The Passion of the Site

All the planning in the world won’t make up for a lack of interest.

My financial services affiliate site has hit the skids. Let’s take stock and I’ll show you how it ended up in the poorhouse.

Before I launched the site, I did my research. I discovered that the highestpaying merchants in Commission Junction’s Financial Services category rose to the top when results were sorted by sale. In early February of this year, for example, E-Loan paid a hefty $150 commission per funded motorcycle loan and $60 to $90 per funded auto purchase loan. Commissions for a qualified mortgage refinance application were between $50 and $75.

E-Loan defines a “qualified application” as one with “all necessary fields filled in, including a valid name and social security number for a loan product that can be offered by E-Loan or one of its partner lenders.”

Talk about easy money! Referred visitors to the E-Loan site don’t have to buy a thing. As long as they can type their information correctly into the application form blanks, you could be raking in the big bucks.

In addition, I found that Google AdSensor did especially well with financial sites. When Google AdWords recommends that advertisers place a minimum bid of $5 for keywords like “credit card” and “loans” just to get their ads displayed, AdSense revenues on the same terms are rich and rewarding.

And goodness knows there was no shortage of credit demand. According to Overture’s Keyword Selector Tool, almost 900,000 surfers searched for terms including the phrase “credit card” in December 2005. About the same number searched for “loan,” while the keyword “mortgage” topped the charts with 1,317,728 queries in the same month. One might conclude that the number of credit seekers is inflated during the Christmas spending frenzy. But how many more people need credit solutions when the bills arrive in January?

Furthermore, the market for credit certainly showed no sign of decline. According to an ACNielsen survey released on Jan. 24, Americans are among the world’s most cash-strapped people. After basic living expenses are paid and discretionary items bought, nearly a quarter of Americans (22 percent) have no money left at the end of the month. At 19 percent, Canadians came in a close third behind Portugal, which tied the U.S. for first place.

Let’s review: high commissions and a huge, hungry market – that should have been a one-way ticket to Easy Street. Maybe the site was the problem.

The Right Stuff

When you visit the site, you see a nice design that includes the requisite number of pictures of people jumping for joy.

Site navigation is consistent throughout and the categorical structure is simple, limiting a visitor’s choice to credit cards, credit repair, credit reports, debt consolidation and loans on the first tier. Specific credit card and loan types are made available on the second tier.

Because we didn’t want to overwhelm visitors with too many complicated options, an Editor’s Top Pick is included at the top of every product page, and the number of choices per category is limited.

Informative articles including “What To Consider Before Approaching Lenders” and “5 Killer Steps to Avoid Credit Card SCAMS” are posted to educate and motivate users to visit merchants who will help ease their financial burden. Credit card and savings calculators are available to figure out how long it will take to pay off loans and how much interest can be earned from saving. A glossary defines unsecured credit card, balance transfers and more than 35 other important financial terms and concepts. Contact, Privacy Policy, Disclaimer and About Us pages are all in place.

Last but not least, there is an opt-in form on every page that offers a chance to sign up for my newsletter, “FREE Money-Saving Tips & Credit Advice.” Subscribers receive an eight-part e-course delivered over a period of three weeks. The e-course covers topics such as applying for credit, mortgage lending and debt consolidation. It also goes into moneysaving hints and tips, how to repair bad credit, and saving for retirement.

So far, so good. The site is rich in information and other incentives to keep visitors interested. After receiving the last installment of the e-course, however, subscribers never hear from me again.

What a mistake! Especially since building relationships by regularly communicating with my subscribers has always been the lifeblood of my affiliate marketing business. Even my merchant partners confirm that my lists are some of the most productive they’ve ever seen.

Readers of my affiliate marketing newsletter or book will attest to the fact that I harp constantly about the need to establish a trust relationship with their audiences. During site reviews, I tell webmasters who haven’t placed a lead-capture form on their site to either build a list or go out of business. Those who act on the warning see their conversion rates soar. For example, one webmaster whom I convinced to install a lead-capture form later remarked, “Holy cow dung! I’ve already got 1,000 subscribers and make $2,500 whenever I send a broadcast. Thank you, Ros!”

OK, he didn’t say “cow dung,” but the rest of the message is verbatim.

The Root of the Problem

So, why didn’t I follow my own advice and write a regular newsletter for my credit and loan site?

Well, I discovered that chasing the almighty dollar doesn’t work. When I ignored my first rule of business, “follow your passion,” the second rule, “build relationships,” was impossible to follow without unacceptable compromise.

Although I am passionate about helping people improve their financial situation and can write all day long about wealth-building strategies and techniques, the dry-as-toast subject of credit and loans doesn’t exactly fuel my fire. Call me Pollyanna, but the thought of encouraging debt just feels wrong.

While I could hire a ghostwriter to write a year-long broadcast series, proofreading the material would be a huge yawn, and this Pollyanna would balk at the sham. Worse, I’d live in perpetual dread of having to research and answer subscribers’ questions.

Boredom, drudge work and dread. My goodness, but doesn’t that sound exactly like a J-O-B? What a foolish choice to make when I already had a proven formula for highly profitable affiliate sites.

Learn from my mistake. Pick a topic you love, chat with newsletter subscribers who share your interests, and then say, “Goodbye debt, hello AAA credit ratings!”

By the way, if you are passionate about the credit and loan niche, I know of a slightly-used website in which you might be interested.

ROSALIND GARDNER is a super-affiliate who’s been in the business since 1998. She’s also the author of The Super Affiliate Handbook: How I Made $436,797 in One Year Selling Other People’s Stuff Online.

From Maui, With Love

A comprehensive but dated Hawaiian travel site gets a modern makeover.

Break out your favorite Hawaiian shirt and toss a lei around your neck – we’re headed to Maui! Well, Maui.us, anyway. Unfortunately, when we found the three-year- old online travel guide, it was wilting faster than a week-old hibiscus. But don’t fret – we can revive this online travel site.

They say content is king, and I agree. If you want to garner a loyal audience, you need to present the content that audience is seeking (with frequent updates, I might add). Maui.us CEO John Bottomley said he spent thousands of hours building his site. With an interactive map, a comprehensive activity guide, a meticulous hotel directory and a slew of other exclusive features, Maui.us certainly has all the content it needs to become “the major travel gateway to the island of Maui” that Bottomley always dreamed it would be.

Still, Maui.us is hardly generating the new traffic, repeat visitations or conversions Bottomley anticipated when he launched the site in 2002. So while content may be king, let’s not forget to invite conversion design, his lovely and talented queen, to the luau. Conversion design is the process of designing to meet business objectives, such as converting traffic into sales.

The Problems

In order to live up to its potential, Maui.us needs to exude the authority, trust and credibility that people expect from a major travel gateway. The site must also instantly communicate its compelling offerings and make it crystal clear why visitors need them. Finally, to make the conversion design transformation complete, we need to place more emphasis on the site’s top moneymakers. Bottomley says that these are, in order of importance, the custom vacation builder, hotel bookings and the activities guide.

The bottom line is that Maui.us lacks visual appeal, which can be assessed within 50 milliseconds, according to a report published in the Behaviour & Information Technology journal. That suggests that Web designers have about 50 milliseconds to make a good impression. Keeping that in mind, here’s a list of shortcomings we can remedy to make those first 50 milliseconds really count.

Outdated appearance. The site’s outdated graphics and cliche island imagery leave users wondering whether the site is still active. Savvy travelers today are flooded with online options, and they refuse to waste their time on a site that might be outdated. Remember, they are looking for information and resources they weren’t able to find at the first five Maui sites they visited. We need to make visitors feel confident that Maui.us can provide the answers they need.

Inconsistent and cryptic site wide navigation. In our last two makeovers, we pointed out a common problem: too many items in the main navigation. While that is also an issue at Maui.us (count a whopping 12 items), the even bigger problem is inconsistent placement and appearance of the main navigation. On an 800 x 600 browser, you actually have to scroll down to see the nav. What’s more, the placement and arrangement of the links changes from page to page.

Then there are the cryptic icons; so cryptic that users “don’t think to click on them,” says Lisa Ramos, sales director for Sostre & Associates. (Ramos just happens to be planning a trip to Hawaii in a few months, making her exactly the audience that this site needs to woo.) “The icons just look like part of the design,” she notes. “At first, I thought the site only offered hotel and air search. That discouraged me from exploring the site further.”

Wide text columns. It’s hard enough to read text online. By taking your column of text and stretching it across the length of your Web page, you’re essentially guaranteeing that no one will read it. Just for fun, here are the numbers for some top information websites: MSNBC articles feature text columns that are 460 pixels wide, BBC articles post at 405 and Yahoo news stories come in at about 550. Compare that to Maui.us, which stretches its text columns to almost 700 pixels wide. As a general rule, the maximum width for columns of text should be around 500 pixels.

Poor use of photos. Occasionally you can get away with using poor images. I’ve even been known to discourage the use of gratuitous images in conversion design. But come on – we’re talking about Maui here. If there was ever a time to leverage photos and imagery, this is it. Images help to create an emotional response, and that’s what people want when they’re planning a Hawaiian vacation. After all, it’s not often that someone needs to make a trip to the middle of the Pacific Ocean, so we must encourage the emotional desire to take the trip of a lifetime.

The Solutions

Now that we’ve identified the issues, let’s get to work. Our first step was to go to iStockphoto (www.iStockphoto.com). When you need great images, and you have a limited budget, this is the place to go. iStockphoto offers professional-quality photos and illustrations for ridiculously low prices (about $1 each for Web quality). A search for the term “Maui” yields 462 mostly professional images of the stunning Hawaiian isle. After downloading a few that didn’t work out, we settled on a relaxing scene from Big Beach, Maui.

Next, we whittled the navigation options down to five. We kept the links to the seven other items, but we worked them in toward the bottom of the page to reduce viewer confusion. Next, we placed the main navigation right at the top of the page, like most websites, so it wouldn’t jump around as users moved from page to page. Last but not least, we worked a little conversion design magic to give the site a more current look, while maintaining our focus on the big three income generators. After all, that’s what conversion design is all about.

When Bottomley submitted his site, his original goal was to “make a top-ranking site that MUST be as beautiful as the natural beauty of Maui itself!” Of course, meeting that challenge is surely impossible (have you ever been to Maui?), but I believe we’ve brought the site much closer with this new design. The real proof will come with the increased number of users that decide to use Maui.us for vacation planning.

Would you like to get a free home page or landing page design for your website and see it featured in this article? 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 Miami-based consulting and development firm that also promotes affiliate programs on its network of websites, including Audio-BookDeals.com, EquestrianMag.com and iTravelMag.com. Sostre is currently working on a book about his concept of conversion design, scheduled for release in summer 2006. For more information, visit conversionpublishing.com.

The Importance of Being Creative

Creativity was not an inherent talent in Neanderthal man. It was, fortunately, part of our makeup by the time homo sapiens came into being. People may not think they have the capacity to be creative, but Michael Ray, a Stanford University professor who teaches a course on this subject, disagrees. He contends that creativity exists within everyone, including guerrilla affiliates.

Professor Ray believes that when people can’t tap into their creativity, that doesn’t mean it doesn’t exist. Instead, it means that the creativity is being suppressed by what he calls the voice of judgment – what I call the inner censor. That’s what gets the blame for destroying self-esteem and slowing down sales by affiliates.

According to Ray, there are five qualities of creativity: intuition, will, joy, strength and compassion. Four tools stimulate those qualities: faith in your own creativity, absence of judgment, precise observation and penetrating questions. He and I agree wholeheartedly that creativity is not one great eureka moment that produces a brilliant idea. Instead, it is a way of life.

That’s the way it ought to be with every guerrilla affiliate. Almost every creative professional knows very well that true creativity is not the result of inspiration, but instead comes from hard work and focus. I’ve authored or coauthored 44 books, and not one of them has come from a moment of inspiration.

If I waited for that flash of inspiration, I’d still be laboring over page one of my first book. The idea is to be able to create by reaching deep into yourself and not to wait for a bright light to flash inside your head. If you do opt for that bright light, you’re in for a long, dark wait.

Memes and Marketing

Your job as a guerrilla affiliate is to come up with a winning meme – a symbol that conveys an idea, such as international traffic symbols do. Unlike a logo, your meme should be one that not only identifies your business and communicates something about the quality that you offer, but expresses it in terms that suggest a benefit.

If you’re looking for creativity heaven, you’ll find it right inside of yourself. And you’ll see that your meme will not only be the result of your creativity, it will also serve as the nucleus of creativity for all your future marketing.

Would the great artists, musicians, dancers and writers throughout history have been creative guerrilla marketers? My guess is that they would have – because they did not wait for inspiration, but instead knew where to find it inside of themselves.

A powerful meme is of extreme value to a company that markets online because it conveys at a glance what that company is about. In addition, it can be used on a website and as part of a link. But many online marketers are so wrapped up in technology that they are accustomed to finding their inspiration outside of themselves rather than within. After all, it’s outside of themselves that technology has always resided.

But the rules are different for creativity with true guerrilla affiliates. It resides inside of them – if only they’d look long and hard enough.

The Making of a Meme

In the mid-80s, the telecommunications wars were being waged with ferocity and nonstop telemarketing. All the phone companies had been striving for a point of difference. My guess is that some copywriter in some ad agency was one of many working to give his or her client an edge.

Research showed that one of the benefits that could be offered by a phone company was clarity of sound. Said copywriter most likely pondered this concept and then tried to recall how people refer to clear sound. “So quiet, you could hear a pin drop” came to mind. That spurred the birth of Sprint’s meme, a graphic depiction of a pin dropping next to a telephone, which immediately suggested sound quality.

Since that time, Sprint has been using its meme wisely and consistently, in true guerrilla fashion. Even when the company merged with Nextel, the pin-drop meme was blended into part of the new logo. Ideally, Sprint will be able to stay with that meme for a long time, or at least until research shows that clear sound is taken for granted. Unlike Y2K, which was a short-lived meme, the pin dropping can be a meme with longevity – the best and most powerful kind.

The tale of Sprint is one of creativity in action. It should serve as inspiration to you as an affiliate. That copywriter was probably not aiming to win awards or accolades. Instead, the motivation was to communicate a meaningful benefit to consumers, something instantly conveyed by the visual of a pin dropping. In just a flash, viewers and readers got the point – no pun intended. This kind of creativity is rare. But it’s the kind you’ll need in our increasingly competitive marketing environment.

The Meaning of Creativity

Because creativity is so misunderstood in marketing circles, astonishing sums of money are wasted. Truly creative marketing does not have to be attractive, but should come on strong to key prospects, attractiveness aside. It takes into consideration the lifetime value of a customer rather than the instant gratification of a quick sale.

My advice to you as a guerrilla affiliate is to trust the creativity that you already have and use it to communicate with your prospects and your current clients. Don’t think that it is not in your possession, because it definitely is – and if you use it, you’ll have an enormous edge over those people who think they are not creative.

Remember that for an affiliate, the true measure of creativity is profitability. If your communication efforts garner compliments, earn sales and win awards, but don’t generate profits, they are not creative. If your communication efforts result in pats on your back and high fives, but don’t generate profits, again, they are not creative.

Creativity for affiliates is proven when the bottom line gains beauty. All of your creativity must be directed toward accomplishing this – and it is not easy. I have had many clients enjoy record-breaking numbers of responses to their offers, record-breaking sales figures and record-breaking traffic to their sites, but they were losing money as those things happened. That is not creativity. That is not guerrilla marketing.

These people took their eyes off of the bottom line and focused on the wrong criteria. I hope you will always maintain your bottom-line focus and realize that it is that very line that is the lifeblood of your business. It is the reason you are in business in the first place.

As an affiliate, true creativity is your shining light toward increasing your revenue. Let it shine. And let those revenues reflect it.

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 website is www.guerrillamarketingassociation.com.

Relationship Manager Needed

Connection, communication and commitment are the cornerstones of a good affiliate marketing relationship.

I’m looking for someone to share my life with. My life is busy, complicated and filled with people who are looking to me for advice on relationships. I spend all day helping others make meaningful relationships, only to come back the next day and start all over again. I’m not in it to make a match for myself, but to help everyone around me make a match. Why, you may ask. The answer is quite simple: As an affiliate manager, that’s my job.

I manage affiliate marketing relationships for an online personals site. I’ve managed affiliate relationships for a number of years, and I’ve come to realize that what I do for work feels a lot like dating. For instance, every day I search for someone special who shares my goals and is willing to work as hard as I am to reach them. I look for someone who knows that an affiliate relationship must be built on communication, and sometimes compromise. I want to find someone with whom, in the end, I hope to make a successful match to ensure a long-term commitment.

As an affiliate manager, I recruit people and companies to join my program, and these affiliates recruit others to join the site. These two objectives are inexorably linked. The stronger a bond I create with my affiliates, the harder they will work for me. I believe in my affiliates and, above all else, I believe that I should invest as much as I can into establishing quality affiliate relationships.

I would like to share five essential tips that have helped me build successful and profitable relationships with my affiliates.

Provide Attractive Creative

It is important for an affiliate program to have fresh, well-designed creative in a variety of sizes and styles. Many affiliates judge the value of a program by the way its creative looks. It’s important to remember that a program’s creative reflects not only on the quality of the program, but also on the quality of an affiliate’s site. After all, affiliates’ sites are your first line of defense, and establishing trust and rapport with their visitors is vital.

In a lot of ways, this is like searching through your closet and picking out your best-looking outfit, getting a haircut and washing the car before you pick up a date for a nice night out. If you don’t look like you care about how you present yourself or the way you feel about your affiliation, it’s going to be difficult for your relationship to take root and bloom.

Communicate

Communication is the cornerstone of any great relationship. Not only does communication take patience, it also requires that we listen to the needs and concerns of others; it’s a two-way street. Affiliate managers need to make sure that they ask their affiliates for tips and suggestions and give advice accordingly.

If something is working well for your company, share it with your affiliates. If you’re an affiliate stuck in a rut, call your affiliate manager and talk to them about looking at your site to find ways to push the needle. In the words of recently retired Loyola University Chicago professor John Powell, “Communication works for those who work at it.” If you work at communicating with your counterparts, you will be able to increase your earnings and give your affiliates incentive to remain loyal to your program.

If you work with a network that does not share affiliates’ personal contact information such as phone numbers and email addresses, this may be a little more difficult. However, you can still make sure that you provide affiliates with the easiest ways for them to contact you. Give them all of your email addresses, phone numbers, instant message handles and, if you operate a blog, the blog’s URL. But don’t let that be all. Most networks still allow you to send out emails, newsletters and promotional offers, so take advantage of this. It is important to make sure that your communication is of the highest quality and will add value to your affiliates’ promotional efforts.

Be Available and Accessible

I am constantly receiving email and phone calls from affiliates who are so grateful that we make ourselves available to them. Nearly every night before I go to bed, I check my email; when I have new messages, I try to respond to them as soon as possible. A number of our affiliates run their sites as a side business and usually work on them after-hours. Therefore, if I can expedite my responses and make an affiliate’s work easier, our program will benefit.

Be Honest and Up Front

Never make promises you can’t keep. This is the quickest way to destroy relationships. When you are honest and up front about expectations and goals, both sides will be more willing to foster that perfect team of manager and affiliate. Give More Than You Receive In a very real way, being an affiliate manager is like being a big brother to hundreds of people. My job is to fight for the needs of my affiliates. If an affiliate needs more creative, then it’s the manager’s job to make sure the affiliate gets it. Above all else, managers should always be looking for ways to give more to affiliates – more time, more commissions, more of whatever they need.

Gone forever are the days when affiliate managers and affiliates could ignore one another and remain successful. Relationships in the affiliate marketing world take a lot of work and must be managed well in order to succeed. If you want your affiliates to work for you, start working for them. Do more than send monthly newsletters or mass emails, although those are a good start. Constantly review affiliates’ sites and look for ways to improve them or to help affiliates with any errors they may not be aware of. Then call each of your main affiliates and those with potential to be top affiliates. Develop that personal relationship and help them to grow their programs.

We would be smart to keep in mind the words of entrepreneur and author Dr. John C. Maxwell: “If your focus is on what you can put into people rather than what you can get out of them, they’ll love and respect you – and those attributes are great foundations for building relationships.”

JAMES GREEN is customer acquisitions manager and heads up the affiliate program for MingleMatch, Inc., a division of Spark Networks plc. Originally from Utah, Green formerly worked for 10xMedia and 10xMarketing.

New Network Flavors

The affiliate network menu is expanding to offer many more options than just vanilla, chocolate and strawberry.

Call them what you wish – ad networks, sub networks, CPA networks, CPA ad networks. No matter the name, these aggressive challengers are mounting pressure on the “Big 3” affiliate networks.

CPA ad networks, which use a cost-per-action payment model, are providing increased competition, which is likely to mean publishers will benefit from more choices, bigger payments, a wider range of potentially lucrative offers and what some observers claim is a more nurturing environment.

Affiliate consultant Shawn Collins refers to ad networks as the “hybrid of affiliate marketing – part merchant and part affiliate.”

Like traditional affiliate networks, CPA ad networks rely on publishers willing to promote their advertisers’ offers. But unlike their cousins, ad networks act more like direct CPA-deal brokers and generally focus on lead generation, registration-based offers and bounty programs. In addition, CPA ad networks often don’t require start-up fees and advertisers to prequalify, thus lowering the barrier to entry. It’s estimated that one needs approximately $5,000 to get a CPA network off the ground.

However, many claim the life span for the bulk of these emerging ad networks is limited and this crop will never be able to truly compete on a larger scope with the bigger established networks such as Commission Junction, LinkShare and Performics. “

CJ started in 1999 and the landscape has changed over the last six and a half or seven years,” says Kerri Pollard, director of publisher development at Commission Junction. “There’s been an increase in competition and new CPA networks.”.

Some affiliate managers argue that CPA networks fail to add value because they poach advertisers who are already in merchant affiliate programs. Others insist CPA networks add tremendous value because they attract new and unique advertisers who in turn, deliver new valuable customers.

Regardless, CPA networks are emerging as major players in the online marketing world. These marketing companies have direct access to groups of advertisers who, through a wide array of techniques, have the potential to drive a high volume of clicks, sales and new customers.

Maybe that’s why you can’t attend a conference or trade show related to online marketing without seeing the booths of the exhibit hall jam-packed with CPA ad networks looking to woo affiliates and garner some attention.”

Who’s on First

With so many players in the game, it’s difficult to keep tabs on everyone. Some well-known current networks include CPA Empire, DirectLeads, Endai Worldwide, Adteractive, Metarewards, The Vendare Group, XY7.com, YFDirect, eMarketMakers and TheBizOppNetwork. In addition, several new ones are popping up nearly every week.

In 2005, many of the major players gained a bigger foothold by partnering with other companies. Affiliate Fuel, also known as Thermo Media, LLC, was acquired by Experian in April. PrimaryAds was bought by Think Partnership for nearly $10 million. And ValueClick purchased Web Clients for $141 million.

For affiliates, much of the appeal of these ad networks is the size and frequency of payments. Affiliate networks usually pay on a monthly schedule or when a certain revenue level has been achieved, whereas CPA networks typically pay affiliates weekly so they don’t need to float the costs of advertising or, in the case of incentive sites, the costs of the incentives themselves. CPA networks often negotiate top-rate commissions for their publishers. In many cases, these deals are much better than what a publisher can negotiate from the merchant’s affiliate manager.

A post on the ABestWeb.com forum from an affiliate sums up the appeal of CPA networks:

“As an affiliate, I love them because they often pay considerably higher commissions than the major networks, they often pay quicker, and most don’t allow reversals,” writes Michael Coley, president of AmazingBargains.com.

While the affiliate appeal is high, some downsides to dealing with ad networks exist, including poor practices, such as cookie stuffing, adware, spyware and spamming. “

The biggest problem I’ve had is that campaigns will get canceled without any notice sometimes, so I end up having to find another source and switch out my links,” Coley continues. “I don’t think any of them are ‘clean.’ Most seem to work largely with email marketers, some of which are notorious for spam.”

Merchants claim to be somewhat cautious for a variety of reasons. Although CPA networks reduce the risks for publishers while maintaining the direct-response needs of the merchant, the merchants have no control over how their offer is presented. “

As a merchant, you don’t know who is promoting you, and the CPA network is not going to tell you, because you’d cut them out of the deal if they did,” according to Collins. “

What I like least about CPA networks is they build loyalty between the network and the affiliate with merchants’ money,” says Beth Kirsch, group manager of affiliate programs at LowerMyBills.com.

J.T. Stephens, director of auctions marketing and business development at Overstock.com Auctions, offers some tips for advertisers dealing with CPA networks:

  • Communicate your business needs;
  • Provide networks with an email suppression list of marketing companies/ affiliates on your blacklist and a list of your top affiliates that the network cannot contact;
  • Be on the alert for unsavory affiliate activities (adware, spam, spyware); and
  • Do not let the networks determine how to market your offer.

Many CPA network advertisers are huge proponents of free iPod offers and promotions. That tactic is likely to bring in customers more interested in the prize or giveaway than the merchant offer. This type of promotion fuels the perception that CPA ad networks only cater to less-savory advertisers.

Still, some figures state that big brand names make up 30 to 45 percent of all CPA advertising. Big-brand sites can also act as affiliates accepting CPA ad buys, such as MSN, when it has remnant inventory. Big-name publishers are selling CPA buys, but often it’s directly to the advertiser and not through the network.

Everybody into the CPA Pool

Though networks generally make more money selling on a cost-per-thousand (CPM) basis, some will sell leftover inventory and run CPA offers, according to an executive at one of the major affiliate networks, who asked not to be named for fear that the industry stigma associated with CPA practices would be damaging. In most cases, the networks are “booking these revenues as CPM,” the source says.

Another network executive says her network will continue to stay focused on its overall value proposition.

“We want to make CJ remain the preferred place for the new publishers,” Pollard says. “We have many different categories of publishers. They are the backbone of affiliate marketing. The top request from our 1,500 to 2,000 advertisers is overwhelmingly, ‘How can we help publishers trying to make money?'”

Pollard claims that by leveraging CJ’s connection with its parent company ValueClick, it can provide more value than CPA networks can by going beyond affiliate marketing to include lead-generation business, click integration, tracking and email.

“It’s a bigger and better picture to the clients. We have more synergies and offer them in a streamlined way,” she says. “But there is a lot of value that CJ brings as a trusted third party and the value associated with that is worth a lot to our clients. It’s currently a win/win situation and we want to make sure it remains that way.”

Rob Key, president and CEO of online agency Converseon.com, says the Big 3 are doing well with fraud initiatives and payment services. He also applauded LinkShare’s efforts in the area of analytics, which he says adds a higher level of sophistication to its program. However, he feels there is some room for improvement in the area of data feeds and customization.

“There will always be a place for LinkShare, CJ and Performics,” Key says. “But the space is expanding and people want more customization than the Big 3 can offer.”

He claims the movement toward more customized platforms has “topped out in the networks, which are looking to be all things to all people.” Instead, by offering specialized services, certain network alternatives help “people look beyond the traditional and reinvigorate.”

Converseon’s network-agnostic custom platform is designed to aid companies that are trying to get a view of their data across all channels, Key says. “You can’t do that if the affiliate data is off to one side, like it is with the networks,” he says, adding that the traditional networks will see continued price pressure.

Pollard expects to see consolidation in the CPA network space over the next year or two and says there’s no threat of a CPA network displacing any of the Big 3.

“I also expect that one or two other larger players may come in, but nobody that’s the size of LinkShare and CJ. CPA networks will evolve for months and years, but many of them will not be around for long,” she says.

The increasing power of ad networks was brought to the forefront at the end of last year when Commission Junction ousted AzoogleAds from its network. Because AzoogleAds was a CJ affiliate that grew into its own revenue-sharing network, many industry watchers claim it was just a matter of time before CJ kicked out the sub network.

Joe Speiser, AzoogleAds.com cofounder, called the move by Commission Junction “flattering,” adding that his company was clearly “dangerous enough from ValueClick’s point of view” to warrant giving up the “nearly 80 percent of traffic we brought in on the eBay campaign.” That’s a huge factor, since eBay is CJ’s biggest campaign.

Speiser also says that CJ was threatened by Azoogle’s growing presence.

Pollard says despite the incident with Azoogle, CJ has no plans to ban sub networks.

“Our business is always changing and we never want to put policies in place that hamper publishers and stop them. I want the creativity to remain,” she says. “Sub affiliates are great partners and we want to continue to have relationships with them.”

From Pollard’s point of view, sub affiliates “have found good niches and are good at servicing the advertisers.” However, she notes that it’s important for CJ to maintain network quality and ensure sub networks do not do business with affiliates that are engaging in questionable practices, such as performing downloads and software installations.

Collins says CPA networks are a dime a dozen. “A good amount of them fail quickly. If 10 new CPA networks open today, most of them will fail within months,” he says. “I guess it’s sort of like affiliates; there are a million affiliates and only about 10,000 that are doing things. Some aren’t going to move the needle,” Collins continues. “The networks certainly don’t need to sweat it just yet.”

Rather, according to Collins, pay per click is a much bigger threat to the networks than CPA. He expects a viable challenger to soon emerge (such as Direct Response or KowaBunga) that is backed by significant capital from a public company.

Regardless of the challenges, Pollard claims the good news is that the performance marketing pie is getting bigger and there’s room for everyone.

The Dating Game

Making a match can lead to big bucks if you know the rules of affiliate courtship.

Although Blake Killian is a Christian and believes there are benefits to Christian dating, he is forthright that the motivation behind his two websites, ChristianDatesOnline.com and Christian-dating.com, was purely financial.

It was the serendipitous result of some research of online dating keywords he was doing for his day job as an Internet marketer at Voodoo Ventures. Killian noticed that the search volumes for Christian dating keywords were really high but the bids were affordable. So, in March 2005, after committing himself to stop if he was losing money, he put together a website that reviews online dating sites and includes affiliate links on it. Initially he spent 20 to 30 hours per week. Now, a year later, he works on his sites about five to 10 hours a week and the monthly net profit is only $100 short of paying his entire mortgage payment every month.

“I knew there was money to be made. It has taken a lot of hard work since March but now the site is rolling. I love my job,” the 24-year-old New Orleans resident says. Is he experiencing beginner’s luck or is there still money to be made in online dating?

Super-affiliate-turned-author Rosalind Gardner, who famously made $436,797 in one year as an affiliate for online dating services (Sage-Hearts.com), started back in 1999 and continues to do extremely well. She says that although the current environment for starting an online dating site is “pretty complex,” nearly anyone can be making money today if you’re using Google AdWords. “There are still keywords and keyword phrases out there that people haven’t picked up on yet,” she says.

Even though online dating is vast – according to Publishers Association/comScore Networks, it represents the second- largest category of paid content online after music and video downloads – the boom years appear to be over.

In a JupiterResearch 2006 survey of 2,000 consumers online, the percentage of online users who visited dating sites in the last 12 months grew slightly from 2005 to 2006, while the percentage that posted online personal ads and subscribed to dating sites fell marginally during the same period.

A 2005 JupiterResearch report predicted that the industry would grow 9 percent to $516 million in 2005, down from 19 percent growth in 2004 and 77 percent in 2003. According to eMarketer, the overall market is often pegged at over $1 billion if ad revenue for the free portion of online dating sites is included.

Most experts agree that this decrease is just the beginning of a cooling of the market as opposed to precipitating a larger drop. Nate Elliott, an analyst for JupiterResearch, says, “We see continued growth for the next five years but it is plateauing – the rate at which consumers are subscribing to dating services online is flat. As a result the revenue growth is not going to be as high as it was.” James Belcher, an analyst for eMarketer, says, “I don’t see things shrinking in aggregate.”

Most experts agree the market is mature and headed for consolidation.

“I think there will be fewer sites. There will be some consolidation – you won’t have 15 versions of JDate.com. I think some of them will merge or fade away,” Belcher says.

“The market is saturated; you have all of the online dating sites you’re ever going to need,” notes Elliott.

One area that is thriving is “adult” dating sites – such as AdultFriendFinder, IWantU.com and SexSearch.com. According to Nielsen//NetRatings, traffic to AdultFriendFinder, the most visited adult dating site, rose 67 percent in January from a year earlier. Prices for these sites are comparable to traditional dating sites – most are in the $20 to $30 range.

Options for Increasing Revenue

For years, online dating sites relied upon significant growth in unique visitors to drive revenue. Nowadays, JupiterResearch’s Elliott believes that revenue growth is being driven by higher monthly rates rather than increased membership. Due to the slowdown in unique visitors, dating sites are faced with either improving their conversion rates or increasing the value of each customer.

Sites need to convert more visitors to paid subscribers to keep revenue growing. A 2006 JupiterResearch report found that only one-third of those who go to dating sites sign up for membership. This is the first time JupiterResearch has seen a drop in conversion rates since it began tracking the space in 2003.

Another way for sites to develop revenue is to increase the value of each member – sites are charging higher monthly subscription costs and are encouraging subscribers to maintain their memberships for long periods of time. Yahoo! Personals recently raised its one-month subscription price by 25 percent, and its six-month subscription price by 50 percent. Many of the more expensive sites justify their price by offering advanced services such as privacy enhancements, personality tests and security checks.

Increased prices, however, even those for premium features, seem to be backfiring. “Rising prices have kept a large number of users from converting to paid subscribers ” 37 percent of visitors who don’t convert say dating sites cost too much, making it their leading complaint,” explains the 2006 JupiterResearch report.

Another challenge the online industry is facing is a high level of dissatisfaction among users. Thirty-five percent of online daters were somewhat dissatisfied or very dissatisfied with the sites and only 29 percent were somewhat satisfied or very satisfied, according to a 2005 JupiterResearch report.

A 2005 Keynote Customer Experience benchmarking study found that the most common frustration reported by customers stemmed from a lack of trust or comfort in other members. Sixty-one percent of customers are concerned that other members are misrepresenting themselves and as many as one in three express a lack of trust in other members.

Looking for Love

According to the U.S. Census Bureau, there are 33 million U.S. adult singles that are online and open to pursuing a relationship. Dave Evans, who blogs about the online dating industry at Online Dating Insider, says he believes the number is close to two in five online singles who have tried online dating.

Not everyone is so bullish.

“Everyone who has wanted to do online dating has tried it,” eMarketer’s Belcher says.

However, JupiterResearch reports that only 5 percent of consumers online currently pay for an online dating service – down from 6 percent in 2004.

More than 34 million people visited the top five online dating sites in December 2005 alone. Evans claims the 80/20 rule applies. “The top five sites get 80 percent of the traffic. The remaining 20 percent is split up among the thousands of dating sites out there,” he says.

A January 2006 study by comScore MediaMetrix found the top five online dating sites were: Yahoo! Personals, Match.com sites (including Chemistry), Spark Networks (which owns AmericanSingles, JDate, ChristianMingle, etc.), True and Mate1. Other leading sites that consistently land in the top 10 include eHarmony and FriendFinder (if you include AdultFriendFinder).

“The top rankings seem to be fairly consistent but the numbers for unique visitors vary hugely between comScore and Nielsen,” Mark Brooks, editor of Online Personals Watch, says. “Hitwise uses partnerships with ISPs, Nielsen has a panel and data feedback from a toolbar download and Alexa uses data from its downloadable toolbar.”

Online Dating Insider’s Evans claims some new measurement is needed. “There needs to be a new metric which is a blend of visitors, members and features. Traffic rank certainly reveals popularity but that popularity can be bought and sold via toolbars, spyware, etc.,” he says.

The remaining 20 percent of online daters go to the thousands of smaller online dating sites – many of them niche sites. Niche sites aggregate users with similar interests into a more concise space; which purportedly promotes better, more relative connections. Many believe that niche sites raise the chances of finding more compatible partners rather than going to huge data warehouses like Yahoo! Personals and Match. There are dating sites that cater to Filipinos, Muslim singles, gays and lesbians, farmers, etc.

If a 50-something, female Asian lawyer in Boston wants to try online dating, should she go to a niche site? It depends on how closely she is aligned with the niche. She could go to a site that serves Asians or seniors or to a regionally focused site for the greater Boston area. If she wants to marry another lawyer, LaywersInLove.com would be a good avenue to explore.

“It’s the spear versus the shotgun approach. The shotgun approach throws money, time and energy without much regard for results. The spear approach is targeted, contextual, focused,” Evans says.

James Green, marketing manager for MingleMatch, a Spark Networks property, explains the opportunity of niche sites such as ChristianMingle by saying: “The volume is low but the conversion is high.”

Some niche sites do extremely well. Online Personals Watch’s Brooks says that, JDate, for Jewish singles, has “a lot of word of mouth and brand inertia. Most of their users come from type-ins and the extreme focus of their site.”

Financially, JDate, which charges $34.95 per month, generates average monthly revenue of $29.42 per subscriber and spends an average of just $8.09 to acquire a subscriber.

“It’s a golden site. They own the Jewish segment – no one comes close,” Brooks says. Compare that to a non-niche site like AmericanSingles, which generates an average monthly revenue of $22.16 per subscriber with an average acquisition cost of $43.29.

The range in monthly subscription fees varies widely. Yahoo! Personals and Match.com charge $19.95, American Singles and Date.com charge $24.95, while True.com charges $49.99 and PerfectMatch.com charges $59.95.

In general, serious daters are considered to be lucrative – they are more likely to be new to online dating and these unique users provide incremental revenue to sites. They are also considered to be willing to pay higher subscriber costs for advanced features and be longer-term members.

“People think that on serious sites, you’re going to meet people who are more motivated and committed. Because of that, eHarmony attracts people who are serious about finding the right relationship and they can charge $50 per month and require a two-hour profile questionnaire,” Brooks says.

Some sites, such as LavaLife.com, have a reputation for catering to casual daters, many of whom are younger. Because of the churn rate among the more casual sites, Yahoo! Personals and Match.com have each launched premium services, Yahoo! Personals Premium and Chemistry, respectively, to try to capture some of eHarmony’s market share.

Getting Social

Over the last several months, social networking sites such as Facebook, MySpace.com and Hi5.com have gained momentum. Some industry watchers perceive the social networks as a threat to dating sites – mainly because social networking sites are free and fueled by viral marketing.

“MySpace has been so successful because they empower the connectors – the connectors are the people that talk. MySpace hit people at their point of passion; they successfully appealed to the music lovers,” Online Personals Watch’s Brooks says.

Online Dating Insider’s Evans says social networks are hazardous to online dating sites because, “It would be very easy for social networks to add a dating component – all these sites need to do is add check box.”

Others disagree, claiming that dating sites and social networks cater to different customers. A 2006 JupiterResearch report found that the social networking sites pose little threat to the online dating industry.

“Just 14 percent of dating site visitors who don’t pay for subscriptions say they use free sites, like social networks, for online dating instead,” the report states.

Brooks agrees, “Social networking sites attract ‘freebie hunters.’ Serious daters come to online dating.”

While there is some disagreement as to how this will all shake out, nearly everyone concurs that 2006 will be a critical and decisive year in the results. Most agree that there is still opportunity if sites can determine how to capitalize on it.

According to Evans there is certainly potential for growth. “Remember that a significant amount of online users have not tried online dating. The services have to get better to lure them online and into the fold,” he says.

To attract price-sensitive users and to convert registered users who have not subscribed, smaller sites should adopt below-market subscriptions. Discounting and short-term subscriptions “offer the best way for dating sites to grow paid subscriptions and market share,” JupiterResearch’s Elliott says.

The Rules of Attraction

Another way to attract more people is to reach out to a larger universe of users, such as eHarmony’s campaign to target “marrieds” for counseling, or by continuing to spend heavily for online and offline advertising.

It appears that big spending on online and offline advertising will not diminish in 2006. Mike Jones, CEO of Userplane, says, “Everyone is upping each other on marketing dollars, so winning at online dating just becomes another spending war.”

eHarmony, which claims that more than three-quarters of its users come from television advertising and word of mouth, raised $100 million a few years ago and has spent tens of millions of dollars, and possibly more than a hundred million, on advertising in the last few years, according to Elliott.

“You have so many options; that is one of the reasons why eHarmony has put out so many ads – it cuts through the clutter,” says eMarketer’s Belcher. “Branding will be more and more important in the sector because people are familiar with the concept but not the individualized powerhouse of dating sites.”

To help distinguish a dating site from others, branding must be in line with the company’s goals. For example, True has spent a ton of money on advertising, especially with suggestive ads that may raise its profile, but may not attract paying subscribers like serious daters.

“I think we will see more and more high-profile psychologists and relationship advisors such as Dr. Phil getting behind Match.com; sites want some very specific personalities that people can attach themselves to,” Userplane’s Jones says.

Another feature to become more prevalent is personality testing. “I think personality profiling is the future. I think that people will pay for it – I see them charging $100 a month. The technology is just going to get better 10 years out. I don’t think we are there yet.” Tickle and Chemistry offer a variety of tests, as does True, which offers a sexual compatibility test,” Brooks says.

Jones agrees. “A lot of companies are embracing personality profiling systems to facilitate meeting people better.” He thinks we will see more testing on sites – “it will become a necessary component” – but does not foresee sites requiring tests in order to use the service, like eHarmony does.

Differentiators

Security checking is also a big issue for 2006. Illinois State Representative John Bradley proposed a bill that would require any online dating service with members in Illinois to disclose on its website whether it has conducted background checks on members. Not everyone would consider this to be a good thing.

Joe Tracy, the publisher of Online Dating Magazine, estimated that 30 percent of daters using online services are married; a number he believes has steadily risen. Because of this, there are married or recently divorced people who don’t want to disclose that information. “You have a portion of online daters that do not want background checks,” he says. Like personality testing, background checks could be a feature that sites offer but not necessarily require.

Another way that sites are looking to differentiate themselves is by offering the latest technological marvel. “Nowadays, most sites offer or soon will offer live communication tools, especially ones that are audio- and video-enabled,” says Userplane’s Jones. For example, in February, Vivox introduced Tempo, which allows users to connect using a variety of communication tools – voice, video and IM – across various platforms such as the Web, interactive voice response telecom, Internet protocol and mobile phones.

But these bells and whistles “will not be a differentiator for very long because they are easily imitated,” eMarketer’s Belcher says. What matters more in the long run is, “do you have enough potential people on the site that are close by and would be of your same interest group,” he says. “That’s far better than the kind of avatar that you can choose from for your IM on the dating site,” he explains.

Courting Affiliates

For affiliates, the objective is to go after sites that convert. Conventional wisdom would recommend that affiliates focus on the big online dating players – the logic being that the more people who are in the network, the higher the chance of conversions. Also, according to Online Personals Watch’s Brooks, “The top sites have brand equity, which means that they convert better.”

But bigger isn’t always better. Some affiliates have had better luck with smaller sites. Killian of ChristianDatesOnline.com says the niche sites, which have fewer members than the big players, have served him the best – mostly because people who come to his site are “prequalified” – they are looking for Christians who date.

“I do the best on ChristianMingle – I have unbelievable conversion rates, like 70 percent,” he says. “I have not made one dime on Match.com.”

Super-affiliate Rosalind Gardner says, “Many folks are disenchanted with the really large sites that try to be everything to everybody. I actually do better with the smaller niche sites that appeal to specific demographics; for example, interracial or seniors dating.”

According to Brooks it’s a combination of factors.

“The best affiliates do the following: They have unique content where they drive traffic; they have some content that is really geared for getting natural search traffic; and they have PPC [pay per click] on it; or they do a combination of all three,” he says.

An online dating affiliate needs to provide compelling content that is timely and informative to please the visitors of the site and to boost natural ranking. Search engines such as Google are getting more selective and smarter about how it ranks content.

Gardner says the traffic boost from a blog can be huge and that it makes a big difference when running a content site. “I would do everything just like I did when I started but the only difference today is that I would expand my content base faster by adding a blog.”

Many online affiliates have been successful with reviews about each dating site. Some of the successful dating affiliates offer these types of service, including ALoveLinksPlus.com, OnlineDatingMagazine.com and eDateReview.com.

Because daters want to meet people in their area, another successful affiliate approach is to offer a site that has a regional focus, such as Seattle Singles. Michael Brucker, WebEx affiliate manager and former affiliate manager for Yahoo, says that for the affiliate site SinglesOnTheGo.com, “the owners spend a lot of time listing all of the singles events in each city; events such as bowling night, library night and Toastmasters.”

The relationship between affiliate and affiliate manager is paramount; for example, MingleMatch’s Green and Killian communicate almost daily. “I can instant message James a couple of times a day and he will get right back to me. That is not something that is going to happen with Commission Junction,” Killian says.

Stephanie Lewis, affiliate manager for Date.com, says Date.com offers both an internal program and one through Commission Junction. She says the big networks are attractive for new affiliates because they offer the promise of easy reporting and help getting started.

Money Matters

“Some seasoned affiliates are compensated better, they have more flexibility and they don’t have to pay a percentage to CJ. If we paid X amount to CJ, we could give that bonus to the affiliate. Or we could offer a co-branded partnership that we could not do within CJ,” Lewis says.

Payment structures vary widely. The compensations listed on the affiliate splash page are the public (or street) offers. Better affiliates get better rates, based on their value to the affiliate program and the specific requests from affiliates. Payments can be extended 30 percent (and higher) to better- quality affiliates.

Some affiliate programs pay on the first month and subsequent months – which makes a huge difference on what affiliates earn. Many top affiliates negotiate a revenue share based on the subscription and an ongoing percentage for every month the affiliate’s customers remain subscribed.

Gardner says, “I try only to do business with those merchants who offer a fair rev share. Fifteen percent on a digital service simply doesn’t cut it, especially not when I pay to advertise my affiliate sites. 50/50 recurring is my idea of a fair deal on online dating services,” she says. “While I do promote a few big merchants that don’t pay a fair commission rate, I use their names to get people looking around the site, and then direct them to more fair-minded merchants.”

Despite recent buzz that online dating has peaked, there is plenty of evidence that the dating market is just leveling off from its skyrocketing growth and that the segment is still a viable road for affiliates to travel. With the enormous range of sites out there that cater to every religion, race and hobby under the sun, there is sure to be a plethora of keywords and daters for affiliates to target.

Given the surge in traffic and subscribers to the adult dating sites, affiliates who are comfortable dabbling in those racier areas will be able to yield returns for years to come.

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

Comparison Shopping Engines Drive Sales

Rev your sales by driving comparison shoppers your way.

Could comparison shopping be the gas fueling tomorrow’s affiliate sales? In 2005, three of the top comparison-shopping engines pulled in a whopping combined $351 million, thanks to merchant commissions. Yet insiders at the top shopping- comparison sites say the best days are still ahead.

“Comparison shopping really is vertical search and its day is just starting to dawn,” Mike Aufricht, chief marketing officer of mega-shopping-engine Shopping.com, says.

Already the number of comparison shoppers online is growing faster than the number of new Internet users. comScore reports that the Internet audience grew 5 percent over 2005. The number of comparison shoppers, meanwhile, grew nearly twice that much, according to comScore.

What started as a way to directly compare prices and features for technology at various online retailers is now expanding to all kinds of products and services sold by retailers online and off. Some comparison engines categories are already top of mind, such as travel, books and soft goods like apparel. Others are just gaining a foothold, such as education, financial services, automotive, healthcare and real estate.

The result? Thirty-seven percent of those who went online or used an Internet application in January 2006 used a shopping comparison site, according to Nielsen// NetRatings. That’s a whopping 57 million consumers in January alone. In the financial category, 15 percent of financial consumers based in the United Kingdom used a price-comparison engine in January before picking their purchase – up from 6 percent in 2003, according to Forrester Research. And here’s the kicker for affiliates: Forrester also found consumers who use comparison sites spend 25 to 30 percent more online than those who don’t.

Affiliates, Start Your Engines

So what new revenues are affiliates bringing in by adding comparison-shopping engine functionality? A whole lot, if you ask affiliate David Felts.

In 2002, Felts had one website with static affiliate links organized in directory format. Three months into running it he received his first affiliate check: $22. He now runs 40-plus niche price-comparison sites pulling from a database of over 1 million products from more than 50 stores. His main site, iShopHQ.com, receives an average of 400 visitors a day. In December 2005, gross revenue from his network exceeded $9,500.

Providing the ability for his customers to view in-stock products from multiple vendors in an aggregated, yet simple, format “definitely gives me an edge over single- vendor affiliates, and helps drive sales,” he says. Vendor data feeds are automatically

downloaded and unzipped; data import jobs pull the new feeds into the database, and more jobs reconcile the inventory and rebuild the search index. The whole process kicks off every day at 2 a.m., giving up-to-date inventory daily. He hosts all the sites from his own server at his house using a business-class broadband connection. “As a Web application developer by trade, I was able to do all the programming myself,” Felts says, “and my search engine marketing background enabled me to leverage PPC and SEO to complement my affiliate marketing efforts.”

With search results filtered by price, price range, feature set, brand or whatever users want, price-comparison engines are indeed changing the process of comparison shopping, both on and off the Web.

“Rather than flipping through catalogs, writing down sale items from newspaper ads or scouring the Yellow Pages and calling local retailers,” says NexTag vice president of product shopping Mark Bradley, “[shoppers] can now conduct product – and

many services – in a few seconds with a few mouse clicks.”

While comScore’s mid-2005 study of consumer electronics comparison shoppers found 75 percent were merely window shopping, 25

percent did buy within the next 90 days. Only 10 percent bought online, though. That’s a figure top comparison engines are working hard to increase. Some have added buy-now incentives. Some have built-in peer pressure in the form of real-time blogs and peer-to-peer reviews. Some offer special deals only found online.

“Consumers are just beginning to understand the power of the Internet when it comes to shopping: comparison,” Farhad Mohit, founder of the Shopzilla.com comparison engine, says. “In the offline shopping world, there hasn’t been a service like this that lets you have all the choices for all the stores.”

While the Sabre system in travel allows people to tap in to all the flights and seats that are available, there is no Sabre for shopping. “In a very real way, we are building the Sabre in our industry,” Mohit says of today’s top comparison engines. “All of us are attempting to do this.”

But for affiliates, paying to be included in comparison-shopping sites is not very thorough searches for just about any seen as a benefit, according to industry observers. That’s primarily because most merchants are already sending feeds to the big comparison engines and since most of those charge a cost per click, rather than a percent of the sales price, click costs also quickly add up. For instance, Shopzilla collects the equivalent of 10 to 15 percent commission in click costs for every product sold. Affiliates would profit only if their commissions were substantially higher.

A few enterprising publishers are launching their own comparison engines, simply adding search technology within their existing catalog of affiliated merchant products. Take Pepperjam.com, which since 1999 has amassed a loyal following of a reported 6.5 million unique visitors monthly to shop its QVC-advertised collection of grandmother’s-recipe pepper jams and a growing assortment of affiliated merchant products. With more than $100 million in affiliate sales through LinkShare, Commission Junction and Performics in 2005, this 25-employee super-affiliate in March launched the Pepperjam Comparison Shopping Blog, its house-made search and customer review forum.

“Over the past six years, as we’ve grown as a company, we’ve received calls from a merchant or affiliate manager saying, ‘How can we work more closely with Pepperjam to get more sales for us?’ Now it’s going to be easy,” says Kristopher Jones, Pepperjam’s co-founder and CEO. Featured search placement goes to merchants who increase their commission or open a Pepperjam online merchant account and bid their product to the top. “With 6.5 million visitors already coming to our site,” Jones says, “now, in order to get the premier real estate on Pepperjam, [merchants] are going to have to give us more.”

While Pepperjam has more than 1 million products in its catalog, the largest product selections are found on the existing biggies of comparison sites, which include up to 100 million products each. So, the secret for most affiliates to profiting on this trend is to get in as an affiliate of a comparison-shopping engine already offering categories their site visitors need. Shopping.com, PriceGrabber.com, NexTag.com, Shopzilla.com and many other engines have affiliate programs, either through co-branding, custom banners or text links.

“Consumers are just starting to realize that general search is very difficult for doing shopping,” Shopping.com’s Aufricht says. “Consumers talk about the chaos that’s created by using general search engines to do their shopping. They talk a lot about having to click from a search engine to a website, back to the search engine, taking notes along the way, opening multiple browser windows simultaneously. That’s very unwieldy and very time-consuming. Shopping comparison engines allow you to do all of this very quickly from one website. It’s a value proposition that’s very appealing to consumers.”

Not the NASCAR Crowd

The purchase prices for three of the top engines that were sold in 2005 seem toconfirm industry

watchers’ expectations for growth. Shopping.com went to eBay for $634 million, Shopzilla.com was sold to media conglomerate E.W. Scripps for $525 million and PriceGrabber was acquired by Experian for $485 million, plus expenses.

Companies buying these shopping engines are justifying the hefty price tags with the promise of a potentially lucrative and loyal shopping following. NexTag’s Bradley says the demographics for electronics is typically higher income/higher education, while there is a more broadbased appeal for apparel and sporting goods – those run the full gamut when it comes to education and income.

With the addition of such categories as education and healthcare, across-theboard comparison shoppers are “a very general audience now,” Bradley says. “We touch a lot of people simply shopping for anything online.” Meanwhile at Shopzilla, “women are our target demographic; 70 percent of women use Shopzilla.com,” Mohit says.

Though you may think of comparison shoppers as cheapskates, they’re not. At Shopping.com, Nielsen//NetRatings reports 42 percent of its shoppers have household incomes of more than $75,000 and 48 percent hold at least a bachelor’s degree. Shopping.com also reports 80- plus percent of its shoppers prefer to shop for brands they trust, with less than 10 percent considering lowest price to be the primary driver behind their buying decision. According to comScore Media Metrix, that translates to five times the revenue per lead of other leading portals and search engines.

PriceGrabber brings in all ages, from 18 to 54, with high incomes (users report an average yearly income of $71,000) and college educations (77 percent). The average order is $450. NexTag, meanwhile, seeks to “close that gap between the savers and the non-savers,” Bradley says. “Since comparison shopping is morphing from lowest pricing and grabbing to social shopping, we’re adding in content, recommended merchants, special deals and coupons that you can’t get anywhere else.”

For now, online comparison shopping is anyone’s race. “You put all those numbers together,” says comScore chairman Gian Fulgoni, “and what that says to me is: It’s having a pretty major impact on the way consumers spend their dollars.”

Fine-tuning Your Engine

As far as placing your comparison engine on your site, “every site’s different,” Bradley says about comparison search engine box placement. “Above the fold is the best, but it really depends on their navigation and how they have their advertising laid out currently. You can do very effective testing over a month’s period.”

Must-haves are things like images, product reviews and search technology that allow users to not only search by general search terms, like shirts, but also search for specifics like a camera make and model, and corresponding product reviews. At the least, says Peter Koning, a British Columbia-based M.B.A. and founder of Affiliate-Software- Review.com, “affiliates need to get to that next stage if they want to survive, as more technology is used in the shopping experience,” he says.

“It comes down to basic business principles: If you understand your audience and are listening to them and answering their

questions, then you need to go a little further and give them a little help so they can self-serve and educate themselves. Try to separate yourself from your bias as an affiliate, where you only get paid for a sale, with the real challenge of establishing your credibility so they are willing to trust you. At minimum, put up a one-page comparing products on your site. Show them you’re not biased and you’ll really provide value,” Koning says.

You’ll also want a defined marketing message. In January, Forrester researcher Benjamin Ensor found that price comparison sites aren’t top of mind even for previous users. “The more we can educate consumers when they first come to us through a search engine, the more likely they are to return,” Shopping.com’s Aufricht says. The message is simple, he says: “We need to generate awareness that comparison shopping exists and the advantages of consumer search engine sites. The biggest advantage is to be able to search across millions of products across thousands of merchants. As a result, you’re going to find the right product, at the best price, and probably most important, do it with the least amount of effort.”

For the 10 percent or more searching exclusively for price, University of Indiana Professor and new-economy researcher Michael Baye in 2005 uncovered some stats that make good promotional verbiage for site visitors: “Consumers save 18 to 20 percent, on average, by comparison shopping for products online versus visiting the nearest brick-and-mortar retail outlet.”

Here’s Shopzilla’s marketing strategy: “We have a higher conversion rate because we prepare our shoppers in advance to make a purchase once they click on a listing,” Mohit says. “By having all the information up front, they’re not going to click on a listing that doesn’t make sense to them.”

NextTag’s marketing advice comes from Bradley: “Reviews for merchants that don’t have brand-name recognition are very important. If a customer comes in and hasn’t heard of that merchant, reviews from satisfied clients definitely help them make a sale.”

The Finish Line

And there’s plenty more for comparison shopping down the line: Yahoo Shopping, with 100 million products in its database but no engine affiliate program as of yet, will be the first to bring out a comparison- shopping service for mobile phones. “So you’re at point of sale and simply type in the product model number and have access to comparison information,” says Rob Solomon, vice president of Yahoo! Shopping Group. “That is a game changer from a consumer perspective, because it gives a lot more power to consumers on price. In the future, they will be able to scan in a bar code or take a picture of the product. It’s just a phone call, and it isn’t an incremental cost at all (depending on your phone plan). You could also use a pay-per-call technique in the future; I can imagine a universe where that happens fairly soon. It’s nascent, but it’s coming and it’s very interesting.”

Whether turning to an existing comparison engine or launching your own, experts say you’ll do well to get in now. “The general question is whether online shopping is going to continue at its torrid pace, but it’s tough to see it slowing down anytime soon,” says comScore’s Fulgoni. Even better news: “On top of that, when users go to broadband, their spending rates just rocket, plus the broadband user is spending 35 percent more time online,” he says. “This just plays into the hands of anybody that’s offering a value-added service online. Comparison engines have got to be one of the beneficiaries.”

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

The New Face of CJ: Q & A with Lisa Riolo

Commission Junction’s Lisa Riolo steps into a new role with some familiar responsibilities.

As Commission Junction’s senior vice president of business development, Lisa Riolo is responsible for driving revenue for the sales and business development teams. While she’s not technically filling Todd Crawford’s shoes, Riolo will be the new face of the affiliate network, taking on many of the same challenges as the former vice president of sales, who left in February.

Owned by ValueClick, CJ is based in Santa Barbara, Calif., and has tens of thousands of publishers in its global network. In the six years that Riolo has worked there, she has led the sales, client development, search and product management teams. In her new position, she manages the 25 people who make up the sales and performance optimization departments. Revenue Senior Editor Maria Sample recently interviewed Riolo about her company’s practices and plans for the future, as well as the affiliate marketing industry and the importance of understanding people.

Maria Sample Your predecessor was very active in the affiliate community (i.e., forums, message boards, etc.). Do you plan on continuing to be Commission Junction’s face in those arenas?
Lisa Riolo Actually, the organizational structure introduced by our general manager, Tom Vadnais, positions me in a role that hadn’t previously existed. So, fortunately, I’m not faced with the challenge of having to fill someone else’s shoes. I do recognize that, since its earliest days, Commission Junction has relied upon one or two individuals to convey most of its messages. In the future, I think the affiliate community will hear and see us take more of a team approach.

MS Todd Crawford (the former vice president of sales) was considered the public face of Commission Junction. The downside of that is that he often took the heat from angry and upset affiliates. Are you prepared for that? And how will you handle those sorts of public (and sometimes personal) attacks?
LR I believe passionately that Commission Junction achieved greatness because of the publishers. I’m very open and prepared to listen to them. It’s been part of my role for the past six years.

If I end up the target of discussion, that’s OK. I’ve found that frustrations expressed reveal great opportunities to learn and improve. I tend to worry more about silence than I do about rants.

MS Part of your responsibilities include increasing Commission Junction’s market share. What plans do you have to increase market share over the next 12 to 18 months?
LR Our vision has consistently included a global perspective, and in the last 18 months, we’ve expanded our European presence from the U.K. to Germany and France. In 2006, we plan to launch offices in more countries in Europe, and continue to leverage opportunities we have in Asia.

We’re also committed to improving our clients’ experience in the CJ Marketplace. As we make it easier for them to extract information and interact with our product offering, we’ll attract new participants to our business.

MS What about plans for driving new revenue?
LR Our current plans fall into three categories. Last year, we expanded our service offering to better meet the needs of our advertisers, especially those selecting the CJ Access service level. We see additional opportunities for services that benefit other segments with our client base. Next, we’re exploring opportunities for leveraging new distribution channels created by technology innovation. And finally, we’ve reaped great benefits by collaborating with other teams in the ValueClick family of brands and plan to continue to do so.

When you look at the ValueClick products and expertise, you’ll see we have a compelling story. When you look at the metrics from just a couple of our cross-divisional efforts, you see the type of incremental lift that generates real excitement on our part.

MS What threats, if any, does the sudden proliferation of ad networks present to Commission Junction?
LR Ad networks have existed for years, some of which we’ve had relationships with for a long time. We don’t see ad networks as a threat, per se. They offer value that complements what we do at Commission Junction. We see that from our collaboration with our teammates at ValueClick Media, who run the largest independent display ad network in the U.S. The more monetization opportunities we can offer our publishers, the happier they are and the more they want to work with us.

The fact is, as heard from several outstanding publishers, they go where they get the best return on investment [ROI]. Commission Junction must understand and optimize every component of the ROI equation, from payout to time spent in our member area.

MS Can you outline the risks and benefits of sub-affiliate networks?
LR From an advertiser’s perspective, the benefits are a) you’ve potentially improved your efficiency because you’ve outsourced part of your relationship management responsibilities, and b) the sub-affiliate network may generate significant volume and extend your reach. The two primary risks of working with subaffiliate networks are a) you’re typically paying a premium for “aggregated” transactions, and b) you often do not have good visibility into the promotional methods used by the “subaffiliates” which, in all likelihood, will challenge quality standards.

From a publisher’s perspective, the benefits offered include higher commissions and often, faster payouts. The downside is productive publishers that don’t have direct relationships limit their ability to demonstrate their value. Hence, negotiating exclusive offers or higher payouts is difficult. The other risk for publishers is that, often, the sub-affiliate networks are not only outsourcing to other affiliates, but also competing with them. How often does a subaffiliate’s transaction get attributed to the network or super-affiliate?

MS Andrew Jacob, Leadpile’s CEO, seems to think his company’s Centralized Online Lead Marketplace could take the place of Commission Junction. Recently, he referred to his offering as an alternative to “traditional, old-fashioned affiliate marketing programs like Commission Junction.”
LR Isn’t it fantastic to operate in an industry where someone references a company that hasn’t celebrated its 10th anniversary yet as “old-fashioned?” Anyway, my response in these situations is usually the same: I pay attention. I never dismiss the potential importance of a future or existing player in the space. If you’re still in business, the game never ends. You’re always competing and you always have to scout and monitor what else is out there – and why. You won’t catch me not paying attention.

I do look for potential issues with other networks. For example (and acknowledging that it’s still early on), Jacob hasn’t illustrated how he plans to manage quality and scalability from the advertiser perspective. If you can’t drive and manage large-scale results on a reliable basis, you can’t drive value for your network participants. And a bid-based pricing system alone doesn’t really resolve all of the issues around quality. Nor can he simply assert, “Our sellers provide high-quality leads” with no basis. Even if the prospective customers Leadpile provided to its past advertisers were of acceptable quality, it’s a completely different thing to build a quality network.

So, it’s about quality, efficiency and scale, and no one in the affiliate marketing industry has driven all three of these as well as Commission Junction.

MS What does Commission Junction have that the competition does not?
LR The first thing we have is market-leading scale. Commission Junction is a global leader in performance-based marketing, and is the No. 1 provider of affiliate marketing managed services. Second, our commitment to upholding quality standards within our network of advertisers and publishers is unparalleled. We are the only network that has a team dedicated to monitoring and enforcing our Code of Conduct and Service Agreements. We are a trusted third party that continually strives to build and retain our clients’ (and future clients’) trust and exceed their expectations.

Third, we provide more transparency than the competition. The CJ Marketplace is the only network that openly publishes the performance metrics of advertisers, publishers and ads, allowing for a results-driven environment.

Fourth, as part of ValueClick, we can introduce our advertisers and publishers to a broader set of solutions that help advertisers meet their various online marketing goals and publishers monetize their online presence.

MS Why does Commission Junction use the term “publisher” instead of “affiliate”?
LR When we made the change from “affiliate” to “publisher,” we introduced the CJ Marketplace with the intention of influencing online marketing beyond the affiliate world. So, we adopted terms more commonly used by the ad networks. We also switched from “merchant” to “advertiser.” The strategy worked well and we have caught the attention of a broader group of online marketers.

MS How often do you interact with publishers?
LR During the past six years, my primary responsibilities involved developing our clients – both the advertisers and the publishers. When it comes to personal interaction, client meetings reflect about a 70/30 split between advertisers and publishers. Typically, though, I spend more of my time in the publisher meetings. At our annual client-facing event, Commission Junction University (CJU) and other industry events, I focus my attention almost exclusively on publishers because I need more data points from that group to understand if, and what, trends exist.

MS What makes an affiliate/publisher a “super-affiliate” at Commission Junction?
LR There are several attributes, including commissions earned, that earn publishers a CJ Performer designation. Generally, I’ve found the highest performance levels represent the top 5 to 10 percent of a program or network’s participants.

MS What traits do super-affiliates/publishers possess that separate them from the others?
LR I almost always see a balanced blend of entrepreneurial spirit, technical ability and creativity among this type of publisher. They are goal-driven and usually set aggressive benchmarks. The one unique quality I see in those with a long track record of proven results is a greater focus on flexibility than massive scale.

MS What type of online advertisers/companies do you work with?
LR We work with 1,700 advertisers. There isn’t a specific type of advertiser that we work with – we attract a broad spectrum of advertisers from small, regional businesses to global brands and from all industries.

MS What rate of measurement works best for advertisers? Publishers?
LR ROI and ROI.

MS What do you think publishers could be doing better?
LR On the whole, publishers tend to focus on attracting consumers that have already progressed toward the decision-making phase in the purchasing cycle. I think they could improve their ability to effectively move a consumer through more of the earlier phases in the purchasing cycle.

MS What do you think online advertisers could be doing better?
LR Advertisers should focus on managing their spend and resource allocation across channels. Too often I hear the statement that affiliate marketing generates the best RoAS [Return on Ad Spend] coupled with the assertion that the channel isn’t capable of producing comparable “volume” to their other channels. Managed properly, as evidenced by a number of savvy advertisers in the industry, the affiliate channel can effectively outperform the alternatives – including search and portal deals.

MS What do you like about performance-based marketing?
LR Both the left and right sides of my brain get stimulated by this work. I love the analytics and seeing the big ideas unfold. You might think the accountability in performance-based marketing, with its focus on metrics, would discourage creativity. I think it’s quite the opposite. Driving results, on a pay-for-performance basis, forces a level of effectiveness that demands creativity. I think the publishers are often at the leading edge of change and innovation.

MS What do you dislike about performance-based marketing?
LR When you compare results across marketing channels – the standards set by performance-based marketing should prevail. Yet I still see advertiser clients having to fight, internally, for budgets and resources. If the team involved is properly monitoring for quality, then blowing through a “budget” should equate to blowing through sales goals – and that’s a good thing, right? They should be feeding the revenue machine.

MS Are you involved in Commission Junction’s Internet radio show, “Affiliate Marketing Today”?
LR Yes, I participated in the decision to produce the show and it launched on March 21. Our team changed the broadcast format to take a unique approach in that it covers the continual changes in the industry, with both an advertiser and publisher perspective across beginner, intermediate and advanced levels.

MS What’s happening in 2006 at Commission Junction – any big changes?
LR This year is very exciting for us and our clients. We have some significant projects in our pipeline. Also, I mentioned earlier we plan to launch in some additional European countries this year.

MS Do you think Yahoo’s ban on trademark bidding will have a big effect on SEM?
LR Right now, a conflict exists between brand marketers and performance marketers. The assumption is that you are either creating awareness or driving sales. Actually, both channels should benefit the other. I think pricing models and ROI metrics, rather than restrictions, are the best way to manage the effectiveness of a channel. As marketers’ perspectives on this issue evolve, I think Yahoo may choose to alter their policy.

MS What would happen to Commission Junction if Google suddenly went out of business?
LR At its core, Google is a distributor of information. I don’t think Google created demand that wasn’t already there. Instead, they found a way to effectively supply the information. Initially, Google altered the way people navigated the Web. If suddenly the system being used to access information disappears, what happens? People adapt and find a new source, or sources, to access information. With respect to Commission Junction, we, through our publishers, would adapt. Publishers would find new opportunities to promote offers at the emerging information sources.

You know what? These changes are already happening, but it’s gradual, not sudden. Web users navigate and source information differently today, compared to yesterday. What are we doing about this? Sensing, responding and facilitating changes within our model.

MS How has your psychology degree helped you in your career?
LR A psychology degree wasn’t supposed to help me in business – or so I recall having heard from people more often than not. I remember thinking that studying psychology would help me understand what motivates people. And, it seemed to me, if I was going to be an effective leader within any business, I better understand what motivates people. I think my theory held up pretty well.

The Research Report

How online marketers use facts, figures and forecasts.

Studies, polls, reports, surveys, statistics and forecasts. Every day the latest data on the most current trends is widely disseminated and distributed. Want to know which demographic group is most likely to spend more online, to have broadband or to download music? There’s data out there that purports to have the answers.

There’s no dearth of data, for sure, but just how much of this mountain of market research is useful for online marketers who need to make crucial business decisions is up for debate.

Kathryn Finney, a.k.a. The Budget Fashionista, uses reports from Forrester Research and comScore to learn about the top sites in women’s apparel. This gives her an idea of “who to target, who to partner with and to get an idea of where the industry’s going.”

Joe Zawadzki, founder and president of Poindexter Systems, which provides online ad management services, is less convinced about the value of some market research. “Once that research is made public, the opportunity to capitalize on that information is gone. Private data is the key.” Zawadzki says public research does have its uses, claiming it’s good for sales and venture capital fund-raising.

Some merchants claim research is helpful to them in a variety of specific areas, including understanding the competition.

Catherine Paschkewitz, manager of Consumer Marketing at HP Home & Home Office Store, which has partnerships with Forrester, JupiterResearch, eMarketer, comScore and Hitwise, says HP wants to see how Hitwise is working with the competition, which helps to understand and plan campaigns.

“We want to see how we rate versus our competitors,” says Paschkewitz. “We also do studies around search behavior and research to see how we can further optimize our program.” HP commissions comScore to create some of this custom research, but also relies on its own customer base for information, overlaying Claritas data and performing usability studies internally.

“Research is part of a process,” she says. “One part is up-front planning – looking at affiliate sites via Hitwise to see their traffic and customer profiles.”

When the HP Home & Home Office Store launched its affiliate program, for example, the team wanted to make sure it would succeed, so they researched what was working for the affiliate market, and talked to affiliates, managers and merchants who had affiliate programs, in addition to looking at research on the subject, Paschkewitz says.

HomeGain’s Affiliate Manager Marie Nilsson says merchants often use research to start a campaign.

“[It] is actually a piece of your research project in a sense, if you document your findings, draw conclusions and use it for optimizing your future campaigns,” she says. “That’s the beauty of advertising on the Internet: Provided you have the right tracking tools in place, you are able to measure each move.”

Nilsson says that once you have some experience, the research process is easy.

“As a merchant, you understand how your channel works by launching campaigns and documenting every step of the way, noting all the details, such as placement, targeting, creative used, time of year, close rates, conversion rates, CTR, pricing, etc.,” she says. This type of data becomes your future research. “Every campaign can be looked upon as an individual test in a series which compiles a research project if you outline, structure and target your tests.”

HomeGain obtains its research in several ways. It gets monthly Hitwise information, which Nilsson says “is great for understanding what your competition is doing.” The company also internally compiles metrics and data. “We use census information, which is free. We also do consumer surveys on a regular basis, all in-house,” Nilsson says.

But not all research is relevant for a merchant’s business, according to John Joseph, Performics’ senior vice president of affiliate marketing. He claims that merchants are very interested in statistics regarding overall ad spend and retail figures. “A year from now, merchants will really start using the demographic info that’s available,” says Joseph.

However, the use of research appeared to be a sensitive subject for many merchants. Calls to BestBuy.com went unanswered. Representatives from Walmart.com and Target.com declined to comment, on the grounds that this type of information is proprietary.

The Affiliate Perspective

FatLens’ co-founder and president Siva Kumar says the research his company finds the most useful is “learning about other companies with similar challenges and business models to us. We meet with and share experiences with many of the marketing personnel of other companies.”

However, Kumar notes that, “While we have perused published research from establishments like Forrester and find the information interesting, the high-level nature of the reports is not as relevant for daily decision making.”

FatLens relies on its own traffic and revenue performance data as research, because it is the “best way of learning about what is working and what we should expect to see as results.”

He claims that this type of information is most critical to help FatLens in modifying its programs as well as experimenting with new methods of traffic and revenue generation. “Our growth as a company from inception to our current revenue and traffic levels over the last nine-month period is mainly due to the research we have done on the various online customer-acquisition techniques for similar companies in terms of market segment and business models,” Kumar says.

Melissa Salas, senior marketing manager at Buy.com echoes Kumar’s reverence for research.

“It’s essential for marketers to be well-informed about industry reports, analyst projections, shopping trends, product announcements and reviews, as well as critics’ remarks. With this knowledge, you can position your company to meet your overall business objectives.”

Salas claims that marketing campaigns benefit from research as well. “Being a multi-category retailer, it is imperative to stay on top of best sellers and new product releases so marketers can create specific promotions to gain market share,” she says.

Research = Understanding

“Consumer research leads to insight,” Greg Smith, executive vice president of media, insights, planning and analytics at interactive agency Carat Fusion, says. “It gives you ideas of where to place ads.” Smith cites a past campaign in which research led his agency to recommend positioning minivan ads on parenting and kids’ sites as well as on car sites.

Smith says Carat Fusion’s use of research depends on the client’s objective, be it marketing or branding. Marketing efforts are most always motivated by sales, so the results are measured in straightforward metrics and the agency can move from site to site until it finds the best results for the client. With branding, clients are usually looking to change perceptions and attitudes, which makes the process a bit more complex. Here, Smith would use research to define the target, and then figure out where to find that audience in large numbers. Later in the process, Carat conducts “follow- on advertising” to find out if consumers bought the advertised product. The results are then presented to the client.

Carat Fusion has relationships with AdPlan (owned by AGB Nielsen Media Research) as well as comScore, Forrester and Jupiter. Smith says the company also researches its campaigns by analyzing search results and chat rooms to find out how a product is thought of, and speaking to consumers themselves.

Going Deeper

Former JupiterResearch analyst Gary Stein, now director of client services at BuzzMetrics, has noticed a trend of late that companies are conducting deeper research on the front end. Syndicated search from companies such as Jupiter, Forrester and Fathom Online acts as “preventive medicine” for their clients.

Stein estimates that clients usually have 90 percent of their campaigns nailed down, with ads placed on high-profile sites, but that the remaining 10 percent is “haphazardly planned.” That’s where research comes in – to offer insights to fill that gap.

Some research is suspect, Stein says, such as financial surveys sponsored by brokerage houses. To find reliable data, Stein recommends finding an objective source with a good track record, looking at several studies and in the end, making your own estimates. It’s an economic issue for many companies, because to get a good survey sample, they have to pay for each person, says Stein.

Stein believes some research is misleading, not in the spin it receives or the headline it gets, but in the very questions it puts forth. For example, Stein sites one study that asked, “Would you use a Bluetooth-enabled device?” of consumers who were not likely to know what a Bluetooth-enabled device was.

The best surveys are those that are weighted properly, according to another former Jupiter analyst who asked not to be named. “Numbers are good, but demographic variables are better.” He claims that most surveys by the well-regarded resources are properly weighted (see Research sidebar).

Pulse of the People

Most research industry insiders note that the majority of statistics are garnered from the U.S. Census data, released every 10 years. One company that has census information to power its business is Claritas. Prizm NE (short for New Evolution) is the company’s signature product. Introduced in 2003, it’s updated whenever there is new census data.

Prizm NE is a segmentation tool that divides the population into 66 categories based on a “geodemographic system” revealing behavioral and consumer activities. The product uses the census as its primary source, but is also infused with data from private sources and other governmental data. The 66 categories, which include controversial names such as “Shotguns & Pickups,” change based on the census. When the last report was issued in 2000, 26 names stayed the same, bringing 40 new ones to light. The geography is based on zip codes, with the census data as the foundation.

“Our syndicated services definitely affect online marketing decisions,” claims Bill Tancer, general manager – global research at Hitwise, which resells Prizm NE data. Hitwise provides research including “benchmarks so customers can see where they rank, and click-stream analysis to see why they have that rank.” Hitwise also offers traffic information so clients can see how users are getting to their sites, as well as the sites of the competition.

The majority of online marketers obtain research from established companies in the field. But smaller companies are popping up with some new ideas. Cydata Services owns T3report.com, a site that spotlights products such as T3 Competitor Report and T3 Affiliate Report (see Revenue March/April issue). These products allow affiliate managers to get the info they need to copy competitors’ marketing plans and potentially poach affiliates.

Having worked exclusively in the adult entertainment industry to date, Cydata recently turned its attention to the performance marketing arena. While some may find the company’s tactics unethical, Cydata founder and CEO Brandon Shalton claims his company is simply providing a shortcut to success, even though he does admit it is “a very disruptive service.”

He likens Cydata’s clients to smart fastfood chains, which shouldn’t “bother with all the research – just move in across the street from McDonald’s, because they’ve already done the research.” Shalton believes the T3 products let you “advertise smarter.”

Joe Pilotta, Ph.D., vice president of Big Research, feels his company is offering a unique service as well. “We produce more of an index of what the influence is on category of merchandise purchased. Our clients don’t need click data, etc., because it’s not that important.” Pilotta says his company’s data is created by sales and future intentions, so it’s never static.

Big Research obtains its data from established panels, and occasionally invites offline participants, such as listeners from radio stations, to weigh in. The company conducts its Simultaneous Media Study twice a year, which analyzes 32 different types of media. To get a complete consumer’s point of view, the study surveys 14,000 to 15,000 people.

Predicting the Future

Just as research reports and surveys of past activities play a big role in online marketing decisions, so do predictions for the future. “Forecasts give a gauge of how to prioritize – is search as big as we think it is? People want verification that people are spending money on a sector and that it’s growing,” Shar VanBoskirk, senior analyst on Forrester’s marketing strategy and technology research team, says.

HP’s Paschkewitz uses forecasts to plan for her company’s future, but adds in the site’s own data to get a more accurate picture.

Like most industry watchers, who claim that forecasts play a more valuable role for publishers rather than retailers, Performics’ Joseph says merchants don’t really act on general forecasts, such as last year’s hype of the potential of the Hispanic market (see Revenue March/April issue).

Big Research’s Pilotta says his clients definitely use forecasts to make decisions. Since the company releases its Consumer Intentions and Actions forecast every month, his clients are working with “fresh data” from 10,000 people.

“We use forecasts and trend reports to ensure that our infrastructure planning is adequately matched to the expectations of the market, FatLens’ Kumar says. “The trends also help us judge relative performances of the various marketing channels we are using and adjust our spending according to industry directions.”

Buy.com’s Salas agrees. “Reviewing forecasts and trend reports is an important part of preparing for the future of your business. Our marketing team makes business decisions based on internal customer behavioral data in addition to accurate and reliable forecasts, trend analyses and competitive intelligence,” she says.

HomeGain’s Nilsson says her company watches trends in the online real estate and marketing fields.

“We see a big shift now from a seller’s market to a buyer’s market. It’s a nationwide trend – the question of 2006 in real estate is ‘The Year of the Buyer?'”

Nilsson’s company also keeps an eye on housing price trends in local areas, as well as changes in the competitive landscape.

“For real estate, smaller online players with great technology and VC [venture capital] backing, like Zillow.com, posed a threat in the beginning of 2006. We saw this coming at an early stage and answered with adding more local neighborhood data and by marketing our free home-valuation tool more aggressively,” she says. “Another example is foreclosed homes. A lot of homeowners have interest-only, adjustable-rate mortgages; they are going to get hit hard as rates rise, and a larger percentage will default and go into foreclosure. In anticipation of this, we’ve deepened our partnerships with the foreclosure companies.”

While many statistics are dismissed as obvious or hype, data often provides merchants, affiliates, analysts and even researchers themselves with an idea of how to improve their marketing messages and overall businesses.

TV Tunes In

Broadcasters are jumping on board the online bandwagon as bandwidth makes video a reality for users.

Television networks have spent much of their 60-plus-year media reign continually adapting their revenue models for new delivery platforms such as cable and satellite. After many years of hoping that interest in multimedia Internet content would fade as quickly as sitcoms featuring former Seinfeld stars, the networks are now fully embracing online video distribution.

Now that online consumers spend just as much time at the keyboard as with the remote control (14 hours per week, according to JupiterResearch), the TV networks are joining the party. The top networks are creating custom content and partnering with online media moguls to develop streaming and download services.

Making even a fraction of the vast reserves of current and archived television programming available through streams or downloads to portable media players and mobile phones will greatly increase the partnership and revenue opportunities for online advertisers, search marketers, publishers and affiliates.

Video Takes Action

The networks’ initial forays into distributing content online primarily featured clips of programs that were distributed for free and without advertising.

News dominated the early offerings from CNN, MSNBC, Fox and the big three broadcast networks (ABC, CBS, NBC). NBC was the first network to stream an entire regular newscast, when it launched its webcast of the NBC Nightly News with Brian Williams.

Late last year that trickle of content became a steady stream, thanks in large part to Apple Computer. Apple sold more than 1 million video downloads within the first three weeks of its iTunes video store opening in October 2005. Over the next few months Apple signed deals to sell downloads of TV programming from NBC, USA Network, ABC, Disney, Showtime and others through its iTunes service for $1.99 per program.

The global market for pay-per-content broadband was $360 million in 2005, and it is expected to skyrocket to $7.5 billion in 2010, according to ABI Research principal analyst Michael Wolf.

He says that previously the networks were wary of putting premium content online, afraid it would cannibalize their broadcast efforts, but Apple’s successful introduction of a new version of its iPod that plays video files convinced the networks of the feasibility of selling television content online.

According to Wolf, the most dedicated followers of popular TV shows such as Desperate Housewives or The Office are likely to also be active online media consumers.

CBS’ website had the most unique visitors among video publishers, followed by MSN Video, AOL Television and Yahoo TV according to December 2005 data from Nielsen//NetRatings.

In order to broaden the reach of video content beyond their own websites, the TV networks are turning to search engines and portals to distribute content. CBS partnered with Google to sell downloads of some of its top-rated shows including CSI and Survivor as well as “classic” shows such as The Brady Bunch and I Love Lucy through the Google Video Store. Disney is developing a broadband channel that could make up to one-quarter of its prime-time offerings available on demand.

America Online is offering old TV shows from parent company Time Warner including Alice, Chico and the Man and Wonder Woman. AOL also purchased video search engine Truveo in December 2005. Yahoo is teaming up with actors/producers Matt Damon and Ben Affleck and reality show guru Mark Burnett to develop an online reality show called The Runner.

However, the online video market still has some things to learn about alerting consumers to its offerings. Unlike television viewers who have several options to find programs of interest, online consumers are currently dependent on search to find programs.

To find what’s on broadcast and cable TV, viewers can look to TV Guide, newspaper listings, online programming guides and advertisements on the networks themselves. Currently, it’s the early days of television distribution on the Internet, and video search engines from Google, MSN, Yahoo and AOL do not offer TV directories or guides. Instead users are primarily using search boxes. Users plug in terms and hopefully find what they are seeking.

The next 12 to 18 months will be the prime time for the expansion of television programming online as the networks and search engines reach out to large and niche publishers to aid in content distribution. But the portals are not alone – specialty video search engines including TVEyes.com and blinkx.com are challenging the biggest players for a share of the advertising revenue from online television programs.

San Francisco-based blinkx has signed up E Entertainment, BBC, ABC, NBC, HBO and British news broadcaster ITN to deliver TV programming through its video search engine. blinkx CEO Suranga Chandratillake says, “2006 will be about telling other people to put our search on their sites.” The company is also partnering with performance marketing network Miva to expand the distribution of its video search.

Publishers can “splice and dice” the blinkx television feeds to create custom channels that match their individual audiences and will be paid via a revenue share, according to Chandratillake. For example, publishers could choose to limit searches to celebrity news, or make available only content from the A&E network.

Chandratillake says that to simplify the indexing of content, the TV networks provide metadata describing each program. blinkx enhances the quality of the search results through speech-recognition technology that identifies the subject matter being discussed.

Arise Ye Networks

Although most of the current revenue from full-length TV programming is derived from subscription services or downloads, income from advertising-supported content is expected to rival payfor- content. Advertising revenue will come from banner and contextual ads displayed on search results pages, as well as video ads that appear within the program.

Since the beginning, advertising has largely financed consumers’ almost-endless appetite for television, and online it is likely to be the same. The advertising market for online video will reach $8.6 billion by 2010, according to ABI Research.

“Broadcast TV shows are filler between the ads,” Peter Carlin, a TV critic for The Oregonian newspaper, says. He recently attended the Television Critics Press Tour where the Internet rated “above ratings” as a leading topic of discussion. Figuring out how to capitalize on online video distribution is top of mind for many TV executives, Carlin says, as they are anxious to exploit the lucrative online audience that tends to be younger and slanted toward males.

Carlin says broadcasters are learning how to maximize their revenue from digital content by exploring relationships with search engines and portals, and by testing new advertising models. “Nobody wants to be like the Betamax of new media age” and be left behind, he says.

To fully exploit the possibilities, TV broadcasters must learn about search engine optimization, developing affiliate networks and performance marketing revenue models. Carlin expects that the networks won’t have a problem with taking lessons from the online experts. “Being entirely reactive is not something they are uncomfortable with,” he says.

Video Ad Specialists

Demand for video ads will also create a new industry of production companies and interactive agencies that specialize in developing and distributing video ads. Companies such as ROO, PointRoll and Eyeblaster will work with online publishers to place ads within their online and downloadable content.

Repurposing TV programming for online distribution could also ignite interest in interactive technologies that link from videos or advertisements to landing pages. The networks have turned to escalating the use of product placement within programming to offset some of the revenue lost to online advertising, according to Carlin.

American Idol has blatantly pitched Nextel’s wireless service and placed large cups with the logo of Coca-Cola prominently in front of the judges, Carlin says, and The Office has an executive producer whose job is to determine how to incorporate products into the storylines “without prostituting the show.”

Microsoft is developing technology for its AdCenter platform that will enable video ads or broadcasts to link directly to other websites and with new technologies. This could open the door for the interactive TV market that has been much ballyhooed for a decade.

Dollars Drive Creativity

The revenue generated from online video distribution is likely to affect the creative process by increasing the demand for content and opening up the market for short forms of content. Television networks will likely use feedback from their websites to assess the viability of existing shows as they debut new programs online first to gauge audience response.

Carlin believes online distribution “increases appetite for shows that are less obviously mainstream.” The TV networks are quicker than ever to cancel shows, and online metrics could give the networks valuable input in determining a show’s fate. For example, fringe shows like The Office may get more consideration by the networks because of their popularity online.

Cable channel Comedy Central is aggressively pursuing an online audience and will develop 24 new online-only programs this year, according to Lou Wallach, senior vice president of original programming and development at Comedy Central.

Comedy Central has developed a media player called the “MotherLoad” to showcase its repurposed and original content. Wallach says that comedy is well-suited for short-form videos (five minutes or less) that have become popular online. Comedy Central’s online lineup includes sketch comedy and parody shows, such as All Access: Middle Ages, which pokes fun at the black plague and the crusades. The short-form video will also give increased exposure to digital and stop-motion animation, according to Wallach.

Wallach says one video ad will be shown in between every four to five segments. In addition to banner and video ads, Comedy Central is also considering sponsorships and product placement as revenue options.

Artists are embracing the new format, Wallach says. “The talent community recognizes that this form is here to stay.”

During the next year, television broadcasters will shift from experimentation in online distribution to expecting positive returns on investment. There is a strong incentive for publishers and advertisers to work with them to successfully exploit the medium. If online video distribution fizzles, the networks will likely cancel their online programs and invest more in competing video-on-demand services delivered to televisions.

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