Linkshare Shuffle

In early February, just six months after LinkShare agreed to be acquired by Japan-based e-commerce portal giant Rakuten for $425 million, the founders of the affiliate network have decided to step aside.

The resignations of Chairman and CEO Stephen Messer and President and COO Heidi Messer, who founded LinkShare in 1996, were not surprising according to industry watchers, but definitely signaled changing times in the performance marketing and affiliate marketing space.

Beth Kirsch, a long-time affiliate manager, who is now group manager of affiliate programs at LowerMyBills.com, called it “the end of an era.”

LinkShare was one of the last big affiliate and performance marketing networks to finally be swallowed up by a big conglomerate. LinkShare rival Commission Junction was bought for $58 million in cash and stock by ValueClick in October 2003; ValueClick previously purchased affiliate network BeFree in March 2002 for $128 million in stock. Performics was acquired by DoubleClick in a cash deal estimated at $58 million (plus an earn-out of up to $7 million) in May 2004; DoubleClick was acquired in July 2005 by Click Holding Corp. in a deal valued at $1.1 billion. The new era of performance marketing will feature Steve Denton, most recently LinkShare’s senior vice president of client development and distribution services, who has been tapped to head LinkShare. As president, Denton, a six-year LinkShare veteran, will lead all day-to-day operations. As part of those duties he will continue to oversee all sales efforts, as well as affiliate services and support. His new duties will include responsibility for account services, the search team, marketing and technical sales consultants.

Denton will report to John J-H Kim, CEO of Rakuten USA and executive vice president of international business headquarters, who will handle LinkShare’s legal, technical and finance functions.

“It’s very much like how Heidi and Steve split up their duties within the organization,” Denton says.

With the departure of the company’s founders, LinkShare faces some new challenges. The biggest, according to Denton, is to “move from an organization that was a privately-held New York-based affiliate network into a global role that it was intended to play, while still being the leader in affiliate and performance marketing.”

Rakuten, a public company with a market capitalization of $10 billion, bought LinkShare because it was looking to break into the U.S. market and wanted to establish an immediate presence. Founded in 1997, Rakuten has several divisions and is involved in e-commerce, media, travel and financial services, and owns a baseball team in Japan (the Tohoku Rakuten Golden Eagles).

“Heidi and I have taken LinkShare to a great place, but now it needs to become a Rakuten company. This is the best timing – the fourth quarter is over; Valentine’s is almost over and now LinkShare has all summer to beat Google and Yahoo,” Steve Messer says.

Timing is everything. Denton says that by putting all the pieces in place during the spring time frame gives LinkShare “a runway to get on track with new initiatives, new leadership teams and the company’s continued global expansion efforts, in time for the critical back-toschool period and the hectic fourth quarter” – a time when LinkShare historically generates a hefty chunk of its revenue.

LinkShare is on track, according to Denton, to expand into the U.K. and China sometime in 2006. However, he declined to disclose specifics.

LinkShare and Rakuten also have an integration team of executives, including Denton and Kim, to deal with the merger of the two companies, which includes establishing best practices, as well as streamlining financial reporting and human resource services such as employee benefits.

Denton is vehement that integration is not a euphemism for “consolidation,” which is then often translated to “elimination” as in downsizing when a smaller company is acquired by a huge conglomerate. “Rakuten bought LinkShare for its leadership in technology and the affiliate marketing space, not to rip the company apart,” Denton says.

But there is plenty of change happening. Steve Messer says that he and Heidi needed to move on in order to facilitate that growth. Consultant Shawn Collins says the transition should be smooth.

“It might affect the culture. Denton has a different personality, but it’s not like bringing in a stranger. Everyone is familiar and comfortable with him. And people are really excited.” Messer called his departure a continuation of the global expansion plan that he and Heidi had envisioned when they sold the company to Rakuten.

Messer says that during his tenure, he increasingly saw LinkShare’s main competitors less as the other affiliate networks (Commission Junction and Performics) and more like the major search and portal players such as Google and Yahoo.

“We think that Rakuten is doing a whole lot more to be competitive in the U.S. and we can help them go head-to-head with Google and Yahoo, while the partnership with Rakuten is going to help LinkShare’s presence in markets outside the U.S,” Messer says. “Rakuten has a huge appetite going forward. I think in a few years people will be talking about how they own the whole market. The strategy we put in place will prove itself out.”

Still, Messer says leaving is not easy. “I imagine it’s like the bittersweet feeling a parent has when their children go to college. You’re proud you’ve given them the skills to survive and do well, but you’re sort of sad that they no longer need you to get along.”

He claims his first taste of this occurred when he and Heidi spent most of 2005 in Japan negotiating a deal with Rakuten and he realized that “we had built such a great company and we were gone for nearly a year and the company did phenomenally well. They really didn’t need us.”

As for what’s next for Messer, he says that after 10 years in the bustling performance marketing space, he’s looking forward to a little “breather” and anticipates being “back in the game in the summer.” He declined to disclose any specific plans, noting he’s “still thinking about what I want to do.”

However, during his time off, he says he plans to more fully formulate some new business ideas – all while sitting at the beach and doing some kite boarding. And of course, any new venture will include LinkShare co-founder Heidi Messer. “We are a team,” he says.

Sources close to LinkShare claim it’s no surprise that Steve and Heidi are leaving the company after each received a hefty payout from the September 2005 all-cash sale to Rakuten. Although LinkShare had investors at the time of the sale (including Mitsui & Co, Ltd., Mitsui & Co. (U.S.A); Internet Capital Group; and Comcast Interactive Capital, an affiliate of Comcast Corp.), Steve Messer reportedly owned 20 percent of LinkShare, while Heidi owned 11 percent. Steve’s proceeds from the sale were said to be approximately $100 million, while Heidi got over $51 million, according to sources close to the company.

“I think it’s obviously a good transaction for Heidi and I and the team,” Messer says.

“Steve and Heidi should be proud of the wonderful company they built, the leadership position they established and the vision they had,” Denton says. “All of us feel fortunate to have worked with them and we look forward to all the new challenges.”

Kimathi Marangu: The Team Player

It’s not easy to combine all those passions but Marangu has managed to strike a good balance.

Marangu is the co-founder of Mall Networks, an affiliate that builds shopping portals tailor-made for affinity organizations such as school districts, charities, sports teams and consumer associations.

The company, which was formed in 2005, already has a handful of private-label online malls. One of the most recent ones includes a fundraising mall to support Epilepsy research at epilepsy.com (http://shop.epilepsy.com). But Mall Networks isn’t just about dealing with nonprofit organizations; it provides professional services as an affiliate to for-profit business including NASCAR and The Los Angeles Dodgers. For NASCAR, MallNetworks.com built the NASCAR Racepoints’ Online Mall (http://emall.racepoints.nascar.com).

“A lot of our clients are strong brands with large customer bases. The bread and butter of our business is going to come from partners like NASCAR or MLB – including the Dodgers. Loyalty is important and enhances those kinds of efforts.”

Maybe that’s why Marangu, always the team player, notes that his two favorite sports or teams are NASCAR and the LA Dodgers.

Marangu helped start Mall Networks in mid-2005 several months after being introduced by a mutual friend to David Andre, the company’s president and CEO. Andre, a performance marketing veteran, was formerly the founding chief technology officer of Upromise, one of the largest consumer loyalty programs. Prior to developing and implementing the business model for Upromise Online Shopping, he was vice president of engineering at Lycos and Direct Hit (acquired by Ask Jeeves).

The two bonded over a shared love of performance marketing, online shopping malls and the ability to provide services to organizations that didn’t have the resources.

“Working in the performance marketing arena is something that I’m very comfortable with. I like working on projects that deliver measurable results.”

At the time, Marangu was running his own consulting business, called Seaspray, so he had the freedom to go out and start something new when the opportunity arose. Andre’s idea for Mall Networks was already in advanced discussion regarding funding by the time Marangu joined the company.

Once on board, part of the challenge for Marangu was getting buy in from merchants. “It was a little chicken and egg problem. Affiliates don’t get approved by merchants without a website to point people to. Yet it was impossible to put up an online mall with merchants. It was an infinite loop we had to break through.”

But Marangu’s past experience and relationships he had previously established in the performance marketing and affiliate marketing space paid off. He was able to get a core group of merchants to sign on, which then led to other merchants coming on board. The company also works with the big affiliate network players including LinkShare, Performics and Commission Junction.

As of early February, Mall Networks had grown to eight employees. Marangu lives just a few miles from his Burlingame, Calif. office. But he is the sole Mall Networks’ worker in the office suite. Still, he shows up every day dressed in business attire ready to tackle his workload. He could work from home, but likes the idea of going into an office.

When he isn’t traveling to the company’s Lexington, Mass. headquarters or other locales for business, he’s up by 7 a.m. and off to the office to “track down an East Coast client.” He keeps in constant communication with his team using Skype and email. He also travels to the East Coast at least once a month. Marangu thinks that being so far apart “is a crucial reason to show up physically every month” in the main office.

Fundamentals

Marangu started off his professional career with a Stanford M.B.A. in hand as an investment banker at Morgan Stanley and J.P. Morgan in New York and Australia.

“I’d taken entrepreneurship in business school. I was very interested in being an entrepreneur. I thought that investment banking provided a solid basis of understanding how businesses and business models are developed. It was great for a broad range of understanding the fundamentals.”

Back in 1998, Marangu attended a reunion of business school alumni (he is the current president of the Stanford Business School Alumni Association) in Palo Alto, Calif. At that event he had an opportunity to catch up with a lot of his classmates who had joined or started Internet companies. “That time was ripe to join a venture. Many people I knew had taken the plunge,” Marangu says.

Not long after that gathering he relocated from New York City to the San Francisco Bay Area and joined ShoppingList.com as Director of Business Development. ShoppingList.com is an online resource that allows shoppers to research local specials and sale items at stores close to home. Just by typing in their ZIP code, shoppers can search by product category, store or brand name. The venture is now part of ShopLocal, which is the result of a partnership by newspaper giants The Tribune Co., Knight-Ridder and Gannett Inc.

Marangu then moved on to be the General Manager of SchoolPop.com, a school fundraising company that connects schools and merchants together in a loyalty program. He was brought into the company by a former colleague who ran SchoolPop’s business development and merchant relationships for the online mall.

Not unlike many online ventures of that era, the website and the business were well under way; but Marangu says, the “revenue model needed a closer look.”

What he found was some good news and some bad news.

“On the good side, there was a strong metric among the consumers, high conversion rates and high order rates,” Marangu says. “The bad news was that SchoolPop was not getting full credit with the merchants for delivering the shoppers. We were getting paid a basic affiliate rate and in 2001 that was, relatively speaking, a pittance. The online marketing money was still going to the big portal deals. Affiliates were the last at the table to get budget allocated to them. The commission rates were quite low and not very substantial.”

Still, during his tenure, Marangu developed and deployed SchoolPop’s business model, which delivered over $250 million in trackable multichannel sales to merchants, and as a result raised millions to support public and private schools in every U.S. state.

After three years, in 2003, Marangu left SchoolPop.com to form his own consulting business with clients including Apple Computer’s online store, where he ran the affiliate program and helped grow it to become one of the largest in the industry. He also designed, negotiated and implemented search and comparison shopping partnerships with Google, Yahoo Shopping, BizRate/Shopzilla, Overture, Shopping.com and PriceGrabber.

Outside Interests

But before going out on his own, Marangu took a much-deserved vacation to Africa. Although he was born in the Midwest, he had attended high school in Kenya, before returning to the United States to go to college at Vassar in Poughkeepsie, New York. His parents still live in Kenya and although he hasn’t been back there since he took his family for that trip in 2003, it’s one of his favorite places in the world.

Years before that trip back, he had deferred his admission to business school to spend a year serving a special assistant to renowned paleoanthropologist and environmentalist Dr. Richard Leakey at the Kenya Wildlife Service, who, at the time, was leading the war on poaching.

For Marangu, who is a wildlife conservationist, it was “a once in a lifetime experience” to work with a figure often described as one of the most controversial, influential and inspirational figures in African politics and world conservation.

Marangu’s job with Leakey came at a crucial time as the conservationist successfully campaigned for a worldwide ban on trading ivory. This huge achievement was symbolized memorably when Kenya’s President Moi set a mountain of ivory tusks on fire.

“I got the opportunity to work on a number of projects that were constructive in nature [such as] being able to prepare proposals and budgets for World Bank projects,” Marangu says. “We were able to help fund water, school and nursing facilities for communities near the national parks.”

He was also involved in negotiating lease agreements for lodges in Kenya’s national park, which were paying outdated rates, which were not in line with the hefty prices they were charging Western tourists. “They were not paying for the benefits they were getting for security and other services.”

He was also responsible for changing antiquated ticket pricing for the national park.

“If you compare how much one would spend to go to the zoo and what was being charged for two whole days inside a wildlife national reserve in Kenya, it was a pittance by comparison,” says Marangu, who notes that under his plan the entrance fee for locals was not raised. ‘I wanted to encourage the local population to enjoy the reserve.” Aside from the lure of working with Dr. Leakey, there were many things that attracted Marangu to that position.

“I had been away from Kenya for several years and I really want to try and contribute to the well being of the country and help the environment and saving wildlife,” he says.

However, these days his interaction with wildlife is limited to weekend trips to the San Francisco zoo with his wife and three children (aged 5 and under), where they are members. While he prefers to see animals in their natural habitat, Marangu enjoys spending the time with his family.

Marangu says, the lessons he learned early on working in Kenya and in his previous jobs are all very applicable to affiliate marketing. “The most important things are integrity, responsibility, transparency and accountability.”

Optimized for the Future: Q & A with Noah Elkin

Noah Elkin is the director of industry relations at iCrossing, which was recently named Best Search Agency of 2005 by industry trade publication OMMA. iCrossing, started more than nine years ago in Scottsdale, Ariz., is jumping into new arenas, such as the mobile search market, and expanding client services to include content creation and website design.

Elkin is responsible for iCrossing’s public messaging and interfacing with high-profile analyst firms, along with sitting on industry committees, such as the Interactive Advertising Bureau, the Direct Marketing Association and the Search Engine Marketing Professional Organization, which puts him in a unique position to observe the online advertising industry from a variety of angles. Elkin, who previously worked as a senior analyst at research firm eMarketer for five years, has a Ph.D. from Rutgers University and received a B.A. with honors from Columbia University. He recently spoke withRevenue senior editor Maria Sample about winning industry accolades, providing services for the little guys and where search marketing is headed.

Maria Sample: Your company calls search marketing “reverse direct marketing.” How would you describe it?

Noah Elkin: It’s something of a philosophical shift in how customers and businesses interact. Customers are now actively searching for brands and products and services, for information. It’s a seismic shift from a typical push-advertising model where you get an email message or a TV spot or a regular print advertisement. It reflects the degree to which the customer is in control. With reverse direct marketing, a customer has already given an indication of what he or she is interested in. Search, as we like to say, is like a giant focus group.

MS: What’s the main difference between iCrossing now versus 1998?

NE: Our recent restructuring of the organization into three main service lines – marketing services, marketing technologies and marketing properties – is a major shift. Another difference is the building of expertise in these separate business units. And the addition of certain services like creative is one of the biggest changes, not only for us, but also for our space as well.

MS: What has remained the same at iCrossing since 1998?

NE: Certainly the talent of our people has been the constant, and the expertise across the board has been a constant since the start, and it’s something we’re very proud of. It will drive us forward as we expand. And as we continue to receive accolades from the industry, it will enable us to attract the top talent that we’ve become known for.

MS: What has changed since iCrossing won the OMMA award?

NE: We’ve been building really powerful partnerships with the world’s leading brands for more than seven years now, and along the way, really changing the ad agency landscape by helping clients connect with their customers anytime, anywhere, however they want, wherever they want, whenever they want. We feel the OMMA award is a great honor. We’re really proud to have worked so diligently to build these kinds of partnerships that we have with Fortune 500 companies. That’s a tremendous validation of the work that we’ve done, and it sends a message about the potential that search and commercial brand marketing have for helping businesses interact at a much higher level than ever with their customers.

MS: How is iCrossing different from its competitors?

NE: As our founder Jeff Herzog likes to say, iCrossing has been an innovator in search advertising since before Google was Google. What we have that’s unique is our full-service approach. We’re not just a search engine optimization vendor; we’re a fullservice marketing connection. I think that’s a major differentiator between iCrossing and other companies. We’ve really been growing the company with the evolution of search as a medium. I think it’s that kind of vision that puts us on the leading edge, helping to drive the future of advertising – with our in-house expertise on the services side and also on the technology side. We’re the largest independent agency out there, and we back up our tremendous talent with our market research, our strategic alliances, planning and client services with our proprietary technology. That’s a one-two punch that most other places can’t really boast of.

What makes us different is that we have this expertise in market research that provides clients with the deep-dive analytics about their company and industry. We give them the knowledge and tools to help succeed by planning how to accomplish short-term goals and long-term opportunities, using a full array of tools and services organized around search.

Another exciting differentiator for us is the creative service we offer. It’s one side of the business that we’ve really been building in the past year, and it’s really going to grow quite a lot in 2006. It’s everything from copy to actual website design, all organized around improving and maximizing both user experience and optimization of search. We see ourselves as a one-stop shop when it comes to advertising online as well as through emerging technologies, mobile included. We are launching a major mobile innovation called mCrossing, expanding our expertise from natural search optimization on the Web to global devices.

MS: What’s the most important service your company offers?

NE: The most important service is the fact that we offer all of the services, but our strength is expertise in natural search optimization. It’s been able to help prepare us to expand to mobile devices. Bear in mind that natural search results are clicked on 80 to 85 percent of the time, far more than paid search. It’s very important to have that grounding in natural search; it’s the bedrock of what we do. It’s important to have strong expertise, and we’ve been able to complement that with strengths across the board as well as market research and our agency services.

MS: What kind of search are you going to be capitalizing on in the next year?

NE: Mobile search is a very exciting opportunity in the year ahead. Global is one initiative, and certainly local search and classified search – yellow pages. We’ll have a product geared toward the small- and medium-sized business market organized for local search that will be going out toward the end of the quarter.

MS: I’ve heard a little criticism that some of the smaller businesses can’t afford the products you offer.

NE: That’s why we built this technology in-house – that’s a real differentiator as well, that we build all our technology platforms inhouse. Technology is the largest department in our Scottsdale office. Expanding on that, we looked at the small- to midsized business market as well and discovered people that don’t necessarily have either the need or the budget, but they probably want some of the benefits of visibility on the Web. If you’re a plumber in Illinois, you don’t really care if someone in New York finds you on a search for a plumber, because chances are that person is not going to use your services. What we’ve done is to build a selfservice platform that integrates our optimization and tracking software in a way that will make it more accessible for the smalland medium-sized business. Our approach is, whether you’re local, national or international, we help your brand make the connection and quantify the results. What we do best is help companies reach their consumer at their point of interest.

MS: How are online retailers missing the boat in search?

NE: There’s a growing need of the importance of integrating search engine optimization into the workflow process and ensuring that this takes place before the product is launched and before the copy for it is written. Companies and clients need to understand that products must be optimized well before they’re launched, and make sure that search is a priority and not an afterthought. You’re going to get the majority of traffic from natural search, so we strongly encourage clients to plan for that well in advance.

Another way companies are missing the boat is not implementing recommendations in a timely fashion. Clients who receive recommendations from the search agency and then sit on them really run the risk of not getting the online visibility for their products that they would otherwise get from implementing optimization recommendations. This can be particularly crucial at specific times of the year, such as prior to the holiday shopping season, which is obviously the most important time of the year for online retailers.

MS: Give me an example of a client that implemented recommendations in a timely fashion.

NE: One of our best examples is Fairmont Hotels & Resorts. They’ve been a client with us for a very long time. It’s really a great success story of crowding out the competition, like critical search engine traffic drivers such as Orbitz, to really control the user experience and the message that consumers are getting. That’s one that we’re extremely proud of because, as a brand, you want to make sure you control the experience and not the search engine. So it’s been a great partnership for both Fairmont and iCrossing.

At the beginning of our engagement with Fairmont, in terms of keyword visibility, we saw the number of keywords appearing on the first three pages of search results increase to 2,579; a total jump of 1,156 percent, from a baseline of 223 keywords. In terms of baseline search traffic, which was established at 29 percent, within a month of implementing optimized coding elements, the search traffic increased by 41 percent and booking reservations increased by 150 percent over the baseline.

MS: Do you have any studies planned for 2006 that you’re particularly excited about?

NE: We have a relationship with Harris Interactive – they do studies for us and we have three or four planned for 2006. But we’re really excited about a couple of themes that we’re going to work on from both a horizontal basis as well as some of the vertical industries that we’re targeting. One is branding search – why major companies are becoming more comfortable with this concept and how we can augment individual marketing and help branding efforts.

In 2005, there was a lot of talk about paid search, and quite a bit of money spent on it, but we really see natural search as the biggest driver of traffic to websites. We want to focus on and evangelize why and how you can provide the best return on marketing spend and how to budget and manage for a successful marketing campaign.

Another area is about marketers themselves, about what kind of website, from a design and architecture perspective, is going to really reinforce the brand. One of our goals is to optimize the creative and maximize the value of the client’s investment in natural search results for years to come. We do this by optimizing Web pages, building specialized microsites and landing pages designed to drive specific consumer actions, and deploying paid media and mobile marketing campaigns. We partner with clients to break down the barriers between them and their customers.

MS: Is that one of the reasons you joined the Mobile Marketing Association?

NE: In part, yes. For us, that was an industry-leading move, and we’re certainly the first search marketing agency to do that. We want to make sure we’re positioned to take full advantage of opportunities in the mobile space and, in some ways, to branch out our contacts and gain potential opportunities to companies that might not think to come to us.

MS: What do you want most for your company in the future?

NE: Continued growth, continued profitability and continued engagement with the world’s leading brands. A deepening of relationships with both interesting and new clients. As online advertising continues to grow, the lion’s share of those dollars is moving to search. And to really be able to apply our expertise on the agency and technology side, to really be the one-stop shop when it comes to interactive marketing. We want to be top of mind when companies are looking to embrace interactive and emerging technologies.

MARIA SAMPLE is a senior editor at Revenue. In the past 15 years, she has worked for Ziff-Davis, CNET, Charles Schwab and Restoration Hardware. This is her first article for Revenue.

Retooling the Web

Microsoft was late in recognizing the profit potential of online search. Meanwhile, upstart Google surpassed older search sites such as AltaVista, America Online and Yahoo to become the clear leader in search and, therefore, online advertising revenue.

In late 2005, Microsoft chairman Bill Gates and chief technical officer Ray Ozzie wrote widely quoted memoranda acknowledging Google’s success and stating that Microsoft would refocus the company’s MSN division to address the “Internet services disruption.”

The Microsoft executives said the software giant would introduce advertising-supported services to the company’s vast portfolio of services and software, which would enable it to access a greater portion of the growing online revenue opportunities. Microsoft, which had become accustomed to defending a leadership position in desktop and server software, is now on the attack, trying to catch up to hyperactive Google, which has become an incessantly moving target.

Who Should Be Afraid

Although some online entrepreneurs may be fearful of becoming casualties in the escalating competition between Microsoft and Google, it’s traditional media companies that are much more likely to see their revenue streams reduced.

For the overwhelming majority of online sellers and service providers, the Microsoft-Google tussle will create more opportunities than it takes away, observers say. Neither MSN nor Google are primarily focused on the areas of selling products, search engine marketing, developing interactive advertising platforms or generating content. MSN may even provide a boost for the partner companies in its shopping and content portals, since MSN search does not exclude other sellers.

Google likewise opens search to anyone and everyone, and one of its main tenets is to remain inclusive. The company’s unofficial motto is “Don’t be evil,” a play on the nickname “Evil Empire” given to Microsoft by high-tech insiders. So far, most industry watchers claim that Google has remained true to its original precept of exposing the universe of digital information and supporting search through ads. The company does not directly sell products or services, and it continues to derive revenue from sharing in advertising dollars, which creates opportunities for both publishers and advertisers.

However, Google is showing an interest, albeit limited, in software development and distribution. Google now offers a desktop search application and Picasa, an image searching utility that could someday become supported through advertising. Google also reached an agreement with longtime Microsoft foe Sun Microsystems to cross-promote products and jointly market “Microsoft-alternative” applications such as OpenOffice.

Regarding the heightened Microsoft-Google competition, Rachel Lyubovitzky, vice president at search engine marketing company Searchfeed, says she doesn’t see any negatives for her customers. She says that by aggregating consumers who were previously a fragmented audience, the companies are “helping to organize Internet populations so that they will be more receptive to people’s messages.”

By convincing a majority of consumers to have either MSN Hotmail accounts or Google home pages, both companies are gathering information en masse, which advertisers love. However, even these users will continue to spend most of their time enjoying the diversity of content and search services available outside of Microsoft and Google, enabling plenty of room for creativity and innovation.

The online advertising market continues to grow rapidly, and Microsoft’s announcement that it would begin to support some of its multi-billion dollars in software and services through advertising is likely to further accelerate the growth. However, it may take several years for Microsoft to develop ad-supported services for the company’s recently announced Windows Live initiative, so don’t expect a major impact in the next 12 months.

Google’s new search services – which will streamline consumers’ ability to find video, music and text published in books – will likely also create a wealth of new advertising inventory options and contribute to market growth.

During the first nine months of 2005 advertisers spent $8.9 billion online, a nearly 29 percent increase over the previous year, according to Pete Petrusky, director of advisor services for accounting firm PricewaterhouseCoopers.

Petrusky expects the double-digit growth of online advertising to continue for the foreseeable future, at the expense of other media buys. Online advertising revenue topped $12 billion in 2005, equal to the amount spent in consumer magazines, and closing in on the $16 billion spent on cable, according to Petrusky.

Increasing inventory through new services led by Microsoft and Google could correct what Petrusky sees as an imbalance between the amount of time spent online and the advertising dollars generated. “The Internet captures about 15 percent of people’s media consumption time,” says Petrusky, “… but only 3 to 4 percent of total ad spend” that includes magazines, newspapers, television and radio.

Newspapers, which have been losing revenue to online classified ad services such as Craigslist and Yahoo, will likely have more trouble competing online when both Google and Microsoft enter the arena. Television broadcasters will see their advertising revenue decline further as Microsoft and Google make it easier for people to browse video and audio content online.

Although both companies are rolling out dozens of new services, they cannot keep up with the wide variety of services created by entrepreneurs – there are too many moles to whack for either company to be dominant in all areas. In the areas where Microsoft and Google do compete with smaller companies, having a powerful brand alone isn’t enough to convince consumers to switch, according to Greg Sterling, program director with analyst firm The Kelsey Group.

“New services can’t be marginally better; they have to be much better” to prompt changes in user loyalty, Sterling says. For example, MSN search and Google’s comparison-shopping engine Froogle and Gmail email have had trouble gaining traction. Therefore, there will always be enough room for innovators such as Digg.com, Flickr.com or MySpace.com to innovate and carve out a niche (or be acquired by big players looking to expand).

Competition Is Good

The intensifying Microsoft-Google rivalry will create a better audience for advertisers and will spur innovation in the technologies that enable people to more quickly find what they are seeking. Microsoft’s interest in advertising- supported services will also provide a necessary counterbalance that prevents Google from becoming a dominant player.

“The more options, the better” for advertisers, says Michael Stalbaum, CEO of interactive marketing and advertising agency UnREAL Marketing. For several years Google has been expanding its reach as the largest player in the largest segment of online advertising dollars, so increasing competition from Microsoft could provide an important alternative solution.

According to Nielsen//NetRatings, the volume of Internet search queries grew 15 percent between June and October 2005 to more than 5.1 billion. Nearly 48 percent of those searches were performed on Google, a figure more than double the closest competitor, Yahoo, and more than four times MSN’s share of search.

If Microsoft were able to become a stronger competitor in search, “it would be a positive for advertisers,” Stalbaum says, because Google may have to revamp its pricing structure. “Prices may come down a little bit,” he says.

Technology at the Core

The primary front in the battle between Microsoft and Google is technology, which will force all participants to continually innovate or risk losing their audience. If Google or Microsoft enters an emerging service area, the existing companies have additional incentive to upgrade their existing products.

For example, in early 2005, Google and Microsoft announced separate projects for digitizing books and making the content searchable. In December, publisher HarperCollins responded by announcing it would do the same for its content.

Charlene Li, principal analyst as Forrester Research, says the increasing competition “gives better products, which leads to better spending options” for advertisers. Products tend to be not only better, but come out more quickly once the powerhouses are involved. “Microsoft and Google participating, and to a lesser extent AOL, accelerates the product development cycle,” says The Kelsey Group’s Sterling.

Google Labs produces a steady stream of new services that make information more accessible, and the company’s willingness to share unfinished ideas with developers is accelerating the rate of technological change. Not surprisingly, Microsoft has shown an increasing willingness to publicly preview technologies and similarly make available its application programming interfaces (APIs) for developers to tinker with and enhance.

Opening up the technologies has proved a boon for third-party development. Innovations from Microsoft and Google are giving momentum to the next generation of interactivity online, designated as “Web 2.0.” Google has included Web 2.0 technology AJAX (asynchronous Javascript and XML) to build interactive Web applications such as Google Maps and Google Reader, a program that aggregates RSS feeds.

Google is also testing new technologies for publishers to structure and describe their content to make it easier to search. Salar Kamangar, vice president of product management at Google, says Google Base (which he emphasizes is not a classified ad service) is an experiment in allowing publishers to tell Google how their data is structured so that the company can deliver better results to consumers.

Rather than requiring Google’s search algorithm to guess how to identify an online seller’s product inventory, Google Base enables publishers to disclose how they format information. Data entered into Google Base is then made available to any Google property, such as Froogle or Local listings. This “increases the amount of content that Google properties can draw from,” Kamangar says.

Similarly, publishers looking to optimize their presence in search results can use Google’s Sitemaps tool to reveal how their sites are organized. Sitemaps “enables us to crawl their sites more effectively,” says Kamangar, adding that spidering websites today relies on following trails of links, making it difficult to detect dynamically generated pages. These efforts give publishers more of a say in how technology is used to influence their search standing.

Microsoft’s next-generation browser, Internet Explorer 7, will automatically discover RSS feeds and include tools for managing feeds. Microsoft also built RSS support into the Vista operating system, which will greatly increase the ability of publishers to widely distribute content by opening up RSS to a mass audience. Microsoft is also developing extensions to RSS known as simple sharing extensions (SSE) that will enable feeds to be shared and synchronized. For example, SSE could give publishers and affiliates the ability to automatically share information about advertising inventories and campaign performance.

The efforts of Google and Microsoft to outdo each other with sophisticated publishing and search technologies increases the burden on marketers to keep up with the innovations or risk having their websites appear lifeless by comparison.

Some publishers are using the available APIs for these emerging technologies to create “mash-ups” that mix data from multiple providers to create new hybrid applications. For example, Frappr.com lets individuals map where their online friends are, while ChicagoCrime.org shows where crimes are committed by matching police data with Google Maps.

Targeting Targeted Ads

Advertisers and consumers will benefit from the increasing competition as Microsoft and Google implement technology that tailors the online experience for each person. Personalized searching and browsing will create audiences that are more receptive to marketing messages.

Through the MSN AdCenter platform, Microsoft began offering advertisers a method of targeting ads to a particular demographic by leveraging data collected from its millions of registered users. When a signed-in user comes to an MSN site, Microsoft anonymously matches the demographic information to the visit, enabling the company to know the gender, age and location of the people who frequent their properties.

By enabling advertisers to target users by demographic characteristics, Microsoft is introducing targeted marketing “in an innocuous way,” says David Berkowitz, director of marketing at online advertising agency Unicast. He says targeted advertising will become “arguably the most groundbreaking innovation for advertisers.”

Berkowitz says that rather than competing with Google based on audience reach (quantity), Microsoft is relying on superior information (quality) about its customers to sway prospective advertisers. “MSN’s plan is not really about better software, but about delivering demographics,” Berkowitz says. Having demographic information about a large audience of registered users gives Microsoft an advantage in targeted marketing. “Forty million Hotmail users is a huge asset.”

Senior director of advertising and marketing Eric Hadley says Microsoft will evolve MSN AdCenter to target ads to people who set up personalized home pages on its websites, including the recently launched Start and Windows Live destinations. MSN AdCenter was first launched to support advertisers on its websites, but then will be rolled out to third-party publishers, putting it as a direct competitor to Google’s dominant AdWords and AdSense products.

Hadley says a future version of the MSN AdCenter will integrate a consumer feedback mechanism. “If you hover over an ad [with your mouse], there will be a pop-up window to say ‘why am I getting this ad?'” Users would be able to request not to see the ad again if the product or service is not of interest to them. For example, married people might not want to receive ads for matchmaker services.

A not insignificant challenge for Microsoft to make MSN AdCenter a success will be to build the marketing relationships with national and regional online publishers and advertisers. Determining how to split the business model for its applications and online services between subscriptions and support through advertising places a learning curve on a company built on selling products.

Microsoft and Google are vying to create personalized experiences by customizing search results based on prior searches, tailoring information preloaded onto home pages, and delivering ads based on user actions.

For a user who has not signed in before visiting an MSN site, Microsoft will use behavioral marketing techniques to generate contextual ads based on the person’s experiences on its network of sites. For example, Hadley says if an unknown customer is browsing the MSN Music site and searches for artists Kanye West and 50 Cent, ads for other rap artists would appear.

Behavioral marketing is effective in generating high conversion rates for advertisers, says Unicast’s Berkowitz. However, because it tracks consumer actions in the background, “it is a bit creepy,” he says. Microsoft and Google need to respect privacy when building personalization services to maintain consumer confidence. “A consumer has to decide who is trustworthy and who is evil. That’s going to be a major wild card” in determining whether or not users will feel comfortable in visiting a website.

Berkowitz also says, however, that companies must be careful in their pursuit of personalization services to prevent consumers from having too narrow of an experience. Google is experimenting by personalizing search results based on prior searches, but this increases the “risk that exposure to other things that might be of interest” could occur.

“I wonder how far you want to go down that personalization road before you lose the communal experience entirely,” he says. For example, Berkowitz says that while he is primarily a New York Mets fan, he doesn’t want a search engine to stop recommending articles about the rest of the league.

Looking forward, Microsoft and Google will determine if and how to commercialize the myriad of beta services that are currently under development while keeping one eye on what the other is doing.

Microsoft will learn the ropes of the ad-supported model for services and software while trying to grow and leverage its audience of registered users. According to MSN’s Hadley, the biggest challenge for Microsoft will come after the AdCenter platform is opened to third-party publishers. “How do we absorb all this demand from [large companies like] American Express to mom-and-pop” marketing firms? “As soon as we open the gates, we have to bring people in quickly with high quality.”

Algorithm-obsessed Google will continue to refine its search technology to better match customer expectations. “We are very far from being where a person can ask a question that brings back a single answer” that matches what they were looking for, says Google’s Kamangar.

For the rest of the decade and likely beyond, Microsoft and Google will continue to play the leading roles in the unfolding drama of the growth of the Internet as a platform for commerce and entertainment. Their perpetual sparring will spur all of the players involved to perform their best to satisfy the audience.

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

Mining for Keywords

Now that you’ve set up your search engine marketing campaign and it’s chugging along nicely, how do you take things to the next level? You’ve picked out some good keywords, written some good copy and you’re getting a reasonable ROI, but every time you look at your pay-per-click campaigns, you just know there’s more that you could be doing to maximize your investment. And you know what? You’re right.

The next step is to start prospecting for keywords that are lower in price but still bring good results. Anyone can set up a keyword campaign with all the obvious keywords and spend a bunch of money. Smart marketers know, however, that one of the best ways to beat their competition is to go after those keywords that the competition hasn’t discovered yet. More than 500 million keywords are searched every month on the major search engines, yet only 15 to 20 percent of those keywords have bids. A veritable gold rush of keywords is just waiting to happen.

Admittedly those keywords will have lower volumes of search than all of the one-word and two-word options you are currently bidding on, but the conversion rates will be higher, and by spreading your budget over a larger number of words, you minimize your monetary risk.

The Mining Process

You’ll want to utilize two methods in the mining process. One involves brainstorming, the other research, but good keyword development strategies take advantage of both.

For the first, find yourself a big blank wall and a stack of sticky notes. You’re going to use this wall to start the brainstorming process, but don’t do this alone or, even worse, with your marketing team. You are too close to your website to be objective. You’ve watched its growth and development since it was nothing more than a twinkle in the designer’s eye, and although you may try to think like your customer, nine times out of 10 you will fail to consider all the different ways someone might search for your product or service.

People search in very random ways. Most of them don’t know all the buzzwords, jargon and abbreviations associated with your business, so they don’t use them. Your marketing team may be in the habit of trying to influence your customers to behave in certain ways on your site. Many marketing teams are great at this, but their influence doesn’t extend to the way people are accustomed to searching. They are going to search their way no matter what you think, so your job is to figure out their thought process and put your website in front of them.

The best thing you can do is conduct your own informal focus group. Gather a bunch of your friends, associates, relatives and others, and sit them down in front of that blank wall. Feed them (if that’s the only way you can get them), but try to get folks who know little or nothing about your business. Tell them, “I sell widgets. If you were looking for widgets online, what would you enter into a search engine?” Then get ready to write each keyword on a sticky note as fast as you can. The reason you will want to use sticky notes is that once you have all the keywords written down, it is easy to move them around to create “buckets.” These buckets usually correspond to specific products, price and volume. Once you have those buckets, you can easily set up your categories in Yahoo and your Adgroups in Google. Having these buckets established will also allow you to write relevant titles and descriptions for each, thus minimizing the amount of time spent copywriting.

The second step in the keyword mining process involves using tools to dig for more variations on your keyword bucket themes. You can take all the words your focus group has suggested and use them to expand your lists by plugging them into such keyword research tools as:

  • Yahoo Keyword Selector Tool (searchmarketing.yahoo.com/rc/srch)
  • Google AdWords Keyword Tool (ad words.google.com/select/)
  • KeywordSandbox (https://adwords.google.com/select/ KeywordSandbox)
  • Wordtracker (www.wordtracker.com)
  • KeywordMax (www.keywordmax.com)
  • Keyword Intelligence (www.keyword intelligence.com)

Taking It to the Next Level

While brainstorming and research are crucial to the keyword prospecting process, they are much more effective when combined with other techniques. Take advantage of all the tools and advice available to make your site a veritable gold mine. Here are some time-tested ideas that have worked for me.

Add an internal search engine to your site. This will give you tons of information on how users are finding you. It will also let you know whether users are finding what they want when they get to your site. A good search engine tool can be found at www.freefind.com, or you can find many others by typing “open source search engine” into any search engine. You will want one that just searches your site rather than searching the whole Web, as you obviously don’t want to encourage users to leave your site as soon as they get there.

Check out the source code on your competitors’ sites. You may be able to get ideas for your brainstorming process from some of the keywords they are focusing on. Remember, it’s not a good idea to use the same keywords unless you offer the same product or service, but it’s a good place to start looking for ideas.

Consider your entire website. Many folks stop their keyword research on their home page. They don’t know that their internal pages can provide a wealth of new keywords to attack.

Look for all related words. Make sure you include all variations of a term. Choose words that are singular, plural, misspellings, abbreviations, etc.

As you mine, remember that a “keyword” is not just one or two words. Many keywords are now three, four, five or more words in length – these are the keywords that are producing higher ROI with less investment.

Internet users are becoming more sophisticated in how they search and are utilizing longer keyword phrases to find what they need. Marketers, fortunately for you, aren’t keeping pace with this trend, and that’s what’s driving the prices so high on the one-word and two-word search terms. By thinking a little more creatively, and pursuing more of those niche terms, you can compete very effectively against the big keyword mining companies. After all, a little bit of gold from a lot of rocks is worth just as much as one big nugget. You may have to work harder to get it, but in the end, a gold baron is a gold baron, regardless of how he made his wealth.

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.

Entrepreneur Sees the Light

While reviewing newbie sites, my heart sinks as I see the world’s zillionth “How to Start a Successful Online Business” site. The aspiring netpreneur, whom I’ll call Bob, has obviously sweat great drops of blood to build his first site, yet he hasn’t seen a dime of revenue.

If only I could talk to him…

“So, what made you choose Internet and affiliate marketing as the topic for your first site, Bob?”

“Well, there are piles of money to be made promoting Internet business info products and software because everyone wants to start an online business and make money on the Internet,” he explains.

I agree that it certainly seems that way, then give him some hard data. Overture’s Keyword Selector Tool shows that “Internet marketing” was queried approximately 250,000 times last month. “Make money online” had just over 67,000 searches. In demand terms, that’s a workable market. To see if it can work for Bob, I ask him some questions about his site. “I see you’re promoting XSitePro and Article Announcer. What do you think of them?”

Bob replies, “Oh, I haven’t bought either. I used a free HTML editor and I use other people’s articles on my site.”

Although I know he doesn’t use an autoresponder service either, because there’s no subscriber signup form on his site, I ask how he likes ABC’s autoresponder service.

Bob tells me that he doesn’t plan to build a list because he’s not into the hassle of putting together an e-course or writing a regular newsletter. His no-knowledge, no-experience responses are consistent until I ask for his thoughts about the Internet/affiliate marketing courses prominently advertised on his home page.

He says they’re great and rattles off the list of Internet and affiliate marketing tutorials and software products he’s bought over the last few months. “Insider’s Secrets was the very first product I bought online, then John Reese’s, Corey Rudl’s, Jim Edwards’, yours and-and-and… .”

I do some quick math and estimate he’s already invested a couple thousand dollars in tutorials and software. I tell Bob that those are excellent resources to be able to refer to in his Internet business library.

“Can you tell me what persuaded you to invest in John’s course?” I ask Bob. “Was it his sales copy, or did you get a recommendation from someone who bought it?”

“I’m not really sure where I learned about it first,” Bob says. He thinks he may have seen an ad for it on Google, but he’s on a lot of different lists, including some of John’s affiliates’ lists, so he may have gotten an email from a couple of them. Bob says he read about the course on John’s site, then posted questions in some of the affiliate marketing forums to find out if anyone really bought the course and whether it worked for them. Bob was convinced to buy John’s course based on the testimonials on the site. He appreciated seeing proof of how well John’s techniques work by showing screenshots of the results some people had after using his system. “There were even links to those sites,” Bob explains.

“Well done,” I say. Like most Internet shoppers, Bob did his due diligence and ended up buying a good product.

“You’ve probably noticed that John Reese’s affiliates continue to recommend Traffic Secrets to their newsletter subscribers,” I explain. The most successful affiliates keep testing John’s techniques and tracking traffic. They broadcast good results to their list and mention that they learned those techniques from the Traffic Secrets course, which they then link to in their message. That’s a stellar example of how the top affiliate marketers work. They find a product they can stand behind and then recommend it to their subscribers, who are interested in products of that type.

Bob remains quiet, so I continue. “The process works exceptionally well when your subscribers know that you aren’t the merchant, but rather an unbiased reviewer who gives them the straight goods.” When you consistently make excellent product recommendations, I tell Bob, both your credibility and income will skyrocket. Unfortunately, a balanced review is pretty hard to write when you haven’t tested a product, and building credibility within a niche is virtually impossible if you aren’t building a list.

I am met with complete silence from my new friend Bob.

I ask, “Did you know that each of the Internet marketing experts you mentioned started online in markets that had nothing to do with Internet marketing products?” John Reese became an eBay expert, Corey Rudl sold car decals, Jim Edwards was into real estate and the single crowd is still my primary market. All of us learned how to market online in businesses related to one of our passionate interests or hobbies.

“When you’re really keen on a topic, it’s easy and fun to share what you know with a group of like-minded individuals – your subscribers,” I tell Bob. “They listen to you, come to like you and then they’ll buy from you. Better yet, passion for your topic will keep you going on those days when you feel like you’re drowning in a sea of cut-and-paste affiliate links or promotional emails from your merchants.”

I ask Bob what he’s passionate about and discover that he lives and breathes martial arts. With Overture’s Keyword Suggestion Tool open, I am able to quickly tell him that there were 241,000 searches for “martial arts” last month. That’s almost the same number as for “Internet marketing,” and we haven’t even begun to look at the permutations. There are martial arts product suppliers with affiliate programs, some with commissions as high as 30 percent. To make the site lucrative, however, Bob will have to build a subscriber list.

“Do you think you could write a regular newsletter about martial arts?” I query.

“For sure,” Bob replies.

“Perfect. And you can keep using your current domain, BlackBeltBobs.com.”

“Awesome!”

“It must be destiny, Bob,” I say. “The only suggestion I’ll make is that you may want to reconsider your royal blue, olive and burgundy color scheme. Check out ColorSchemer.com for some good combinations.”

“Hey, thanks for the great tip, Ros.”

“My pleasure, Bob.”

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. It is available on Amazon and www.SuperAffiliateHandbook.com.

A Brand New Day for BrandNewDad.com

Not every website sells widgets. But that doesn’t mean every website doesn’t need an effective home page.

In this column, we chose an information portal as our subject. So instead of addressing questions like what the site is selling, and how to make a purchase, our focus was on the proper display of content, use of colors and communicating the benefits of registration.

Our subject is BrandNewDad.com. The site has a wealth of information for fathers, with helpful feature articles, pregnancy information, forums, a shopping directory and various other valuable resources. Unfortunately, the owner succumbed to the common temptation to jam-pack the home page with more options than the eye can bear. The result is a cluttered, confusing, jumbled mess.

As BrandNewDad.com owner Dave Trenck put it, “The site is too busy. ” I’d like to be able to highlight the community aspects of the site, the personalization features and, of course, intertwine all the various affiliate links and support the various CPM and CPC ad placements.”

The goal of this redesign – just as with OriginalDogBiscuit.com (the online purveyor of doggie treats we featured in the last issue) – is to increase conversions. Ultimately, that’s what it is all about.

That’s why I’ve coined the term “Conversion Design” to describe the business of design. You’ll be hearing much more about this concept as the year unfolds because it encompasses critical Web design elements that spark increased conversions, like color theory, usability and copywriting.

How do you increase conversions on a site that does not peddle products? Conversion Design is not always about direct sales. Sometimes it’s about indirect sales, or even qualified sales leads. Trenck’s goal, for example, is to woo site registrants so that in addition to serving up personalized content, he can display targeted ads that convert at higher percentages than their untargeted counterparts. In this case, registrants are considered conversions.

Our task was to redesign the home page to make the site’s benefits crystal clear. At the same time, the home page would need to soft-sell the advantages of free registration. The end result would be more registered users, more repeat visitors and more ad revenue for BrandNewDad.com. That’s good news for Trenck, but we’ve got to wade through the bad news to get there.

When we showed the original site to our small yet highly critical focus group, phrases like “too wordy,” “too much info,” “unclear navigation” and “no main point of interest” echoed through the meeting. Vincent Flanders, author of Web Pages That Suck: Learn Good Design by Looking at Bad Design, probably would have agreed. He lists having too much material on one page as one of his top 10 Web design mistakes. According to Flanders, “With so much content vying for attention, it’s initially impossible for the eye to settle on one thing. People get confused and people leave.”

BEFORE

Sostre & Associates’ art director Jason Graham has a slightly different take on the issue of displaying too much content: “A good site should lead me or suggest to me what content I might find useful. The biggest problem with BrandNewDad.com is that even though things are categorized, it doesn’t feel like they are.”

Graham’s guiding concept for our approach: Group the content into clearly defined categories so visitors can easily move through the page. This is referred to in the design industry as “chunking.”

AFTER

“The idea is to categorize and then visually group information, as opposed to letting it all bleed together,” Graham says. “We can do that by adding more white space between the elements and making the headlines or titles larger. Chunking helps to make the page scannable so we can still include all the same information that the website currently has, but now it’s easy to understand.”

Besides better content organization, we took three additional steps in our quest to make the home page more user-friendly: reducing the navigational elements, decreasing the number of colors and increasing the white space.

Like other sites with loads of content, BrandNewDad.com wants users to see it all. That’s why the site has so many options in its main navigation. In our experience, however, having too many navigation buttons can overwhelm visitors. So we reduced the number of buttons to five and repositioned the missing navigation items.

Next up: colors. The site uses six colors throughout the various user-interface elements. This mishmash spectrum contributes to the busy, uncomfortable feeling our focus group verbalized. We cut this number in half and allowed a three-color scheme to help unify the design.

White space can be tricky. On one hand, if we overdo it, we waste space that could be displaying information. On the other hand, if we don’t have enough white space, we end up with a cluttered mess. In this case, we definitely needed to increase white space to achieve the “chunking” Graham mentioned.

Our redesign simplified the site without sacrificing important information, making it easier for new visitors to understand the site’s benefits. Once the visitors are sold on the site, enticing them to register and personalize their experience is much more likely. We can encourage registration by highlighting personalization features and positioning the “register” and “sign in” links in standard locations.

We’ve taken the important first steps of giving this home page a much-needed overhaul. But the work should not stop there. An essential aspect of Conversion Design is continuous testing and review. Websites should be reviewed and tweaked frequently to ensure that their creators are getting the best possible outcome. User feedback and a careful eye for conversion rates should be the guiding factors in this process.

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

PEDRO SOSTRE is principal and creative director at Sostre & Associates, a consulting and development firm, which also promotes affiliate programs. Pedro is currently working on a book about his new concept of Conversion Design, scheduled for release this summer.

Winning the Seasonal Race

Managing a seasonal program is akin to drag racing – lots of hard work goes into the preparation, the light turns green, then it’s over.

For a seasonal program to be successful, it’s crucial for its managers to think like affiliates. If you were a top affiliate looking for a program, where would you go and what would you want to hear? If you can get into the head of an affiliate, you can gain the perspective of a top performer, understand the tools necessary for success and learn how to win.

Attracting Valuable Affiliates

All of your affiliates are valuable, but the top performers will give you the highest return on investment. Forget the 80/20 rule (80 percent of revenue comes from 20 percent of affiliates). In 2005, for example, only 1 percent of TaxBrain.com’s affiliates generated 80 percent of affiliate revenue. Obviously some affiliates were better prepared before the season began. They most likely used the following steps to success.

Find the best program. Check out resources such as search engines, affiliate networks, directories, forums, events and other networking opportunities. Within these, look for the most compelling stories on potential earnings in terms of conversion rates, clicks per sale and commission structures.

Use the right keywords. Your program’s online presence begins by building affiliate pages optimized for keywords in your niche. Online marketing success means ranking high in the search results for your particular niche (such as "tax affiliate program"). Searching on Google for "affiliate program" yields 134 million organic results as opposed to 74 million for "top affiliate program." Paid search has a decent ROI, but you can also achieve meaningful results by site-targeting popular affiliate and webmaster hangouts, as well as home businesses and small-business portals.

Spread the word. Take advantage of communication opportunities available through your affiliate network. These include multiple category listings, newsletters, conferences and email marketing. Top-performing seasonal programs are often overlooked by the Big 3 affiliate networks (Commission Junction, LinkShare and Performics). This is because their indicators are heavily weighted with off-season trends. To overcome this, capture your performance results when it’s your time of the year and trumpet that information all year long.

Get listed. Affiliate directories work well, so get listed in as many as possible and pay those that are worthwhile. Often, reciprocating links are all you need to offer. To attract the best performers, talk payouts, highlight impressive stats or try catchy headlines like "Top Affiliate Earned Enough Last Season to Take Rest of Year Off!" Most directories don’t offer much listing space, so make your sales pitch count.

Use the forums. Forums are a beautiful thing – think of them as the eBay feedback mechanism of affiliate marketing. They allow you to monitor affiliate concerns and provide an excellent opportunity to market your program. Buzz around the forums, abide by the rules, post when appropriate and be sure that your signature promotes your affiliate program.

Make it personal. Personal relationships with affiliates often begin at trade shows and other industry networking events through direct contact. When online, you can gather contact information by using freebies and give-aways as motivation. For example, offer T-shirts or publications in exchange for direct contact information.

Optimizing Your Program

With thousands of seasonal programs all claiming to be the best and attempting to clear obstacles such as being overlooked by network indicators, it’s imperative that awareness of your program rises above the noise. For a seasonal program to be a winner, it must be well-tuned. To achieve maximum performance, managers can use the following ideas:

  1. Evaluate all existing affiliate communications from sign-up to acceptance. Review and revise your program listing to sell the opportunity, not just the product. Adjust your welcome letter and carefully craft your first message so they are appealing.
  2. Review competition in and out of your own network. Sign up as an affiliate and join your competition’s programs. Examine messaging and compensation within those programs for strengths and weakness. Implement strategies to exploit the weaknesses of your competition. Use the information to increase the appeal of your program while reducing your competition.
  3. Determine the lifetime value of a customer and create the highest commission structure in your niche. Pay more and pay faster. Pay your best affiliates the most. Provide additional strategic information and offer customization. PPC players don’t have much time to test a seasonal program, so you can accelerate their acceptance and understanding by releasing specific ROI stats from your own PPC performance.
  4. Create program offers that are appropriate for differing business models. Loyalty, incentive, shopping and content sites may have different needs than those of email marketers. To help accelerate sales during the season, create tiered offers that reward affiliates with additional commissions when well-defined revenue targets are achieved. Be sure your reward structure is attainable and measurable.
  5. Assess and build compelling creative. Ensure that initial messaging and associated landing pages match for consistency. Eliminate extra clicks or distractions at registration and preserve the initial click through messaging throughout the experience to checkout.

With your engine tuned for best performance, it’s time to put team dynamics into play.

School Your Affiliates

Once you have affiliates, you must teach these new business partners how to sell your product effectively. They have the ability to generate traffic, but you have to show them how to deliver it for maximum conversion. Here are some helpful tips to get the job done.

Organize your approach into complete campaigns – define targets, duration and exact message, using your affiliate Web pages for emphasis. Produce a matching keyword list. Promote each campaign individually.

Separate affiliates into meaningful groups to quickly spot trends. Create "watch" groups so you can track performance and monitor activity. Consider grouping by like business models or by special promotion. Continue to reorganize and regroup as business conditions change.

Communicate specific selling opportunities and develop a messaging strategy around each campaign. Start a blog enabled with RSS, in lieu of an emailed newsletter, to keep affiliates informed. Give your affiliates sufficient notice to put a new campaign into play (some need up to a month’s lead time).

Motivate your affiliates. Contests make things fun, but more importantly they help keep your program top of mind all season. For maximum exposure, create a contest that anyone can win. Have a daily prize throughout the selling season.

Try to identify demographic shifts or new trends that might be happening, then communicate this new information quickly. As an example, Hurricane Katrina created new government initiatives that benefit survivors, which could affect the way consumers search for tax products. This made new keyword combinations such as "hurricane tax," "katrina tax relief" and "hurricane katrina tax forms" valuable.

When managing a seasonal affiliate program, remember it’s the off-season that’s critical to next year’s success. That’s when you should learn from the experience, evaluate performance, incorporate new technologies and make all necessary changes. Recruit, optimize and communicate – these are the keys for managing a topperforming seasonal program.

 

TODD TAYLOR manages business development for TaxBrain.com from Petz Enterprises in Tracy, Calif. He is a technology veteran and entrepreneur with more than 20 years in the industry. He studied economics at Carleton University and is a graduate of computing from St. Lawrence College.

Managing a seasonal program is akin to drag racing – lots of hard work goes into the preparation, the light turns green, then it’s over.

For a seasonal program to be successful, it’s crucial for its managers to think like affiliates. If you were a top affiliate looking for a program, where would you go and what would you want to hear? If you can get into the head of an affiliate, you can gain the perspective of a top performer, understand the tools necessary for success and learn how to win.

Attracting Valuable Affiliates

All of your affiliates are valuable, but the top performers will give you the highest return on investment. Forget the 80/20 rule (80 percent of revenue comes from 20 percent of affiliates). In 2005, for example, only 1 percent of TaxBrain.com’s affiliates generated 80 percent of affiliate revenue. Obviously some affiliates were better prepared before the season began. They most likely used the following steps to success.

Find the best program. Check out resources such as search engines, affiliate networks, directories, forums, events and other networking opportunities. Within these, look for the most compelling stories on potential earnings in terms of conversion rates, clicks per sale and commission structures.

Use the right keywords. Your program’s online presence begins by building affiliate pages optimized for keywords in your niche. Online marketing success means ranking high in the search results for your particular niche (such as "tax affiliate program"). Searching on Google for "affiliate program" yields 134 million organic results as opposed to 74 million for "top affiliate program." Paid search has a decent ROI, but you can also achieve meaningful results by site-targeting popular affiliate and webmaster hangouts, as well as home businesses and small-business portals.

Spread the word. Take advantage of communication opportunities available through your affiliate network. These include multiple category listings, newsletters, conferences and email marketing. Top-performing seasonal programs are often overlooked by the Big 3 affiliate networks (Commission Junction, LinkShare and Performics). This is because their indicators are heavily weighted with off-season trends. To overcome this, capture your performance results when it’s your time of the year and trumpet that information all year long.

Get listed. Affiliate directories work well, so get listed in as many as possible and pay those that are worthwhile. Often, reciprocating links are all you need to offer. To attract the best performers, talk payouts, highlight impressive stats or try catchy headlines like "Top Affiliate Earned Enough Last Season to Take Rest of Year Off!" Most directories don’t offer much listing space, so make your sales pitch count.

Use the forums. Forums are a beautiful thing – think of them as the eBay feedback mechanism of affiliate marketing. They allow you to monitor affiliate concerns and provide an excellent opportunity to market your program. Buzz around the forums, abide by the rules, post when appropriate and be sure that your signature promotes your affiliate program.

Make it personal. Personal relationships with affiliates often begin at trade shows and other industry networking events through direct contact. When online, you can gather contact information by using freebies and give-aways as motivation. For example, offer T-shirts or publications in exchange for direct contact information.

Optimizing Your Program

With thousands of seasonal programs all claiming to be the best and attempting to clear obstacles such as being overlooked by network indicators, it’s imperative that awareness of your program rises above the noise. For a seasonal program to be a winner, it must be well-tuned. To achieve maximum performance, managers can use the following ideas:

  1. Evaluate all existing affiliate communications from sign-up to acceptance. Review and revise your program listing to sell the opportunity, not just the product. Adjust your welcome letter and carefully craft your first message so they are appealing.
  2. Review competition in and out of your own network. Sign up as an affiliate and join your competition’s programs. Examine messaging and compensation within those programs for strengths and weakness. Implement strategies to exploit the weaknesses of your competition. Use the information to increase the appeal of your program while reducing your competition.
  3. Determine the lifetime value of a customer and create the highest commission structure in your niche. Pay more and pay faster. Pay your best affiliates the most. Provide additional strategic information and offer customization. PPC players don’t have much time to test a seasonal program, so you can accelerate their acceptance and understanding by releasing specific ROI stats from your own PPC performance.
  4. Create program offers that are appropriate for differing business models. Loyalty, incentive, shopping and content sites may have different needs than those of email marketers. To help accelerate sales during the season, create tiered offers that reward affiliates with additional commissions when well-defined revenue targets are achieved. Be sure your reward structure is attainable and measurable.
  5. Assess and build compelling creative. Ensure that initial messaging and associated landing pages match for consistency. Eliminate extra clicks or distractions at registration and preserve the initial click through messaging throughout the experience to checkout.

With your engine tuned for best performance, it’s time to put team dynamics into play.

School Your Affiliates

Once you have affiliates, you must teach these new business partners how to sell your product effectively. They have the ability to generate traffic, but you have to show them how to deliver it for maximum conversion. Here are some helpful tips to get the job done.

Organize your approach into complete campaigns – define targets, duration and exact message, using your affiliate Web pages for emphasis. Produce a matching keyword list. Promote each campaign individually.

Separate affiliates into meaningful groups to quickly spot trends. Create "watch" groups so you can track performance and monitor activity. Consider grouping by like business models or by special promotion. Continue to reorganize and regroup as business conditions change.

Communicate specific selling opportunities and develop a messaging strategy around each campaign. Start a blog enabled with RSS, in lieu of an emailed newsletter, to keep affiliates informed. Give your affiliates sufficient notice to put a new campaign into play (some need up to a month’s lead time).

Motivate your affiliates. Contests make things fun, but more importantly they help keep your program top of mind all season. For maximum exposure, create a contest that anyone can win. Have a daily prize throughout the selling season.

Try to identify demographic shifts or new trends that might be happening, then communicate this new information quickly. As an example, Hurricane Katrina created new government initiatives that benefit survivors, which could affect the way consumers search for tax products. This made new keyword combinations such as "hurricane tax," "katrina tax relief" and "hurricane katrina tax forms" valuable.

When managing a seasonal affiliate program, remember it’s the off-season that’s critical to next year’s success. That’s when you should learn from the experience, evaluate performance, incorporate new technologies and make all necessary changes. Recruit, optimize and communicate – these are the keys for managing a topperforming seasonal program.

 

TODD TAYLOR manages business development for TaxBrain.com from Petz Enterprises in Tracy, Calif. He is a technology veteran and entrepreneur with more than 20 years in the industry. He studied economics at Carleton University and is a graduate of computing from St. Lawrence College.

The Best Intentions

Effective self-marketing is the quickest path to success.

Whether you know it or not, you’re marketing yourself every day – to lots of people. You’re marketing yourself in a quest to make a sale, warm up a relationship, get a job, get connected, get something you deserve. You’re always sending messages about yourself.

Guerrillas control the messages that they send. It’s all about intention. Guerrillas live intentionally. Non-guerrillas send unintentional messages, even if those messages sabotage their overall goals in life. They want to close a sale for a consulting contract, but their inability to make eye contact or their confusing email message turns off the prospect.

Avoid Unintentional Messages

Unintentional messages erect an insurmountable barrier. Your job is to be sure there is no barrier. There are really two people within you – your accidental self and your intentional self. Most people are able to conduct about 95 percent of their lives by intent. But that’s not enough.

It’s the other 5 percent that can get you in trouble – or in clover. I’m not talking about phoniness here. The idea is for you to be who you are and not who you aren’t – to be aware of what you’re doing, aware of whether or not your actions communicate ideas that will help you get what you truly deserve.

Who do you market to without even realizing it? Employees. Customers. Prospects. Teachers. Parents. Children. Bosses. Prospective employers. Mates. Prospective mates. Friends. Sellers. Landlords. Neighbors. Professionals. Members of the community. The police. Service people. Family. Bankers. These people can help you or stop you from getting what you deserve. You can influence them with how you market yourself.

To market yourself properly, answer these three questions:

  1. Who are you now – if friends described you, what would they say? Be honest.
  2. What do you want out of life? Be specific for the best results.
  3. How will you know when you’ve reached your goals?

If you can’t answer these questions, you’re doomed to accidental marketing and spending your life reacting instead of responding, and the odds will be against you reaching your goals.

How do you send messages and market yourself right now? With your appearance, to be sure. You also market with your eye contact and body language, your habits, your speech patterns. You market yourself in print with your letters, email, website, notes, faxes, brochures and other printed material. You also market yourself with your attitude and ethics.

Again, you may not be aware of it, but people are constantly judging and assessing you by noticing many things. You must be sure your marketing message doesn’t conflict with your dreams. What are people using to base their opinions, to make their decisions about you? I’ve come up with more than 30 variables, but here are the top 10:

  1. Clothing
  2. Enthusiasm
  3. Neatness
  4. Tone of voice
  5. Energy level
  6. Eye contact
  7. Writing ability
  8. Spelling
  9. Business card
  10. Availability

You’re fully aware of your intentional marketing, and you invest time, energy and imagination into it, not to mention money. But you may be undermining that investment if you’re not paying attention to things that matter to others even more than what you say. These are things such as keeping promises, punctuality, honesty, demeanor, respect, gratitude, sincerity, feedback, initiative and reliability. People also notice passion – or the absence of it. They notice how well you listen to them.

How to Market Yourself

Now that you know these things, what should you do? Ben Franklin said that three of the hardest things in the world are diamonds, steel and knowing yourself. Here’s a three-step plan to get you started on the road to self-awareness and self-marketing acumen.

  1. Write a positioning statement about yourself. Identify just who you are and the positive things that stand out most about you.
  2. Identify your goals. Put into writing the three things you’d most like to achieve during the next three months, three years and 10 years.
  3. State your measuring stick. Write the details of how you will know when you’ve achieved your goals. Be brief and specific.

To guerrilla market yourself, simply be aware of and in control of the messages you send. Do so and your goals will be a lot easier to attain.

Look at your policies, procedures and daily management practices. What behaviors are you measuring and rewarding? Examine your purchasing and pricing practices – these impact your brand far more than anything you might say in your ads. Finally, look at your website through the eyes of your customers – you’ll begin to glimpse the truth of your brand.

Taking Action

Examine the soul of your company through your daily actions, not your beliefs, and you’ll soon be able to write branding ads that will ring like a bell. Behold the keys to successful brand writing:

Truth in advertising. Bad ads are filled with phrases you like to say about yourself. Good ads are filled with what your customers say about you when you’re not around. To be successful, your branding ads must sharply echo the word on the street about your company. Jeff Bezos, CEO of Amazon.com, got it right when he said, "It has always seemed to me that your brand is formed primarily not by what your company says about itself, but what the company does." You’ll discover the truth behind your brand when you can explain why customers come back.

Overstatement is passé. Offer proof to back up what you say, even if it lies only in your customers’ experience or assumptions. Branding isn’t just about the facts: People buy brands with their hearts as well as their heads. Brand loyalty is built on the fact that our purchases remind us – and tell the world around us – who we are.

Search for evocative words. Sniff out overused phrases. Stimulate customers’ minds with thoughts more interesting than the ones they were previously thinking.

Be consistent. The consistent use of the same colors and fonts is often called "branding." Your brand should remain constant in all communications from your company, including your website, email, brochures, business cards and so on.

Brands are built on consistency, the roots of which are patience and attention to detail. It’s going to take a lot longer to build your brand than you feel it should. Here’s the bottom line: If you think you’re going to be able to measure brand progress at the end of 12 short months, you’re dreaming. Brand development isn’t measured in months, but in years. Good luck with your brand.

Remember always that you are your own brand, and that if you’re not guerrilla marketing yourself, you are falling short of what you ought to be doing.

 

JAY CONRAD LEVINSON is the acknowledged father of guerrilla marketing with more than 14 million books sold in his Guerrilla Marketing series, now in 41 languages. His websites can be found at www.gmarketing.com and www.guerrillamarketingassociation.com.

Scrutiny on the Bounty

As every good bounty hunter knows, capturing your target requires exacting execution of a well-designed plan. But unlike intrepid fugitive hunters such as reality television star “Dog” Chapman, earning sizable rewards by corralling customers online doesn’t require risking life or limb.

Instead of offering commissions paid in nickels and dimes, bounty programs attract a growing number of publishers by handing out dollar rewards of tens and twenties. Programs offering substantial bounties for acquiring customers and qualified leads are now among the most lucrative opportunities for publishers. However, the increasing competition among bounty programs requires publishers to rigorously scrutinize leads and to be more aggressive in pursuing consumers.

“The biggest money in affiliate marketing is bounty programs,” says Beth Kirsch, group manager of affiliate programs at LowerMyBills.com. Kirsch, who says publishers can earn up to $75 for delivering a credit card customer, says bounties provide the greatest opportunity for rapidly increasing revenue “without going for porn or gambling.”

Companies on the hunt for consumers will pay hefty premiums “because advertisers are willing to pay up front for the lifetime value of the customer,” Kirsch says. Unlike retail sites that focus on capturing a single transaction, the companies paying bounties are looking to build an ongoing relationship with a customer. The most popular industries utilizing bounty programs include real estate, personal finance (such as credit cards and loans) and subscription services, according to Kirsch.

Kirsch says that while most bounty programs pay commissions after a transaction is completed, companies such as Netflix and Audible.com will pay out merely for getting people to sign up for free trials. “The amount of money flowing through [bounty programs] is amazing,” she says.

Leading to Search

The prospect of earning lucrative commissions is prompting companies to increase their online advertising as well as the incentives offered to attract consumers. Sites such as FreeiPods.com that are relying on search marketing to acquire new customers now make up 6 percent of total online advertising revenue, according to the Internet Advertising Bureau. During the first half of 2005, online advertising revenues for lead generation and customer acquisition rose by more than 200 percent over the prior year to $347 million.

“Paid search is a focus for customer acquisition,” says Shar VanBoskirk, a consulting analyst with Forrester Research. VanBoskirk says that search marketing is an effective tool for bounty sites in industries such as travel because it “captures a person at their point of interest.” The increased spending is raising the cost of keywords and encouraging companies to become smarter at search marketing, she says.

To earn these bounties, publishers are aggressively pursuing consumers by promising cash incentives and free popular electronic devices such as iPod music players and Xbox 360 game consoles to those who will fill out a credit application or subscribe to a publication or service. These sites have found that consumers are willing to provide personal information as well as refer several friends in order to receive a device worth up to $400.

However, VanBoskirk says that while some marketers do not seem to be concerned with how their publishing partners attract an audience for their subscription or financial service, they may be putting their customer relationships at risk. “You could turn away a loyal customer if you were associated with a bad brand or screwed-up message,” says VanBoskirk, who recommends that marketers retain some control over the incentive process.

Service and subscription companies looking to acquire customers are among the top individual Internet advertisers. According to Nielsen//NetRatings AdRelevance advertising data for November 2005, telephony company Vonage spent more than any other company in online advertising, while LowerMyBills.com, BellSouth Corp., Netflix, Verizon and QuinStreet were also in the top 10.

Interest in bounty programs has spurred the development of specialty performance networks, such as QuinStreet, Adteractive, AzoogleAds and MetaReward, that are focused on customer acquisition and lead generation. These networks are bypassing the largest networks and offer generous bounties to publishers who can funnel traffic to their clients.

“To the extent that you can deliver more quality leads, advertisers are willing to pay for them,” says J.B. Orecchia, president of MetaReward.

Detailing the Demographics

Orecchia says the increasing competition among bounty programs is prompting marketers to collect more extensive demographic and lifestyle information so that they can match consumers with advertisers. MetaReward collects date of birth, gender and address information as part of their registration process. The company, which along with Lower MyBills.com and PriceGrabber.com are subsidiaries of Experian Interactive, analyzes the information and delivers targeted advertisements for its advertising clients.

“Deriving positive return on investment from cost-per-lead/account programs relies on the marketer’s ability to match the consumer profile with the type of customer the advertiser is looking for,” according to Orecchia. “It all comes down to yield management,” he says. “Marketers must identify the characteristics of the programs that maximize the quality of the leads.”

Orecchia says his clients do not want to filter out bad data themselves, so publishers must scrub the lead data at the same time it is being collected. MetaReward relies on technology developed by parent company Experian to verify the authenticity of address information as well as remove duplicate leads in real time so that the consumer experience is not disrupted.

Publishers need to be diligent in filtering consumer data because consumers are being more creative in trying to scam companies out of free goods, according to Greg Morey, executive vice president at marketing consulting firm GR Wyse. “The free iPod generation prompted people to [find new ways] to beat the system.”

Morey says despite improvements in screening submissions, there is “still a high amount of bad data” being submitted to lead-generation sites. He says the additional techniques for weeding out spurious information, including email verification, double opt-in steps and survey questionnaires, are increasing the cost of processing leads. In recent years the cost to publishers of verifying a lead has risen from approximately 50 cents to more than $2.

Data verification companies such as TARGUS info use multiple databases to check the authenticity of information in real time. These databases not only verify that the phone numbers and addresses are valid, but also that they match the names of the person filling out the form, Morey says. After a form is submitted, TARGUS info checks the data and, if it is valid, consumers are sent to a landing page from the advertiser.

Morey says competitive verticals such as travel companies, vitamin supplements and mortgage lenders are willing to pay the additional cost to reduce the number of bogus leads.

Media Get Their Share

Publishers and broadcasters are also receiving bounties by converting audience members into leads. Technology from LiveDeal enables newspapers and radio stations to host classifieds on their websites and receive commissions for leads, according to Steve Harmon, vice president of corporate development at LiveDeal.

Harmon says publishers that are losing revenue from classifieds to companies such as Monster.com and Craigslist can earn between $10 and $30 for a lead on a vehicle, and between $30 and $300 for a real estate lead. LiveDeal partnered with radio and advertising giant Clear Channel Communications to create classified site SFBayAuto.com. ClearChannel promotes the classifieds on its six San Francisco Bay area radio stations, and the media companies receive a bounty when someone clicks on a vehicle listing and then fills out a form with her contact information.

LiveDeal provides all of the technology, including the classified listings, e-commerce and images of the items for sale, according to Harmon. The lead-generation service, which went online in 2005, enables media companies, which already collect extensive demographic information about their audience, to connect their fans with products that are likely to be of interest.

Turning Leads to Clicks

Performance network Kanoodle has developed a program for niche publishers who can earn small bounties by sharing information about their site’s visitors with larger publishers. BrightAds, which became available in December 2005, is a third-party cookie program that uses information collected on a website to generate relevant ads on another, according to Doug Perlson, Kanoodle’s chief operating officer.

For example, a golf blog or enthusiast site will install BrightAds software, which places cookies on consumers’ computers to record their activities while on the site. Should that consumer then go to a Kanoodle partner site such as MSNBC.com to check the weather, the cookie information would be retrieved, and they would be shown a golf-related advertisement.

“Third-party cookies are going to be the lifeblood of publications that offer free content,” Perlson says.

When a consumer clicks on an ad, Kanoodle gives 5 percent of the revenue from the publisher to the referring web- site, according to Perlson. Because BrightAds has no exclusivity requirements and does not conflict with existing advertising programs, publishers can earn additional revenue without having to modify their current relationships, he says. And while getting a sliver of the PPC commission (Perlson says the money comes from Kanoodle’s share, not the publisher’s) may not sound like much, third-party cookies can be delivered to all consumers who don’t actively block them.

This “stealth” referral program leverages the information collected by niche sites with dedicated audiences to deliver ads to general interest sites, according to Perlson, who expects consumers to become more comfortable with third- party cookies as they realize the benefits of being exposed to more targeted ads. To address privacy concerns, Kanoodle deletes the cookie information after a maximum of 30 days, and sometimes in less than a week.

Forrester’s VanBoskirk says that while BrightAds helps larger publishers to optimize the yields from the ad programs by targeting customers, some consumers may be concerned when they realize that behavioral information is being shared among sites. Consumers are gradually learning that visiting sites utilizing cookies can provide a better experience, but the cookie placement has to be made known to consumers. “Responsible publishers will want to explain that they are collecting cookies,” VanBoskirk says.

She also notes that some small publishers may have reservations that participating in third-party cookie programs could help competitors. “The biggest concern is that a third party will be selling data to another advertiser,” she says.

Going Offline

Publishers in industries that are completed by offline transactions have been limited to pay-per-lead programs, but new technology allows bounties also to be paid on a pending-sale basis. Because advertisers control the offline sales process, fraud is a concern for publishers, according to Jackie Bates, Web marketing director for affiliate network LinkConnector.

LinkConnector’s pending-sale technology enables publishers to follow a campaign’s performance by tracking the progress of the consumer-seller activity until it is completed, Bates says. LinkConnector monitors the progress when leads become pending sales, such as vacation packages or jewelry where sales representatives are often needed to close the deal, she adds.

LinkConnector passes a completed call form from the publisher to the seller, which initiates the monitoring process. The network provides publishers with status reports and processes the payments to guarantee that publishers are compensated, according to Bates.

Bates says the technology gives merchants that do not have online shopping carts more flexibility in setting commission structures. LinkConnector “enables more merchants to come into the affiliate marketing game,” Bates says.

Bounty programs are popular with publishers because of the substantially higher commissions offered for capturing new customers. New tools that clean up lead data and collect more extensive demographic information will make them more useful both to advertisers and consumers.

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 MIT’s TechnologyReview.com.