchants if they can move away from the myopia of simplistic deal structures. Smaller affiliates will continue to feel the squeeze of the powerhouses, but should do OK by dominating niches and working with mid-tier or emerging brands.

  3. The problems are myriad and affect different groups. The erosion of the once-fertile CPA space will happen as the market has become super-saturated with dozens of networks and they must start to shrink unless they too specialize. Co-registration, another once-lucrative market, will suffer. Most “thin” arbitrage players will also get knocked out of the game and affiliates will rise up and realize it really is about being unique and having content. Controlling partner sprawl and the problems inherent with this phenomenon will continue to plague large affiliate networks and PPCSEs. Advertising powerhouses will be forced to provide more visibility into their networks as premium merchants demand to know where and how their brand is being presented. Some are starting to care.

    Once again the rise of a tough and well-funded rogue element is looming – the mass tide of botnets, experienced fraud rings, rampant content theft, aggressive Web agents and the lot are rapidly gaining contextual marketing skills and sociological and technical sophistication. If the e-commerce industry in general ­ – both PPCSE, merchants and network aggregators – do not rise up and clean things up, security companies or perhaps legislation and litigation will do it for them. I am not bullish on this cooperation based on past experience, but it is possible. If security firms, e-commerce firms and law enforcement worked in tandem, the tide could be turned.

    It boils down to an emphasis on quality and restraint and the need to mature beyond the “growth at all costs” mentality as well as adjusting merchants’ expectations and teaching them to think long term so that system pollution doesn’t kill the environment in which we all do commerce, operate and converse.

  4. Nascent.
 

Holger Kamin, executive account director, Zanox

  1. MSN Search Launched; MySpace working with Google; eBay and Yahoo; Web communities and blogs are on the rise. Big mergers are changing the landscape of this industry.
  2. Performance models such as CPO and CPA are the main driver. Advertisers as well as networks/providers realize that success-based commission models are king and key for success. Globalization is the most important issue – globalize or die.
  3. Globalization and multichannel approach to reach each and every possible market on this globe.
  4. Paradigm Shift.
 

Anik Singal, CEO, Affiliate Classroom

  1. Two themes jump out at me, and they are intimately related to each other: transparency and professionalism. The entire industry seems to be waking up to the fact that both sides of the affiliate marketing equation – merchants and affiliates – need to open up to each other about their business practices.

    Every day I talk to forward-looking merchants and managers who are eager to hold themselves to the same standards of transparency that mainstream bricks-and-mortar businesses do. They’re also actively seeking affiliates who are willing to play by the rules of fair business practices. They want affiliates who are well-versed in best practices, diversified marketing methods, compliance and good old-fashioned ethics.

    Which ties into the theme of professionalizing affiliate marketing. The history of business has proven that you can’t have transparency without professionalism. I see merchants and affiliates literally thirsting for professionalism in every aspect of affiliate marketing. They want to raise the bar and see those professional standards become part of their online careers.

    More and more affiliates and managers tell me they actually view the affiliate marketing industry as a lifetime career . To me, that says professionalism will become one of the most talked-about ideas in our industry in 2007.

  2. As an entrepreneur in the field of affiliate education and training, I believe 2007 will be the year in which merchants and affiliates both realize affiliate marketing has been a very lucky industry. We’ve seen massive growth in spite of the fact that all the players have been learning the game – even developing the rules – on the playing field. It’s been very rough and tumble and a wild ride, yet we’ve evolved our own business models, practices, culture and conventions while learning on the job.

    But with that growth – and all that money at stake – all of us, including the biggest players, now need to hold ourselves to higher standards. We must do that if we want our revenue to grow without interference from the outside. That’s why transparency and professionalism will literally force themselves upon us in 2007. The stakes keep getting higher.

    So I expect to see many more super-affiliates stepping up to the plate and saying look, we need to take responsibility for engaging in upright business practices. You’ll see them become open to educating newcomers in the industry. It won’t be about cutting out your competition, but developing a bigger and more powerful affiliate workforce.

    And I expect to see managers becoming excited about the possibilities of capturing the loyalty of those affiliates by becoming truly affiliate-friendly. They’ll be doing that through innovative and humane management practices, such as offering comprehensive and innovative training and development programs.

  3. Many people will disagree with me, but as I work with affiliates in the trenches I see all the Web 2.0 trends making a huge impact on not just performance marketing, but all online marketing. Interactive communities and “spaces,” social bookmarking and social search – those are grassroots trends being developed by audiences that spend lots of time and money online.

    Web 2.0 is not just about teens and college kids any more. Research by organizations like Pew has shown that a significant percentage of grown-up people with grown-up incomes could live without search engines. Who can blame them when the results are relevant one day but off-kilter the next? Spam is also making email a less-reliable form of communication.

    But people have realized that Web 2.0 can satisfy your need for self-expression plus help you build and communicate with a whole network of like-minded friends. That’s why all kinds of people today are blogging, sharing their favorite links and shout-boxing their ideas about everything, including products. While I might be too young to have experienced it, I’m told this is a trend back to the early days of the Web.

    That’s when a list of links on a Web page wasn’t scraped with automated software, but handpicked with care. People want to be able to have that kind of trust in websites. And they are realizing that the only way to reclaim that trust is by finding which sites their online neighbors turn to.

    For the smartest people in performance marketing today, those Web 2.0 micromarkets represent a massive opportunity. Yes, reaching them is not just a challenge, but probably impossible through traditional marketing channels. But it’s the perfect fit for affiliates, especially affiliates who are well-versed in those spaces.

  4. Can I make up a word? Rocketing.
 

Brian Littleton, founder and CEO, ShareASale

  1. There has been a huge shift in traffic sources – with two main groups. The first is PPC, which has been a major source of affiliate traffic in 2006 and has brought with it significant issues such as “brand bidding.” The second is blogs – which I believe will be a major driving force in the coming years as well.
  2. A return to the importance of new-traffic-generating affiliate marketers.
  3. The two sides, affiliates and merchants, have different goals. It is a constant challenge for both parties to try to find a common goal, which isn’t always as simple as just “sell more stuff.”
  4. Fast.
 

Brook Schaaf, principal, Schaaf Consulting

  1. No truly new themes emerged. We saw click fraud penetrate the consciousness of the mainstream media at the same time there is a growing sense of animosity (possibly jealousy?) toward Google inside and outside our industry. Some merchants are reviewing their trademark bidding terms and looking to accommodate affiliates. Finally, you did see a lot of affiliates publicly say they were moving away from black-hat and toward white-hat activities.
  2. I don’t see as much of a buzz around an idea like RSS or rich media as the continued entry into the marketplace of more content and paid search publishers. For their part, merchants will continue to experiment with new channels and partners.
  3. This is a competitive marketplace. Publishers must continue to adapt in order to perform and marketers must manage more and more relationships.
  4. Growing.
 

John Battelle, founder and chairman, Federated Media Publishing

  1. The re-emergence of brand as an important part of the marketing equation after years of focus on ROI/DR/search.
  2. Yahoo and Microsoft will debut new products to compete with Google.
  3. Understanding how to integrate with conversational marketing online, and learning the new “hybrid” model of both performance and creative/branding-driven marketing.
  4. Flux.
 

Scott Hazard, president, Brightside Media

  1. When the situation calls for it, affiliates and affiliate managers can band together and stand their ground on an issue.
  2. Not sure, but I’m afraid it will center around Google.
  3. Keeping links from being whacked by ad blockers and trying to set our sites apart from those in the space, which give the space a bad name.
  4. Dynamic.
 

Mary Beth Padian, senior director, Upromise

  1. Confirmation yet again of the value of relationships.
  2. RSS feeds for special offers and coupons becoming more commonplace on affiliate sites – even loyalty sites!
  3. The biggest challenge moving forward is Sarbanes-Oxley and the network aggregators. There has to be absolute tracking integrity within all the affiliate networks – or the model will ultimately become extinct and be replaced with direct (and auditable) relationships.
  4. Nascent.
 

Linda Woods, president, PartnerCentric

  1. Affiliates/publishers are in the driver’s seat now, not merchants/advertisers. Affiliates have money, power and traffic, and their requirements ­ – business practices and needs – dominate the relationship. Merchants need them more than they need merchants, who are unable to comply or cooperate with terms. They can deliver the goods; can merchants respond adequately to their demands? If not, NEXT!
  2. Tools, tools and more tools for affiliates. With the announcement of CJ’s Web services and many other players creating technology tools to either improve reporting, functionality or efficiency, the next “big thing” is, who can provide what to better service affiliates’ growing hunger for technology tools?
  3. Keeping up with the speed of innovation on the Internet!
  4. Exciting!
 

David Lewis, president, 77 Blue

  1. Search is a bigger part of affiliate marketing than many people thought.
  2. A shift to the extremes. Merchants will begin to completely embrace or flat out reject publishers utilizing search. Past decisions will not be factored in. New decisions will be made and there will be no way to predict where anyone will stand on the issue on December 31, 2007.
  3. Trust. People do not pick their partners wisely and misjudge “the other side.”
  4. Irrelevant.
 

Rosalind Gardner, super-affiliate and author

  1. White hats came into style in a big way, and were even more prevalent after Labor Day.
  2. Content authority and visitor-optimized sites are now all the rage … and everything old is new again as the meaning of “value-added” gains ground amongst the gray-hat set.
  3. Continued decline in the effectiveness of current search engine optimization methods.
  4. Traffic building through social networking media will continue in effectiveness and popularity throughout 2007.
  5. No change here. Getting heard and getting seen. Affiliate managers and merchants will have to work increasingly harder and smarter to put their products in front of affiliates who will actually promote them. Rewards and incentives for top affiliates will increase while commission rates for less-productive affiliates will decrease.
  6. Fabulous!
 

Matt Ranta, affiliate manager, Vanns.com

  1. Video, video and more video.
  2. Effectively and ethically integrating the use of video ads into affiliate marketing.
  3. Disconnected.
 

John Grosshandler, event director, eComXpo

  1. Just how vibrant and powerful the performance marketing community is. This can be seen in the response to LMI, the upward trend in budgets for performance marketing by advertisers and the growth in publications, events and forums serving the community.
  2. Technological innovation will become even more important in 2007. Between the growth in online video, broadband adoption and new tools for contextual advertising, behavioral marketing and detecting fraud, the gulf between those who leverage the newest trends and tools and those who rely on yesterday’s approaches will widen.
  3. Volume. How to sift through the masses to identify the diamonds in the rough, whether they are advertisers, affiliates or partners. Emails and newsletters no longer get through, and when they do, are seldom read.
  4. As President Bush likes to say, “Strategery.”
 

Lisa Riolo, online marketing professional

  1. A few years ago, you could quickly tell whether or not an online marketer “got” affiliate marketing by discussing affiliates. Those that got it conveyed respect for the affiliates. Those that didn’t, well, they tended to use adjectives like “little” or “questionable” when describing their role in the model. In 2006 the performance marketing community witnessed affiliates asserting their right to be treated respectfully. It is no longer acceptable to be a participant in this space and not get it.
  2. Brands will attempt “ubiquitous messaging” regardless of whether the focus is to increase awareness or generate sales. I think a big part of this stems from the promise of behavioral targeting.

    Look at the popularity of MyYahoo or Netvibes – and how, with respect to content, the users’ ability to bring preferred publishers’ material to them changes their online navigation. Users can browse in the comfort of their own home page. What does this mean for advertisers? I think you’ll see increased effort by the advertisers to create a presence within user-generated content. Subtle or otherwise, ethical or not, the marketers will not settle for a possible ad to appear over on the right margin in the Google AdSense block. No, they’ll be pushing for coverage in blog posts or a logo in a video.

  3. Revenue Science, Tacoda and BlueLithium represent a possible disruption for performance marketers. The assumption of many is that the budgets will shift away from other display ads. I think behavioral targeting may also disrupt search and affiliate because it is equally data-driven and ROI-focused. The advantage of behavioral targeting is that it focuses on all aspects of the consumer’s buying behaviors, not just the research and purchase decision phases typically pursued by the performance marketers.
  4. Transitory.
 

Greg Schraff, director of strategy and business development, Brooks Bell Interactive

  1. BT seemed to be a popular buzzword but I never really heard too many real success stories. My observation is that online marketers are actually getting comfortable with the basics and are now casting an eye toward testing and optimization in order to squeeze out better results.
  2. Following my comments above, more structured and strategic testing and optimization efforts. A/B, multivariate and companies that provide these services.
  3. Still getting online marketers beyond just keeping their heads above water, i.e., just running the actual marketing campaigns so that they have the bandwidth to concentrate on performance factors and tactics they can employ to improve performance.
  4. Burgeoning.