The Social Security

Sites that rely on user-generated content are altering the human fabric of the Internet and the way that performance marketers reach out to customers and merchants and communicate with each other. Online marketers are testing all of the new communication methods – blogs, social networking sites, wikis, and photo and video-sharing sites – to see if these platforms can help them drum up business.

And with good reason. The popularity of many of these emerging areas is seeing steady, if not explosive, growth. Blogs, which allow users to easily post new content to their site as well as effortlessly link to other sites, are on fire. Forty-four percent of American Internet users read and post on blogs, discussion boards and other consumer-generated media outlets according to a February 2006 Pew Internet & American Life project study. Technorati reports that approximately 70,000 new blogs are created every day and that the total number of blogs doubles at least twice a year.

But it’s not just blogs. Social networks, such as Bebo and MySpace, are communities in which an initial set of founders sends out messages inviting members of their own personal networks to join the site, and new members repeat the process, are a new national phenomenon. As of July, MySpace has 72 million members, Bebo has more than 57 million members and hi5 has more than 40 million.

In addition, there are single-use social networks where people share one type of topic such as YouTube.com for video, Flickr.com for photos, Digg.com for news stories, Del.icio.us.com for links and Wikipedia.com for encyclopedia articles.

All these types of collaborative platforms are the crux of the Web 2.0 model where the ease-of-use technology allows anyone the ability to contribute.

These sites are built to harness the breadth of experiences so everyone can benefit from the collective wisdom – they have the advantages of collaborative group input but because these services are online and can be anonymous (through aliases), users are not afraid to dissent, according to Jim Nail, a former analyst at Forrester covering the social networking space, who is now the chief marketing officer of Cymfony. “Therefore there is not concern about the dangers of ‘groupthink,’ when individuals intentionally conform to what they perceive to be the consensus of the group.”

And when it comes to growing social groups MySpace.com leads the pack. In July, Hitwise announced that MySpace.com, for the first time, was the No. 1-ranked website in the United States based on the number of visits. MySpace.com accounted for 4.46 percent of all Internet visits in the U.S. for the week ending July 8, 2006 and has propelled past Yahoo Mail. Bebo increased its market share of visits by 21 percent from May 2006, the largest percentage increase among the social networking websites.

THE SOCIAL BUTTERFLIES

So who’s hanging out at these social networking sites?

Nielsen has identified a group, called “My.Internet,” that’s especially likely to visit networking sites. Sixteen percent of Web users belong to this group, which has a median age of 32. Nearly all members of this group – 99 percent – visit blogs; 84 percent are members of an online community; 57 percent have their own blogs; and 22 percent use RSS feeds. Nielsen reported that “My.Internet” users tend to be highly engaged with most of the websites they visit, as measured by 10 factors, including whether they “liked” the site and were likely to return.

With all of the promising information about traffic and demographics, advertisers are eager to get their messages in front of the young and wired demographic that favors the social networking sites. Combined spending on blog, podcasts and RSS advertising skyrocketed 198.4 percent to $20.4 million in 2005. It is expected to grow another 144.9 percent to $49.8 million in 2006, according to an April 2006 report from PQ Media, a custom media research firm.

But advertising on social networking sites can be tricky, and marketers need to take strategic and creative approaches. The audiences skew younger, and often these younger audiences are exceptionally adept at tuning out traditional banner advertising – therefore pushing ads no longer works.

Mark Brooks, an analyst for OPW.com, says, “Interruption marketing is old school and not appreciated by the younger audience. Marketers wanting to use social networks need to put their thinking caps on and get creative.Case in point: Burger King is sponsoring downloads of episodes of 24. Very cool and very viral and plays to the MySpace demographic perfectly.”

In addition to advertisements and sponsorships, marketers know that the buzz generated on social networks is much more of a powerful endorsement than any form of promotion. In fact word of mouth is widely considered the most powerful form of marketing and the wave of the future for influencing sales. According to a December 2005 McKinsey report, approximately two-thirds of all economic activity in the U.S. is influenced by shared opinions about a product, brand or service.

Forrester Research’s 2004 study showed that over 60 percent of consumers trust product recommendations found in online sources like discussion boards. A 2004 RoperASW report, now part of GfK Group, found that over 90 percent of Americans cite word of mouth as one of the best sources of ideas and information. Further, they rate word of mouth twice as important as advertising or editorial content and put one-and-a-half times more value on it today than they did 25 years ago.

Dave Evans, moderator of the social networking panel at Ad:Tech San Francisco in May and co-founder of Digital Voodoo, along with Dave Ellett, CEO of Powered, examined the purchasing funnel of ACP (awareness, consideration, purchase). They saw that the majority of traditional advertising dollars, such as interruptive efforts like television commercials, is applied at the awareness point in the ACP. But because consumers are increasingly finding ways to block advertising through TiVo, spam filters and do-not-call lists, the impact of these types of traditional advertising has diminished. Now marketers are not only tasked with how to get their messages through to potential customers, but they must also worry that their potential customers are increasingly talking with each other and “comparing notes.”

To counter this problem, Evans says that, “When marketers reach out in the consideration phase, they contact consumers at the precise moments that they are thinking about a product or service. Through consumer-generated media and word of mouth, evangelists can actively impact consideration processes.”

The advantage of social networking for marketers is that it does not involve interrupting like an advertisement (which is in the awareness phase) does.

LEVERAGING SOCIAL NETWORKS

There are a variety of ways marketers are taking advantage of consumer-generated media and word of mouth. Social networks are having an incredible influence on how business is getting done. Organizations, ranging from movie studios to sneaker manufacturers, are changing the way they make decisions, connect with customers and market products because of the increase of new tools that enable people to express themselves more easily online.

“There is a new paradigm where consumers drive the conversation and have the control. Companies have to let go of the marketing speak and let people communicate with each other in an unfettered environment,” Geoff Ramsey, CEO of eMarketer, says.

One opportunity is for marketers to take ideas from social networking sites and apply it to their own business, he says. For example, GlaxoSmithKline is working on a social networking site for the weight loss community that lets users talk with each other and answer each other’s questions about how to lose weight, such as diet and exercise. GlaxoSmithKline is doing it for two reasons:

  1. To gain learning from these affinity groups – marketers can find out a great deal about how this group of people define and express themselves. They can use the language or phrases observed for purchasing keywords for search campaigns. They can apply the learning to sales copy in magazines, radio campaigns or on the Web.
  2. To participate at the site, the visitors must register there and provide some demographic information. Now GlaxoSmithKline has a list of consumers to market to when the weight loss product launches.

By listening in, marketers have an opportunity to hear how people really feel about their brand or product. With such learning, they could correct misperceptions in the marketplace or make effective changes to their products or customer service.

“Until you have demonstrated that you listened and responded accordingly, you cannot deliver hard-core messages to people,” Ramsey says. For this reason, there are many natural language processing companies that can determine what users are saying.

One company, Cymfony, offers a product that follows the flow of the message, tracks the positive and negative reactions to it and measures its influence on the audience. It scans and interprets the voices of users in blogs and social networks to determine how these discussions are impacting potential customers.

Nail points out, “In Web.1.0, the marketers’ job was to appear adjacent to that content but now that users are generating the content and are looking for a social engagement, marketers’ messages need to be part of the content.” To do this, companies need to know what their customers are saying.

Another way that companies can use social networks is to create profiles on the sites. For example, MySpace is currently charging upwards of $50,000 per month for big brands such as Pepsi, Adidas, Dell and Ford to build and promote profiles. Although this seems like something that members would dismiss as sheer commercial promotion – a quick look on MySpace shows that Jack Box, the character behind the Jack in the Box restaurants, has 130,989 friends (meaning that these MySpace members intentionally linked to the Jack Box profile). Of course, MySpace must be careful that selling these types of member profiles does not cause a mass exodus of its members.

Another way that marketers are leveraging user-generated content is by having consumers create their advertisements. The benefits are multifold: It gets consumers involved in the brand; the ads feel more authentic; it saves marketers money because they don’t have to hire an advertising agency; and if the ads are funny or interesting, they propagate themselves by being sent around on platforms such as YouTube.com or GoogleVideo. Companies like Volkswagen and MasterCard have harnessed the affection that some customers have for their specific brand by asking them to create and vote on ads, and created successful campaigns and tremendous buzz in the process.

AFFILIATES GOING SOCIAL

When it comes to testing the waters in burgeoning areas, affiliates are usually eager to dive in headfirst.

Rosalind Gardner has a blog called Net Profits Today, which she updates daily. She says: “I love my blog. They make posting new content to the web such a breeze. No uploading required. Just write and publish. It doesn’t take much to copy and paste a merchant offer and add a few of your own editorial comments. Another advantage is the free search engine traffic that blogs invite. Search engines love fresh content, so I’d highly recommend that any affiliate who isn’t blogging yet, start ASAP! Of course, the best benefit is that blogs are yet another way to enhance the relationship you definitely want to build with your visitors as an affiliate, especially in light of how difficult it is becoming to make sure the mail gets through nowadays.”

One social network specifically for affiliates is the Affiliate Summit Social Network. Consultant Shawn Collins, the Affiliate Summit co-organizer, says the network “helped Affiliate Summit by enabling attendees to network in advance of the conference, as well as to brand themselves through posts to their journals, sharing bookmarks, etc. This value-add assisted us in selling Affiliate Summit, and I think it is conducive to our goal of bringing the community closer together.”

He adds, “Now that the [July] show has ended, I will be focusing on getting more attendees to register after the fact. The ongoing network will benefit them, and we will be using it as a retention tool that ties to our mission of creating a unique educational environment and networking opportunity that facilitates the exchange of information about affiliate marketing.”

Affiliates are also testing the waters of mainstream social networks, such as MySpace. Collins has created a profile on MySpace, with the user name affiliate manager, and posts the content of his blog, AffiliateTip.com, on his MySpace blog. “My goal is to get more eyeballs for my blog. The goal is awareness – to get incremental readers – the ultimate goal is to recruit managers for affiliate programs. The first thing I talk about in my profile is that I am running these two programs and I have banners up to join them – PayLess Shoes and Snapfish.”

One clever affiliate whose social networking site has garnered lots of media in the past six months, including spots on CBS Early Show and Good Morning America, is 23-year-old IT manager Kevin McCormick. Six months ago he started DressKevin.com, a site that is a graphical database of his wardrobe, where users vote on what Kevin should wear on a daily basis and later comment on it. DressKevin.com inspired a second site, MyDrobe.com, a wardrobe management system for users. Both sites keep track of the last time an item of clothing was worn, the size, brand and style details.

On DressKevin.com, the clothes descriptions sometimes include a link to the merchant or affiliate program where it can be purchased – but not for every item. “If affiliate marketing did not exist, I would be providing uncompensated referral links anyway. I am trying to maximize it without comprising the integrity of the site. That is why affiliate marketing works well for me. I have Old Navy shirts on my site and they have links to Old Navy through Commission Junction. But I also have descriptions of my shirts from Hollister and Express with no compensation because I like their shirts.”

He attributes this growth and popularity to the credibility and authenticity of his site. McCormick says he started his site not to make money but to see if it would catch on and people would pass it on to their friends. “I was uninformed about CPC advertising, media, PR, affiliate marketing or even making a website.”

McCormick does not actively seek out affiliate agreements with merchants. He signed up to participate with some retailers such as Old Navy and Macy’s through Commission Junction. He appreciates the convenience that the network offers in terms of finding him appropriate merchants to sign up with, and the tracking and processing of commission paychecks.

McCormick’s other site, MyDrobe.com, offers more opportunity for generating revenue. It is a wardrobe management system that is a database for clothing, and enables users to manage their wardrobe and create a profile as well as enabling people look through other people’s clothes and to see what they are wearing. MyDrobe.com has 4,900 registered members and the demographic is heavily female, with a significant amount of girls between the ages of 13 to 16, followed by a concentration of girls in the 16-to-20 age range.

“Any website that focuses closely on brand-name products like clothing is a great candidate for utilizing affiliate marketing channels that will pay a commission on referral sales. MyDrobe’s clothing descriptions have ‘click here to buy this shirt online now’ for those who see a particular item of clothing that they like in someone else’s wardrobe and would like to buy it for themselves as well,” he says.

The site offers complete product catalogs that are provided by affiliate networks in “vendor showcases,” which are made for a single clothing company. For example, at the vendor showcase at MyDrobe.com/gap, users can browse through clothes currently for sale at Gap. Users can add clothing to a wish list, post comments and provide ratings and click on links that will bring them to Gap.com.

“Product feeds make this possible because MyDrobe will automatically update these vendor profiles based on what is currently for sale, so that my site does not need to continually manually enter new clothing into the site. XML technology makes this easy to implement for both the clothes manufacturer and site operators,” McCormick says.

Another property exploring how much social networks affect e-commerce is the brainchild of Lisa and Brian Sugar in San Francisco. In March 2005, they started a blog devoted to celebrity news called PopSugar and a community developed rapidly around it. By June 2006 they had 4,000 registered users chiming in about Jennifer Aniston’s new YSL bag or Britney’s second pregnancy.

In June 2006, they launched TeamSugar, which offers its readers a service similar to MySpace, providing registered users with their own profile, Web page, blog and the ability to send messages to one another. FabSugar, a fashion blog, launched in July with other sites devoted to topics like technology, home decor, and fitness to come subsequently. Brian Sugar, who previously was the chief Web officer at Bluelight.com and vice president of e-commerce at J.Crew, explains that “eventually, we will have 12 categories that sit on top of your social network which is called TeamSugar.”

Sugar’s goal is to get 100 million page views and 25 million unique users per month from the combined sites that will target trendsetting women between the ages of 18 and 35 and the advertisers that seek to reach them. He points out that, “TechCrunch and MySpace cater to guys, and DailyCandy is about fashion but without the celebrity gossip component. There is a massive crossover between InStyle and RealSimple and Allure and I don’t think the readers are getting served online from social networking and an editorial standpoint.”

FabSugar blogs about style and beauty products; for example, it contains an entry about the flats that Kate Bosworth and Sarah Jessica Parker are wearing, with links to two sites that sell them. Right now the site has text links with no merchant agreements yet but Sugar thinks that, “We definitely will be linking at Sephora and J.Crew. If they offer an affiliate program, we will sign up. If they don’t use affiliate programs, I think we will be able to broker the deals,” he says. “We have always believed that the majority of revenue would be from our advertisers.”

LOTS OF BUZZ

Another site that drives word-of-mouth commerce by leveraging the community aspects of a social network is MyPickList.com. The effort integrates a user’s profile and his or her favorite product recommendations into a networked community.

It works like this: Users create a list of their favorite items from multiple categories, called a pick list. They add the product, choose a preferred merchant for product sale, write a short product review and tag it. Only products that are sold through a retailer in the MyPickList network are eligible for a product commission. Once the pick list is created there are four ways to get a pick list viewed/distributed: Send to a userdefined buddy/email list; RSS feed; a banner ad creation (MyPickList.com badge/widget) that allows users to create custom ads to promote their pick list on websites and blogs and MySpace page; and direct from the MyPickList.com website.

Jeff Eichel, CEO of MyPickList, says it helps users become affiliates “by allowing them to recommend products and services under their MyPickList account. If a product that a user recommends gets purchased from the pick list, that user will earn a commission ranging from 1 percent to 10 percent. Most of these people would never get approved for affiliate programs on their own, but because they are under MyPickList there is no approval needed.”

Another social media platform for affiliates is Affilipedia, which, like Wikipedia.com, uses Wiki software to allow users to contribute articles and edit entries. Novices to experts can submit new information on affiliate marketing as well as edit the existing pages in the affiliate marketing encyclopedia if they disagree with the explanations of affiliate, merchant, commission or other affiliate marketing terms.

This egalitarian collaboration works – Cymfony’s Nail points out “Wiki in general is a collaborative platform and therefore they don’t have [to have] a centralized editorial staff. They are not limited to how much you can afford to pay.”

Although the sharp increase in content presents more prospects, it can be risky to be associated with some of the uncensored and often-critical material of user-generated content.

“You might come to the conclusion that this is not a ‘safe’ environment for advertising your product or service,” says eMarketer’s Ramsey.

If affiliates do decide to invest their time and effort into a specific social network, they should be aware that although members can be loyal to their favorite sites – studies find that users are driven to return often by ever-changing content and membership – audiences (especially young audiences) can be fickle and move on to the next great thing and online marketers need to be ready to move on as well.

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).

Performance Powerhouse: Q & A with Steve Denton

Earlier this year Steve Denton was named president of LinkShare, following the resignations of Chairman and CEO Stephen Messer and President and COO Heidi S. Messer, who led LinkShare’s development from its founding in 1996 through its $425 million sale to Rakuten in late 2005. Denton heads up all day-to-day operations including management and continuous development of the talent and processes required to drive LinkShare’s continued growth. Revenue Editor-in-Chief Lisa Picarille spoke with Denton about the cultural, organizational and other big changes that LinkShare is dealing with in order to achieve its goal of becoming a performance marketing powerhouse.

Lisa Picarille: What’s changed since LinkShare became part of Rakuten last year?

Steve Denton: Rakuten USA is the company set up in Boston, and the CEO of Rakuten USA is John Kim and he’s the CEO of LinkShare. LinkShare was the first international acquisition for Rakuten. It’s been great working with John and the entire team at Rakuten, including Hiroshi Mikitani, the CEO. Rakuten is now the sixth-largest Web services companies in the world from a market cap standpoint. And having access to those resources from that organization has been very rewarding and very fulfilling. When there are new products we want to roll out, new markets we want to enter, new geographic footprints that we want to establish, I don’t have to wait for two years to accumulate the capital to do that. I have an owner that has the resources and that’s why we sold the company. We also sold the company because we don’t just compete against affiliate companies. We are in a performance marketing industry – so we are competing against everyone out there that is going for inventory on these publishing or distribution sites.

As far as the way we operate the business, there has been no real change. The financial results roll up into Rakuten. That is obviously a structural change. There’s a new board of directors. But as far as running the day-in-and-day-out business there’s John Kim and myself. We have seven teams’ employees working with counterparts in Japan on integration projects to see where we can find some synergies and some best practices from both organizations. That’s taken a good amount of time and we just looked at the final presentations [in June] and there have been some subtle changes there that you wouldn’t notice externally. We’ve been the beneficiaries of development resources from Japan, which again, Jonathan Levinson, our CTO, came from Rakuten. But as for the nuts and bolts, it’s all about continuing to build on what we have.

LP: What impact has there been for LinkShare since the departure of Steve and Heidi [Messer]?

SD: Clearly anytime the founders that established a business and an industry leave, they are missed. But as an organization we are moving forward. I run the day-to-day business or the customer-facing business. I deal with distribution services, merchant services affiliate support, marketing, product development, client development and search. All of those roll up to me. And beyond the customer-facing – tech, legal, GNA, finance – John Kim manages that.

We’ve been focused on three things since this past February: the leadership transition; strengthening our core offering; and the cultural transition from being a New York-based privately held business to a business unit in a division in a large international media company. That’s been a big transition – culturally, and the leadership change, that’s been a big focus.

The second big thing – strengthening the core offering – not that we had any issues with the core offering and some of the products we announced at the symposium – rolling out Link Locator Direct, which is our first Web services offering. It enables affiliates to have easy access to links, and have them defined in categories: coupons, hot products, logos, general promotion, free shipping and best converting.

We’ve made some changes to our merchandising product. We have a client in beta now for whom we’ve recently categorized the data feeds; so, working with normalization and unification. Synergy Analytics has been in beta for some time. We held the affiliate and merchant advisory boards in San Francisco at the [LinkShare] Summit; we got some great feedback. And working with the development teams, and it’s our intent to take both of those products out of beta by the end of the summer, then run dual reporting for six months as the performance testing and get the feedback from the users. It’s been in beta a long time but that’s because it’s a product that’s going to change and revolutionize the way we do things here at LinkShare and send information to our partners. That’s been a big focus.

LP: What changes have you made at LinkShare since being appointed president?

SD: Lead generation, ad networks, AdSense itself and shopping comparison, performance- based and what used to be known as affiliate marketing deals have all evolved. I think that we need to embrace that and find a way to be inclusionary with that, rather than just watching it grow up around you.

People ask me if the affiliate marketing industry is slow – no. I don’t define affiliate marketing as just what I do; I look at performance marketing. Anytime you are paying a third-party website a commission for some sort of thing that is a measurable and definable event – applications, sales, subscription – that’s inventory that a company like LinkShare should be going after. Because we’ve got great merchants, and we’ve got great distribution partners. That’s inventory we should be going after.

LP: What are some of the initiatives LinkShare has planned over the next 12 months?

SD: It’s been a busy four months: leadership transition, cultural changes, integration with Rakuten. The Synergy Analytic product – getting it out of beta is just step one, but then refining that product and taking the feedback from users and enhancing that product over the next six months and beyond is key for us. The work we’ve been doing on the merchandising data feeds and expanding that out. Taking this new locator direct and expanding our Web services offering in new ways of distribution of links is critical. Then we’ll be in the middle of back-to-school, then right into fourth quarter, and that’s not a time to roll out new products. So, our road map is fairly well-defined, with some of the exciting things we did last year and with Athena and enhancements we’ve been making to that – the affiliate analytics and the changes to that. It’s been busy. And launching U.K., that road map is fairly well-defined. And at the end of the day it puts us in a space where we can make LinkShare a safer, more reliable and more profitable place to do business on the Web. We’re focused on the right things.

LP: Is the reign of the “Big Three” (CJ, LinkShare and Performics) over?

SD: When you talk about the big three, I think Yahoo, Google and Rakuten, and we’re all going to be just fine.

LP: Interesting that you don’t count Microsoft in there at all.

SD: I do, but you said three, not four. I think Microsoft all the time. I spend a lot of time thinking about Microsoft. I spend a lot of time thinking about Yahoo. I spend a lot of time thinking about Google. And eBay. And Amazon. And ValueClick. That’s what changed. Because all those folks are in my game. They all have performance- based products – they are called different things. They look different, but they’re all in this space. It’s just not LinkShare against CJ and Performics. We are competing against well-funded big organizations with many assets. What you need to talk to your clients about is, How can I help you with your performance- based needs?

LP: But many of the big three you talk about have mainstream mindshare. What is LinkShare going to do to establish itself among those players?

SD: LinkShare is a B-to-B company – not a customer-facing brand. Although Rakuten is a customer-facing company in Japan. As a B-to-B, we need to stay focused on executing where we are. It’s new markets, new product and new ways to monetize. As we move forward there are lots of other areas we can make headway in. Like mobile. That’s an area in which we are very successful at LinkShare in Japan. We have a significant amount of transactions through mobile devices. As new platforms become available for us to work with, that’s an area where we can do really well.

However, the affiliate terminology limits us. I would submit that LinkShare brought affiliate marketing mainstream. We are recognized as the pioneer in affiliate marketing. When you are the leader in any space, it’s great; people look to you for your thought leadership but you can get pigeonholed as well. The difference between lead generation and ad networks and AdSense is those are affiliate sites, but just the way you compensate them and contractually the way that the relationship is set up may be different, but at the end of the day a third-party website is getting paid to drive a commissionable action to your site. And who manages that salesforce for you – that’s where the differentiation lies. So, if an ad network is managing that salesforce for you and they’re taking a financial risk and they’re putting their money to work and they are working on a spread – then that is called an ad network. If Google is doing it and they’re sharing a percentage of it – that’s called AdSense. But yeah, it’s jargon. But the bottom line is websites are getting paid commissions to drive commissionable and measurable events.

We need to stay focused on providing our clients with new ways to engage with their customers, new ways to monetize those engagements and expanding that global footprint.

LP: How are you doing that?

SD: We are opening our LinkShare U.K. office [on July 1, 2006]. We have space over there and we are staffing it up. We’ve got people on the ground. We already had the LinkShare U.K. network, but we’re putting people on the ground there and aggressively going after that marketplace now. There will be five to seven people to start out. Mostly customer-facing – sales, service, distribution, affiliate support, things like that. I’m really excited about that. That’s the resources of Rakuten. I can make the commitment to do that and aggressively go after that market. Our clients expect that from us, being part of a global company.

LP: Give me an idea of what you think the performance marketing space will look like in three years.

SD: From a LinkShare standpoint, we’ll reflect the needs of our customers, we’ll help them grow their business cost-effectively by acquiring new customers at a fair price or on a pay-for-performance basis. We’ll introduce new products, new channels of distribution and new marketing. International expansion is key in this space. New tools, Web services.

The performance space in the next three years. Let’s take a look back three years. Search has transformed this landscape. And that was very new three years ago. I imagine there will continue to be transformations like that in the future. The key with LinkShare is to remain flexible enough to ensure that we can offer our customers any new performance-based marketing tactic.

We do that today, but need to remain flexible to continue to give them insight to the ROI – whether it’s a click to a sale, or subscription or pay per call or mobile.

As our merchants find new ways to monetize and exchange with their customers we need to be there – one dashboard – to provide that feedback. I think the methods are going to vary but LinkShare’s core value proposition will not. The performance marketing space will still exist – it will experience robust growth as we see today, continue to grow. The performance-based marketing industry outpaces the growth of e-commerce. That’s where we need to stay focused: on this platform that can track all of that and provide the markets and the channels that our clients need to get there. I think it’s a two-pronged approach – platforms and channels.

eBay: What’s in Store

Describing eBay as a commerce website is like saying Elvis was a singer. The 11-year-old company that began as a virtual flea market similarly has become an international phenomenon, spurring the creation of cottage industries and sustaining thousands of small businesses.

And despite being one of the Internet’s forebears, the company is in many aspects just getting started. As eBay grows, so will the myriad of obvious and less-apparent methods that marketers can use to profit in, around and through eBay.

By economic standards, eBay is a medium- sized country. In 2005, the value of the sales through its marketplace ($44 billion) and financial transactions through its PayPal service ($27.5 billion) together were slightly more than the gross domestic product of Belarus, an Eastern European nation of 10.2 million people.

The eBay network includes much more than online auctions, encompassing vertical marketplaces (Motors, Rent.com), fixed-costs sites (Express and Stores) shopping sites (Half.com, Shopping.com), as well as a telephony company (Skype) and PayPal.

The San Jose, California, company’s revenues continue to grow at an unusually high rate for a mature company, jumping by 35 percent during the first quarter of 2006. “eBay has its own weather pattern,” analyst Greg Sterling of Sterling Market Intelligence, says. In addition to the many people who make a living selling goods on eBay, Sterling says the rapidly growing eBay economy also impacts “off-line eBay enablers, including packaging and shipping companies.”

INSIDE INFORMATION

While the auction service is eBay’s signature sales venue, it is only a fraction of the revenue opportunities available to marketers, many of which do not require selling goods. Publishers are leveraging the site’s considerable traffic to complement or as a portal to their own websites.

The eBay audience of active purchasers grew to 75.4 million users in the first quarter of 2006, up 25 percent from the previous year. The same strategies used to attract consumers on the greater Web, including search marketing, optimization and email advertising, can be used to capture traffic within the eBay universe, according to eBay Power Seller Skip McGrath.

“A lot of people use [eBay] as a marketing gateway, to market to them later,” says McGrath, who is the author of seven books on the company including “Titanium eBay, A Tactical Guide to Becoming a Millionaire Powerseller.”

Even if consumers don’t make a purchase, publishers can still profit by linking to their sites from within eBay, according to McGrath. “A substantial amount of people make more money from the advertising on their own sites through traffic from eBay than from actual [auction] sales,” he says. “I get 2,000 to 3,000 visitors per month just from people clicking through from eBay,” he says.

Publishers must be careful in promoting external sites, as eBay will ban anyone who violates the company’s linking guidelines, according to McGrath. For example, only the “About Me” page of an eBay Store can contain external links, and those must be at the bottom of the page. But McGrath has commandeered substantial traffic by including the URL of his business in the image he created for his About Me page, which he says is okay by eBay rules.

Maintaining an eBay Store not only provides the possibility of selling items for fixed prices, it also enables sellers to advertise to eBay’s massive audience. The company has one of the largest inventories of advertising positions to sell, as it is ranked as the fifth-most-trafficked website, according to comScore Media Metrix. In May of 2006, 77 million people visited the site, or 60 percent more than Amazon.com

eBay sellers can promote their wares by purchasing keywords on the site, but the ads can only link to eBay Stores. eBay Stores are promoted through Google’s Froogle shopping engine, and eBay spends about $250 million per year advertising with Google’s AdSense program to increase traffic, according to analyst Sterling.

eBay offers an email marketing program for contacting registered users. Power Seller McGrath says he increased the traffic to his website by including links in a newsletter that has 35,000 subscribers. “It’s a great platform to reach international markets, as it is hard to promote a website overseas [through search marketing],” McGrath says.

Marketers looking to improve the performance of their products on eBay or to identify the valuable keywords to promote in search marketing can license data from the company, says Greg Isaacs, the manager of eBay’s developer program. Publishers “can determine fair market value of items that are for sale” by analyzing data about sales at a fixed price versus at auction, Isaacs says, but eBay does not license personal data about its registered users.

To capitalize on the potential of the wildly popular social networking phenomenon, eBay recently launched two of its own Web 2.0 services. During the eBay Live users conference in June, the company unveiled Member Blogs, which enables members to promote their products and stores. Bloggers can expand their social network through posts in which they are not restricted from promoting and linking to their websites. The company automatically creates RSS feeds of the blogs to facilitate syndication and continually update readers.

Also announced at eBay Live was the eBay Wiki, a user-created encyclopedia of insider marketing tips and best practices for participating in the eBay economy, which publishers can use to showcase their marketing savvy.

“The next level [for eBay promotions] will be social commerce,” says Robb Hecht, a business blogger who publishes the Media 2.0 site. He says getting the blogosphere to build a community around the company and its products will be an important factor in maintaining eBay’s growth.

In addition to promoting themselves within the eBay cloister, marketers have a plethora of opportunities to generate revenue by promoting eBay commerce throughout the Web. Through advertising, integrating eBay listings and affiliates, marketers are spreading the gospel according to eBay and earning commissions.

An advertising system under development by eBay will enable publishers to generate commissions by referring users. AdContext, which competes with Google’s AdSense, searches the content of a Web page and automatically generates links to relevant eBay categories.

“Contextual advertising allows us to leverage content on any website, and connect it with any transaction [on our site],” says Lily Shen, a senior manager who oversees eBay’s affiliate program. Or, publishers can manually match their content with eBay keywords using software available to eBay affiliates.

Affiliates interested in AdContext sign up through network partner Commission Junction, according to Shen, who says affiliates are prohibited from using AdContext to link to their own eBay Stores. Commission payouts are tiered based both on the volume of new eBay users referred and the dollar amount of the winning bids that referring consumers make, says Shen. While referrals to eBay Marketplaces (including eBay Motors and eBay Express) are aggregated toward reaching the tiered goals, affiliate referrals to other eBay companies (such as PayPal, Half.com or Shopping.com) are not, Shen says.

Affiliates who promote other eBay companies receive separate revenue and traffic reports and must sign up for each program individually as every eBay property has its own commission structure, according to Lisa Riolo, senior vice president of business development at Commission Junction. Riolo says the addition of AdContext could help eBay to reach new publishers, although “there aren’t too many publishers who aren’t aware of eBay.”

Would-be publishers looking to create their own Web identity can use an eBay commerce and content tool. ProStores.com is an eBay subsidiary that offers an email marketing system for sending permission-based newsletters and promotions.

BUY DON’T BUILD

While eBay provides an extensive list of application programming interfaces (APIs) that publishers can access to integrate content into their websites, a growing number of third-party programs provide the shortest route to assimilating with eBay. The roster of eBay’s developers doubled last year to 30,000, according to eBay’s Isaacs. Applications developed by independent programmers generated 25 percent of the listings on eBay, he says.

Specialty retailers can boost their inventory by incorporating eBay Marketplace listings into their stores. For example, by customizing an eBay API, ticket reseller FatLens.com displays eBay items alongside tickets from other vendors, says president Siva Kumar.

While Amazon.com has more mature software, eBay’s technology is straightforward to use, and Kumar is impressed with the quality of the listings. “eBay has many long tail items like Civil War uniforms, things you can’t find in a regular store,” he says.

Advertising company Scope Aware recently introduced SmartyAds, a program for companies that want to participate in search engine marketing with the leading engines but do not want to manage multiple programs. Scope Aware acts as an agent, managing the campaigns for marketing eBay Auctions, eBay Store, and eBay Express listings across MSN, Google, Yahoo and Ask.com, according to founder Ali Gungor.

Scope Aware’s software “automatically analyzes goods for sales and comes up with the keywords to buy,” says Gungor, who charges a setup fee and percentage of the value of the goods sold. SmartyAds creates the ad copy and suggests the language for landing pages, Gungor says. By acting as an agent and negotiating with the search engines, Scope Aware enables small advertisers to participate in paid search dominated by large companies, he says.

Even though eBay’s commerce business is more mature than search, the company and its partners continue to develop new services for marketing and selling products. But maintaining that growth in the face of competition from Google, which is just beginning to exploit commerce, and Amazon, which is adding content to its retail properties, will be a challenge according to analyst Sterling. “It’s unclear how broadly eBay can expand.”

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.

Scott Hazard: The Performer

Despite having many talents that often thrust him to the forefront, Hazard is a modest man who typically shuns the spotlight.

For more than three years he’s been an extremely active and vocal member of several online affiliate marketing forums. While many of his closest industry friends often refer to him by one of his message board handles, he prefers not to give away his online identity publicly so that he can continue to voice his strong opinions about unethical practices without fear of repercussions.

But Hazard stresses that he’s not hiding behind the anonymity of the message boards and that he never says anything in those forums that he wouldn’t express face-to-face. Rather, the fear is that if the offending players in the space knew his real name and his websites, they might retaliate by using their technical know-how to attack his sites, which are his livelihood. Other affiliates say they worry about being physically harmed or having someone knock on their front door. He agrees that type of threat is within the realm of possibility.

Still, Hazard dismisses the notion that some message boards can be vicious at times. For him it’s been a wonderful community where he’s been able to develop some extremely close friendships – which are a very important component of doing business for him. Because he works from home – like many other affiliates – he’s somewhat isolated from the typical, everyday office interaction and considers the message boards his water cooler, albeit an online version.

He appreciates all the help and advice he’s often received – and given – as a huge factor in his continuing participation in these forums. The ability to log on and find answers about a merchant he’s promoting or thinking of promoting is priceless. Approaching the posters on these boards with a sense of humility and respect means that forum members will bend over backward to help you, Hazard says.

But it’s not like everyone is about to divulge all their secrets. He likens the amount of information that affiliates are willing to reveal to each other to the Seinfeld episode where two magicians are having dinner. However, in the popular TV show, the magicians spend the entire meal trying to one-up each other, and most affiliates, Hazard notes, are just the opposite – they don’t give out any information, including the most basic stuff – like the names of their websites. He laughs at that idea, calling it a very cool dynamic.

And he’s no different when it comes to disclosing specific information about his business. He operates approximately 30 to 40 websites that are in the retail space and focus primarily on apparel, but he’s hesitant to give out any more details. But when it comes to his latest site – CouponPouch.com – he’s not shy about talking it up.

The site launched in April and is his first venture into coupons. He always thought there was a large opportunity in that area – especially since he’s got some friends that are every coupon-intensive people, many of whom he describes as toting around a tickler file of coupons that weighs two pounds.

In order to spread the word about CouponPouch.com, Hazard is taking a multifaceted approach. There’s lots of local advertising in many parts of the United States. He’s using newspapers in each area to get the word out. He’s doing a lot of online and off-line promotion and focusing on viral advertising. He wants people to talk about his site and he thinks freebies and giveaway goodies (business cards, fridge magnets, hats, etc.) are a great way to do that.

Of course, there’s the Honda Element he drives around the central Florida area with the giant kangaroo on the side that’s hard to miss. He recently had the SUV professionally wrapped to display the CouponPouch.com logo. And if you spot his vehicle parked and stop by to say hello – he’ll give you a free gift. However, don’t try and pull him over on the road for the free gift. He’s a gung-ho marketer, but not at the expense of on-the-road safety.

None of these marketing ideas is random. Hazard says he lies awake at night thinking about these kinds of things. He’s got a pretty good idea of what works and what doesn’t. And he’s learned that means striving to be independent of any single source of traffic. Although natural traffic is free and he spends money on Yahoo and Google, he stresses that affiliates need to get smart and develop marketing strategies outside of the box.

He may lie awake at night, but he bounces out of bed each morning and can’t wait to get to his computer. Hazard loves his job because it allows him to use his creative side to think about ways to bring items to market. But he can also use his logical side to structure events to bring the creative vision to fruition. He says it is the most fulfilling job he can possibly imaging having – and it’s not about the money. Yes, he admits, we all need money and money is not a bad thing, but for Hazard, it’s the satisfaction of developing an idea and then walking it through to completion that is the real joy.

He loves that, armed only with creativity, personal drive and a computer, he has the ability to compete with multi-million-dollar corporations. “They have a website. I have a website. The playing field is much more level,” Hazard says. “I can’t go to the mall and build a Nordstroms and sell wares, but I can sit at the computer and create a website to sell wares.”

And not everything is a success. If something doesn’t work, he’ll shuck it and move on. He has lots of ideas and spends time cruising through the networks and looking at websites searching for new ideas and things that spark his creativity. He checks many of his new pay-per-click ideas using what he calls the $200 rule. That means he spends a day or two to set up a website or Web pages, sends some PPC advertising to it and when he’s spent $200 he evaluates whether it’s working or not. If not, he just puts it aside and moves on.

He may have an easy time turning off marketing campaigns that aren’t performing, but he admits that it’s not as easy for him to turn off work – especially since he works from a home office. He’s thought about renting an office nearby and trying to do the 9 to 5 thing, but knows that he’ll end up back in front of the computer at home in the evenings anyway, so he’d rather not waste the money.

Hazard has a love/hate relationship with his computer. “The computer is always there,” he laughs. He works about 60 hours a week and says that often he has trouble distinguishing what day it is.

He springs out of bed around 6 a.m. and starts the day off with a big 16-oz. coffee, while he checks his stats from the previous day and scans the Internet for news. A self-admitted Yahoo pool addict, Hazard will usually get in a few games before getting to his real work in the morning. He also plays Yahoo pool in the late evenings when he’s wrapping up for the night.

His No. 1 piece of advice to affiliates is to stay physically active. He says he’s gained weight since becoming an affiliate three years ago and stresses that work-at-home affiliates need to force themselves to exercise and stay active. But at least he’s quit his 20-year smoking habit.

In an effort to kick back a little more, he just bought a fishing boat after not having owned one in eight years. For the avid bass fisherman it’s a wonderful way to relax. So is music. He recently attended a Willie Nelson concert and says it was a wonderful feeling to have a night unplugged, where he just sat back 40 feet from the stage in a small auditorium and drank a couple of Heinekens and listened to two and half hours of Willie.

The youngest of seven kids, Hazard loves music. He plays the drums and sings. He recently moved from belting out tunes from behind the drum kit to center stage where he now fronts The Quarter Mile Band. They play straight-up rock tunes – covers and about a dozen originals, half of which Hazard wrote. After an 18-month hiatus and some bad luck with a string of bass players, the band is now practicing once a week and working toward putting out a CD or getting their material out in MP3 format.

Still, it’s very difficult for him to turn his brain off. The wheels are always turning with ideas and he’s always looking for better ways to do things. He’s been like that as long as he can remember.

One way to improve things was to go to college. At 29 he quit his job selling Hondas near his hometown of Alexandria, La., and enrolled at LSU with the goal of becoming a certified public accountant.

Although he was making a good living selling cars, he hated the business. One of the reasons was that he’d often spend several weeks talking with a potential customer, only to return from a day off of fishing and find that customer had come in and bought a vehicle and that he’d lost that commission to another salesperson. There weren’t any ill feelings; he was just tired of being in commission-only sales and hustling people for a living.

But accounting didn’t suit him either. After just two semesters, Hazard decided that being a CPA wasn’t for him. He spoke with an adviser and took some aptitude tests that showed he had strong skills for becoming an attorney. Instead he decided to pursue a liberal arts degree with three minors – English (in his senior year he was the editor of the LSU newspaper); history; and speech/theater.

Four years later, with a degree in hand, he was ready to move out of the student mode, give up his part-time gig as a weekend disc jockey at a rock station in Alexandria and get back into the world of full-time employment.

So, he moved to Miami to direct at a theater in South Beach for the summer. He starved, had a great time and then went to work for a marketing company in Fort Lauderdale. That company immediately sent him to work on a project in New Orleans for three months. When he returned to south Florida he pitched his firm on an idea for a jobs site. The company passed and Hazard left to start SouthFloridaJobs.com on his own in 1998.

After visiting a friend in central Florida, he made the move there in the spring of 1999 and subsequently sold his company in the fall of that year. “I’m a Southern boy and I have to move north to get back to the South,” he says.

He began doing various freelance Web design projects and then started designing an e-commerce website for a merchant in Daytona Beach. That website competed with affiliates and Hazard says “those affiliates were kicking my butt and eating my lunch.” His relationship with that merchant ended and he was forced to look at affiliate marketing.

He calls that 2003 incident the single best thing that’s ever happened in his life.

Maybe that’s because he surpassed his original income goals. Hazard pays more in taxes now per month than he originally estimated he’d make in a month and now generates between $2 million and $4 million in sales annually. He was also was named as a charter member of CJ’s Performer program in 2005.

“My affiliate endeavors have proven better than my wildest dreams,” he says.

But a big part of those dreams for Hazard also included leaving behind the rat race and having complete and total control over everything in his business. However, there’s a downside to complete control, according to Hazard, who says that often there is nobody to question your decisions or say no to you, and it’s not uncommon to get tunnel vision.

That’s where friends and forums come in for feedback. And in the end, for Hazard it all comes down to doing the right thing and having good friends.

Savvy affiliates like Hazard often have a choice to make – work extra hard to develop new methods to make money or employ questionable tactics that in the short term will increase revenue. Hazard loathes those that opt for the latter, which he believes is the easy way. He credits his mom and dad with instilling a rock-solid sense of right and wrong in him. He says that at the end of the day, when he’s brushing his teeth and looking in the mirror, he enjoys knowing that what he’s accomplished was good and right.

Plus, he has like-minded friends that will call him on his actions. He gets together with a group of four to six friends in Orlando once a month to talk about the affiliate space. These folks are not direct competitors – there’s an affiliate manager and some other merchant affiliates (but they are all in different verticals). They openly share very sensitive business information.

It’s a relationship based on trust formed over the years, according to Hazard. In the end, he likes being a key piece of what he calls the happy triangle.

“If I did something that helped someone find a shoe and in the process generated a sale and the customer and merchant are happy, then I’m happy,” he says. “If I simply find ways to cheat the merchant and I end up with money and the customer is happy, but not the merchant, then that’s not a happy triangle.”