The State of Online Marketing

By the time Revenue magazine hit newsstands in January 2004, performance marketing and affiliate marketing had already had their share of ups and downs. Online marketing had survived the dot-com bust and continued to evolve from the e-commerce craze into something that sparked enthusiasm and life in a shell-shocked market.

The idea that retirees, housewives and those with “real jobs” could work at home a few hours a day (or into the wee hours of the night) and make some extra money earning commissions by promoting products from someone else seemed too good to be true. But it wasn’t. And in many cases, people weren’t just supplementing their income, online marketing had become their main source of income. They were able to quit their day jobs and focus on their new business.

Revenue was born out of that passion and enthusiasm to help chronicle, sort out, explain, educate and bring to light all the pertinent issues facing online marketers. We’ve been here for two years now, and we hope to be here for many more as the market remains on its incredible growth trajectory.

To celebrate our milestone, we’ve brought together some research, voices from the industry and past history. It just may help you navigate your continuing journey into online marketing.

Search is hot. Local search is even hotter. The areas of podcasting and blogging are white hot. Then there are predications for growth in ad spending over the next year. There’s no lack of research to show that all segments of online marketing are going strong and getting stronger. The facts, the figures, the surveys and the data all point to a future filled with opportunities for online marketers. We bring you some of the key indicators (see page 58).

And if you’re still not convinced how the market will shape up, you can forget the numbers and go right to those in the trenches. We asked online marketing leaders to give their opinions on how things have evolved over the last two years, an update on where the online market is right now and where it’s headed. There are comments from a lot of different types of folks, all with different jobs and all with their own perspectives, but the optimism about online marketing is a common thread among them (see page 60).

If you’re wondering how businesses adapt and survive in such a rapidly changing marketplace, look no further than the “5 Who Thrived.” These are five individuals we profiled in our premiere issues because they had already carved out some early success in the affiliate space. We revisit each of these folks and find they all have been able to roll with the punches and not only survive but thrive. Actually, they’ve all grown their respective businesses and have no plans to rest on their laurels (see page 62).

Finally, Revenue magazine has worked hard to stay on top of the constantly evolving online marketing space. And along the way we’ve made some changes in the look of the magazine as well as how we handled the editorial content. Take a stroll down memory lane with us as we revisit each of our past issues (see page 64).

Facts & Figures

Online Retail Sales

Online sales were $96 billion in 2003 and are expected to reach $230 billion by 2008 (10 percent of all U.S. retail sales).
Source: Forrester Research

Online retail sales in the third quarter of 2005 reached $23.32 billion – 26.7 percent more than the $17.6 billion for the same period of 2004.
Source: The Census Bureau of the U.S. Department of Commerce

The proportion of online retail sales to total retail sales reached 2.3 percent in the third quarter of 2005, compared with 2 percent in the third quarter of 2004.
Source: The Census Bureau of the U.S. Department of Commerce

Online Ad Revenues

Total revenues for 2005 are expected to reach $12 billion, a 25 percent increase over 2004’s final tally of $9.6 billion.
Source: Interactive Advertising Bureau

Total U.S. online advertising and marketing spending will reach $14.7 billion in 2005, a 23 percent increase over 2004. It’s forecast to reach $26 billion (8 percent of total ad spending) by 2010.
Source: Forrester Research

Eighty-four percent of marketers had plans to increase U.S. online ad budgets in 2005.
Source: Forrester Research

Almost half of marketers plan to decrease spending in traditional advertising channels like magazines, direct mail and newspapers to fund an increase in online ad spending in 2005.
Source: Forrester Research

Display advertising, which includes traditional banners and sponsorships, will grow at the average rate of 11 percent over the next five years to $8 billion by 2010.
Source: Forrester Research

Search Engines

Forty-one percent of 1,577 Internet users surveyed in September and October reported that they had visited a search engine the previous day. That is up from 30 percent in June 2005.
Source: The Pew Internet & American Life Project

Search is the second most popular task on the Web with 41 percent. Email still leads the list with 52 percent of U.S. Web users saying they had sent or received email on the day before being surveyed this fall.
Source: The Pew Internet & American Life Project

Users average 24 minutes a day on email, compared with less than 4 minutes for search.
Source: comScore Media Metrix

Search engine marketing will grow by 33 percent in 2005, reaching $11.6 billion by 2010.
Source: Forrester Research

The Big Three

Yahoo’s third-quarter 2005 marketing services revenue grew 46 percent, to $1.16 billion, from $797 million in third-quarter 2004. Ad revenues at America Online increased to $324 million in the third quarter, marking a 28 percent leap from 2004. And Google saw third-quarter revenues surge to $1.578 billion – a 96 percent leap from the third quarter of 2004.
Source: Company information

Keywords

The average “cost per keyword” increased from $20 in July to $26 in September 2005.
Source: Performics

Keyword costs for the words kitchen, food and wine-related terms went up 8 percent in the third quarter of 2005. Prices for keywords about apparel and accessories rose 10 percent during the same period.
Source: SEMphonic

Travel

Among the 35 million consumers searching for travel, nearly one-third purchased a travel-related service either online or offline within the eight weeks following the initial search. Among these buyers, 80 percent completed travel purchases online.
Source: comScore Networks, Yahoo and Media Contacts

Only 20 percent of all travel transactions linked to search engine activity occurred directly following the initial search referral, while the remaining 80 percent took place in the days and weeks following the initial search session.
Source: comScore Networks, Yahoo and Media Contacts

Over the last year, Merrill Lynch reported that direct travel supplier sales increased 27 percent compared to 19 percent for online travel agencies. Travel search engines were driving direct supplier sales and accounted for $600 million in direct bookings last year.
Source: Merrill Lynch

Youth

Nearly 60 percent of children ages 6 to 11 go online at least once a month, and about one in 12 goes online daily.
Source: Mediamark Research

Forty-four percent of teens have purchased something online. Teens spent an average of $73 on their last online purchase.
Source: Teen Research Unlimited

Music

Apple Computer’s iTunes music store now sells more music than Tower Records or Borders. Apple has maintained more than 70 percent of the PC-based digital music download market throughout 2005.
Source: The NPD Group

Digital music sales accounted for slightly more than 4 percent of the market during the first half of 2005, up from about 1.5 percent during the first half of 2004.
Source: The Recording Industry Association of America

Gambling

Worldwide online gambling revenues will top $10 billion in 2005, up from $8.5 billion in 2004.
Source: eMarketer

In July 2005, 30 million U.S. Internet users (18 percent of all Internet users) visited gambling sites. This is comparable to the number of Internet users who visit retail music sites and is double the number who visited gambling sites in December 2001.
Source: comScore Media Metrix

Local

Local online advertising has more than tripled since 2000, going from just over $1 billion to more than $4 billion.
Source: Borrell Associates

More than 26.3 million online users had visited a top 15 classifieds site in September – 80 percent more than the 14.6 million in the year-ago period.
Source: The Pew Internet & American Life Project

Blogs, Podcasting and RSS

Sixty-four percent of respondents are interested in advertising on blogs; 57 percent through RSS and 52 percent on mobile devices, including phones and PDAs.
Source: Forrester Research

An estimated 5 million people will have downloaded podcasts in 2005, compared with just 820,000 in 2004. That figure is expected to reach critical mass in 2010 with 62.8 million users.
Source: Bridge Ratings

Newspapers

Almost one in four U.S. Internet users now reads online versions of newspapers.
Source: Nielson//NetRatings

More than 39 million unique Internet users visited newspaper websites in October 2005, up 11 percent increase from the previous year, and more than three times the year-overyear increase of overall Internet users.
Source: Nielson//NetRatings

Video

Spending for Internet video advertising in the U.S. will nearly triple in 2007 to $640 million from 2005’s $225 million.
Source: eMarketer

Navel Gazing In the Trenches

The Past

What’s been the biggest change in affiliate marketing over the last 24 months?

How could it be ANYTHING but Google AdWords?
– Seth Godin, Marketing Expert, Author

The biggest change we have seen is the surge of search-enabled affiliates.
– Joe Speiser, Co-founder, AzoogleAds.com

Google’s AdSense altered the pay-for-performance landscape forever!
– Beth Kirsch, Group Manager, Affiliate Programs, LowerMyBills.com

The negative campaign against ad-ware and the declining conversion of email marketing.
-Michael Stark, President, PostYourProperty.com

We saw more big players entering this industry, both good and bad, and the many different ways they capture the attention of the search engines and visitors.
– Greg Rice, Affiliate Program Manager, Commerce Management Consulting LLC

Gone are the days of putting a banner into rotation or some text links and waiting for revenue. Professionals realize that generating real revenue can only happen when they master the advanced toolsets available.
– Wayne Porter, Associate Editor, ReveNews

The demand for ethical marketing practices by networks, affiliates and merchants. Affiliate managers today aren’t just remarked upon because of how well they grow a program, but also how well they police that program.
– Chris Sanderson, Marketing and Affiliate Partner Manager, Mondera.com

The Present

What’s been the greatest development in online marketing during the last 2 years?

The need to be transparent. If you lie, you get nailed.
– Seth Godin

Complete and total domination of the search channel.
– Beth Kirsch

The emergence of blogs/RSS being leveraged by affiliate marketers has opened up a new frontier of quality, content-based real estate for affiliate ads.
– Shawn Collins. President and CEO, Shawn Collins Consulting

Probably the intelligence that can be built into online advertising. Intelligent advertising can be presented when the likelihood of a sale is at hand.
– Greg Rice

The rise in popularity of blogs and RSS feeds combined with the availability of contextual advertising technologies like Google AdSense.
– Adam Viener, President and CEO, IM Wave

There has been a turnaround in attitude on the part of media buyers. They have learned to trust the medium again and are bringing the dollars back.
– Dana Todd, Executive Vice President, SiteLab

Describe the state of online marketing right now.

Still chaos, because people haven’t figured out how to regularly and consistently test and measure.
– Seth Godin

Online marketing is here to stay, but it’s much too early to predict the methods we will use to market in the next couple of years. Truly disruptive innovations are yet to happen.
– Elizabeth Cholawsky, Vice President, Marketing ValueClick

The current state of online can be best summed up as The Second Coming!
– Michael Stark

The industry is very young still and needs time to mature and develop rules and regulations to play by.
– Brian Littleton, President, ShareASale.com

Exciting and fun! The shift from offline to online spend that we all have been talking about in the past 10 years is happening.
– Ola Edvardsson, CEO, Performancy

The key issues are confusion and consumer trust. Some consumers are becoming so turned off by the Internet pollution it hurts e-commerce as a whole and our emerging global community.
– Wayne Porter

Crowded, chaotic and filled with confusion. A massive cleanup is needed to sort out the bogus from the real and make it easier for legitimate firms to do business in an environment of trust.
– Chris Sanderson

The Future

What are the largest hurdles for online marketing going forward?

Standardization of data is a significant challenge. Until we can make it simpler to run online campaigns effectively, we’re excluding the small and medium businesses from full participation.
– Dana Todd

Enhancing customer trust and redefining online marketing ideology. The gap between reach and budgets will decrease and success-based models will be the future.
– Holger Kamin, Executive Account Director & Special Projects RoW, Zanox

Marketers must allow the consumer to choose which advertisements they would like to see anytime and anywhere.
– Elizabeth Cholawsky

Unreasonable client demands combined with impatience.
– Seth Godin

Once the major ad agencies fully embrace the Internet and its measurement and performance benefits, then the industry will really explode.
– Joe Speiser

Strategically, to bridge the gap between traditional brand/media advertising with the means to track and measure the ROI of online marketing. More tactically, to clean up the sleaze factor of online marketing including hammering the nail in the coffin on the spyware and spam issues.
– Beth Kirsch

I think we’ll see some overzealous enforcement of current and future laws related to email, adware and online advertising in general. Plus, there’s always the bogeyman of an Internet sales tax being enforced across the board.
– Shawn Collins

The constant abuse of the end user experience. As a marketer you always need to ask yourself: Is what I am doing really benefiting the end user? Is this the way I would like to be treated myself? The Golden Rule does apply in online marketing as well.
– Ola Edvardsson

Trying to make sure that we don’t behave so badly that the government steps in with strict regulation on tracking technologies.
– Brian Littleton

Where do you expect online marketing to be two years from now?

The separation between online and offline advertising will begin to blur. Online methodology will dominate and make the growth in online advertising appear even more dramatic than just the numbers would suggest. The handwriting is on the wall.
– Elizabeth Cholawsky

There will be fewer players, but they will be the more sophisticated, rule-abiding marketers that stick around through 2007.
– Shawn Collins

I think we will see far more sophisticated tools, better analytics and an emphasis on Web services.
– Wayne Porter

Online marketing will become a science of sorts. Since we’re able to track everything that happens online, we’ll see more companies focusing on analytics.
– Rachel Honoway, Vice President of Sales and Marketing, KowaBunga

Who Thrived

In our premiere issue we noted only about one in 50 affiliates finds real success. We profiled five affiliates who had beaten the odds. Now, two years later, we look at what’s happened to each of them over the last 24 months and what they’re up to now.

Rosalind Gardner

WHEN WE FIRST MET: Gardner had just finished writing her book, The Super Affiliate Handbook: How I Made $436,797 in One Year Selling Other People’s Stuff Online, and she was running Sage-Heart.com, an online dating service. She was making about $30,000 to $50,000 a month and had the business running to the point that she only needed to spend a few hours per month to keep it going.

WHAT’S HAPPENING NOW: In addition to being a columnist (Affiliate’s Corner), Gardner has been very busy with many projects. She’s working on more books – one is about how to make money selling books online. In the future she’d like to write books that have nothing to do with Internet marketing. But for now, she’s very in demand in the affiliate community. Gardner is consulting on a regular basis, speaking at high-profile conferences and seminars including Affiliate Summit and Affiliate Bootcamp, and building several affiliate sites.

Of course, Sage-Heart.com is still her bread-and-butter site, but she claims that NetProfitsToday.com, the site where she offers affiliate advice and a newsletter and sells her Super Affiliate Handbook, is taking up more of her time. She has what she calls a “virtual assistant,” but he only puts in an hour or so of work each day. Gardner recently started a forum on NetProfitsToday.com – something she had consciously avoided in the past, due to the huge amount of time forums require for monitoring, removing spam comments and just generally keeping things rolling.

The good news is that Gardner gets to unwind a little more. These days she works like a fiend for a stretch then heads off to China or Mexico for several weeks of rest and relaxation.

Wendy Shepherd

WHEN WE FIRST MET: Shepherd was a mom to three boys by day and a super-affiliate at night, working five to eight hours running her flagship site, TipzTime.com, plus a half dozen other retail merchandise sites. She was making about $40,000 a year and sending out her popular opt-in newsletter to more than 30,000 people.

WHAT’S HAPPENING NOW: Shepherd’s load certainly hasn’t lightened over the last two years. She’s still super busy home-schooling her boys, running two main sites (TipzTime.com and ChartJungle.com) along with about a dozen others and working into the wee hours of the morning. However, she has tripled her revenues of two years ago; she’s working on a top-secret unique site that will be launched later this year; and she’s thinking about hiring someone to help out with the Web development end of her growing business.

In addition, her husband stepped down from his managerial role at his job and is now working only about 30 hours instead of 50 or more. That means there’s a little more family time, which is more important than money or business, according to Shepherd, who admits that she never has time to be bored. Shepherd has been asked to speak at industry conferences and seminars, but declined – mostly because, she says, she “just can’t travel right now.” Meanwhile, she’s also contemplating writing a couple of books in the near future. She wants to help and encourage others.

Zac Johnson

WHEN WE FIRST MET: Johnson started his first Internet business at the age of 14 in 1997 selling website banners for $1. By 2004 Johnson was signing up people for free stuff like catalogs, coupons and samples on his site MoneyReignNetwork.com. He was also working with PostMasterDirect.com to push newsletter subscriptions by collecting names, addresses and email addresses through a double opt-in system. His income was in the low six figures.

WHAT’S HAPPENING NOW: Johnson’s MoneyReignNetwork.com site was recently redesigned and expanded to include more than a half dozen websites focused on games, celebrities, entertainment and community. He’s out of the email and newsletter business and more into building traffic through viral marketing. About a year ago he tried his hand at launching an ad network, but closed it quickly. A few of his new sites have cracked Alexa’s top 10,000 ranking. Johnson, who spends a “ridiculous amount of time working,” says 2006 will “easily be his best income year to date” as he prepares to add a couple of new sites to his growing stable.

Elisabeth Archambault

WHEN WE FIRST MET: After quitting her part-time job as a technical writing instructor, Archambault opened her flagship site (BuckWorks.com), a virtual mall that sold everything from auto parts to prom dresses. Her revenue was going up and down, depending on the month, but she claimed in a bad month she might make $3,000 and then make something in the low five figures in a good month.

WHAT’S HAPPENING NOW: Archambault continues to operate BuckWorks.com, but now it’s just one of nearly a dozen active sites she runs. She has expanded into areas beyond consumer shopping, and another site, which she won’t name, has become her money maker. Archambault also owns over 1,200 domain names along with a huge file of “great ideas.” In November she traveled to four cities and was able to conduct much of her online affiliate business. Her goal is to set up her business so she can completely run it from anywhere. Meanwhile, she’s doing more affiliate consulting work, which accounts for 20 to 30 percent of her business. She’s been so busy that she has turned down requests to speak at various industry conferences.

Ulrich Roth

WHEN WE FIRST MET: Living in the Canary Islands, Ulrich was running Last-Minute-Reisen-Weltweit.de, a travel service offering vacation packages, flights, rental cars, cruises and vacation homes. A native of Germany, he focused on the German travel market and was earning $150,000 per year, with monthly revenues ranging from $10,000 to over $20,000 at peak season.

WHAT’S HAPPENING NOW: Last-Minute-Reisen-Weltweit.de is still up and running and lists Roth as the contact. There is also a photo of Roth on the site’s landing page. However, he did not respond to attempts to reach him via telephone and email. The site continues to cater to German travelers and offers various last-minute travel packages to such exotic destinations as Ibiza, Mallorca, Turkey, Spain and Portugal.

Resolutions Require Resolve

It’s mid-January. The holiday revelry is over, Christmas decorations have been packed away and the leftover turkey in the fridge is turning green. What about your New Year’s resolutions? Are they also becoming stale and moldy?

Are you still hitting the gym regularly, forsaking Haagen-Dazs and renewing your determination to avoid the evil weed with each nicotine fit? What about your resolutions to improve your affiliate marketing business this year? How are you doing with those?

What’s that? You didn’t make New Year’s resolutions related to your affiliate sites? Well, that comes as no surprise, as only a tiny percentage of those who make New Year’s resolutions include goals to improve their business. What is surprising is that a smart affiliate marketer would choose to give their competition such a big advantage to start the year.

Consider this. Super-affiliates who made resolutions and set goals are already executing plans to increase their annual income through market research, new site creation and customer base expansion. Existing pay-per-click advertising campaigns have been reviewed, ineffective keywords tossed and new campaigns and traffic-generation strategies are being put in place. Phone calls are being made to enhance relationships with affiliate managers, negotiate commission increases and forge new strategic partnerships. Last but not least, working methods are being organized and streamlined to save time, money and effort.

While statistics suggest that most of the “resolvers” will venture down the familiar path that ends in this year’s broken resolutions, the “super resolution makers” will stick to their plans and substantially increase their share of the commission pie.

So, do you want a bigger piece of that pie? Well, better belated than never. There’s still plenty of time to boost your affiliate business in 2006 by making and executing a few well-planned resolutions.

Here are 10 tips to avoid the pit of broken resolutions and reach your affiliate marketing business goals in 2006:

  1. Be realistic.
    “Make 10 million bucks” is a lofty aspiration, indeed. However, your chances of reaching that goal are about zero to none, unless of course your super-duper affiliate marketing company netted $5 million to $9 million in 2005.
  2. Be specific.
    “Make big heaps o’ cash” means different things to different people. Use specific numbers to define what you mean by big. Consider resolving to increase annual gross revenue by 20 percent or to deposit $2,000 in your savings account each month.
  3. Set a deadline.
    A goal without a deadline is just a wish. Do you wish to learn HTML, or will you actually learn HTML and upload three pages to a free Geocities domain by Feb. 15, 2006?
  4. Put it in writing.
    Write down precisely what you want to achieve and post it in a place where you will see it every day. The list will remind you what you’re working toward.
  5. Make a plan.
    When vacation planning, we research destination options, decide when and where to go, how to get there and then make reservations and an itinerary. You may use a similar approach to creating a step-by-step plan for your affiliate marketing business activities.
  6. Use positive terms.
    Frame your resolutions from a positive perspective. For example, instead of writing, “Stop joining low-commission nonproductive affiliate programs,” reword your goal to read, “Research and apply to one new recurring or high-commission-percentage affiliate program in my primary niche each week.”
  7. Commit to your plan.
    What will motivate you to stick to your plan? Is it the thought of how appealing you’ll be to the opposite sex while driving your shiny new sports car with the top down, or perhaps you dream of a vacation to some exotic and exciting destination? Maybe it’s the promise of creating a better future for your children with a hefty college fund. Whatever your goals, visualize and reaffirm them frequently to strengthen your commitment to the plan and enhance your chances of success.
  8. Be flexible.
    Today’s hot market may become tomorrow’s dog – just ask some formerly successful pharmaceutical affiliates. Although it would be terribly discouraging to see your time and hard work wasted, be ready to revise and rework your plan if required.
  9. Be persistent.
    According to a study conducted by Elizabeth Miller, a doctoral student at the University of Washington; and director of UW’s Addictive Behaviors Research Center, Alan Marlatt, of those who succeed with their resolutions, only 40 percent do so on the first try. Don’t despair. The rest succeeded after multiple attempts, and only 17 percent required six or more tries to succeed.
  10. Reward success.
    Don’t wait until you’ve saved enough for that brand-new Mercedes to reward your success. Take credit when you achieve a resolution and treat yourself. Also, don’t blame yourself if you fail. Instead, discover and dismantle the obstacles that were in your way and change your plan accordingly. The beauty of resolutions and goals is that you can create and revise them throughout the entire year – not just at New Year’s.

Do I follow my own advice when it comes to making New Year’s resolutions? Yes. In addition to my annual “lose weight, exercise more and watch less CNN” resolutions, I did make a few that are directly related to my affiliate marketing business.

For example, to eliminate the annual tax-time stress-fest during which I plow through an enormous pile of unsorted receipts, statements and stubs, I have resolved to do my bookkeeping on a monthly basis. Maintaining the books in a timely manner should spare what remains of my accountant Glen’s hair and save about $1,000 in bookkeeping charges at tax time.

Will my resolution succeed? Well, I’m not sure whether preserving Glen’s hair is sufficient motivation for me to stay the course. However, the prospect of an extra grand in my pocket to buy another pair of Stuart Weitzman boots guarantees its success.

Happy 2006. May this be the year that you reach and exceed all your goals and dreams.

ROSALIND GARDNER is the 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.

It’s Just Direct Marketing

As I go around the country teaching workshops on pay per click (PPC) I get asked many varied questions on search engine marketing (SEM), depending on which city I happen to be in. Larger marketers seem to have more sophisticated questions; smaller marketers tend to focus on subsistence tactics. However, one theme seems to reoccur frequently: the myth that SEM is some kind of rocket science.

Smaller businesses and many members of marketing departments at large and even Fortune 1000 companies have bought into the idea that SEM is something that can only be properly utilized by those who know the correct “voodoo” to make it work.

But really, SEM is just another form of direct response marketing and many of the same principles apply. Why else do you think those nasty 24-page sales letters work so well at driving conversions from search engine traffic? Personally, I hate those letters, but I am not their targeted audience.

The marketers who write long sales letters typically have years of experience in direct response marketing and have figured out how to use search to reach the same customers that they would target with any other marketing vehicle. They are successful because their message resonates with their intended customers (mostly Internet newbies) and they apply the same controls to their search marketing campaign as they do to any other campaign.

So how can you apply the same tactics? Don’t get me wrong; I’m not advocating the use of long-winded sales letters with 15 calls to action set in strategically placed buttons. They may or may not work for your product – depending on your offer – whether your consumer is educated in your marketplace and your price point. What I am saying is that you too can adapt their techniques to reach your intended goal.

Here are some direct response marketing principles that should also apply to your SEM campaigns:

  • It takes work. In order to truly be successful at search engine marketing you have to constantly test your response rates. Those who throw up a campaign and expect to just sit and watch the dollars roll in without any labor investment are just wasting their time. Successful marketers test copy, keywords, placement, pricing, messages, landing pages, etc.
  • You have to test. In direct response marketing, testing rules is never-ending. Just like testing in direct mail, the cost of the campaign can be justified if the lift in the conversion rate is enough to offset the expense. To measure the effect, you have to A/B split-test your traffic, testing new landing pages against the old. For retail sites with thousands of products, you can minimize the expense by testing just the product pages driving the most sales. If the lift in conversion offsets the cost of optimizing the pages, keep testing and roll out new ones.
  • You have to track results. Just as savvy offline marketers can tell which piece of mail and from which specific message a customer converted, you have to be able to tell which keyword, message and referrer drove your sale. Tracking is easy to do on PPC, harder on search engine optimization, but critical on both.
  • Creative is key. Google rewards those with high click-through rates (CTR) on PPC by better placement, and the way to get high CTRs is to write great copy that resonates with your audience. A good copywriter can make the difference between a successful PPC campaign and one that bleeds cash. Similar to an offline campaign, online creative (i.e., your search listings) should be tested frequently because even a small lift in conversion can affect profitability.
  • It’s all about the benefit. Successful marketers remember that the customers’ needs are paramount at all times. They sell on benefits, not features, and look for the messages that play on their customers’ emotional responses to their product or service. Include in your creative the things that work best such as your unique sales proposition, calls to action, list of benefits, money-back guarantees, etc. Never test more than one element at a time, or you won’t know which one contributed to the lift or falloff. Over time, you will discover offers that work only online, but like offline marketing, it comes through the same test-and-learn discipline.
  • The “Lead to Sale” conversion rate is important. Just as in the offline world the key to conversions from search is providing the right hook in your listing at the right phase of the buying cycle, and then converting that lead into a paying customer with the right offer on your landing page.
  • Analysis is your friend. Like any good offline campaign, you learn a great deal from analyzing your testing and conversions. Sometimes, new search engine marketers make the mistake of analyzing all their online test campaigns as one big program. This can really skew your testing as the set of results from one search engine campaign can vary dramatically from another. Likewise one set of keywords can perform significantly better than the rest; but because even changing a keyword from singular to plural can have dramatically different results, you have to test and analyze each variable separately.
  • It’s all about CPA or CPL. All search engine marketing campaigns need to be analyzed in just the way you would analyze your efforts in the offline world. Cost per acquisition (CPA) or cost per lead (CPL) is your common denominator and the only number that really counts in the long term.
  • Create customer loyalty.Search engines are looking more and more at how many websites link to yours. But a bunch of links from high-traffic sites are worthless unless those links drive sales. Link campaigns are too time-consuming to do them just for the sake of getting higher search engine ranking. You need customer evangelists driving more sales, and links can provide that.

Not all traffic is created equal. Just as in the offline direct response world, the 80/20 rule applies. In that world we know that 80 percent of your profits come from 20 percent of your sales. The same thing applies in SEM: 20 percent of your keywords will drive 80 percent of your sales. Obviously those are the keywords you will focus 80 percent of your attention on but you can’t discover those drivers unless you test constantly. Some keywords will bring you more traffic, but fewer conversions on the back end. Other keywords may bring you no sales, but be effective in driving branding or eliminating a stumbling block in the buying cycle.

Direct response marketing skills and experience are some of the key drivers in SEM campaigns. There are some nuances of SEM that you can only learn by experience, but if you go into it with the mindset that these rules apply you will demystify the whole experience. Regardless of the source or channel this mindset is what makes the difference between success and failure.

MARY O’BRIEN is a partner at Telic Media. She was formerly senior director of sales at Yahoo Search Marketing and is currently presenting their advertiser workshops around the country.

Home Page Makeover Unleashed

In this first installment of Revenue Magazine’s “By Design Makeover,” I worked with my team at Sostre & Associates to choose one site and give that lucky winner a visual redesign of its home page. After reviewing more than 50 submissions from readers like you, we finally selected – drum roll, please – OriginalDogBiscuit.com.

We chose this site because it serves as a prime example of a challenge website owners commonly face – designing an effective home page. I am convinced that online retailers could drastically improve conversions by redesigning their home page, and I am out to prove it. So stick with me as we walk through this makeover geared toward increasing conversion rates for OriginalDogBiscuit.com.

Before you design a website it is critical to thoroughly understand the product or service that you are peddling. That’s why we started the makeover process with a conversation with Elyse Grau, owner of The Original Dog Biscuit Co., to learn as much as possible about her products.

Grau says her company’s value proposition is quality. In other words, the biggest benefit of buying her biscuits is the ingredients. The Original Dog Biscuit uses all natural, human-grade, mostly organic ingredients, no preservatives, sugars or salts. The results leave dogs barking for more of this healthier snack.

Grau’s customers are health-conscious dog lovers. So it comes as no surprise that her best-selling products are regular and special diet dog biscuits, with dog gifts and dog supplements taking a backseat to these staples. The Original Dog Biscuit Co. also touts great incentives for frequent buyers, including discounts and free products.

Armed with this information, we needed to understand how users interact with the website. This is User Interaction 101. A first-time visitor has three primary questions: What is this site selling; why should I buy from this site; and how do I buy from this site?

Your website’s home page is charged with providing quick answers (sometimes in less than 10 seconds) before you require anything of the user.

Now let’s check out how the original design responds to those questions.

What is the site selling? The Original Dog Biscuit Co. may have a clear domain name and logo, but the website sends mixed signals. A quick glance at the home page screams of salmon oils instead of the company’s best-selling biscuits.

The three product categories – Dog Biscuits, Dog Gifts and Supplements – are each given the same weight in the navigation. That makes it confusing for customers who came to the site looking for dog biscuits with the best ingredients and best taste.

What’s more, the home page doesn’t display any images of the actual products being offered. This imagery is commonly referred to in the industry as a “hero shot.” And according to MarketingSherpa’s Landing Page Handbook, a good hero shot can increase brand recognition and response rates. That’s our goal!

Why should I buy from this site? As we learned from our business owner interview, the unique value of the doggy treats is ingredients that are far superior to your average grocery store brand. The problem is that the site doesn’t communicate that value proposition.

Well, OK, technically it does in that hard-to-find text blurb in the middle. But people don’t always read text, especially text that stretches across the page with no distinguishing characteristics. And the Our Ingredients link is sandwiched between the Frequent Buyer Program and Privacy Policy links, neither of which will draw much attention. This is where a good tagline comes in.

Wait ” it already has a tagline. Yes, and if you squint really hard you can almost see it right there under the logo. Can you see it? It says, “Best Ingredients. Best Taste.” It’s not the best tagline in the dog-biscuit world, but if it was visible, it might help.

How do I buy from this site? Now let’s assume that a user gets past the first two questions. They understand that the site sells dog biscuits and that the high-quality ingredients make this a much better brand for their canine friends. There’s still one more problem: How do they make a purchase?

Although not immediately recognizable, the phone number isn’t too hard to find.

Since there are no product images on the home page, we have to dig a little deeper to find the dog biscuits we want. But once we get there, adding them to the cart is fairly straightforward.

Bottom line: OriginalDogBiscuit.com could use a few improvements. I’ve pinpointed a few specific areas that need some immediate help:

  • Too much navigation
    When there are too many navigation options, it’s hard for the eye to pick anything out, much less see what’s really important.
  • Corporate identity inconsistency
    The logo is attractive and has personality, but it doesn’t flow with the rest of the page.
  • Missing unique value proposition
    The unique benefit for dog owners who buy from this site is that their pets are getting treats that are healthier than their mass-market counterparts. This value is not communicated on the home page.
  • Ordering phone number not prominent
    Many users still want to pick up the phone and call. The placement of the number is not prominent enough.
  • Wrong focus
    The first thing a visitor sees on the site is “salmon oil.” This is not the primary business of the website and, although there should be a place for news and announcements, it is taking too much real estate in the current design.

Now comes the fun part. Sostre & Associates art director Jason Graham spearheaded the visual aspect of this redesign. He was excited about the project because, “Their logo and packaging looks terrific. They obviously invested a lot into their brand identity, and we can capitalize on that.”

First we took the most important elements and positioned them right in the center of the page. Now their top products are prominently featured, along with their value proposition, and Add to Cart links allow customers to begin shopping right away. Then we surrounded that imagery with supporting elements, like testimonials, articles and frequent-buyer discounts.

“Everything on the home page supports the user’s desire to buy or learn more about the product and the person selling it,” Graham says. “The new home page gives users lots of reasons to feel good about buying the product.”

In the competitive world of e-commerce, online shoppers are always looking for reasons to not buy from a website. Having a less-than-optimal home page can give them what they perceive as a good reason.

Remember the saying, “On the Web, your competition is only three clicks away”? Well, it may be old (in Internet time), but it is still true. This By Design Makeover is sure to keep the competition at bay and dog owners happy with a user-friendly store to buy nutritious doggy treats.

PEDRO SOSTRE is principal and creative director at Sostre & Associates, a Miami-based consulting and development firm, which also promotes affiliate programs, including AudioBookDeals.com, BestCredit Solutions.com, EquestrianMag.com, iTravelMag.com and Look-Your-Best.com.

Defining Affiliate Marketing

Guerrillas know that affiliate marketing is just a fancy word for selling and treating people well. It’s more common sense and patience than anything else. But people often think affiliate marketing is a bunch of things it isn’t.

You’re going to save a lot of money, time and stress simply by avoiding these many misconceptions about what you really do for a living – especially if it’s you who has the misconception. If you are sharply focused on what your business really and truly is, you’ll disappoint no one, including yourself. I want your expectations to be based on clear reality, not smoky information that will happen when you know for certain what affiliate marketing isn’t. So, let’s look at what affiliate marketing is not.

  1. Affiliate marketing is not advertising. Don’t think for a second that because you’re advertising, you’re marketing. No way. There are over 100 weapons of affiliate marketing. Advertising is one of them. But there are also 99 others. If you are advertising, you are advertising. You are doing only 1 percent of what you can do. If you do think affiliate marketing is running a lot of ads, go immediately to the rear of the subscription list.
  2. Affiliate marketing is not direct mail or email. Some companies think they can get all the business they need with direct mail and email. Mail-order firms may be right about this. But most affiliates need a plethora of other marketing weapons in order for their direct marketing to succeed. If you are doing direct mail or emailing only, you’re off to a brilliant start and I commend you, but I caution you that you are not a guerrilla.
  3. Affiliate marketing is not telemarketing. For business-to-business marketing, few weapons succeed as well as telemarketing – with scripts. Telemarketing response can be dramatically improved by augmenting it with advertising. Yes, advertising. And direct mail. Yes, direct mail. And even email. Yes, email. But be warned, marketing is not telemarketing on its own.
  4. Marketing is not brochures. Many companies rush to produce a brochure about the benefits they offer, then pat themselves on the back for the quality of the brochure. So, does that brochure qualify as marketing? Proudly display it on your website. Offer it all over the place. It is a very important part of your marketing arsenal when mixed with 10 or 15 other very important parts. However, it doesn’t work all by itself. You’ll need more.
  5. Affiliate marketing is not being in the Yellow Pages. Most, and I mean most, companies in the United States run a Yellow Pages ad and figure that takes care of their marketing. In 5 percent of the cases, that’s the truth. In the other 95 percent, it’s disaster in the form of marketing ignorance. Sure, you should have a Yellow Page ad as part of your arsenal – if people are used to finding businesses like yours in the Yellow Pages – but remember that it’s only part of your marketing weaponry.
  6. Affiliate marketing is not show business. There’s no business like show business, and that includes marketing. Think of affiliate marketing as sell business, as create-a-desire business, as motivation business. But don’t think of yourself as being in the entertainment business, because affiliate marketing is not supposed to entertain. If it does entertain, it does so while increasing the momentum that leads to a sale. But affiliate marketing as entertainment? I don’t think so.
  7. Affiliate marketing is not a stage for humor. If you use humor in your marketing, people will recall your funny joke, but not your compelling offer. If you use humor, it will be funny the first time and maybe the second time. After that, it will be grating and will get in the way of what makes marketing work – repetition.
  8. Affiliate marketing is not an invitation to be clever. If you fall into the cleverness trap it’s because, unlike the savvy guerrilla, you don’t realize that people remember the cleverest part of the marketing – even though it’s your offer they should remember. Cleverness in affiliate marketing is a vampire, sucking attention away from your offer.
  9. Affiliate marketing is not complicated. It becomes complicated for people who fail to grasp the simplicity of affiliate marketing, but at its core affiliate marketing is user-friendly to guerrillas. They begin with a seven-sentence guerrilla marketing plan, create a marketing calendar and select from 100 weapons – half of them free. It’s not too complicated.
  10. Affiliate marketing is not a miracle worker. More money has been wasted due to marketers expecting miracles than to any other misconception of marketing. Marketing is the best investment in America if you do it right, and doing it right requires commitment, patience and planning. Expect miracles and you’ll get ulcers.

Before I let you scour the Net for more nuclear-powered gems for your business as well as a myriad of opportunities for affiliates, I feel honor-bound to let you know that affiliate marketing is a way for you to earn profits with your business, a chance to cooperate with other businesses in your community or your industry and a process of building lasting relationships.

As you ponder this, think about the fact that we have left the age of single-weapon marketing and now reside in the age of multiple-weapon marketing. Where once it took but one marketing tool to make the sale, today it takes several. But the principles of saying the same thing in each method of communication remain the same – to advance the relationship to a sale.

Marketing is a topic that intimidates many business owners, so they steer clear of it. For guerrillas, affiliate marketing has no mystique at all and is a whale of a lot of fun because they enjoy launching a marketing attack and knowing they’ll succeed.

JAY CONRAD LEVINSON Is the author of Guerrilla Marketing and the author of the best-selling 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.

Educating and Informing Your Publishers

As anyone managing an affiliate program knows, educating your network of publishers is a vital and often daunting part of building and growing an affiliate program.

This is definitely true for RealNetworks’ program, which focuses on digital media subscriptions, including Rhapsody, with more than 1.3 million songs, GamePass with hundreds of games and SuperPass with premium news and entertainment content.

Though thousands of publishers may have joined our affiliate program, some may not even be familiar with the products, let alone the tools and tactics for successfully marketing them. So with the limited resources available to manage and grow these programs, it’s important to be efficient in your efforts to educate your publishers.

The keys are constant communication with your network, listening to your publishers’ feedback and implementing change from it and sharing best practices and insights on marketing your products.

Your welcome email, the first correspondence your publishers receive upon joining your program, is extremely important. This is your chance to provide new publishers with helpful information on tools available in the program, as well as to present information on your products and tips for successfully marketing them. Many publishers won’t read your welcome email, but it’s worth making it good and helpful for those who do.

It is also important to communicate with the entire network via an email newsletter on a consistent and ongoing basis. These mailings should include broad information such as updates and tips on marketing your products. Again, many publishers will ignore these e-newsletters, but you should make it as educational and informative as possible for those that take the time.

Next is the important step of segmenting your publisher network. Your top-volume drivers will have needs that differ from your mid-tier publishers, which also have needs that differ from those who’ve barely begun promoting in your program. The size of your segments is also likely to vary. Your top-tier group is typically the smallest, while the largest segment is often made up of newcomers and non-performers (for those who keep them in the program).

How much time should be allocated to each segment is really a matter of preference and experience with the individual program. Some managers might find that working to increase a top publisher by a small percentage has a greater impact on revenue than seeing each mid-tier publisher grow by one transaction a month. Others may find the opposite to be true. That’s why it’s extremely important to test both tactics in your program and at different points throughout the year.

Again, the main elements to the education process are constant communication with your network, listening to your publishers’ feedback and implementing change from that feedback, along with sharing best practices and insights on marketing your products.

So let’s start with the big guys. These publishers are invaluable partners to the company and key players in your affiliate program. For RealNetworks, they are the ones who continue to amaze and impress us with their constant innovation and online marketing savvy. They often build, test and optimize faster than we can and move quickly to implement new products and offers. We stay in constant contact with these publishers, keeping them informed of upcoming launches, providing them with new products and offers first, granting their requests and requesting their feedback.

We provide our top publishers with tips on top-performing search keywords, any new knowledge we’ve acquired through recent testing, customized creative and updates on the constantly changing and increasingly competitive digital music and entertainment space.

Requests coming from these publishers have helped to shape our program and have greatly influenced the development of the tools and processes we have in place.

The mid-tier publishers can be defined in a number of different ways and may even be split into multiple tiers depending on the size of the program and the amount of management resources available. In our program, we consider the mid-tier publishers to be those who have shown some success in generating revenue, but have not reached a certain threshold to be considered a top performer.

There is a great deal of opportunity within the mid-tier, especially since these publishers have already put some time and energy into marketing your products and have started testing and gaining knowledge. One helpful way to gauge the potential of these mid-tier publishers is to keep a spreadsheet showing their best week. This key metric provides a benchmark and an opportunity to understand the potential impact of focusing on this group.

Working with mid-tier publishers often entails a combination of a one-to-many approach as well as a certain amount of individual attention. Consistent, ongoing e-newsletters and email messages to these publishers are a great way to let them know about new promotions, products, tools and tips. Since they probably already have a basic understanding of the products and tools available in the program, we try to focus our communications here on new information.

In addition, we also designate certain times throughout the year when we reach out to our mid-tier publishers by phone or direct email. For those who are interested in taking the time to speak with us, we find it invaluable to understand what is and isn’t working for them, and give them tips and ideas for growing their volume and finding greater success in our program.

And finally there’s the low-tier publishers – those who have barely begun or have not had much success promoting our product, or have joined the program but have not successfully driven a transaction. While some programs choose not to allow inactive or nonperforming publishers to remain in their program, we view them as an opportunity to activate a publisher who has shown enough interest in our program to at least complete the registration process. We take a purely one-to-many education approach with this tier, using similar tactics of sending e-newsletters and emails to educate them on our products, as well as alerting them to tips and tools in our program to help successfully market our products.

I believe that there is a large opportunity within this tier, particularly because it’s one of the biggest segments. For example, our program can, within one quarter, get 5,000 inactive publishers to drive one Rhapsody trial; we that as a fairly significant lift.

There is one important caveat to the segmentation model: If a large publisher joins your program, reach out right away to ensure they are aware of the data feeds and other tools in your program.

By continually informing and educating your publishers, you can ensure success and a long-term, mutually beneficial partnership.

RACHEL LAZAR is a consumer marketing director at RealNetworks. She previously worked at Amazon.com in online advertising and launched the Inshipment Marketing Channel. She holds a B.S. in psychology from Santa Clara University.

Casting a Wider Net

Podcasting is emerging as an interesting and potentially lucrative opportunity for online marketers who want to reach a wider audience.

The figures for podcasting vary, but by all counts the podcasting market is poised to explode and online marketers want in. A report from The Diffusion Group, a technology research consulting firm, showed that the use of podcasts is expected to grow from an estimated 4.5 million users in 2005 to 56.8 million by 2010.

Also called audioblogging or blogcasting, podcasting is a term formed from the combination of the words iPod and broadcasting. Podcasting started cropping up with some frequency in early 2004 and, despite its etymology, an Apple Computer iPod is not required – any MP3 player or computer will play the audio files that are created and downloaded from the Web.

These audio files, which can be about a diverse range of subjects (from cooking to computers and religion to comedy), are posted online and, by subscribing to RSS feeds, can be automatically detected and downloaded to a user’s computer.

Until recently, podcasting, like blogging, was the domain of those with a desire to create whatever sort of content they chose without regard to advertisers’ preferences, editorial guidelines, format or demographic targets. They were even exempt from government regulators such as the Federal Communications Commission.

Then in 2005 several events occurred in the span of just a few short months that shone the spotlight on podcasting and pushed the grassroots movement into the mainstream consciousness.

In April some impressive data emerged that showed podcasting was a large and still-growing market. The Pew Internet & American Life Project reported that more than 22 million American adults owned iPods or MP3 players. Nearly 30 percent of them had downloaded podcasts from the Web to listen to audio files at their leisure. Then in May 2005 BusinessWeek put podcasting in front of the average business Joe by running a cover story and special report focused on podcasting.

By October, Apple had announced the integration of podcasting into its popular iTunes music service software. This made it easier for users to search for and subscribe to podcasts. The move struck a chord with users who signed up for more than a million free podcast subscriptions in just two days after the announcement.

Also in October, Apple launched its much-anticipated video iPod. Users were overjoyed to find out they would be able to download episodes of their favorite TV shows including Lost and Desperate Housewives.

Marketers began jumping on board just as quickly. Only a little over a month after the video iPod was unveiled, fast-food giant Burger King sponsored a set of comedic shorts that could be downloaded and played on the new device. The Burger King sponsorship entailed a branded page for video files specially encoded for video iPods.

Also just shortly after the device debuted, a group of users of Adobe Systems’ software launched what may have been the first podcast infomercial, a half-hour tour of the company’s popular photo-editing software, Photoshop.

All of this was bolstered by surveys, data, research and reports predicting huge gains for podcasting.

A November report by radio and media market researcher Bridge Ratings estimates that 4.8 million people have at some time during 2005 downloaded a podcast from either a radio station or other source. iTunes was referenced as the most often accessed portal for podcast downloads. This 4.8 million estimate is up from 820,000 podcast users in 2004.

By 2010, conservative estimates say that 45 million users will have listened to at least one podcast. Aggressive estimates place this closer to 75 million by 2010.

The study shows that approximately 20 percent of current users who have ever downloaded and listened to a podcast do so on a weekly basis. This group downloads an average of six podcasts per week and spends approximately four hours a month listening to those podcasts. More interestingly, on average less than 20 percent listen to their podcast downloads on an MP3 player or other portable digital device.

A lot has changed since a year ago when Allen Weiner, research director with market research firm Gartner, referred to podcasting as largely a hobbyist phenomenon, attracting “anybody who’s ever had a microphone or worked at a college radio station.”

Now this burgeoning podcasting market, which had already quietly developed a huge and fiercely devoted following, was the object of interest for venture capitalists, traditional media players, advertisers and online marketers – all working overtime to figure out how to make podcasting profitable.

And that is a polarizing topic for the podcasting community.

At the Portable Media Expo & Podcasting Conference in Toronto in early November, keynote speaker Leo Laporte said, “If somebody gives you money, you owe them something. I listen to my listeners, but I don’t want to listen to advertisers.”

Laporte, an author and high-tech guru, appears in advertising-supported radio and TV shows but shuns commercial advertising and promotions for his popular “This Week in Tech” podcast.

But for most the basic questions are no longer, Is podcasting an advertising vehicle or a marketing vehicle, or is it an art form or a commercial form? The discussion has moved beyond that to acknowledge that it’s all of those things and more. Now the real question is exactly how and who will make money from podcasting.

Add Advertising and Stir

Adam Curry, a former MTV VJ from the early 1980s, is widely credited with helping get podcasting off the ground. Curry was among the first to create a podcast by working closely with Dave Winer, a programmer, who is also often acknowledged as the first blogger, credited as the father of RSS and a former resident fellow at Harvard Law School’s Berkman Center for Internet & Society.

In November of 2005 Curry’s company PodShow, which promotes podcasts and finds sponsors for them, acquired Podcast Alley, a grassroots podcasting directory that played a big role in sparking the podcast craze. Many define success as a spot in Podcast Alley’s Top 10 list. Those with top rankings are often downloaded hundreds of thousands of times.

The acquisition comes less than a month after news that PodShow, which also helps mainstream companies produce and distribute podcasts, received $9.85 million in funding from Silicon Valley venture capital firms Kleiner Perkins Caufield & Byers and Sequoia Capital. Curry’s plan is to launch a podcast network with anywhere from 30 to 50 shows that will split ad revenues.

While Curry’s been in the podcast mix since the start – he often refers to himself as “the Podfather” – there’s no lack of jockeying for position among big tech players and some newcomers, many of whom are attempting to lay the foundation for selling shows and advertisements. Technology companies including America Online, Apple Computer and Yahoo are jumping into the mix with aggregation services that collect thousands of podcasts in a single location.

Apple’s iTunes offers 15,000 podcasts, and as of press time listeners had signed up for 7 million subscriptions. Listeners confirmed more than 10,000 podcasts can be found at PodcastAlley.com.

And there’s power in numbers. Once podcasts are aggregated it is likely to be easier to sell ads across a group of shows. A lot of different approaches are being tried, including placing advertisements in actual podcasts, offering subscriptions to individual shows and in some cases, getting podcasters to actually do shows devoted to specific products or talk them up, much like the early days of radio.

Curry plans to offer advertisers a variety of sponsorship possibilities, including spots where a podcaster tests a product and then devotes an entire podcast to that product or service.

Last November, the women behind Mommycast (part of Curry’s network), a weekly show hosted by two mothers from their homes in Virginia, secured a major sponsorship deal with paper products maker Dixie, a division of Georgia Pacific. In a 12-month, six-figure deal, and repositioning that will be happening this spring.

Another high-profile sponsorship deal was also inked just before Thanksgiving. Martina Butler, a 15-year-old podcaster, snagged sponsorship from Nature’s Cure, a top brand of acne treatment. Butler’s show, Emo Girl Talk, features the life and times of a teen girl who talks about her favorite music and interviews celebrities. Officials from Nature’s Cure said in a press release, “There are a number of teens now listening to podcasts. Sponsorship is an excellent way to increase our brand awareness in an environment that is meaningful and credible to them.”

Many say these deals prove the podcasting medium is starting to gain traction among advertisers, and not just those reaching out to early-adopter males.

Sponsorships typically involve a 15- or 30-second audio ad at the beginning of the podcast. In the past, the popular podcasts usually set flat rates ranging from a few thousand dollars a month to as much as $45,000.

For example: In early 2004, Volvo agreed to pay $60,000 for a six-month sponsorship of the monthly podcast of Weblogs Inc.’s Autoblog, as well as advertising on the site itself. Over that period, the show was downloaded 150,000 times.

Some industry watchers note that because the number of listeners is changing fast, a flat-rate sponsorship isn’t always such a good deal for advertisers.

KCRW, a public radio station in Santa Monica, Calif., cut a deal with Southern California Lexus dealers for a sponsorship this summer, when the station was getting 20,000 downloads a week. Since then the number spiked to 100,000. When the Lexus deal ends, KCRW plans to charge $25 per thousand listeners, according to Jacki K. Weber, KCRW’s development director.

That new rate is considered pretty high given that one morning radio show in New York City (America’s No. 1 market) often charges between $12 and $15.

Venture capitalist Mark Kvamme of Sequoia Capital says podcasting may end up diverting anywhere from $1 billion to $2 billion away from the $30 billion radio advertising market over the next three to five years.

To fend off that possibility, some in the radio business are getting into podcasting in a big way. National Public Radio, which offers 33 podcasts, pumped out 5 million downloads in less than three months. NPR grabbed Honda Motor Co.’s Acura division as sponsor and is wooing others.

Still, some like Laporte are seeking ways to support their podcasts without directly taking ads and instead are asking listeners for donations. Laporte’s “This Week In Tech” podcast has more than 200,000 listeners and asks for donations of $2 per month. It often takes in nearly $10,000 a month, he says.

Tools and Metrics

Once ads get placed, sponsors want to make sure they are getting exactly what they paid for.

The difficulty in tracking podcasts, however, goes beyond the number of downloads and instead is about the portability of the files. Because the player software is often on a mobile device, such as an iPod or other MP3 player that is not connected to the Internet, the marketer loses track of the downloaded file when it leaves the computer.

For that reason, some podcast advertisers are turning to techniques used for traditional media like radio, such as custom 800 numbers or offer codes. And since podcasting uses RSS feeds for distribution – the same syndication and distribution mechanism used by blogs – RSS-centric technology companies such as FeedBurner are leading the way to help podcasters build the format into a moneymaking business.

There are also tools that make it attractive to launch ad campaigns across various mediums including blogs, podcasts and RSS feeds. Blog and RSS advertising network Pheedo is developing a program for advertisers looking to launch integrated multichannel campaigns across blogs, RSS feeds and podcasts.

If your advertising message is in only one of these channels, there’s a chance it will be missed by part of the customer base, according to Bill Flitter, Pheedo’s founder and chief marketing officer.

Advertising buys will be a package deal, with guaranteed impression counts for the RSS and blog inventory, while the podcast portion will be measured by the number of average downloads from previous shows.

While Pheedo has been testing integrated campaigns for a few advertisers since June, the company is still developing technology for podcast ad serving and is building its podcast network. Pheedo’s podcast ad network currently offers ads on about 30 podcasts and has run campaigns for six advertisers. The RSS and blog components are already in place. To date, technology, video game and automotive advertisers and publishers have the most success with blog and RSS advertising, according to Flitter.

While many applaud the moves to provide some basic metrics, they admit that strategic marketers are always focused on the return on investment and need to know who’s viewing the page and who’s downloading the file in order to accurately measure the impact on their own end, according to John Furrier, founder of PodTech.net and host of the Infotech podcast series.

Shelly Palmer, president and CEO of Palmer Advanced Media, a marketing consultancy in New York, says, “If you think about podcasts as marketing vehicles, you would be taking advantage of all the tools available to Internet marketers: tracking software, affiliate marketing schemas, SEM (search engine marketing), and SEO (search engine optimization) methodologies, etc. This makes huge sense since, for the moment, podcasts require a personal-computer-based client and an Internet connection.”

Palmer adds that brand awareness, lift and purchase intent are three of the most common metrics that brand managers use when calculating return on investment for advertising and marketing dollars. “What’s nice about podcasting is that the Internet enables census-based metrics. Properly used, podcasting can tell you a great deal about how effective it is for your business.”

Furrier claims that better ROI calculations won’t be possible until the different systems involved are integrated.

Many are working hard to make that possible. At the Portable Media Expo & Podcasting Conference in November, much of the focus was on tools or ways for podcasters to count audiences, deliver ads and charge listeners.

Furrier’s startup, Podtrac, announced a demographics-and-advertising program that attaches a prefix to the name of MP3- formatted podcasts that will obtain an exact count of downloads per show, thus far a vexing challenge for podcasters because some podcast directories cache shows on their own servers. The company also plans to help podcasters create sales kits and then work to connect them with advertisers, with Podtrac taking as much as a 30 percent cut of the revenue.

Audible.com, which sells audio books and news programs online, has launched a new service called Wordcast that lets podcast creators chart listener usage behavior somewhat like the Nielsen ratings do for TV – a huge step for getting advertisers to make precise choices.

By providing a way to track not just how many times the show is downloaded, but also whether it is played and for how long, Audible hopes to give podcasters some audience information.

The company will charge 3 cents per downloaded podcast to report whether a downloader listened, and for how long. Audible will also offer tools that will stop the podcast from being emailed to others. It will charge 5 cents per download to track listening and attach the access restrictions. For half a cent per download, Audible will insert an ad relevant to the podcast. Audible also would take a 20 percent cut of any subscription fees it collects.

With the tools, “you can build a bona fide rate card” for advertising, says Foy Sperring, Audible’s senior vice president for strategic alliances.

BitPass, a 3-year-old Menlo Park, Calif., company, showed off a similar process that enables podcasters to sell their content, while Taldia unveiled its podcast-production service. The Altadena, Calif., company has a deal with the Associated Press and other news outlets in which Taldia’s army of voice talent, which is spread across the nation, records audio summaries of printed news reports. For $5 a month, subscribers can select what news topics they want to hear about, how many minutes of content they want and at what time of day they want it delivered to their computers.

Microsoft has also announced plans to integrate support for RSS throughout the Windows Vista operating system to make creating, viewing and subscribing to content of all types, including podcasts, easier. Microsoft is also working with companies like Doppler, a podcast aggregator, to ensure it can take advantage of the open architecture in Windows Media Player for its podcast applications.

Lukewarm

Still, not everyone is convinced podcasting is the next big, big thing. Many are tempering their enthusiasm with a healthy dose of skepticism.

Mark Cuban, owner of the NBA’s Dallas Mavericks and an avid proponent of blogging, wrote in one of his posts at BlogMaverick.com that he expects podcasting to level off soon.

Here’s the picture he paints: “The number of podcasts available individually or through aggregators will explode beyond where they are today.” Then, “that will create a massive dilution in the audience size of the early-entry podcasters. Everyone’s audience will fall as the marginal listeners find something they like better. Yes, there will be some podcasts that get more listenership than others, but most of them will be repurposed content that already has demand.”

Finally, “Individual podcasters who don’t have some other means of generating demand other than being on aggregators will fall off first and the fastest. They will just go away, the only trace remaining will be tiny Web pages on the Wayback Machine. So in about three years, the podcast phenomena will have run its course and will just be a normal part of the digital media landscape.”

Ted Schadler, vice president at Forrester Research, says, “Podcasting feels like the Internet first did: a whole new way of experiencing the world. But at the end of the day, radio is radio and consumers will only listen to things they find valuable.”

Schadler says there are many people with various agendas. “To the rising tide of podcast hosts, podcasting is better than blogging for becoming famous. To venture capitalists like Kleiner Perkins Caufield & Byers, Charles River Ventures and Sequoia Capital, podcasting is a bet on the next big thing. To commercial operators like Clear Channel, it’s yet another channel for selling advertisements,” he says. “Each of these groups expects podcasting adoption to mirror Internet adoption with giddily exponential growth. Alas, there is another precedent that all must consider: Push. Push exploded on the scene with Pointcast, landed faddishly on millions of desktops, and then just as quickly died away. (Of course, push has been rehabilitated as RSS, but push’s big problem – content overload – remains.)

Schadler’s bottom line: “Podcast listening will follow a natural progression: enthusiastic experimentation, disenchanted abandonment, and value-driven adoption.”

By the start of 2006, Schadler says, “Enthusiastic experimenters will find that most podcasts aren’t worth listening to and even the useful ones pile up unopened in the podcast corner of the hard drive. After all, who has an extra hour a week to listen to a radio show? Disenchanted, consumers will abandon most podcasts.”

However, it’s not all so grim, according to Schadler. “Somewhere in the midst of the experimentation and abandonment phases, podcasting will become valuable to consumers that want control over radio or access to niche content. Thus, value-driven adoption will characterize the mature phase of podcasting.”

And based on a historical analysis of Internet radio adoption and a forecast of broadband and MP3 player adoption, Forrester expects 12 million households to be regular podcast listeners by the end of the decade. That’s a far cry from Bridge Ratings’ estimates of 75 million users by 2010.

That kind of conflicting data is likely why some advertisers are also not jumping into the deep end with both feet.

A survey by the American Advertising Federation rated blogs, podcasts and Web-enabled cellular phones as newcomers in the market that are worth watching, but have yet to prove they’re worth major investments.

On a scale of 1 to 5, respondents rated the three new Internet-based channels in the middle of the scale, which is considerably lower than where they placed traditional media and other forms of online advertising.

An AAF representative says that because these media are so new, people are more cautious and are taking a wait-and-see approach. The “cornerstone” of advertising remains the 30-second spot on television, but consumer adoption of new technology is forcing ad execs and marketers to look beyond newspapers, magazines, TV and radio, and question their return on investment.

Pod Porn

One market segment that is always lightning fast to react to new media and new technologies is adult content.

Andrew Leyden, founder of Podcast Directory.com, is quoted in a Newsweek published report saying, “No matter what the technology is, sex finds a way to get involved.”

This shouldn’t be surprising since 85 percent of those who use the search engine’s podcast directory are men according to Yahoo senior product manager Joe Hayashi.

At PodcastDirectory.com, six of the top 20 shows are adult-oriented. On Apple’s iTunes store, “Open Source Sex” is No. 11 and climbing. “Porn” is the second-most-searched-for term at Podcast.net; “BBC” is tops.

Industry watchers also say the plentiful storage capacity, portability and privacy afforded by MP3 devices make it enticing to listen to such titillating adult content. The video iPod is only expected to increase the amount of X-rated content available for download since anyone with a microphone, a video camera, a computer and some privacy can create such adult content, according to Violet Blue, the host of the Open Source Sex podcast. “You don’t need big breasts or big advertisers.”

The flip side of the emergence of sex-related content is religious programming. There are already many religious-themed podcasts – often referred to as godcasting – including Dharma.net, GospelAudio.com, Catholic Insider, Pray-station Portable and Pagan Power Hour.

“Casting” is also being co-opted by all sorts of other industries, market segments and groups. There have also been suggestions of food marketers looking into gastrocasting, music marketing called rockcasting and pharmaceuticals delivering medical education to physicians via medcasting.

In the end, it looks like everyone, including God, is looking for podcasting to pay off in a big way.

Pitching a Fit

Sites related to health, fitness and total body wellness are humming at this time of year based on the good intentions of millions of people who make New Year’s resolutions to get in shape, shed unwanted pounds, start exercising more and devote more effort to their overall health and well-being.

But what happens when the resolve begins to dissolve and consumers begin the inevitable slide back into old habits that don’t include visiting sites promoting health and fitness?

Because there is a seasonal aspect to people wanting to get in shape – the start of each New Year, bathing suit season, wedding season – publishers have started flexing their marketing muscles to attract new customers all year round. Many are using interesting and innovative ways to keep consumers returning regardless of the time of the season.

Puttin’ on the Print

A surprising number of health-related entities are getting into the magazine publishing business. Magazines are expensive to publish, but some health and fitness sites think it’s a good way to attract new customers.

Curves, the fast-growing franchise of gyms for women, produces a print magazine called Diane, named after the company’s founder, Diane Heavin. Curves, too, relies on word of mouth or viral marketing for the bulk of its referrals. Customers talk to their friends and convince them to join the all-women gym, so that they have workout buddies to keep them accountable for sticking to their fitness regime. The company is venturing into online marketing, albeit slowly.

“We’ve only just begun our online marketing campaigns,” Lisa Hendry, manager of marketing technologies at Curves International, says. We’ve had some success with our email campaigns. “We haven’t established what the best has been. So we are experimenting and testing various offers online.”

WebMD also launched a print magazine. One million copies of the first issue were distributed free to doctors’ offices. The cover story in the premiere issue was about actress Brooke Shields’ experience with postpartum depression.

“We think there’s a tremendous opportunity to extend our brand offline,” CEO Wayne Gattinella says. The company also hopes to drive traffic to the Internet site, and many editorial pages contain links to the WebMD website.

BabyCenter.com, a site chock-full of information for expectant parents and new parents, relies on affiliates (who earn 6 percent commissions) and search engine marketing to lure new customers. But it recently launched a magazine called BabyCenter.

While BabyCenter.com does not face the cyclical issues of other sites promoting health, it still is looking to keep visitors loyal beyond the nine-month pregnancy period.

“Instead of TV ads, we have a physical representation in bookstores and the doctor’s office,” says Linda Murray, editor. “Even though it’s free to our members, the magazine serves the same function as paid advertising.”

But the tried-and-true means of supporting the BabyCenter.com site is still personalization and communication through newsletters, bulletin boards and chat.

“When someone comes to our site for the first time, they see an unpersonalized home page. We invite visitors to sign up for our emails. We want you to register for your stage. Then you get a home page that is just for you, whether you are pregnant or a mother of a two-year-old. If you go to another page, we have pop-ups (we are doing fewer and fewer because people don’t like those, and have blockers) but we invite people to sign up,” says Murray. “A fair number of people come specifically to get newsletter information. We do keyword buying on search engines – we show up prominently on searches.”

BabyCenter also has a partnership with MSN, in which BabyCenter.com provides MSN with content and MSN shows related links back to BabyCenter.com. “That is another acquisition mechanism for us. We don’t have TV spots. Early in our history, we did,” Murray says. “The most effective thing for us is really search engines. And people find out about us through word of mouth from their friends.”

Other health sites have found that billboards are their best bet for attracting customers and gaining new business.

Outdoor Adventures

Drugstore.com recently broke a $4.5 million outdoor advertising campaign. The creative for the campaign shows various customers’ orders; copy text says things like, “They carry 25,000 items. I carry nothing.” The ads are aimed at educating the company’s 1.9 million customers and attracting new shoppers.

“Our campaign will concentrate on locations around key ZIP codes and include outlets, such as train and bus stations, street furniture, laundry bags, coffee cups and sleeves and even yoga mats,” CEO Dawn Lepore says in a statement. Drugstore.com is heavily canvassing San Francisco, Chicago and New York.

But the interesting twist is that you can view the ads on the company’s website. If you surf over to Drugstore.com, you can look at each advertisement individually and then click to shop for the items in each ad. It’s one way of trying to get online and offline initiatives together.

Tight-Lipped

Although Drugstore.com might tout its outdoor advertising efforts, the company is much more reticent when it comes to discussing its online initiatives. LinkShare handles Drugstore.com’s associate program.

“We keep our methodologies pretty tight to our vest,” says Greg French, a spokesperson for Drugstore.com. “We are sensitive about our performance-based marketing because we feel like we are ahead of the pack and we don’t like to give a lot away.”

The paranoia in talking about performance-based marketing is hardly unique to Drugstore.com. Many top health sites declined interviews for this story. Executives from Weight Watchers were not available for interviews. Commission Junction handles the Weight Watchers Affiliate program; affiliates get $10 for every qualifying Weight Watchers Online or Weight Watchers eTools subscription.

Recently released research suggests there is a correlation between spending money online and acquiring new customers. The biggest spenders online are Weight Watchers and eDiets. During the week ending August 28, 2005, Weight Watchers had 116 million impressions or 20.5 percent of all impressions; eDiets.com had 61 million impressions or 10.9 percent of all impressions, according to Nielsen//NetRatings AdRelevance. Weight Watchers trailed only WebMD in terms of unique audience active reach.

Spreading the Good Word

Not all health and fitness companies can afford to produce expensive print magazines to complement their online initiatives, á la Curves and BabyCenter, or splashy billboards like Drugstore.com, but many can afford to offer affiliates a cut of the action if they bring in new customers. Many run affiliate programs to drive traffic to their sites. And most offer email newsletters to their customer base, to keep their audiences interested and immersed in their health, fitness or nutritional information.

For many it’s about knowing your audience. A recent study from Nielsen//NetRatings shows that women represent the majority at 55 percent when it comes to visiting health, fitness and nutrition sites. More than 54 percent of all those who go to health-related sites are over 45 years old and 27 percent have an average household income of between $50,000 and $79,000.

Many health sites have also found that their existing customers are their best salespeople. Conduct a quick search online and you’ll find dozens of women blogging about their attempts to lose weight with various programs like Jenny Craig, Weight Watchers and South Beach.

Perhaps one of the most interesting healthcare innovations of late comes from Richard Branson. His Virgin Group, the company known for its music, airlines and mobile phones, is teaming up with Humana to offer health insurance with a twist. This plan, called Virgin Life Care, is linked to gym memberships and will give discounts and bonuses to people whose workouts result in lower blood pressure, weight loss or a shrinking body mass index. Lower healthcare premiums and airline tickets will be incentives for people in the loyalty program. Tampa, Fla. and San Antonio, Texas are the first two cities where the product will be offered, beginning in early 2006.

‘Casting a Wider Net

Others in the health and wellness segments are looking to newfangled technologies such as podcasting that promise to make performance-based marketing a lot more fun.

So far, podcasts have been the domain of edgy brands like movie studios and those excluded from traditional advertising. Condom maker Durex introduced a line extension of lubricants called Play on the “Dawn and Drew Show,” an audio podcast that’s put out by a married couple of ex-punk rockers living in Wisconsin. Podcasts don’t fall under the rubric of traditional advertising, but Durex was pleased with the results.

“Being on the ‘Dawn and Drew Show’ worked for the Play launch. It’s done by a loving couple that have fun together, so they were the perfect spokespeople for our product,” says Pam Piligian, senior vice president of Durex’s advertising agency Fitzgerald & Company, which is based in Atlanta. “It was a leap of faith for us, but we definitely got our money’s worth.”

Piligian says traffic to the www.playlubricants.com microsite quadrupled during the 8-week sponsorship/product placement, the cost of which was “less than five digits.”

Many industry watchers agree that money spent on podcasts is cost-effective. “A sponsorship costs anywhere from $2,000 to $10,000 a month,” Barry Reicherter, senior vice president of public relations firm Porter Novelli, says.

But the medium isn’t huge. According to a study by market researcher Ipsos Insight, about 28 percent of Web users know what a podcast is but only about 2 percent of that group has actually listened to one.

Still, marketers are intrigued with podcasting because it offers a young, technically savvy demographic and a captive audience. The audio programming comes largely from amateurs, is unregulated by the FCC and is consumable on demand. Think of it as the combination of blogs (freedom of expression), MP3s (digital and portable files) and TiVo (time-shifting).

“The good news is there’s a lot of buzz about podcasts, and it’s also cheap to experiment with. But it’s over-hyped,” David Schatsky, senior vice president at JupiterResearch, says. The audience is small – according to Jupiter, just 7 percent of online consumers said they listened to or downloaded podcasts monthly. “And these folks tend to be young, male and rather geeky.”

But, as was the case with Durex, the benefits far outweigh the risks. Many advertisers are intrigued with the possibilities that a new video iPod presents. Apple introduced a video iPod in October and has deals to sell episodes of TV shows, such as Desperate Housewives and Lost, the day after they are broadcast.

“It’s great because you can hit a niche and get personalized,” says Sean Black of Beyond Interactive, which created a Paris Hilton podcast to promote the House of Wax movie. He admits that there isn’t yet full accountability but he is still a fan of the technology. “And now that videocasting has hit, it’ll be a whole new world.”

And performance marketers and affiliates are quick to embrace new technologies that keep their sites in tip-top shape.

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.

Denied

On a cold Minnesota afternoon, affiliate marketer Connie Berg checks her email fearing the worst: a message from a dream merchant saying her affiliate application for either iShopDaily.com or FlamingoWorld.com has been denied.

You see, Berg’s sites post coupon information – a once-hot commodity now shadowed by merchant belt-tightening and recent incidences of customers getting expired or invalid affiliate-posted codes.

“No matter how much we try to convince them that 99 percent of the coupon sites are simply shopping sites that also post coupons, they don’t seem to want to give us a chance,” Berg says.

It’s certainly a frustration for Berg, still an ideal candidate with 90 percent of her traffic from direct bookmarks or type-ins and a “deal alert” newsletter going to thousands. But she’s been caught in a war between ideologies that surrounds many once-highly desired affiliate sites. Merchants are looking twice at any site that could potentially cut its profits, give the wrong idea about its brand or send an unapproved marketing message.

That’s why affiliate application turndowns extend even beyond coupon sites. Under fire are affiliate sites offering coupons, incentives, discounts, email marketing, heavy search buys, forums, downloads and even mass-market and cross-cultural appeal rather than the merchant’s defined niche.

“Five or six years ago, it was about who had the biggest affiliate program,” says Chris Kramer, media director of NETexponent. Kramer, who approves affiliate applications for The New York Times, Financial Times and others, says, “Now it’s more about ‘who is this affiliate, what are they doing and do I have to worry about what they are doing?'”

Performics, for instance, denies 20 to 40 percent of the applications it receives for programs including Bose, Eddie Bauer, Harry & David, HPshopping.com and Motorola. While AffStat 2005 found onequarter of its merchants still auto-approving applications, the buzz is that the remaining three-quarters of merchants are creating additional safeguards to determine who gets in, and who stays in.

“When we talk about this issue of merchants denying affiliates, it’s mostly due to brand sensitivity,” says Kraig Smith, co-founder of Chicago-based Media- Impressions.com. His clients include Apartments.com, Healthcare Media, HEE Corporation, LifeGem Memorials and Performics. “Many big-brand offline marketers are concerned about protecting their brand in affiliate marketing.”

After all, these days merchants can be more selective – mainly because there are plenty of affiliates to choose from.

“There’s a lot of filibustering going around about how many affiliates there are,” says Chris Henger, Performics’ vice president of marketing and product development. “There are legitimately probably 50,000 to 100,000 types of affiliates active at any point in time. While it used to be easy to stand out as an affiliate with a professional site, now you’re just one in the crowd.”

“The whole [affiliate] industry has gotten more sophisticated,” says Elizabeth Cholawsky, vice president of marketing for ValueClick, Commission Junction’s parent company. “These are real businesses with real employees working day to day to grow their revenues and customer base.”

Even Vinny Lingham, a Commission Junction super-affiliate and founder of Clicks2Customers.com, the affiliate search marketing technology provider that won CJ’s 2004 Horizon Award for Innovation, gets denied for about 10 percent of the programs he applies for.

“We’ve mainly been denied because of the fact that we’re search marketers,” he says. “From a search marketing perspective, 90 percent of the merchants realize they can’t market through search engines as well as the affiliates can.” The result, he says, is that some merchants pin search-oriented affiliates as the culprit if their own search campaigns don’t produce.

Perhaps, but Kerri Pollard, Commission Junction’s director of publisher development, says it’s more about being concerned with how an affiliate will fit into the merchant’s overall integrated marketing strategy.

“Paid search has become such a big component of all the affiliate programs,” Pollard says. “They want to make sure that whatever the publishers are doing doesn’t conflict with their own search campaign.”

Still, Lingham’s site takes top affiliate status in many programs, even globally, and Clicks2Customer’s parent company, incuBeta, is one of Business Day’s “Technology Top 100 Companies.” “In reality, if we or any other super-affiliates are not working for your company, we’re building your competitor’s business and market share instead.”

Why Deny?

Oklahoma affiliate Joel Comm has begun running DealofDay.com, a community of 125,000 bargain hunters, since he sold off ClassicGames.com to Yahoo in 1997. Three to 5 percent of his applications are denied, and the bulk of those come from financial-related merchants.

“Some merchants, like financial services, just don’t want to be part of coupon sites,” he says.

His response if denied? “I’ll just put someone else there instead,” Comm says. “There are some affiliate managers that just don’t get it, and others where the affiliate relationships are managed by the legal team – dotting their I’s and crossing their T’s. That ties their hands.”

That’s particularly apparent in the financial services arena.

“I don’t know if it’s as much price point as it is brand concern, but there is a correlation between higher price point products and brand concern; that’s not accidental,” says Peter Figueredo, CEO of NETexponent, the agency that manages the Financial Times’ affiliate programs.

NETexponent’s Kramer says one of the reasons is that financial service companies, ranging from American Express to mortgage companies, are governed by strict rules, codes and laws.

“They can’t have affiliates out there advertising ‘no-fee balance transfers’ when there really is a fee, because they can get fined,” Kramer says. “But when it comes to companies such as Financial Times, it’s more based on brand integrity. They’ve invested a lot of money in protecting and developing their brand,” and wouldn’t want “just anybody” representing that brand. Financial Times also “fits a tight demographic of highly educated, higher-income customers,” he says. “It doesn’t serve their needs to have their ads on sites where their ideal customers are not going to be.”

However, as a trend, “declines by merchants are on a case-by-case basis,” ValueClick’s Cholawsky says. “Some merchants are tiptoeing into affiliate marketing and are very restrictive. Others accept every application. We try to encourage merchants to be more inclusive, since we’ve seen that as one of the best practices. Otherwise, there is relatively little change” across the board.

Either way, the networks say tough requirements work both to the advantage of merchants and affiliates.

“Affiliates don’t want to be associated with a network that has a lot of fraud running rampant on that network,” says Danay Escanaverino, head of Global Resource Systems’ quickly growing affiliate network, Filinet.com. “If we allow fraudulent affiliates, generating bogus leads or clicks, that makes the program difficult to run for our other affiliates, and advertisers start losing faith in the program. It’s in everybody’s best interest for us to be a little bit more vigilant about who we allow in.”

Pay-per-click or pay-per-lead merchants, however, have higher rates of declines, attempting to weed out applications likely to send bogus clicks for quick cash. It’s an issue faced every day by Jonathan Miller, who approves applications for 27 affiliate programs managed by ForgeBusiness.com.

“We get inundated with affiliates trying to get into our programs,” says Miller, who since 2001 has received tens of thousands of applications, if not more. “We used to take just about anybody that signed up, but over the past year I’ve realized that things have become a lot more fraudulent and, in some programs we manage, as many as 90 percent of the applications in some periods are fraudulent.”

It’s usually only a temporary spike, made up by syndicates doing mass submissions from outside the United States, but Miller still usually denies 30 to 40 percent of the applications he receives, many of which are fraudulent.

Though common for pay-per-click or pay-per-lead sites, other merchants generally see fraud in no more than 5 percent of their applications, says a KowaBunga insider. (KowaBunga runs MyAffiliateProgram .com.) The rate of fraudulent applications often depends upon the type of merchant, the type of product, whether the merchant pays per lead or per click, and the dollar amount of commissions for average sales. “If you have lucrative offers,” Miller says, “it will be tested by forgers.”

So Miller, like other affiliate managers, is adding extra safeguards. He now has all the network fraud protections and verifies Social Security numbers and compares application info against the Whois.com registration information for the domain. Even after an application is approved, he watches for any telltale activities, such as lots of immediate clicks or changes in banking information at the end of the first month. Then, before paying out checks that are often in the thousands of dollars, ForgeBusiness.com requests not only a W-99 form but also additional proof of the affiliate’s identity, such as a faxed copy of a driver’s license, Social Security card or business license.

“We are willing to share our identity with our affiliates,” Miller says, “and we’re now requesting that our affiliates share their identity with us.”

Still, Miller says, “There is always a worry that we will be denying legitimate affiliate applications, which is why we call every affiliate that applies that makes it through the fraud software on our networks. If the affiliates can’t be contacted, then we either wait and hope to hear from them or their application is rejected.”

So while merchants of pay-per-click and pay-per-lead programs must still watch out for fake applications, ValueClick’s Elizabeth Cholawsky says – though the company hasn’t made an official statement – that she’s not seeing any more or less overall affiliate fraud than there was years ago. If the website is legitimate, the email address gets a response, and if the tax ID number checks out, then “the initial barrier [into CJ’s program] is fairly easy for a new affiliate.”

Though acceptance is easy, Commission Junction doesn’t cut a check until it’s reviewed by a “network quality team.” In June 2005, it redoubled its efforts, bringing in Cyveillance’s phishing, identity theft and corporate-brand-abuse protection software, which includes affiliate channel compliance and control features.

With more eyes on applications, Commission Junction can now relax some of its other requirements, such as denials of applications from affiliates in certain geographical areas: “We used to exclude all of Asia, all of Russia, but now we just exclude a couple of pockets,” Cholawsky says.

Meanwhile, officials at both Commission Junction and Performics say the number of applications isn’t going up, and the number of active affiliates are about the same even with new entrants (as new ones enter, old ones drop off). At the same time, the number of merchants with affiliate programs is growing year after year.

“As affiliate programs become standard, we’re starting to see it as part of every online merchant’s sales efforts,” Cholawsky says. This seems to say that the issue of perceived growth in affiliate denials isn’t a result of increasing competition for a limited number of spots.

So what is the answer? Though requirements and the number of applications remain stable, what used to slide is now inexcusable. “Three years ago you would see the ‘under construction’ symbols, and maybe that’s what kicked you out; today I’d be shocked to even see ‘under construction’ signs,” Performics’ Henger says. “We probably have a more discerning eye today as to what is a quality site that we want to let into the network.”

Other affiliate sites are being turned down because they’re missing something that could be easily fixed (see sidebar page 51).

Once you’re in the network, remember to reread your affiliate agreement on a regular basis.

“We put a lot of work into post-screening as well, checking month to month on the top sites to make sure they’re consistent with the rules we set,” Kramer says. As such, he says, affiliates are increasingly concerned about guidelines, especially regarding search or email marketing, once they get into the program. “Years ago, nobody cared about search and it was definitely a free-for-all, where you could do whatever you want,” he says. Now it’s a much different model.

These days, affiliates like Berg have to push for acceptance into the programs they want. But they are doing it.

“I’ve had some merchants that I was able to get into by really pushing it with the networks,” Berg says. “American Eagle was really hard to get into; I had to basically promise away my life that I wouldn’t do this or that. They gave me a data feed so I can post real-time products, but they were really particular about what they would allow on the site – and I follow it to a tee.” That means no coupons for American Eagle’s site and no inclusion of the words “discount,” “sale” or “coupon.”

And affiliates like Berg are learning to cut their losses.

“Sometimes I’ve actually dropped some merchants because they didn’t even want their name mentioned in the title meta tags, even when they are the only store on that page.” She’ll either find other merchants who carry the same products or chalk it up as a lesson learned. “Sometimes,” Berg says, “you get into their program, but the restrictions are so tight that you just have to walk away.”

JENNIFER D. MEACHAM is a freelance writer who has worked for The Seattle Times, The Columbian, Vancouver Business Journal and Emerging Business magazine. She lives in Portland, Ore.

Feeding the Beast

If you’re doing online marketing and you’re not leveraging RSS, what the heck are you waiting for? New technologies that both publishers and advertisers use to connect with online consumers are always continuing to emerge. From HTML to Macromedia Flash to streaming video, the arrival of distribution methods requires organizations to periodically reinvent how they speak to their audience.

And that’s just what RSS does, according to Amanda Watlington, a marketing consultant for Searching for Profit and co-author of Business Blogs: A Practical Guide. Tapping into this new distribution channel provides a great opportunity for marketers to connect with consumers.

“I have never been as excited about anything for the Web as RSS,” she says.

She’s not alone. The latest online communication format is the blog format, which features short personal commentaries about timely and topical issues. Driven largely by political and technology content, but rapidly expanding into every niche imaginable, the number of blogs is doubling every five months and is on pace to pass 20 million in late 2005, according to blog search engine Technorati.

While blogging won’t replace traditional Web publishing, it is fast becoming an important content delivery platform for reaching new audiences. However, capitalizing on blogging requires forgetting much of what you know about search engine optimization and following a new set of rules for content preparation, discovery and distribution.

That’s where RSS comes in. Many attribute the popularity of blogs to a handful of technologies such as RSS and Atom, which allow users to subscribe to feeds and also gives publishers more effective and efficient ways to deliver constantly updated information.

The Blog World Order

And while blogging is a relatively new frontier, it is not difficult for marketers to create RSS feeds that are easily distributed, says Watlington, who notes that RSS is misunderstood as being difficult to create even when there are many user-friendly tools for adding XML tags to structured text.

“It is a challenge of imagination, not implementation,” she says.

In addition to the personal and unfiltered nature of blogs, RSS feeds are growing in part because consumers are in control of the media. After finding a blog or news feed of interest, consumers subscribe to a feed through an RSS reader website or application. Feeds are then piped directly to their desktops. This has an advantage over newsletters since it is not being blocked by spam filters or lost within the volumes of email. For marketers this can be a valuable direct pipeline to consumers and a way to further establish loyalty.

According to an October 2005 study by Yahoo and consulting firm Ipsos Insight, 27 percent of people online have read content from RSS feeds. However, there is still an RSS learning curve for consumers as just 4 percent of those surveyed knew that they had interacted with RSS content; the remaining 23 percent had read RSS feeds through personalized home pages such as My Yahoo.

The demographic of those reading RSS feeds is also encouraging for marketers. According to the survey, those reading RSS feeds tend to be wealthier and more educated than the average person online. RSS feeds can also include advertisements, providing access to an audience that tends to spend less time browsing commercial websites.

Raising the RSS Flag

Launching an RSS feed in the preferred format of short commentaries is just the first step in creating a blog to expand your business reach (see Revenue Volume 2, fall 2005). In addition to writing compelling blog entries, capitalizing on blogging requires understanding new parameters, such as how to tell blog search engines that a blog exists. Also, like “Blanche Dubois,” blogging to a certain extent relies on the kindness of strangers, as others must link to your blog to spread the word and increase your search rank.

Also, for RSS feeds, timeliness is next to godliness. Unlike standard search, where a site with relevant content or keyword optimization can remain at the top of the search results almost indefinitely, the timeliness of blog posts factors heavily into blog search rankings.

Much like news searches (many of which are also based on RSS feeds), blog content has to be “bakery fresh” as most of the top blog search results are usually only hours old. Posting once or twice a week on popular topics will not likely be sufficient to penetrate the first page of search results.

In addition to being timely, blog content must be optimized for keywords. Rodney Rumford, co-founder of marketing consulting firm Leveraged Promotion, says bloggers have to walk a tightrope by including many references to the keyword in question without the content becoming obnoxious to readers or being identified by search engines as spam.

Blog searching has many players and no dominant force, so the strategy for optimizing keywords is less defined than traditional search engine optimization. For example, optimizing for one blog search engine may hurt a blog’s standing elsewhere. “No one knows exactly how their algorithms work,” Rumford says.

Blog publishers also must be proactive to be discovered by the blogosphere. While search engines crawl the known universe for content, blog search sites require new content to be submitted for their inspection.

Google and Yahoo’s blog search sites, along with competitors including Bloglines, Technorati and Weblogs, require bloggers to submit their URLs for consideration. Or, services such as Pingomatic or FeedShot can submit sites to many of the top blog search engines, but that may require paying a fee.

Sites such as Pingomatic will monitor your site for new content and send pings (a notification among Web servers) to the search engines every time new content is posted. A group of blog-interested companies is attempting to streamline what is currently a disjointed ping process through a central hub called FeedMesh.

Companies that receive pings will share data with FeedMesh members including Bloggdigger, Blo.gs, Google, PubSub, VeriSign and Yahoo. While some bloggers are skeptical about FeedMesh, the group effort has the potential to make blog searching more comprehensive and less complicated for newcomers to gain exposure.

Unfortunately, blog spammers have been quick to abuse the blog distribution process, and have created tens of thousands of spam blogs (see sidebar on page 71).

The hope is that once a blog search engine is aware of a blog, other bloggers who find the content useful will take notice and include links to your content on their sites. Tapping into the blog community (or blogosphere) can do wonders for a blog’s traffic. Being listed on sites such as Digg.com, Kottke.org or Waxy.org that blog the best blogs, or bookmark-sharing sites including Del.icio.us or Furl.net, can increase exposure more than search engines.

It’s Only the Blogining

Interest in blogging from the major search engines is likely to increase the number and readership of blogs by several magnitudes within the next year. The recent surge in interest and acquisitions by AOL, Google, Microsoft and Yahoo will rapidly bring RSS feeds to the majority of the general public. “We haven’t seen the hockey stick growth yet” in blogs, says Searching for Profit’s Watlington.

In recent months, VeriSign purchased blog site Weblogs, and Yahoo added blogs to its news search, while Google initiated a blog-specific search and a Web-based RSS reader. In May 2005, Google launched AdSense for feeds, which enables publishers to intersperse content- related pay-per-click ads within their feeds. Although few publishers are currently including ads with their feeds, that is likely to change because an increase in the readership of RSS feeds will enhance the revenue potential. One potential drawback for advertisers is the unfiltered nature of content on blogs, which some companies might be hesitant to support through advertising.

Microsoft’s embracing of RSS will likely have the greatest impact on the use of feeds by bloggers and marketers. Microsoft’s next Web browser update, Internet Explorer 7.0, due out in early 2006, will alert readers when RSS feeds are available for a website and will automate the subscription process. (Similar technology is currently included in Mozilla’s Firefox and Apple Computer’s Safari browser.) Microsoft is also adding visual cues to the browser to show when RSS feed subscriptions contain new data.

Microsoft Vista, the next version of the Windows operating system, will centralize RSS feed data and provide programming tools to make it available to applications. This paves the way for business applications to directly collect and organize data from RSS feeds, opening up a plethora of new uses for RSS feeds.

“Internet Explorer will fix RSS in terms of making it invisible” to consumers, says Ron Rasmussen, chief technology officer at KnowNow, an information infrastructure company. Microsoft’s endorsement of RSS could make it a mass-market technology within the next few years and may propel feed subscriptions to become as relied upon as search engines. “You don’t know what happens once you go to 95 percent awareness,” Rasmussen says.

After consumers become comfortable signing up for RSS feeds from blog and news services, they are likely to be more comfortable subscribing to feeds about items for sale, Rasmussen says. For example, consumers can track time-sensitive items such as concert tickets or real estate listings through RSS feeds. Craigslist.org and job site Monster.com are among the first organizations to produce listings as RSS feeds.

Pushing the Future

Building a business around sending content directly to desktops was attempted before without success during the Internet boom. However, “push” technology failed because most consumers at that time were using slow dial-up lines, and because the leading companies such as PointCast used proprietary technology that was licensed and required customizing content. RSS feeds have a greater likelihood of success because the format is free to implement.

A technical similarity between RSS readers and push applications are that both periodically (about once an hour) crawl websites looking for new content on the feeds. While bandwidth has greatly improved since the late 1990s, a rapid rise in the use of RSS feeds could take its toll on the Internet infrastructure. Having tens of millions of RSS reader programs continually querying blog websites for new content could dramatically increase Internet traffic and create a bottleneck.

Two subscription service companies are developing service that they say will reduce traffic by automatically pushing content as it is updated to subscribers. RSS subscription services from KnowNow and PubSub remove the need for each desktop to be continually polling for content by collecting new feeds and sending the data directly to consumers’ Web browsers.

The new services also have the potential to enable online merchants to streamline communications with their affiliates and customers. KnowNow’s Rasmussen says the subscription services consolidate all of the feeds about a given topic, such as golf, reducing the number of feed subscriptions.

PubSub works with publishers to push new content that matches consumer interests to their desktops. For example, when a blog publishes something related to antique cars, everyone who has subscribed to that feed would receive an alert to their browser. PubSub is currently delivering RSS feeds to more than 750,000 subscriptions, according to CEO Salim Ismail, adding that advertisements will likely be added in the future to pay for the free service. Under this model, consumers receive information more promptly, while publishers and advertisers get exposure to a focused audience.

PubSub and a group of blog services are developing a next generation of RSS that enable blogs to add styles to their feeds. Structured blogging includes formatting descriptions for common types of content such as movie reviews, journal entries, job postings and events so that each can be uniquely identified by search engines. Blog creation sites WordPress, MovableType, and Drupal have adopted structured blogging, and publishers could similarly create styles for distributing product information.

KnowNow is developing an RSS feed notification that will be marketed to merchants to provide timely updates to their affiliates, according to CTO Rasmussen. The company would push data such as product information or sales reports that are currently sent in batches through RSS feeds. RSS “takes that latency out of the business process,” he says. Marketers could respond to changes in demand or inventory within minutes instead of waiting for overnight reports.

These days of uncertainty and rapid change in implementing blogs and RSS feeds provide an opportunity to gain valuable experience that can be used to influence future developments. While diving in early has its risks, so does waiting until everyone else sets the agenda.

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.