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.

A Failure to Communicate

There’s plenty of communication, but most of it’s ineffective.

Communication at its most basic level is the exchange of ideas and information. Seems simple, right? Like most things that involve people and processes, it’s not always as straightforward as it appears. Communication is part art, part science, part X factor. Getting it right is not easy. And when things go awry, it can be a hugely frustrating experience for all involved.

This appears particularly true in the online marketing space where the ability to clearly and effectively convey and share information between various groups is hampered by complexities, technology and just plain information overload.

In order to operate effectively, publishers need to get creative materials and up-to-date offers from hundreds of advertisers. Merchants and advertisers often rely on affiliate networks to act as the middleman in contacting their publishers. Publishers need to deal with online agencies and communicate with the networks to track their commissions. The networks have to stay on top of both their advertisers and publishers. It’s very complex and can become difficult.

“The state of communication and general communication throughout the industry is a big problem. It always has been,” according to Linda Buquet, an affiliate management consultant and president of 5 Star Affiliate programs.

That sentiment is prevalent.

“I believe in communication advocacy and relationship marketing – affiliate marketing is lacking that,” says Richard Lewis, president of ReturnOnAffiliate.com.

“Communication is a big issue in the community,” says Adam Viener, president and CEO of search marketing firm IMWave. “On one hand, each affiliate manager wants to communicate better and more often with affiliates. But affiliates want to deal with hundreds of merchants and yet they do not want to have to deal with everyone.”

Viener adds that there is information that is critical to his business that needs to be more effectively communicated to him, but it is often buried in a mountain of other communications that are informational but not urgent or necessary.

“I need to know if there is a change in the terms of an agreement or if someone I’m dealing with is moving – those are the kinds of messages that if I don’t see, I’ll lose money. But many of the messages I get are about opportunities to make more money,” Viener says.

Email Overload

There’s no lack of information available to everyone and methods abound for getting your message directly to your intended recipient, including email, RSS feeds, instant messaging, blogging, newsletters and even the telephone.

If you’re like the average connected person, or the average online marketer, email is your preferred mode of communication and your inbox is overflowing – even after the junk and spam mail filters have done their jobs. The average online marketer is likely to receive hundreds of emails per day.

IMWave’s Viener claims that at one point in early February, his inbox had more than 2,100 unread messages – dating back to November 2005.

“Every once in a while, I miss an important message and I’m not notified when there is a new message. That’s why instant messaging is so good for me,” he says.

That’s what prompted him to create the Affiliate AIM List (affaimlist.com), a list of the AOL Instant Messenger handles of people in the performance marketing space. Members opt to sign up and are then added to the buddy lists of all other members. That allows everyone on the list to see who is offline or logged into IM and then contact them directly (see Revenue March/April issue).

The Affiliate AIM List was created by Viener to facilitate communication among the many different parties comprising the affiliate community. Viener, a longtime fan of AOL Instant Messenger, thought the communication tool would be a great way to foster better and more frequent communication between people.

The list is not a moneymaking vehicle but more of a community service, Viener says. To date, it’s been well-received, and has 250 members. In April he launched AffiliateSkypeList.com as another way to boost communication.

“There has been a dichotomy between merchants, who want the most communication, and the affiliates, who want the stuff, but feel it’s very hard to control the volume,” Viener says.

Getting Personal

Instant messaging works for many, but Shawn Collins, president of Shawn Collins Consulting, says that IM is a more personal communication tool and that using it to send out mass IMs is irritating, impersonal and turns him off.

What irks 5 Star Affiliate’s Buquet is spam. “First and foremost with affiliates is reading emails and not knowing if they are spam they should be filtering or an important program announcement,” she says. “Then you end up having to go through the junk filter.”

Buquet adds that even with all the email rules and filtering offered by most applications, many affiliates still complain of being overwhelmed and bombarded with emails and unfortunately, “some affiliates aren’t very good at organization.”

On the flip side, most program managers don’t think beyond using email. They continue to contribute to the flood of email as it’s the easiest way to communicate quickly with a large group of people.

“With a lot of the affiliate managers, it never occurs to them to go beyond email and that thinking is flawed in so many different ways,” Collins says. “People are not opening email. How about picking up the phone more and engaging affiliates? Also, there’s RSS or direct mail. Just touch base with affiliates on a regular basis.”

He says that it’s also easier to catch less-than-scrupulous people on the phone. “If you have a reason to believe that someone is doing something questionable with affiliate links, you should call and ask them questions,” Collins says. “You can tell by the tone of their voice and the way they deal with you. It’s a much easier way to get a read on someone when you are communicating with them by phone than when they are sending you a prepared statement in an email.”

According to ReturnOnAffiliates’ Lewis, it’s not about how many parties you have to communicate with, but rather the effort that is put into those relationships. “Affiliates often feel like they are just a number,” he says. “I believe affiliate managers will get more out of affiliates if they communicate on a professional level and understand the person they are dealing with. There needs to be more respect for each other’s needs and that includes communicating in a way that is best for each affiliate. For some, that might be a phone call. For others, it might be email and still for others, newsletters.”

There are several things Lewis is unsure of when it comes to the fine art of communication, but one thing he’s sure of, “Communication is the end and the start, and it has to be free.”

Monkey in the Middle

But sometimes it’s hard for any two parties to interact directly with the networks, which are often acting as the middlemen between merchants and publishers.

“The networks get in the middle of merchant-to-affiliate communication to impede direct communications,” Buquet says. She suggests RSS as a way to get around that problem.

“One of the solutions that is an important piece of the puzzle is that the networks and the merchants aren’t using enough RSS,” Buquet says. “But it’s a chicken and egg thing. Not that many affiliates are using RSS feeds, because not that many merchants offer them. And merchants aren’t offering them because affiliates aren’t using them.”

LinkShare also noted the communication gap as an issue at the company’s annual LinkShare Symposium, held in January. Then senior vice president Steve Denton, who has since been named president, offered up some possible solutions from the affiliate network. One of these was a future version of its platform that requires publishers to read their messages right after logging in to the interface, and would not permit them to check other things until they view the messages.

Utilizing the Forums

Many industry watchers claim that forums offer a good way to communicate with partners. A multitude of them exist, and most often companies with big programs have their own designated spaces on these forums to directly relay information to their affiliates and partners.

But some say that many of the bigger, more established forums have taken on a culture of mean-spiritedness. Many blame anonymity for that. While the ability to post under a screen alias provides some freedom – especially if you are criticizing a company you do business with – it also can be abused by others to make unsubstantiated claims.

“If you are saying something on a board, you need to let people know who you are to be taken seriously as a professional and have others value the board as a business tool. Otherwise, it’s just a lot of people trying to point blame rather than debating important issues. There’s no real value to that kind of communication when you don’t know who is asking the questions and who is providing the answers,” ReturnOnAffiliates’ Lewis says. His social networking site started in January 2006 as an alternative to existing forums.

Several sources declined to speak on the record about specific forums for fear of public recrimination. However, many sources that requested anonymity cited ABestWeb.com as an example of a space they did not consider overly friendly or tolerant.

“There are all different types of forums and the mood of the forum is usually much like the personality of the forum leader. It’s like corporate culture based on leadership. If the guy at the top of the company is mean and hard to deal with, then likely so is the company. On the other hand, if someone is an empowering leader, that filters down. The culture is not only that of the forum owner and administrators, but the moderators as well, since they typically have the same ethics as those that hired them,” says one source, who asked not to be named.

Buquet, who is the founder and moderator of the WebProWorld affiliate forum, as well as the moderator of the affiliate forum at Search Engine Watch, posts regularly on approximately 30 affiliate and webmaster forums per month, answering affiliate marketing questions from both affiliates and merchants.

Often called the “Forum Queen,” she says it’s a well-known fact in the community space that one of the best ways to gain attention and notoriety for a forum is with flaming and saying something negative about a popular person or figure. “Sometimes the nice forums are not dicey or exciting enough for some people,” Buquet adds.

For merchants to cut through the clutter and noise in forums, she says, the most basic rule is to choose to participate in a forum that is moderated. Otherwise, the forum can turn out to be a “spam house” and merchants will just be lost in the promotional noise.

One idea currently floating around is working with the bigger affiliate networks to create their own proprietary mini-social networks. The way it might work, according to one proponent at an affiliate network who asked not to be named, is that the networks would offer all the communication facilities and tools used in the existing industry forums (blogs, mail, message boards, etc.). But the main topic of discussion would be issues related to the network rather than general performance marketing subjects.

“It could build value for affiliates and bring the merchants and network closer to affiliates,” the source says.

However, if you have an opinion or information that you’d like to communicate, but aren’t interested in expressing in a more public forum setting, there’s always blogging.

Blogs don’t need to be public. Merchants or affiliate managers can set up a blog with an RSS feed that is sent out only to a specific set of individuals. Many likened this approach to an updated version of a newsletter. Such blogs can be used to convey information about a program, announce changes in creative, publicize new promotions, highlight top performers or offer tips.

Personal blogs by people in the industry also allow communication of ideas.

“Anyone can blog,” Lewis says. “There’s no gatekeeper and the blogger can share their feelings about their work and the industry without too much worry of backlash.”

Sharing Is Caring

Still, many in this market space claim that giving up any information about their business is harmful. Because the barriers to entry in the online marketing space are relatively low, revealing the secrets of exactly how you achieved success is not seen as smart business (see Revenue Volume 2, Issue 7).

But others believe by sharing information you will help the industry grow and thus ultimately achieve even bigger success for your own company. Collins, Buquet and Lewis all claim that is not just part of their personal philosophy, but a key component in how they conduct their respective businesses.

Buquet, who launched her forum in July 2005, says it’s “goal oriented” to promote “positive success.” She wants her members to work together and share ideas.

“It’s an interesting human phenomenon to do things for the right reasons,” Buquet says. “The more you give, the more you receive. I try to empower people.”

Collins agrees. “People don’t really see the need or benefit to help people. It’s way too easy to be selfish and keep secrets. But sharing really does pay off. Giving benefits the overall industry and leads to more quality programs,” Collins says.

He attributes much of the success of the twice-yearly Affiliate Summit conferences he co-hosts to helping others. “I think I did the right thing,” says Collins. “I shared with people, without giving too much away and my business is growing. It’s a pay-it-forward thing.”

Be a Mentor

Collins has been helping people on an informal basis for years and now he’s working to formalize a mentoring program that would have industry leaders working directly with others. The idea is that the leaders would share their experience and knowledge, acting as role models and offering inspiration.

Collins says it’s a grassroots effort that started in 2001, when 30 online marketers in the New Jersey area would get together and simply talk about issues. He claims it spread to other regions, but was never formalized and eventually sort of faded away.

“It would be great to resurrect it. It became too onerous to organize people for the meeting, the meeting space, the food, etc., so it just fell off,” Collins says.

With the explosion of social networks, Collins believes that people are looking to connect in a more personal way with other like-minded folks. This time around, he’s looking for a more one-on-one connection and likening the new idea to the Big Brother Big Sisters mentoring programs.

His idea is to get industry leaders in various geographic locations to agree to participate and then connect them with someone within a 20-25 mile radius. The two would meet periodically to discuss whatever business issues they choose. Of course, people in competing businesses would not be paired up.

“It sounds like a wonderful idea. People respond best to people they can relate to, as well as if they care about you as a person,” says ReturnOnAffiliates’ Lewis. Beth Kirsch, group manager of affiliate programs at LowerMyBills.com, is working with Collins to get the program off the ground. “I’m happy to do anything that will improve communication between parties in the online marketing space,” says Lewis.

Collins is also pairing up people at his conferences. He’s attempting to facilitate the schmoozing aspect of the conference by holding formalized social networking sessions that allow attendees to request mini-meetings with other attendees they would like to meet. It’s like speed dating for the business conference crowd. By starting a dialogue between the attendees, Collins believes he’s helping improve industrywide communications.

Most agree that despite the lack of communication in the industry, things are looking up. There are many vocal performance marketing players from all areas working hard to rectify the problems using a combination of existing tools, new ideas and emerging technologies. This could bring some much-needed sanity and repair the communication breakdown.