The Myths of Affiliate Marketing

There are many myths regarding affiliate marketing that ought to be tucked away where you keep the collected works of the Brothers Grimm, Aesop and Mother Goose. They may be fun to read, but they are disastrous to any affiliate marketing campaign. There are hundreds of these myths circulating, but I’ll deal with the top 10 of them here:

  1. MYTH: It’s good to have a lot of white space in advertisements, brochures and other printed material, and especially on websites.
    TRUTH: Your prospects and customers care a whole lot more about information than blank space. They want to know what your offering can do for them, not that you can afford to run a lot of white space. Usually white space substitutes for powerful ideas, a list of benefits and a fertile imagination. Attention should be drawn by substance, not emptiness. White space is aesthetically pleasing, but profits are even more delightful. Good affiliates are not bamboozled by gorgeous design at the expense of solid ideas.
  2. MYTH: Use short copy because people just won’t read long copy.
    TRUTH: People read long books, long articles and long letters. They read whatever interests them, and the more they’re interested, the more they’ll read. If you give people more data than they need, they’ll either buy from you or they won’t. If you give them less, they won’t buy, period. Studies show that readership of marketing materials falls off dramatically after the first 50 words, but stays high from 50 words to 500 words. That means your non-prospects will turn the page or click it off in a hurry, but your prospects will hang on to every word, trying to learn as much as they can. Many of them will actually wish you had told them even more.
  3. MYTH: It is costly to purchase television time.
    TRUTH: This myth was once the truth, but cable and satellite TV have obliterated it. The cost to run a prime-time commercial in any major U.S. market is now $20 or less, often as low as $5. Better still, cable TV allows you to cherry-pick where your commercials will run so that they air only in communities where your prospects live. You can advertise on CNN, MTV, ESPN, A&E, the Discovery Channel – any satellite-delivered programming. And cable companies will produce your spot for a cost near $1,000, a far cry from the $207,000 average spent on production in 2004. How does TV work for affiliates? Just ask any affiliate who has tried it. TV works wonders for anyone who is reaching the right audience with the right offer. I hope that describes you.
  4. MYTH: Sell the sizzle, not the steak.
    TRUTH: The idea is to sell the solution, not the sizzle. The easiest way to sell anything is to position it as the solution to a particular problem. If you look for the sizzle and not the problem, you’re looking in the wrong direction. Your prospects might appreciate the sizzle, but they’ll write a check for the solution. The job of the canny affiliate is to spot the problem, then offer your product or service as the solution. If you think solutions, you’ll market solutions.
  5. MYTH: Truly great marketing works instantly.
    TRUTH: First-rate sales work instantly. Great limited-time offers work instantly. But great marketing is not made up of sales and limited-time offers alone. These will attract customers, but they won’t be loyal and they’ll be won by whoever offers the lowest price. Great affiliate marketing is made up of creating a desire for your offering in the minds of qualified prospects, then peppering your offers with sales and limited-time offers. But a program of fast-buck marketing usually leads to oblivion. The best marketing in America took a long time to establish itself. Just ask the Jolly Green Giant or that lonely Maytag repairman. And then there’s Amazon.com and Microsoft and Google. None of that marketing worked instantly, but it worked for decades and still does.
  6. MYTH: Affiliate marketing should entertain and amuse.
    TRUTH: Show business should entertain and amuse. But affiliate marketing should sell your offering. This widespread myth is based upon studies that show people like marketing that entertains. They like it, but they sure don’t respond to it. Alas, the marketing community nurtures this myth by presenting awards based upon glitz and glitter, humor and originality, special effects and killer jingles. Those awards should be given for profit increases and nothing else. The only thing that should glitter should be your bottom line.
  7. MYTH: Marketing should be changed regularly to keep it fresh and new.
    TRUTH: The longer that solid marketing promotes a product or service, the better. Guerrilla affiliates create marketing plans that can guide their efforts for five or 10 years, even longer. How long have people been in good hands with Allstate? How long have Rice Krispies snapped, crackled and popped? How long has Intel been inside? Do you think these marketers would be more successful if they kept changing the marketing to keep it fresh? I think not.
  8. MYTH: Affiliate marketing is successful if it is memorable.
    TRUTH: Affiliate marketing is successful if it moves your product or service at a profit. Studies continue to prove that there is no relationship between people remembering your marketing and buying your offering. All that matters is if people are motivated to make a purchase. So don’t aim for being memorable as much as being desirable, because that leads to profitability.
  9. MYTH: Bad publicity is better than no publicity at all.
    TRUTH: Bad publicity is bad for your business. No publicity is a lot healthier for you. People love to gossip, especially about businesses that have allegedly done something so awful that it has been exposed by the media. Guerrillas love publicity but avoid bad publicity because they know it spreads faster than wildfire.
  10. MYTH: All that really counts is earning an honest profit.
    TRUTH: Good taste and sensitivity also count. Marketing, as part of mass communications, is part of the evolutionary process. Affiliate marketing educates, informs, announces, enlightens and influences human behavior. Because it does this, affiliate marketing has an obligation to offend nobody, to present its material with taste and decency, to be honest and to benefit customers. If it does that and earns profits too, it is true guerrilla affiliate marketing.

JAY CONRAD LEVINSON is the author of the Guerrilla Marketing series of books, which are published in 41 languages and are required reading in many M.B.A. programs worldwide. His website is www.gmarketing.com.

Crossing the Line

Years before the Nasdaq tanked and banner advertising died, e-commerce pioneers like Amazon.com and CDNow began partnering with topic-centric websites to drive revenues, paying a commission for each sale referred. The practice spread quickly and became known as “affiliate marketing.” By early 1999, Forrester Research proclaimed “affiliate programs” as the Web’s most effective traffic-driving technique – almost twice as effective as banner advertising.

Consider that by September 1999, more than three years after Amazon launched, there were over 1,000 merchants offering affiliate programs. And by 2000, Amazon’s Associates Program had grown to over 500,000 affiliates. What Amazon founder and CEO Jeff Bezos started as a polite conversation had grown into an entirely new industry, bringing with it affiliate networks, directories, newsletters and a variety of consultants. Affiliate marketing is now an integral part of the Web’s composition. It’s also now widely heralded as the Web’s most cost-effective marketing vehicle.

Still, as affiliate marketing evolved, issues with the model have been exposed. The affiliate community needs to remember that affiliate marketing is not about generating “cheap” advertising, but developing profitable strategic relationships.

But there is a way for merchants to offer a win-win where both merchants and affiliates have a vested interest. Improving technologies now make it possible for the formerly CPS, CPA, CPL performance programs and the CPM, CPC and flat advertising models to unify, creating a hybrid I call the CPP (cost-plus-performance) model.

The CPP combines a paid campaign with a performance campaign and offers the best of both worlds. I see this as the future of affiliate marketing, a wide-open world of performance and payment where the CPP takes back inventory lost to Google’s AdSense and advertisers. The result is a whole new world of opportunities for merchants, affiliate managers and affiliates.

The hybrid CPP is converting former CPM and CPC advocates into affiliate marketing believers. For many top websites, affiliate marketing now represents a chance to loosen the grip of pay-per-click search engines and costly advertising. The most difficult obstacle in affiliate marketing is finding good affiliates with traffic. If a site sells traffic then they must have it, and if you negotiate a cost-plus-performance payout, valuable opportunities begin to open up.

Merchants are also realizing that affiliates need better tools. Technologies such as data feeds, site and shopping cart abandonment (exit traffic) promise to increase EPC and EPM numbers without compromising the visitor’s experience, thereby improving monetization. By offering additional products and services at or after the point of sale, merchants can add revenue without diluting the sales process.

It’s becoming clear to merchants, affiliate managers and affiliates that the line between performance and traditional advertising has been breached.

It started with Google’s entry into the market. Google’s AdSense captured valuable affiliate program inventory, which caused the flexible affiliate marketers to evolve again. The industry’s response was to tangle with the paid advertising side of the market. Google’s method is to pay out for ad space – the same ad space that was used by affiliate marketers. That limits available inventory and changes the Web publisher’s expectations.

Some affiliate marketers using AdSense end up cannibalizing their own market. Why? To get guaranteed income from traffic. If you pay for traffic, you’re guaranteed to get it. The merchants get guaranteed traffic and the affiliates get guaranteed revenue from traffic. This presents a problem, however. Traditional advertising places the risk on the merchants, while performance places the risk on the affiliate. In either case only one has a vested interest in the campaign.

It’s clear from a handful of studies and reports that marketers are frustrated with the current process.

A recent survey of 135 senior-level marketers found that while 60 percent of respondents said defining, measuring and taking action on ROI is important, only 20 percent are satisfied with their ability to do so. In addition, 73 percent reported a lack of confidence in their ability to understand the sales impact of a campaign.

The study, conducted by Marketing Management Analytics, the Association of National Advertisers and Forrester Research in April 2005, was presented in July at the ANA’s 2005 Marketing Accountability Forum.

A Media Life survey of media buyers quantified what most already suspected: media buyers think that only about half of media reps know what they’re doing (MediaBuyerPlanner.com). A significant minority of the buyers – about one in six – have such a low opinion of representatives that they said only 10 or 20 percent are useful.

Complaints centered, unsurprisingly, on time wasting, in the form of over-contacting and proving ill-prepared when conversations do take place. Another big complaint proved to be overly hard selling, with some reps believing that repetition or browbeating may succeed in getting a property on the buy where the numbers won’t.

Half of the buyers said they agree with the statement that the rep problem was “no big deal. Sure, they’re annoying sometimes, but I’m sure they find me equally so. It’s how the industry is set up.” About 45 percent agreed instead that reps are “a necessary evil. Most are okay, but there are a few really obnoxious ones I hate doing business with.”

Even with all the issues, the good news is that the affiliate community is still evolving. Organic search is becoming more competitive. CPM rates are going up. Paid search is becoming cost prohibitive and the need for cost-effective online inventory is becoming stronger, causing the affiliate space to grow at ever-increasing rates. As merchants, affiliate managers and affiliates become even more interwoven, the friction decreases and new forms of integration and aggregation are made possible.

I see it this way: the race is on! In the last year the number of merchants offering affiliate programs has more than quadrupled. Literally millions of websites now participate as affiliates – from personal homepages at GeoCities and Homestead to Fortune 500 companies. And now, more often than not, merchants with affiliate programs are also affiliates.

Whether termed affiliate marketing, collaborative commerce, revenue sharing or syndicated selling, the affiliate space leads the way in the ever-changing landscape of online marketing and has become the Web’s fastest, simplest and most cost-effective marketing vehicle.

As both merchants and affiliates continue to recognize the power of change, affiliate marketing’s best days are yet to come. In a few short years, affiliate marketing looks to become the tail that wags the dog – controlling the majority of the adverting and marketing dollars.

GREG SHEPARD is the CEO of NetTraction, a firm that specializes in deploying, managing and growing affiliate programs. He can be contacted by visiting www.NetTraction.com or by email at cmo@nettraction.com.

Managing Affiliates in a Rapidly Growing Market

Over the past two years, the online real estate traffic volume has increased exponentially. Part of this dramatic growth is driven by the low interest rate environment, but a bigger reason for the increase is the rapid shift in realtor marketing dollars away from offline media – such as print – toward online advertising venues.

Affiliates play a large role in the success of online real estate. While this rapid growth has led to new opportunities, it also brings significant challenges. Merchants who match consumers with professional service providers must maintain a consistent flow of only the highest-quality leads. Low-converting traffic will frustrate the service provider and may eventually result in unwanted churn. The observations following are true in particular for any merchant who matches consumers with professional service providers.

A good affiliate manager must connect the dots from consumer inquiry to affiliate sites prior to approving any potential affiliate. You should strive to determine the main sources of traffic that a potential affiliate brings to the table. Affiliates can generate traffic a number of ways. The most common methods are cost per click (CPC) campaigns, search engine optimization (SEO) and email marketing.

These are all generally accepted practices of online marketing and can be verified by the savvy affiliate manager. For example, if the affiliate is using CPC campaigns to generate traffic, you can verify this by typing in keywords and looking for the affiliate’s ads. If the affiliate is unable or unwilling to provide at least some examples of how the traffic is generated, then you should assume the worst. If you are unable to connect the dots, then it’s possible the affiliate is driving traffic using means such as spyware, incentivized clicks or link hijacking. Connecting the dots is important not only to prevent approving a fraudulent affiliate, but also to gauge the quality and potential volume they can deliver.

In addition to connecting the dots, a good affiliate manager should be able to make the best of a bad situation whenever possible. If a particular affiliate or campaign is under-performing, you need to investigate all possibilities to salvage some or all of the relationship. This can be done by adding, removing or modifying product offerings. You can change pricing. Perhaps most importantly, you can change creative and integration techniques.

For example: an affiliate promoting our brand at a national level wanted to drop the program due to poor results. We offered the affiliate a series of custom city-specific links better suited to his network of local sites and were able to improve the affiliate’s performance significantly.

In another case an affiliate was promoting one of our products but didn’t match the consumers with the appropriate buying service. To turn this around we encouraged this affiliate to start promoting a more appropriate home listings product. This change sent revenue climbing sharply.

In addition to understanding the affiliate- generated consumer traffic, good affiliate managers possess a keen awareness of all consumer traffic channels. To state the obvious: free traffic (SEO or brand recognition) is preferable to inexpensive traffic, which is preferable to expensive traffic.

If free traffic volume increases, the merchant providing professional services should focus more on optimization of existing affiliates and less on recruitment. Aside from ranking traffic by price, you also need to factor in quality. For instance, if SEO traffic is higher quality versus comparable channels, then you should recruit new affiliates that consistently show up well in the search engines for large-volume, relevant searches.

To gain large market share in times of rapid growth, you need to have a flexible affiliate program. One way to do this is to allow affiliates to participate on several different platforms. Affiliates who prefer the online reporting and payment structure of affiliate networks can join under either of those programs. For larger affiliates who want to partner directly, consider offering higher payouts and direct links. On the product side, flexibility could mean offering regularly updated data feeds, including XML feeds and co-branded forms as well as forms of different layout or length. On the payment side, you could let direct affiliates choose between cost per click, cost per lead or even revenue sharing arrangements. This flexibility in terms of platforms, products and pricing is paramount in helping your program expand.

With the recent explosion in Internet advertising, affiliates are bombarded with merchant offers from all angles. To rise above this noise, you need to be an extremely effective communicator. New value propositions such as better payment tiers, contests, fresh creative, case studies, new products and affiliate testimonials must be communicated regularly to existing and potential affiliates. Due to spam filters and overflowing inboxes, email newsletters are becoming a less effective communication method. Try to communicate one on one with larger affiliates whenever possible.

With so many new affiliate applicants each day, it is inevitable that a few bad apples make it through the approval process. To prevent affiliate fraud, you have to routinely deny affiliates that do not respond to initial contact. While the vast majority of existing affiliates play by the terms and conditions of the affiliate program, there are instances where you’ll need to take disciplinary action. In cases where affiliates purchase trademarked broker keywords or if an affiliate violates the CANSPAM Act, action must be taken quickly.

Other challenges include taking steps to monitor cost-per-click fraud. CPC management requires additional time for analysis and closer contact with the affiliates. Each month you need to look closely at the revenue generated per click for each affiliate. Unusual behavior is typically easy to spot and must be corrected quickly. New affiliates – especially those who start on the CPC program – can be given a monthly budget cap to your company’s exposure to any potential click or lead fraud. As trust builds with an affiliate, this cap can be raised or removed altogether.

Merchants offering CPC products should also have analytics tools with robot filtering mechanisms in place, as well as the ability to track click patterns funneled down the merchant’s site. For CPA products, you should monitor each affiliate’s lead-to-close rates and raw lead data on a monthly basis to ensure lead quality.

Implementing tight controls will ensure you have a good handle on your existing base of affiliates, which makes it easier to expand your program as your company grows.


MARIE NILSSON is the affiliate manager for HomeGain, a wholly owned subsidiary of Classified Ventures, based in Emeryville, Calif. She has a background in project management for the telecom and chemical industries and holds a Master of Science degree from Lund Institute of Technology in Sweden.

Don’t Give in to Click Fraud Fears

Click fraud is a potentially serious problem faced by any affiliate marketer who uses pay-per-click (PPC) search engine advertising to market their sites.

One study estimated that between 10 and 20 percent of a PPC advertiser’s budget is lost to fraud. That estimate increased to 50 percent for high-priced, highly competitive keywords.

Unfortunately, there is no guaranteed way to prevent unscrupulous competitors from going click-happy and rapidly depleting an advertiser’s PPC budget.

Solving the problem is tedious and time-consuming. Getting your account reimbursed requires proof of the fraudulent activity. However, detecting click fraud demands effort and resources that most marketers would rather devote to increasing their income – not ferreting out thieves.

No wonder the fear of click fraud has some affiliate marketers running scared. Understandably, dealing with the whole ugly scenario might leave an advertiser feeling frustrated and thoroughly disenchanted with pay-per-click advertising.

Indeed many new and aspiring affiliate marketers are using potential click fraud as an excuse not to try pay-per-click advertising, or to abandon their Internet marketing business plans altogether.

Giving up due to problems that may never arise? What sort of response is that? Any activity, business or otherwise, has its potential problems.

Take something as commonplace as fueling a vehicle, for example. Under certain conditions you may risk starting a spark-induced fire at the pump. Does such a horrible prospect persuade you to sell the car, ride the bus to work and add two more miserable hours to your daily commute? I should hope not. Rational people learn and apply safe fueling techniques to keep from being fried.

Likewise, dropping pay-per-click as an advertising option from your marketing arsenal because you’re afraid of click fraud, or want to avoid the cost of advertising, isn’t the smartest approach to Internet business.

Rather than use PPC, some affiliate marketers rely exclusively on using search engine optimization techniques, an option fraught with its own perils.

First of all, you may wait several months to get your site ranked high enough in the engines to attract visitors, only to discover that your copywriting or the product itself doesn’t convert to sales. So the process begins anew with copywriting, site submissions and another long wait to see the results.

Second, income derived from search engine traffic tends to be inconsistent from month to month, varying with a site’s rank. Imagine having your earnings plummet from $30,000 per month to a paltry $2,000 per month, simply because Google changed its algorithm or de-listed your sites.

I often consult with affiliates who’ve taken the SEO-only route but then need a way to rebuild their shattered businesses. So yes, such catastrophes do occur.

So what’s the answer? It’s simple: use pay-per-click advertising to market your sites. By the way, that’s the same solution many “you don’t have to pay for traffic” marketing gurus use to promote their own products and affiliate programs. Why? Because no other traffic- generation method is as easy to implement or immediately effective as PPC advertising.

I LOVE pay-per-click advertising, and yes, it loves me back. When Yahoo Search Marketing’s (Overture) predecessor, GoTo.com, launched its pay-for-performance search engine in June 1998, I recognized the service as a complete godsend to online marketers and have been using it to successfully market my affiliate sites ever since.

You simply write an ad, input your keywords, set your budget and within minutes a Google AdWords campaign can be sending highly targeted traffic to your site. Yes, minutes, not months!

Clickthrough and conversion rates can be rapidly assessed, most often within hours of starting a campaign. Is the impression- to-clickthrough ratio poor? Simply tweak the ad and test again. If conversion to sales is underwhelming, rework the product review and then resume the flow of traffic to your site with just a click of your mouse.

Don’t know whether you should promote Product A, Product B or both on your site? Pay-per-click advertising quickly helps you find the right answer. Simply create two listings to send traffic to their respective product review pages. Five hundred sets of eyeballs to each page will give you a good reading on which is the most lucrative choice.

You can test conversion rates for various products without having to write an endorsement. Scores of affiliate marketers who don’t have their own websites are making scads of money promoting products as affiliates using PPC. Instead of bringing visitors to a product endorsement page, they send traffic directly to the merchant from Google through their affiliate links.

Perhaps you shun PPC because of horror stories about campaigns run amok and credit cards drawn to the limit? Forget them. There’s absolutely no reason that should ever happen. Most pay-per-click search engines permit advertisers to set maximum daily or monthly budgets. Or you can deposit a set amount into your PPC account, and the campaign will automatically suspend itself when the funds have been depleted. Once you are confident that your campaign is producing satisfactory returns on a consistent basis, automatic funding options are available. Eventually you’ll get to a stage where you can set it, forget it and collect your commission checks – month after month and year after year. Some PPC users complain that increased competition in certain markets is driving them out of business as bid prices skyrocket.

Here’s a simple solution. Don’t raise your bids to compete on the most popular keywords in your niche. Instead, lower your bids or drop those keywords completely. Concentrate on building bigger lists of highly targeted keyword phrases on which your competitors are not bidding. This strategy lowers your average cost per click and increases your returns by driving laser-targeted traffic to your sites.

Targeted traffic is the lifeblood of your affiliate marketing business. Don’t let fear of click fraud or any other potential problem keep you from trying pay-per-click advertising, the easiest and fastest way to get traffic to your sites. Spend a buck and make two, three, four or more. Those benefits greatly exceed any associated risks.

ROSALIND GARDNER is author of the best-selling guide to affiliate marketing, The Super Affiliate Handbook: How I Made $436,797 in One Year Selling Other People’s Stuff Online. Her book is available on Amazon and www.SuperAffiliateHandbook.com.

Search for Tomorrow

It doesn’t take Edwin Hubble to recognize that the search universe is expanding. Instead of studying faraway galaxies to see the shifts in the cosmos, it only takes a glance at the home page of any major search engine to realize that search is moving at light speed.

The stars of search – America Online, Google, MSN and Yahoo – are attempting to extend their reach by launching a stream of search tools that provide custom filters of online information. The rate of change has sharply accelerated during the past year, and it seems that with every fortnight comes a new personalized, localized or visualized search method aimed at speeding up the delivery of relevant results.

A decade ago it was assumed that most users would find companies and information through portals that organize content into easy-to-navigate sections. However during the past few years search engines, led by Google, have become the primary resource for finding information.

According to an April 2005 Harris Interactive survey, Web surfers said they use a search engine during more than 90 percent of their online sessions.

“Google’s sneak attack was quality,” says Jon Cooper, vice president of interactive services at search marketing firm UnREAL Marketing. Instead of trying to direct users to content partners or handpicking links, Cooper says offering quality search results is the best model for satisfying surfers.

Google’s model of throwing open the doors through advertising-supported search has won out over trying to provide premium content. “As long as the content is pretty good and free, people will take the path of least resistance,” Cooper says. Google’s ad-supported search model has helped search engine marketing grow to a $4 billion industry in 2004, according to the Search Engine Marketing Professional Organization (SEMPO).

Tools of the Trade

Basic search tools provided by all of the big four include standard search, image search and news search, although the depth of the search results can vary widely among engines. For example, AOLSearch’s news tool generates results from news wire services only, while all of its competitors include links to articles from newspapers and online media outlets.

This year’s flurry of new search tools will generate additional volumes of Web traffic (and therefore advertising opportunities) by adding utility, increasing the level of competition and enhancing the significance of search in daily online activity.

Google and Yahoo have been the most active during a frenetic 2005 in rolling out new search tools, while AOL and MSN are also rapidly increasing the profile of search on their portals. Instead of taking away traffic from others, the new features will prompt more searches, and advertisers are expected to increase their search engine marketing spending by 41 percent in 2005, according to SEMPO. “The pie keeps getting bigger,” says David Berkowitz, director of marketing at search advertising agency icrossing.

Google and Yahoo have added personalization features that tailor results so that the most appropriate links for the individual are delivered at the top of the results page. Google’s Personalized Search enables users to scan their past searches to “re-find” information and uses the search history to refine the results. Yahoo’s personalization service, My Web 2.0, similarly uses past searches to refine results, as well as enabling friends to share pages that they have visited.

According to Nielsen NetRatings, nearly 70 percent of all search traffic flows through Google (48 percent) and Yahoo (21.2 percent). Personalized search could increase Google and Yahoo’s market leadership because it produces better results without asking users to change the way they search.

Most people use relatively simple one-or-two-word search terms that lack the context to filter out inappropriate results. For example, someone who searches on “Lincoln” will get results about the car, city, university and the president, but a personalized search relying on previous experiences would automatically narrow the results.

“Changing user behavior is a challenge,” says Gary Price, news editor of SearchEngineWatch.com and editor of ResourceShelf.com, because even after many years of searching, people still make the same mistakes. Since people won’t change, “search engines have to do things to make results more relevant,” he says. If what they are looking for is not delivered in the first 20 results, users will give up on a search, according to Price.

Getting Googled

Price says it’s much easier for the market leaders to get users to experiment with new search features than it is for their smaller competitors. When Google introduces a new vertical service, such as a search of academic papers or product catalogs, Web users and the press provide plenty of coverage.

“Google is a PR juggernaut,” says Price, adding that the word of mouth the company gets from enthusiastic supporters puts competitors at a disadvantage. Yahoo similarly generated considerable buzz when it launched tools for searching subscription content and comparison-shopping sites, even though similar services existed from lesser-known competitors.

The challenges for search engines not named Google or Yahoo in spreading the word will likely further the current trend toward consolidation in the search engine industry. Smaller companies that fail to distinguish themselves are likely to be acquired, according to Price.

Microsoft has become more serious about the importance of search on MSN, which previously served as more of a shopping and news portal and showcase for emerging Microsoft media technologies than a top-tier search engine. Microsoft decided in 2003 to replace the Yahoo search technology it had been using with its own search technology, which went online in February this year, according to MSN product manager Justin Osmer.

Osmer says MSN Search’s product development is focused on giving factual answers and not just links. When users type in a question, MSN searches Microsoft’s Encarta database as well as external resources for the answer, an approach similar to that of niche search engine AskJeeves.com. For example, typing in “Phillies score” will yield the score of the team’s latest game as the first result, while “population of Seattle” displays the latest statistics from the U.S. Census Bureau.

Google and Microsoft are further enhancing the importance of search in everyday computing by integrating Internet and desktop search. Both companies have launched free desktop search utilities, and Google’s Gmail email service replaces folders with a search model.

America Online is beta testing a new home page highlighting search tools that makes available to everyone a portion of the content that was previously restricted to subscribers. In addition to reference material and product search utilities, AOL now provides multimedia searches that enable users to tap into its considerable content partnerships.

AOL Search’s video search uses technology from fellow Time Warner subsidiary SingingFish and includes clips from television shows, movies and music videos, while the audio search displays radio program segments and music tracks.

Yahoo’s AltaVista also includes audio search technology, and Google is developing technology to search the text of audio, according to a report in the New York Post. Searching the spoken word currently requires developing faster and more accurate speech recognition technology, but eventually “will become just as important as the written word,” according to SearchEngineWatch’s Gary Price.

Steam Behind the Local Motion

According to Chris Henger, vice president of marketing and product development at Performics, the new tools will propel search marketing to become a $13 million industry within four years. Matching consumers with local sellers is expected to be one of the largest areas of search growth, according to Henger. “Local search is the biggest thing and opens up the door to a whole new set of advertisers,” he says. (See “Think Global, Search Local” on page 40.)

All four of the top search sites have launched local search services that look for nearby businesses selling services or items that match the search term. Henger says that working with smaller regional companies poses some challenges for search companies. Search engines will be interfacing with smaller companies that may be inexperienced in the business model, which may require search engines to augment their existing sales teams with a network of local sales representatives, according to Henger.

MSN’s beta local search service attempts to match the searcher with relevant local information by automatically scanning IP addresses, according to Microsoft’s Osmer. The location of the searching computer is used to call up nearby business listings, and the same technology is also used to identify the location of the results pages so that nearby websites are given priority.

The search engines will have to contend with established phone directory companies such as Verizon’s SuperPages.com, YellowPages.com, YellowBook.com and Amazon.com’s A9, which recently launched a visual search tool that provides images of the actual storefronts.

All of the search engines are experimenting with RSS (really simple syndication) search capabilities, which could further boost the amount of advertising opportunities. RSS is a method of formatting content used by many news sites and bloggers to share information with other publishers. Tracking feeds currently requires RSS reader applications, but search engines are likely to integrate RSS into search in the not-too-distant future.

Google rotates RSS feeds into its Gmail service, which could pave the way for broader RSS searching. MSN Search enables users to save any search query as an RSS feed, eliminating the need to repeat searches. Yahoo is integrating RSS into its news search, and AOLSearch includes video content formatted with Media RSS, which describes the content of the video.

Connecting search advertising with bloggers and news content through RSS would take advantage of some of the Web’s fastest growing segments. Google is currently posting some RSS advertisements on Gmail, and in July WashingtonPost.com became the first major news organization to include ads with its RSS feeds. Yahoo is testing RSS as a medium and looking into the viability of RSS advertising, according to senior manager of communications Gaude Paez.

Too Much of a Good Thing?

Keeping up with all of the search options and learning the benefits of each presents challenges to advertisers and users who must determine which variations will work best for them. The home pages of the top search engines now include a half dozen or more search options, and beta search technologies are often listed on their own pages.

When initiating a search, users have to keep mental notes as to which search tool will work best for each occasion. Users who would like to speed up searches through personalized search must remember yet another ID and password, and also have to remember to sign out before performing searches that they would rather not have saved on a search engine’s servers.

Marketers have to decide which of the multitude of search tools from a given search engine they want to participate in, and then figure out how to track their return on investment. For example, a search marketer might be getting good returns on standard search, but might not do as well on local search and generate no returns from news searches associated with their keyword or contextual ad.

Since each new tool increases the magnitude and complexity of search marketing, the need for interactive agencies will greatly increase, according to Chris Henger of Performics.

“Companies will need to go to specialists and third parties” to sort through the dozens of search marketing options, he says. Specialized agencies will track the new search tools for volume, user demographics and potential ROI.

Icrossing’s David Berkowitz says the rise in search tools “is phenomenal for interactive agencies because it makes it very difficult to keep track of everything that is going on.”

Search marketers also have to consider if they want to exclude having their ads show up on specific websites that include content that they consider objectionable. Berkowitz says large advertisers will call on agencies to protect their brands from unwanted associations, particularly with the rise in video and audio searches.

The search engines are committed to extracting the maximum value from the growing universe of content by producing personalized packets of information. New customized tools that anticipate the intent of users’ queries or automatically refine the scope of the search will further entrench search as the de facto first step in the quest for online information.

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

Think Global, Search Local

If you are looking for help with your water heater in Plano, Texas, Harvey West is your man. Type in “water heater plano texas” on Yahoo and this ad will come up as the top sponsored result: Harvey West Plumbing Company: Water Heater. Family owned and operated repair and replacement plumbing company with fair prices and fast service. $25.00 discount to all new customers.

Off to the right, you’ll see sponsored results from the likes of Lowe’s, eBay, Target and BizRate. But West, who sold his 35-person plumbing company and now works solely with his son-in-law, manages to get the primo spot on search engines these days.

Run a Google search with the same keywords and, once again, Harvey West will be the top dog.

West admits pricing varies by geography and estimates that he shells out a mere $2 per click. Because it’s so cost-effective, Internet advertising is the only marketing the Texan plumber does these days, and it accounts for most of his leads. West is on to something: Local search is growing at an astonishing rate, and the numbers are absolutely staggering.

Searching for Profits

According to comScore Media Metrix, more than 421 million local Web searches were conducted in February. That means the number of times users conducted Web searches for local information more than doubled from January 2004 to February 2005.

Online merchants are eager to capitalize on the trend. Commerce sites typically convert 2.4 percent of visitors into customers, according to a study by retailer association Shop.org. The typical brick-and-mortar conversion rate is about 1 percent. The proliferation of broadband should help e-commerce grow even more. As people can more quickly find results, they are more likely to make purchases.

Industry observers say the already sizable local search market is likely to lift even further. Total local online advertising sales are expected to grow to $5 billion by 2009, with $3.4 billion of that coming from search engines, The Kelsey Group predicts.

Compare that figure to $670 million in 2004, with $162 million coming from search engines.

Sales of sponsored links and other forms of search advertising are expected to increase at a 12 percent compound annual growth rate, generating more revenue than display ads by 2010, according to JupiterResearch.

ComScore found that 111 million people execute 46 billion Internet searches yearly. And The Kelsey Group-BizRate estimates that 25 percent of all Internet searches are local in nature, meaning local consumers are looking for local merchants.

Although local search has really taken off only recently, local search queries already account for more than a third of all search engine queries. If surfers add a geographic term (like city or ZIP code) to their search queries, the results show them businesses within their area, usually giving them results they want – happy searchers, happy local businesses and happy publishers.

Make fun of the Yellow Pages if you want; the local listings are laughing all the way to the bank. This market has been dominated by local phone directories, like the Yellow Pages, with profit margins of 50 percent or more.

SBC made a hefty $2 billion in profits from its publishing unit last year on revenues of $3.8 billion. Researchers at The Kelsey Group predict at least $3 billion of Yellow Pages money will move online by 2008. To put that in perspective, the total Internet ad market was $9.6 billion last year.

But search engines attract 66 percent of online local search users, according to comScore. Clearly, local search is exploding. There is a huge potential to make money – it’s reportedly a $1.2 billion market – and that’s why search localization is the focus of efforts by AOL, Google, MSN and Yahoo.

Competitive Landscape

New data from Hitwise, an online competitive intelligence service, show that the top three search engines – Google, Yahoo Search and MSN Search – accounted for 93.5 percent of U.S. Internet searches across major engines in July 2005.

Visits to Yahoo Local (local.yahoo.com) were 4.4 times greater than visits to Google Local (local.google.com) in July 2005. However, Google Local’s market share increased 61 percent between February and July, while Yahoo Local grew 14 percent.

Google Local’s catch-up is occurring amid the growth of Google Maps (maps.google.com), which has quickly grown to become the third-ranked site in the Hitwise Travel-Maps category in July 2005. Maps have become important to local search users, as 17 percent of Yahoo Local’s visitors went directly on to Yahoo Maps in July 2005.

Yahoo has another advantage when it comes to local search: it has 176 million registered users, so it can direct local ads to people who have provided their cities or ZIP codes upon registration. While Google and Yahoo currently dominate the landscape, MSN has the financial resources to maneuver its way into search superiority. Microsoft spent $44 million marketing various MSN services in the first four months of 2005, while Yahoo spent $14 million – versus just $2 million for Google, says TNS Media Intelligence.

Still, underdog AOL is striving to play catch-up. AOL has long been for members only but it recently opened up its borders, enabling more of America to access its content. The move is meant to encourage advertisers, both national brands and local businesses, to fork over ad dollars because their ads will be seen by more than just AOL subscribers. It is clearly intent on trying to grab a share of search profits. And for good reason: Internet search advertising is set to overtake pedestrian online banner advertising by 2010, as online sales double to $18.9 billion, up from $9.3 billion at the end of 2004, according to JupiterResearch.

Executives at the Big Three realize that local is the way to go. “The local search market should be larger than [Google’s] other markets because most people’s purchases are local,” said Google CEO Eric Schmidt, at an investor conference in May. And Google isn’t alone in its thinking. All the major players are looking for more ways to attract the most local search dollars.

The various search parties are using several approaches to move into local advertising. Maps are a leading tool. MSN has launched a beta of its Virtual Earth application. A Locate Me feature finds a present location and lets the consumer explore and discover the area around them. The Locate Me link activates Microsoft Location Finder, which uses Wi-Fi access points or Internet Protocol address geocoding, to determine a person’s location.

Google has its Keyhole technology. Google bought dodgeball.com and, at press time, aborted plans to acquire Meetroduction, “location-aware social networking software.” Google’s interest in social networking and mobile technologies show its commitment to localized services.

Mobile search is a promising prospect because people are attached to their cell phones and are often looking for goods and services while on the go. Eyeing this mobile climate, AOL bought mobile software company Wildseed; Google has local search for mobile phones; Yahoo introduced a texting service for getting local search listings. While mobile search is still in its infancy, it is likely to take off quickly and add another element to the local search wars.

Local Winners

In August 2005, Affinity Internet announced the launch of ValueTraffic Local, a service that helps small business to target their online advertising to Web searchers in specific geographic areas. Mastering the art of local search is a skill that few possess, but those who do stand to reap rich benefits.

Harvey West, the Texan plumber, is so good at bidding on keywords and tweaking ads that a number of other plumbing outfits, from Philadelphia to Palo Alto, Calif. hire him to help them with their local search efforts.

Cabrillo Plumbing & Heating in the San Francisco Bay Area does extensive advertising – TV spots on local cable, direct mail, Yellow Page ads and moving billboards in the form of company trucks.

“We track every piece of advertising scientifically,” says President Jeff Meehan who handles Cabrillo’s advertising himself. He even shot Cabrillo’s TV commercial on 35 mm film in his mother’s kitchen.

But when it comes to Internet marketing, Meehan hands the reigns over to West. “I’ve given him carte blanche to get us at the top bar for our service area which is San Francisco and Palo Alto.”

West says a Philly plumber doesn’t have much competition and only has to pay around 75 cents a click. Meehan, however, forks over more like $4 or $5 a click because there’s more competition for eyeballs in the Bay Area.

“If you bid the most, you’ll get the highest listing,” explains West. But plumbing is a business where you can spend $300 acquiring new customers – he recalls the days when he spent $8,000 a month on Yellow Page ads alone – so $5 is a deal, says West. But local search isn’t something you let stay static.

Tweak, Tweak, Tweak

Searches for “yoga San Francisco” and “spa San Francisco” found International Orange, located in San Francisco.

“We do local search marketing for good reason,” says co-founder Amy Darland. “It’s effective, and you aren’t committed for a month or year. It’s a nice get-out-of-jail card.” Still, it’s such a tricky business that, like Meehan, she entrusts her search marketing to a Web advisor.

In the past year the average advertiser’s roster of keywords grew by 50 percent, according to Efficient Frontier a Mountain View, Calif., firm that manages $100 million in keyword purchases for its clients.

“People will go in and put in keywords and leave it like it was Yellow Pages,” says West. “You’ve got to tweak it, work on different ads, change it 15 times to see what gets the best clickthrough rates. As soon as it works, you’ll find it changes.”

Local search is a huge and expanding market. The major players are constantly changing and so it’s important to understand the evolving landscape. So how does local search impact primarily merchants and affiliates? It means that large, established merchants are bidding more to get top listings.

The growth of local search is a case of half-full, half-empty for affiliates. But they can take advantage of overlooked locales. They can bid for the top spot in small towns, getting local shoppers to connect to online merchants through their sites. While a spa search in San Francisco or New York results in a raft of sponsored results, there are many towns with only natural search results. So affiliate sites that link to SpaWish.com, for example, can take advantage of the undiscovered towns and bid to get sponsored spots that lead to commission payouts.

But affiliates hoping to be local leaders would be wise to heed Harvey West’s words: “You gotta keep on top of it.”


DIANE ANDERSON is an editor at Brandweek. She was the managing editor for Revenue magazine for Issue 4 and previously worked for the Industry Standard, HotWired and Wired News.

The Cookie Conundrum

Cookies will drive you nuts. As you know, cookies – or very small files that recognize you as uniquely you to particular websites – are kind of the backbone of affiliate marketing. If the cookie didn’t exist, there would be no way for you to claim the sale or track your core customers. This would effectively kill affiliate sites in their tracks.

Or will it? Recent studies on cookies have only confused matters. Survey respondents have said they delete cookies off their hard drives as frequently as every week. JupiterResearch in April released its cookie study that said nearly 40 percent of those online trash cookies monthly. Burst Media weighed in with its findings, echoing Jupiter’s study: 38 percent of online consumers nix their cookies once per month. Nielsen NetRatings pushed up the panic by stating that 43.7 percent of its respondents said they dumped cookies monthly. An InsightExpress survey said 56 percent. But then it backpedaled, saying probably fewer than that number actually delete cookies, citing data that when study participants were asked to immediately trash their cookies, only 35 percent did it correctly.

Even more baffling to the average user are the different kinds of cookies that exist: first-party cookies; third-party cookies; tracking cookies; local shared objects. It boggles. Even Walter Mossberg, a well-respected tech columnist for The Wall Street Journal, came out strongly against tracking cookies and suggested they be classified as spyware. In the same breath he did admit that first-party cookies are what make the Web a fun, personalized experience.

Even so, the studies seem pretty grim. If the results are accurate, then nearly half your sales would be freebies – meaning that 50 percent of your commissions would also disappear.

But then in April, Atlas Institute released an analysis of some of those studies and concluded many simply weren’t true. Atlas found that 40 percent of those who said they deleted their cookies monthly didn’t do it when they said they did. Cookies were generally present twice as long as respondents stated on their surveys.

It wasn’t a conspiracy. In many cases, it was just bad recall. In some instances, respondents assumed cookies were being deleted by anti-spyware products installed on their computers. Some of the deletion numbers are so high because users think the software is doing it for them. In many cases it isn’t. This puts anti-spyware and anti-adware software makers in a strange position: is it their responsibility to help you manage your cookies, or is it just a whole lot of paranoia?

Of the most popular anti-spyware software, about 75 percent come with “cookie management” options. What that means varies from maker to maker. When most anti-spyware programs do their normal scans (daily, weekly, monthly or however the user sets it) they will catch cookies but rarely do anything about them. The default is to generally ignore them. If the program offers a check box to dump certain kinds of cookies on a regular schedule, it has to be turned on by the user. Most anti-spyware makers believe the majority of their users are going with default settings. In fact, some studies have said that the so-called “computer savvy” also keep cookies longer than they say and believe they are deleting them when they aren’t.

All this misperception, in many ways, boils down to a few basic facts that most anti-spyware software makers can agree on: taken on their own, most cookies are not harmful. Cookies carry no code and so they cannot carry viruses. While cookies may carry information on where users have gone on the Web, most of it is anonymously tracked – meaning such data doesn’t contain personal information. The Wall Street Journal’s Mossberg wrote it was akin to a company knowing what channels you watched on TV without telling you it was monitoring you. Generally it’s more like following a set of footprints in the sand to see where they go, but the tracker has no idea if the person making the prints is Jane Doe, Jane Doe’s mom or Santa Claus.

One of the persistent problems, says Phil Owens, product director of CounterSpy, a product of Sunbelt Software, is that “most average users perceive that the program is doing the [cookie] removing” for them. He adds that most anti-spyware software makers are in a bit of quandary about cookies. They are “gray,” Owens says, because they are not malicious. Therefore, you’d think it isn’t software makers’ responsibility to clean cookies. Owens says this is a tough call. “On the one hand, maybe we should play a role and tell people cookies are benign until proven wrong. We can help quell that concern. On the other hand, market pressure by consumers is great. They will say, ‘This software found this but you didn’t,’ even if it is not malevolent.”

“The general public doesn’t understand the value proposition of the cookie,” says Rick Carlson, president of Aluria Software, which makes Spyware Eliminator. That’s why version 4.0 – released in February – has a whole separate tab in its scan results that lists the newest cookies. “Previous versions never detected cookies,” Carlson says, “but we put it in because consumers wanted it. And they wanted to be able to detect and remove them.” He says that sometimes spyware can place a cookie and that there is an outside chance that spyware reads other peoples cookies. Consumers wanted insurance for those remote possibilities, he says.

One of the most high-profile of antivirus software from McAfee currently doesn’t do any cookie tracking or identification either in its McAfee AntiSpyware 1.1 or VirusScan 9.0. McAfee spokesman Hector Marinez says the programs do not delete cookies or recommend deletion of cookies. He adds that the upcoming McAfee AntiSpyware 2.0 will have a cookie tracking function where cookies are identified and the user can choose to delete them. VirusScan 10.0 will not have cookie tracking.

Currently, anti-virus and anti-spyware from Microsoft does not scan for cookies, in part because the remembered passwords and Web page settings in cookies help tailor the Internet experience for visitors of Microsoft properties such as MSN. To help boost commerce, it’s been reported that the beta version of Microsoft Windows AntiSpyware does not disable tracking cookies. However, GIANT Company Software, the company that developed the anti-spyware product and was acquired by Microsoft in December, disabled tracking cookies.

Owens adds that he can conceive of a function in future versions of CounterSpy where the software scan can tell you exactly what each cookie is for, such as whether it was for a retail purchase you made or whether it was placed there by potential spyware.

Spyware Eliminator has its tabs even though Aluria’s Carlson says he would probably have preferred to have Eliminator ignore cookies. “We are extremely sensitive to the affiliate community,” Carlson says. Within the software tab, it clearly states that cookies “pose little risk.”

While anti-spyware companies are trying to figure out if they will take a stand, marketers themselves have stepped up to the plate and started their own grassroots awareness groups. One of the most prominent is Safecount.org, started by Cory Treffiletti, managing director of Carat Interactive’s San Francisco office, and Nick Nyhan, president of Dynamic Logic in New York. Safecount wants to start a “good list” of sites with trusty reputations. So far, the “good list” campaign is in the very early stages, “to show who plays by the rules,” says Treffiletti. A good list can show “you remain marketer-friendly and consumer-friendly.”

Another body is the advocacy group Center for Democracy and Technology, which is trying to help the anti-spyware industry start at the very beginning and define what constitutes malicious data or vehicles for code versus harmless files. Eventually the center wants to write “dispute- resolution procedures” as well.

One company is even using a kind of backup program that automatically saves a copy of cookies before anti-spyware software can do the job. United Virtualities of New York uses something called persistent identification element, or PIE, exploiting attributes in Flash software. Some analysts, however, have labeled it “deceptive.”

Lawmakers are weighing in as well. So far lobbies have managed to get Congress to keep cookies out of anti-spyware legislation. But the most recent bill, the Internet Spyware Prevention Act of 2005, known as the I-Spy Act, is so broadly defined that cookies could very well be included in a legal interpretation. Marketing agencies are also trying very hard to keep cookies out of legislation.

Right now Safecount.org is a small, all-volunteer movement and may not reach enough momentum by the time some of the top anti-spyware software makers have implemented more hands-on cookie administration in their next versions. Alternatives for the affiliate marketer start with what you can do on your own site.

The first thing you could do is to include a brief introduction to cookies on your website. It doesn’t have to take up a lot of room and could even be on its own page with a link that says something like, “A word about cookies.” You can start by explaining cookie deletion versus cookie rejection. Deletion is when a visitor manually dumps a cookie or when anti-spyware software trashes it either through alerting the visitor or by an automatic setting. This is never consistent because every brand of anti-spyware software handles it a tiny bit differently. Tech-savvy visitors may have set their browsers to reject cookies. While Internet Explorer can be set to not accept any cookies and make users feel a lot safer, most online retail sites need cookies turned on to finish a purchase.

Web analytics company WebTrends recommends that businesses focus on serving only first-party cookies (sent from the website you are visiting) and not third-party cookies (sent from a vendor or advertiser on a Web page). WebTrends also advises only carrying the most necessary information in a cookie to avoid privacy worries. Think twice, company officials at WebTrends say, about employing “unproven and risky alternatives to cookie tracking” such as those in Flash or solutions that “trick” a browser into receiving a first-party cookie.

Also, affiliates could list the benefits of cookies – that a cookie helps remember user’s purchase history and passwords, and helps commissions go to the right people. Don’t be afraid to spell it out for your repeat customers: “Keeping your cookie keeps me in business.” Carlson says groups like the Anti-Spyware Coalition (www.antispywarecoalition.org) can only help so much and that standards just don’t start in a committee room but out in the world. “We are just a $20 million in revenue company,” he says, compared to the really huge anti-spyware makers. “We are the flea on the back of a dog.”

Other proactive measures for an affiliate include going to Internet security sites and staying abreast of the latest in hacks, scams, phishes and technological advances. You may think it is asking a lot to suddenly become an expert in deception, but it might be a comfort to remember that you are not alone. In terms of affiliates or retailers online, if there were a cookie problem that was reflected in the bottom line, there would be an uproar. The retailers themselves would step up if their highest earners were fading. If money is being lost, ears prick up.

As affiliates take a bigger role in what companies sell, you can bet their voices will be heard. As with the grassroots bodies and coalitions, pulling together can make a big difference. Advertising companies on the Web rely heavily on the cookie, and they are already drawing up standards. Affiliates should consider doing the same. After all, what does a salesperson really do: Inform and persuade.

ERIC REYES lives in the San Francisco Bay Area and writes about technology and business. His work has appeared in Business 2.0, the New York Daily News, the San Francisco Chronicle and Worth magazine. He has directed and contributed to websites such as Amazon.com and Excite.com.

Look Ma, No Print: Q & A with Michelle Bottomley

Traditional Madison Avenue advertising agencies have taken their share of lumps lately. More companies are spending bigger bucks to advertise online than ever before. Overall spending on advertising is expected to reach $279 billion this year.

That’s a 5.4 percent jump over 2004. However, Internet advertising is forecast to grow 15 percent over last year and hit nearly $8 billion by the end of the year.

The trend has been building for years, but now many traditional ad agencies are scrambling to change or be left behind.

Ogilvy & Mather is one of the world’s largest ad agencies, with annual revenues of $752 million, and is among those that have quickly adapted to the changing online environment. The agency’s OgilvyOne is a leader in customer relationship management and interactive advertising. As general manager of consulting for OgilvyOne North America, Michelle Bottomley is at the forefront of the seismic advertising shift and is responsible for the data, strategy and direct channels (teleweb, email marketing, partner marketing) practices at the agency.

She joined Ogilvy in 1998 to lead the direct and interactive marketing engagements for the firm’s travel and transportation accounts. Two years later she branched into other areas and launched the relationship marketing practice. During her career, Bottomley has led targeted marketing initiatives on behalf of a number of brands including American Express, Cisco, DuPont, Enfamil, FM Global, Ford Motor Co., Jaguar, Nestle and Unilever.

Prior to joining Ogilvy, Bottomley was vice president of marketing at Epsilon, an American Express subsidiary, where she led teams responsible for the development of marketing data warehouses, statistical analyses, loyalty marketing programs and data-driven marketing communications as the client service director for Amtrak, BizTravel.com, Dayton Hudson, Enterprise Rent-a-Car, ITT Sheraton, Nordstrom and Walt Disney Attractions. Bottomley also managed comarketing partnerships between American Express, Amtrak and United Airlines. She began her direct marketing career at Bronner Slosberg Humphrey (Digitas).

Revenue Editor Lisa Picarille spoke with Bottomley to discuss the current state of advertising, what’s happening with big brands online and why the Net has become such an attractive option for advertisers over the last couple of years. They also discussed what Ogilvy has done to adapt to shifting client needs and where advertising – both traditional and online – is going over the next few years. It’s definitely not a one-size-fits-all world when it comes to advertising online, Bottomley says.

LISA PICARILLE: Do you think traditional creative agencies have lost their way and their relevance?

MICHELLE BOTTOMLEY: The need for a clear and compelling brand proposition creatively expressed is not going to change. Great traditional agencies define an ownable and compelling brand proposition that reflects the passions and strength of the organization. Being able to define the soul of the brand and establish a unifying message architecture that can be expressed through every communications touch point is among the most important marketing challenges and the core strength of a traditional creative agency.

LP: Why have most agencies been slow to adapt to the change brought by online?

MB: For the most part, agencies, and certainly Ogilvy, [are] leading the revolution to make online or digital marketing a more prominent part of the communications mix. A key debate in the next two years will be the role digital media plays in the overall mix among agencies, their clients and the major media-planning-and-buying organizations.

Agencies need to push this forward through understanding the target and developing innovative digital brand-building ideas to reach them, but clients and media organizations will need to reallocate existing budgets to bring these ideas to the marketplace. In 2004 Ogilvy launched VERGE, a series of conferences for the agency and clients that feature top thinkers and companies in the new media space, to forward progress in this area.

LP: What is Ogilvy doing to adapt?

MB: Ogilvy’s 360-degree branding is a philosophy and approach that integrates marketing communications to build client businesses. As an extension of our 360-degree branding philosophy we are working on ways to integrate the best of the advertising world with the best of our direct and interactive capabilities in the areas of creative, production, strategy and analytics.

This integration will improve our ability to target smarter and bring ideas that embrace broad and targeted media, including online, to our clients, as we have done already with the Dove Campaign for Real Beauty. This campaign has driven considerable business growth for Unilever, and lives online, on digital billboards, out of home and in print in the United States and around the world as one campaign.

LP: How has the change been received by your clients?

MB: Very well. Our clients will always ask for big brand ideas, but more and more for the use of nontraditional media, which includes digital marketing via online, digital phones, digital billboards, etc. – media that can surround the targets where they live, work and play. We believe that digital media are a tremendous opportunity for brands to deliver unique messages and offers to their targets and achieve superior ROI from their marketing investment.

LP: How hard of a pitch is it to convince big brands of the importance of the online adspend?

MB: Not hard at all, and it’s been getting better. Big brands such as IBM and Ameritrade have long understood the importance of digital marketing and have incorporated it as a significant portion of their marketing plans. Our largest clients are pushing digital marketing further through the use of behavioral advertising, personalized messages, long-form video and dynamic marketing responses to interactions and to improve conversion of hand-raisers to buyers. There is more experimentation than ever before around bringing the right targets into the marketing funnel and nurturing those leads to accelerate conversion to sales using a combination of digital marketing.

LP: What about branding? A few years ago most concluded branding couldn’t be done online. Has that changed?

MB: Some of the most relevant branding is happening online – in the context of where the target is already going for trusted advice and information. IBM led the way in this area through their sponsorship of the Olympics and U.S. Open years ago, using online to broadcast events and scores “powered by IBM.” Online marketing has helped brands move beyond product-specific advertising to creating branded experiences as a way to foster an emotional connection. BMW films were famous years ago for attracting and swaying the right audience online through edutainment – building the brand – while sparking hand-raisers to come in and test drive.

LP: Are big brands increasing online ad spending?

MB: Yes, and even a few percentage points from traditional budgets start to show big increases in online spending.

LP: What about the traditional ad formula doesn’t work online?

MB: The old model of one-size-fits-all messages has evolved to include more use of search and contextual messages based on where the target is seeing the ad or where they have been before online. There is more testing now to optimize clickthrough rates and conversions using search, contextual messages and behavioral advertising alone and in combination.

LP: How has the adoption of broadband changed online advertising?

MB: The adoption of broadband by more households means we can reach more people with rich media, giving marketers the opportunity to blend edutainment into their online advertising as a way to attract more eyeballs and convert them to prospects.

LP: How has online advertising changed the type of account executive agencies hire? Do they have additional talents not seen in traditional advertising?

MB: Account executives equipped for the new world understand the art and science of marketing in a way they didn’t before, owing to the fact this media is so targeted and measurable. We look for account executives experienced with target definition and brand building along the customer journey from awareness to hand-raising and repeat purchase.

LP: How important is online advertising to Ogilvy’s overall strategy?

MB: Hugely important.

LP: Define what it means to be an ad agency in 2005.

MB: Being an agency in 2005 means being flexible, assembling the right people with expertise from a number of areas to solve big client challenges. Fewer are the days when the advertising team would create the brand idea and express it as a 30-second spot to be adapted by the direct team using mail and the interactive team online.

More are the cases of bringing specialists from all three areas together up front to develop innovative ways to define and express the brand proposition in the marketplace. This is one of the best times ever to be in the agency business.

LP: What’s the downside of online advertising – for client and for consumers?

MB: While the nuisance factor of one-size-fits-all pop-ups can be a downside for consumers, the advances in technology are allowing marketers to be smarter about how to engage the consumer online without appearing to be advertising.

LP: How do brands get heard above all the noise on the Internet?

MB: Be relevant, and seek to build a dialogue with the target in a way that opens and nurtures a relationship and value exchange.

LP: Describe the state of online advertising two years from now.

MB: Two years from now online advertising will expand to really be considered digital marketing and include digital billboards, digital phones, interactive TV, digital billboards, retail signage, etc.

Smart marketers will use these channels to enhance the brand experience, delivering more relevant messages and offers – and reflecting target response and prior relationships to refine that relevance in a synchronized way across these digital channels. Measurement of this relevance and synchronicity will provide marketers the opportunity to optimize the yield of their marketing investments, focusing on those digital channels that bring in the best leads and the combination of channels that optimize conversion of those leads at the most favorable ROI. This is among the best and most challenging times to be a marketer.

LP: What are the major hurdles for companies that have never done online advertising, and how do you convince them it’s right for them?

MB: More and more brands understand the needs of their customers and finding a way to deliver on them online. This doesn’t need to look like product-centric advertising, but instead creating branded experiences that provide a call to interact with the brand. A major hurdle for companies that have never done online advertising can be perceptions around channel conflict; for example, whether a dedicated salesforce would perceive direct communications as threatening their ability to represent and deliver the brand. In this case a tremendous opportunity exists to reach the target online and can take the form less of product-centric messaging and more of creating branded experiences online.

LP: In what ways does online advertising impact the advertisers’ ability to establish relationships with their customers?

MB: Online advertising provides a great entree into a relationship with a brand. Those brands that have been able to provide a compelling offer and deliver on that with an ongoing stream of highly relevant communications are the ones beginning to unlock the potential of this medium.

We have to think of online advertising as the start of a conversation, and the more we understand from that individual the better we can make the follow-up conversations. Smart marketers are mapping out the relationship pathway from online advertising to relationship nurturing as a way to convert more of the leads at the top of the funnel into qualified prospects and ultimately customers. Thinking about online advertising as one component of the overall marketing mix with a very specific role, with defined follow- up treatment, takes little time up front and delivers big payoff in the form of a lead pool and new customers.

Clean Sweep

You’re thinking of working with a merchant, but you don’t want to be involved in any program that includes affiliates using questionable, if not illegal, practices. But how can you know for sure whose program is squeaky clean and whose is not?

It’s not easy to tell which merchants have clean programs. Maybe that’s because it’s not easy to pin down exactly what “clean” means.

“That’s the $64,000 question,” says Kellie Stevens, president of AffiliateFairPlay.com. “The answer varies. Clean means different things to different groups. The definition varies even among affiliates.”

The general consensus at the most basic level is that a clean program will not allow parasites of any kind to sign up and will remove offenders if they are discovered. This means that affiliates with downloadable applications that are installed without the knowledge of the consumer or that redirect affiliate links or overwrite affiliate cookies are out.

But there are those even stricter in their definition.

“For some, even if a user can opt out of the download, they consider that parasite-ware,” Stevens says. “So if a merchant partners with that affiliate, they are considered to be supporting the parasite financially and they risk being labeled as unclean.”

“As far as some affiliates think, there is no clean program,” says Shawn Collins, a consultant. “They have a very black-and-white view of anyone who uses adware. They think there are no possible [good] intentions from anyone who uses adware.”

Collins calls that “a simplistic and lazy viewpoint.” “Maybe they don’t understand the issues completely or they are taking this stand from a selfish or competitive viewpoint,” he says.

Under that stringent definition of clean, Collins says any affiliate manager that partners with any loyalty, reward or incentive program would be considered dirty. He disagrees.

“If an affiliate is using the adware for something like shopping and the application is very compliant in allowing users to uninstall the program, I think that’s okay,” Collins says. “Not all adware should be grouped together. It’s not like they are all drive-by downloads or installed or bundled without users’ consent.”

He notes that many in the online marketing community do not consider RemindU from UPromise a parasite, but notes that it uses the same technology as eBates, which is often targeted as being a parasite by affiliates.

Affiliate managers themselves seem a little more lax about what constitutes a rogue affiliate. According to a poll on AffiliateManger.net, a community message board and forum, 54 percent of affiliate managers stated that some adware affiliates are dirty and some are clean. Talk about straddling the middle ground.

But affiliates don’t always see eye to eye with program managers. Most affiliates agree that parasites typically prey on merchants that are ignorant about such nefarious practices or affiliate managers that turn a blind eye to these activities because their program is making a lot of money from rogue affiliates.

It’s a Matter of Trust

That’s why developing trust between affiliates and those managing programs is a crucial component of doing business. Both parties must feel that they’ve entered into a partnership. When you do business with partners there is an implied level of trust that the relationship needs to work for both parties.

“The trust sustained between a network and affiliate is paramount,” says Bret Grow, vice president of LinkMo Advertising Network. “Our affiliate trusts that we keep our links alive, pay a competitive price for their sales/traffic and report it honestly. Networks trust affiliates to provide credible data and lawful traffic no matter the level of volume.”

Andy Newlin, affiliate marketing supervisor for SierraTradingPost.com, knows about trust. He’s earned it. Two years ago, his program was widely criticized by very vocal affiliates. But Newlin listened to those critical affiliates and worked hard to weed out the bad affiliates. His continued clean up efforts and willingness to listen earned him a certain level of trust and respect with the online marketing community. Now if a bad apple slips in, affiliates alert Newlin and he takes care of it immediately. In other words, affiliates are now willing to cut Newlin a little slack.

“Back then I didn’t know about running a clean program and relied on affiliates to educate me,” Newlin says. “And once I had a good idea what a bad affiliate was, I took on every affiliate account and tested it myself and then made a decision on whether or not they were clean and could stay in the program. Every now and then an affiliate will alert me that a spyware or parasite-ware affiliate has snuck in. I’ll thank the affiliate for letting me know and then take the appropriate actions right away.”

Newlin says that if you take the advice of good affiliates and ask for their help, they get over the hard feelings.

Some affiliate managers are revered by the affiliate community as managers who run clean programs. Chris Sanderson of AMWSO, an affiliate marketing firm based in Bangkok, Thailand, and Andy Rodriguez of Andy Rodriguez Consulting are the most notable and mentioned the most often.

“Eighty percent of the [ABestWeb] board hates LinkShare,” says Haiko de Poel Jr., president of ABestWeb.com. “But they love Chris Sanderson. And if he says a program is clean, then come hell or high water, affiliates believe him. By definition, a trusted program is a Chris Sanderson program or an Andy Rodriguez program. There is a huge trust factor with those guys and affiliates.”

This summer Rodriguez held the first Affiliate Program Manager Certification seminar in Florida. The response was so overwhelming that Rodriguez has a second one planned for October.

“Andy is probably the most trusted affiliate manager out there, and it comes as no surprise that he’s the first to offer such a seminar,” says Greg Rice, an outsourced affiliate program manager with Commerce Management Consulting in Medina, Ohio. “As a veteran affiliate, I’m very interested in this topic.” Rice worked as an affiliate several years ago when Rodriguez managed the affiliate program for Tiger Direct.

“That’s where I got firsthand knowledge of how he inspires trust in people. If he says he’ll do something, he does it. He quickly resolves issues and he did a lot of cleaning up of that program to get the parasites out,” Rice says.

Rodriguez says it’s all about building relationships with people.

“If you respect people and are honest with them, they respond to that,” he says. “In my opinion that is what affiliate marketing is about – people and treating them with the same respect you expect to be treated [with].”

But people change jobs, so don’t confuse the merchant with the affiliate manager of that program, advises de Poel. “I know of a couple of programs that were well-managed and clean, but once the affiliate manager left, the programs went to trash. Things like that happen every day.”

Investigate, Sherlock

To get more information on a merchant, you can also talk to affiliates already in the program.

“The quickest way to find out about an affiliate program is to check in with existing affiliates,” Newlin says. “The affiliates will definitely know if the program is clean. With most other sources – such as lists on websites – you run the risk that they may not be up to date or they could be run by a competitor.”

Also check the online affiliate forums or message boards. Many have lists that are frequently, but not constantly, updated. And with thousands of active affiliates, you can always pose questions on the boards about a specific program and see what kind of response you get.

“Trust the forums. If a program is not clean, the posters on these boards won’t hesitate to chime in and tell you immediately,” Newlin says.

Rice agrees: “There’s a good chance that if someone is up to something, then someone on the boards have caught wind of it.”

And in some cases, companies that are known for using adware or parasite-ware will post a list of their partners right on their website. “Once you see who is on that list, we can avoid doing business with them,” Rice adds.

Protect Thyself

Making sure someone is running a clean program is hard work, but for most online marketers it’s something that they need to do for themselves.

Newlin says that both for affiliate managers and affiliates the only real way to be sure about anything is to do your own testing. While it takes some level of expertise to perform the testing and you have to know what to look for (such as testing applications to see if they override the affiliate tracking or the affiliate cookie), it’s worth the effort, he says.

“Before you put the links on your page, actually cut and paste the links into the browser to make a test purchase to see if it tracks,” AffiliateFairPlay.com’s Stevens suggests.

For affiliates, de Poel says there are key things to look for and specific questions to ask affiliate managers. Look for programs that offer a fair commission rate in the industry. Find out if the affiliate manager has more than one point of contact. Can you reach them by phone, email, instant messenger? Make sure the program has the tools and resources to help the affiliate (data feeds, product showcases, frequently updated creative). Is the affiliate manager active in the industry? Do they post on message boards? Are they visible at industry events? Does the affiliate manager quickly address concerns?

While Stevens is sympathetic to affiliates’ concerns, she wants to see them take more action.

“We need to put more focus on holding the affiliates’ feet to the fire,” she says. “They are right that they are losing justly earned revenue, and they are entitled to that. But they need to take a stance and do less complaining. It’s always ‘Microsoft should be detecting problems. Google should be doing this or that.’ They want everybody else to take on the issue. They need to say ‘What can I do for myself to fix these problems?’ “

Especially since affiliates are unlikely to get support from consumers on this issue.

“The average consumer has no idea what link hijacking is and that cookies are being overwritten,” Rodriquez says. “They don’t have a clue and they don’t care. The pressure has to come from the merchants and OPMs that are managing programs. This is crap and it’s hurting the industry.”

Certification or Regulation?

LinkMo’s Grow says that one of the biggest problems his company faces is a lack of affiliate identity verification. His company is inundated daily with fraudulent affiliate sign-ups. “Manually sifting through all of them to find those who are legitimate is time-consuming,” he says. “But no matter how much work it is, it’s critical to weed out crooks that would send bad data and spam across the network.”

Instead of guessing who is doing what, Grow says a possible solution to the problem is an industry-wide, third-party, affiliate verification service. LinkMo is developing a new service called Certified Affiliates to determine which affiliates are legitimate and which are fraudulent before they gain access to any network. LinkMo plans to reward affiliates who get certified through CertifiedAffiliates for the time and expense the service saves LinkMo.

Certification is not a new idea. de Poel says he tried it a few years ago. He started ATrustedMerchant.com, a program that gave out certification logos to merchants that met the predefined criteria for running a clean program.

But several companies that failed to receive certification due to the inclusion of parasitic affiliates raised a stink about their competitors being certified. Calls from the legal department at one of the companies followed, and the whole situation raised issues about the legality of compliance.

“It really become a pushing point for me,” de Poel says. “Everyone keeps on wanting me to make a list of clean merchants, but it got to a point where the list was not valid and there was inaccurate information on the site. It’s just too dangerous to certify merchants as being clean or trusted. Things change too fast to make sure that once a merchant got the certification they stayed clean.”

de Poel was also surprised at the lack of volunteers to help in his efforts, given the volume of messages on his forum devoted to voicing complaints about dirty programs.

“The community is coming out and saying they all want clean programs. Managers want this and affiliates want this, but no one is willing to do the damn work to make it happen. They all want to pass it off to someone else to do the work,” de Poel says. “I asked for help with ATrustedMerchant.com and only five people offered to pitch in. That’s not right.”

Stevens agrees there are many obstacles to certification. “It’s a huge technical challenge, and whoever undertakes such an effort is going to need a large pool of resources in terms of the time it takes, people and money,” she says. “I just don’t know if certification of affiliates is a viable financial business model.”

Consent is a huge issue in the certification process. Clean merchants will readily agree to a voluntary accreditation process, but anyone using questionable practices is not likely to submit to the necessary scrutiny, according to Stevens.

“It’s a sticky wicket,” she says. “People that want to conduct tests regardless of having the consent of the merchant or affiliate may face a lawsuit if they don’t pass.”

Instead Stevens would like to see some test-purchase protocols that could be used by affiliates.

The Networks’ Role

Some claim that the solution might not rest with affiliates, but rather with pressuring the networks to kick affiliates with parasite-ware out of their networks.

“A certification process is no good if networks continue to allow dirty affiliates in. At that point it doesn’t matter if I’m certified as clean,” Rice says. ShareASale.com is the largest network that has rigorous policies regarding adware, spyware and parasite-ware. To ensure no offenders enter its program, ShareASale does not allow any downloadable applications. Period.

“Affiliates could pressure the networks by refusing to do business with them,” Rice says. “The whole issue is driven by money, and right now the networks think that allowing parasites means more money for them. Affiliates need to show them it’s short-sighted and untrue.”

Many vocal affiliates are always informing the networks about nefarious activities. But these whistle-blowing affiliates often don’t feel that appropriate measures are taken against the offenders.

“The networks need to take action on the information from affiliates about bad practices,” Newlin says.

Collins says it’s going to be hard to satisfy all parties. “There’s just no way to placate people. If affiliates are required to provide more information about themselves to get into programs, then they consider that an invasion of privacy, but on the other hand the same affiliates are hollering that programs often let anybody in, including rogue affiliates. They want things to change but they don’t want it to impact them,” he says.

He cites LinkShare’s implementation of more restrictions with its Athena program, an enhanced affiliate registration and management system that allows merchants to verify affiliate contact information when an affiliate first registers in the network and when the affiliate changes any element of their contact information.

“People were screaming from the rooftops that this was an invasion of privacy,” Collins says.

“Project Athena is a great idea that was needed and I give kudos and credit to Steve (Messer, Linkshare CEO), but the execution of the project was chaotic and a disaster,” Rodriquez says. “When launching something of that level, you need to test in beta and retest in beta and test again and then bring it out. They had the launch before it was ready, but it was good for the industry.”

Many affiliates remain distrustful of the networks and say that despite publicly paying lip service to the issue of parasites, most networks are not doing enough and will get their comeuppance.

Rice says he believes “a day will come when this activity is illegal and affiliates will remember who did business with parasites and they will get what they deserve.”

Some encourage affiliates to vote with their wallets.

“Return on investment is key for the networks,” Rodriquez says. “And the networks don’t own affiliates, so affiliates should go where they can get the best return on their money.”

If the networks aren’t doing enough, then some would welcome government intervention.

SierraTradingPost.com’s Newlin would like to see the government step in and take over the regulation of affiliates. “I see parasites stealing hundreds of thousands of dollars, and they should be sued for it. The government should help,” he says. “I envision it like the CAN-SPAM regulation.”

But Newlin concedes that the government lacks the manpower to truly crack down on cyber-crimes. “They are probably not hitting 90 percent of the spammers,” he says.

Some affiliates say New York Attorney General Eliot Spitzer may be the one to finally exterminate parasites.

Spitzer, a candidate for governor of New York in 2006 is best known for his high-profile crusades against conflicts of interest in business. Now he’s focused on cyberspace. In April, he filed a civil lawsuit against Intermix Media of Los Angeles accusing the company of secretly installing software that delivers nuisance pop-up advertisements. He says such programs are fraudulent and threaten to discourage e-commerce.

Spitzer has publicly stated that he looks forward to a time when technology will provide a comprehensive solution to stop spammers, parasites and spyware, but until that time there needs to be a cop in cyberspace who will stop the most egregious abuses.

But any mention of the government getting involved raises heated debate. Rodriquez is opposed to the government getting involved. “The last thing we need is for the government to say this is under their control. That is the very last thing we need. Still, he admits that the industry has evolved and there are tools and companies that are taking advantage of the system.

“If some of the activities in the online world were happening in the regular brick-and-mortar space, some of these people would be in jail,” Rodriquez says.

The Clean Advantage

But just because a program is clean doesn’t mean it is well-managed, according to Newlin.

It’s a lot of work to run a clean program, but there are rewards.

“If you are clean, then legitimate affiliates will promote you harder,” Newlin says. “A lot of super-affiliates will not even touch merchants that have parasites. If the affiliate manager is not selfish in driving their own channel within their company, they will make sure the affiliate program isn’t going through the roof. It’s in their best interest to see if the parasite applications are stealing affiliate commissions in their own channel.”

AffiliateFairPlay’s Stevens expects things to change as the industry evolves and affiliate managers become more savvy about the online market, “but it’s not going to happen overnight.”

Rodriquez says that, in the end, in order for the online marketing space to grow and succeed, everybody has to win. “To become successful you need to help others be successful.”

Pedro Sostre: Follow Your Passion

Pedro Sostre is all about art and good design. And he’s not afraid to voice his opinions on either subject.

“Most websites suck in terms of design,” he says, though he also admits there are many design-oriented sites that are extremely well-done and that he’d be hard-pressed to single out just a handful of them.

When it comes to art, he’s fond of the impressionist style of painting. He loves art with bold colors. He leans more toward more modern work and loves Piet Mondrian and his counterparts, but he’s not very fond of pop artists like Andy Warhol.

A passion for art and design seems to permeate everything he does – especially his work.

Sostre, principal and creative director of Sostre & Associates, is a Miami-based affiliate who also does Web development and consulting.

He’s one of Commission Junction’s top performers – with a network earnings ratio of five bars. He’s been a publisher with Commission Junction since 2003 and runs a number of sites, from book clubs to cosmetics to equestrian vacations, including AudioBookDeals.com, BestCreditSolutions.com, EquestrianMag.com, iTravelMag.com, Look-Your-Best.com and Tax-Stuff.com.

Sostre started his professional design career in 1998 doing identity and brand consulting along with designing logos and business cards. Around 1999, when the Internet was gaining in popularity, Sostre started to get more involved in designing websites. “I really just wanted to see what it was all about,” he says. “Then I realized there was money to be made.”

Like most who wanted to ride the Internet gravy train, Sostre had no formal training with computers or the Web. He came from a graphics design and visual communications background at the Art Institute of Fort Lauderdale.

“In school we didn’t have very many computers. I think I took one programming class, but there was nothing related to the Internet,” he laughs.

However, after working on the design portion of several clients’ websites, Sostre would often see sales jump from $5,000 to $50,000 a month. Suddenly he wondered why he wasn’t doing this for himself. So in 1999 he started working on his first affiliate website and launched it in 2000. Not surprisingly, SiteDesignMagazine.com was aimed at site designers.

“I still have that site today, but now it’s like a stepchild that doesn’t get much attention,” he says.

Sostre concedes that at the time he launched his first site, he “had no idea what was going to work” and he just “put up a bunch of stuff.” The good news was that certain elements showed lots of promise.

“Affiliate marketing was not mature back then,” he notes. “I just kind of did it myself and kept trying new stuff.”

He didn’t have anyone to look to for advice or tips when he started. BeFree was the network Sostre signed up with when he first started out. “It’s not like Commission Junction is now, where they provide advice and help for publishers. It was like ‘Here are the merchants’ links, just grab them and go,’ ” he says.

And if he did come across someone willing to share online marketing war stories, they weren’t really making any money anyway.

“Most affiliates were in their own little sheltered environments,” he says. “The people that were doing well didn’t have the time to be out and talking. They were hard at work on their sites.”

Sostre took note of that. He kept his head down and mostly just figured things out for himself. He says he simply used basic principles of salesmanship and marketing. “I applied what I knew from traditional business.”

During college and high school he had a variety of sales jobs – Godiva and Structure (now Men’s Express) – that taught him a lot, and he says much of his early retail sales training came in handy. He’s also not afraid to take risks and make mistakes.

“I spent a lot of money that I didn’t need to spend, but every cent taught me something,” he says.

Currently Sostre has about 20 sites that are close to done and approximately seven that are completely up and running. He also owns another 100 domains and is trying to figure out how best to use them.

“I can be very fickle and get bored easily. That’s when I move on to different stuff,” he says. If I’m losing on one site and then realize that there’s another area where no one has done very well, then I might consider creating a site to fill that need.”

Typically, like with his equestrian site, EquestrianMag.com, Sostre identifies a market or industry, looks at the existing sites and evaluates them. If there are a lot of bad sites, but he still thinks there are enough people interested in the topic, he will buy a domain name and launch a new site.

The three sites Sostre considers to be his best-performing are FreeBookClubs.com, AudioBookDeals.com and iTravelMag.com.

He does pay per click on his own websites. He doesn’t do bulk email or PPC arbitrage. Because many of his sites are online magazines, he also has to refresh content frequently. He hires freelance writers and updates the site with new articles once a month and uses free press releases. However, he refuses to use keyword articles and search engine spam.

“I know there are people out there that capitalize on that to get the traffic,” he says. “I won’t do that.” But there are several things he has done that have helped him achieve success. “I’m doing something I love. I love designing websites and trying to find new ways to increase business using the Internet, and that’s what I get to do all day long. I’m constantly trying new things. You have to try everything and don’t be afraid to fail. And I’m always learning. Whether it’s a new programming language or a new sales principle, I try to be in a constant state of learning.”

And no matter how successful he becomes, he’s never afraid to seek help or learn from someone else. Recently he considered one of his sites nearly dead. It had only a couple of sales in the last year. But he resuscitated the site by working with an affiliate manager friend. Sostre takes extra care not to take any of the credit for his friend’s hard work and the improvement in performance.

“My affiliate manager friend took it over and improved the program. It was huge challenge, but she knew the program could be good,” he says. “She got the program to a good point where sales went from two per year to 100 sales per month. It showed me what a good affiliate manager can really do.”

In order for Sostre to consider one of his properties successful it has to meet specific criteria: it fills a specific need and he starts to get inquiries on how to advertise on it. “The money comes after that,” he adds.

Professional success has helped Sostre gain personal success as well, which he defines as being able to work from home and spend as much time as possible with his family. His wife is a stay-at-home mom, so she deals with the busy schedules of his four kids.

Sostre really likes to help out, but working from home means having strict boundaries. When he’s working, his office is off limits to the kids, “when they feel like listening,” he says. If Sostre is in the middle of big project or on a tight deadline, his wife is great about occupying the kids in the pool or taking them to visit grandma.

And like most affiliates that work from home, this self-described workaholic can set his own schedule. He says it changes every now and again. On rare occasions he wakes up at 6 a.m., but most of his workdays start around 9 or 10 a.m. – unless he gets “dragged out of bed earlier for a phone call.”

“I’m not an early person,” Sostre says. “I usually stay up until 2 or 3 a.m. or sometimes later. That’s when my brain is turned on.”

By working from home he also avoids a nasty commute to downtown Miami, which can take up to 90 minutes each way in heavy traffic, which is almost always, he claims.

The disadvantage of his job is that few people outside the affiliate community understand what Sostre does for a living.

“I don’t talk to enough people that even know what affiliate marketing is. My mom is convinced that I’m doing something illegal,” he jokes. “I’ve resorted to saying ‘Internet stuff’ when explaining what I do to friends and family.”

Commission Junction certainly knows what Sostre does. As one of CJ’s top performers, he’s often asked by the affiliate network to give tips to new publishers and advertisers on how to run strong programs. Although he’s eager to help others, he seems almost embarrassed to talk about his success. He seems hesitant to admit he’s got a big bag full of great tips and tricks.

It’s not that he’s concerned about someone borrowing his recipe for success. “I’ve talked very openly with a lot of people about how I did it, but everything is not easily duplicated, so it’s not like I’m worried that someone else is going to steal my business,” he says.

Mostly, it’s just that he’d rather not seem preachy or like a know-it-all. Instead, he prefers to talk about his personal experience and let people take what they want or need from his story.

Sostre says he likes to keep a low profile, but in the last year or so he’s been encouraged by a well-connected friend in the industry to be more visible in the affiliate community.

“My friend is remarkable. She’s trying to get me to talk to people. After asking me a couple hundred times, I gave in and let her introduce me to some people.”

That’s led to some interesting opportunities. Over the last several months, Sostre was on a panel at the Affiliate Summit 2005 in Las Vegas in June; he was a speaker at eComXpo, a virtual tradeshow for online marketers; and he’s done some writing for industry trade publications.

“I haven’t done a whole lot of publicly before now,” he says. “I’ve stayed out of the industry. I’m used to doing things on my own. I was not one that visited the newsletter sites and message boards – especially once the experts and gurus came out. I’m just not that keen on listening to them.”

Maybe that’s why he seems so reticent to give out advice. Ironically, about 25 percent of his business is consulting services related to advising others on website design.

One piece of advice he doesn’t hesitate to give out: “People who are innovators try new things. Now people are just trying to duplicate success. Free iPods are huge, and these are not from the original company that made it a success. I hate that. Experiment. Do something new.”

New technologies such as blogging and podcasting offer opportunities, says Sostre. While he’s long been interested in blogging but hasn’t had much time to spend on it, he notes that podcasting is likely not for him. But that doesn’t mean it won’t work well for others.

“People should be open to try new stuff. I thought online marketing was interesting. I tried it and it worked for me as well as a whole lot of other people, even though many marketing experts were sure that it was never going to go anywhere. The more you try the more you can succeed.”

He also can’t emphasize enough the importance of design.

“Most websites really need design improvement and help,” he says. “Mostly it’s someone just attempting to make a few bucks. You know, people want to make an extra $100 per month. Then they realize they can make $500 per month, then $1,000. These are not people that are going to spend time to learn design. I believe that’s why many fail.

“I would like to see the Internet mature in terms of design as other marketing media has. Why do you think Target and Apple do so well? Good design and marketing. Some marketers understand how design impacts them, so they’ll pay a professional,” he says.

According to Sostre, the next step for affiliates is to grow beyond affiliate marketing.

“I’d love to see the affiliate community do something good,” he says. “We need to seek to do something more than just making money.”

However, he explains that he means “do good” from a business standpoint.

“Well, I’m not Mother Teresa or a member of Greenpeace, so when I say do good I mean from a business sense. I would like to see more affiliate sites grow to become top resources in their respective industries. I see a lot of affiliate sites that are just directories or they have content that is not that useful. It’s just there to attract people to the site. I’d like to see affiliates creating real websites that serve as leading resources.”

As for Sostre’s future, he wants to continue to grow his business. Over the next two years he’d like to double his revenue and hire a couple more employees.

“I really love what I’m doing right now and I would hope to be doing the same thing in two years,” he says. “As the president of Sostre & Associates, I get to determine what industries we move into and what websites we develop. This keeps me from getting bored with a particular industry or website. As creative director I get to meet with our clients, learn about their businesses and discover ways to increase it, which is a challenge that I really enjoy.”