Marketing Muscle

Over the years stories about intimidation and goons knocking on the doors of various affiliates and search marketers have circulated at industry events. Some of these scary accounts have taken on a life of their own – much like a game of telephone where fact and fiction are often intertwined as the stories are told over and over again.

The victims claim to have seen a variety of intimidation tactics including death threats issued over the phone, visits at their homes from large, scary-looking men, threats involving physical harm, character assignation campaigns, general bullying and harassment, as well as cyber attacks on their websites and ultimately their livelihoods.

Most of the victims say the perpetrators of this behavior are typically overzealous business rivals or companies they spoke out against that are seeking to silence them.

Retelling of these accounts is often reserved for late-night, alcohol-fueled chats at a bar with colleagues at trade shows and conferences. But trying to get the sober details is much harder. It’s difficult to confirm and corroborate many of these stories since the alleged victims are hesitant to speak in depth, or on the record, for fear of future recrimination.

So are these frightening tales the equivalent of urban affiliate myths, exaggeration or truth? Actually, it’s often a combination all three.

One industry watcher, who asked not to be named, was skeptical of some of the stories.

“It’s somewhat of a Curtis Sliwa syndrome,” he says, “where he faked some crimes and attacks as a way to get more attention for himself and the Guardian Angels. These supposed allegations on the part of affiliates are a way to boost their profile. I may be cynical but unless I see a police report I tend to believe these stories are a way to raise themselves in the industry.”

However, he does admit that regardless of the veracity of the accounts, “they seem to resonate with people.”

Anti-adware/spyware expert Ben Edelman knows the feeling of having his work, which typically exposes unethical behavior on the part of an adware vendor, spark a negative response from those he has criticized.

Edelman says that he’s experienced several instances of threats at varying levels from a variety of unhappy companies that he’s exposed. The Cambridge, Mass.-based lawyer and Harvard graduate student says that’s he not willing to speak about all the incidents right now. He declined to speak about two incidents that he referred to as “very, very nasty.”

However, he did recall a time in the fall of 2003 when for two weeks, a private investigator hired by Claria (formerly Gator) was parked in a dark-colored sedan in front of Edelman’s apartment. He claims the driver followed him to class, around the Harvard campus and to other destinations. The driver submitted to questioning in a courtroom and admitted to being hired by Claria. The driver also said he was simply attempting to serve Edelman with a subpoena, a claim Edelman, who is an attorney, disputes, noting that if the driver wanted to serve him he could have simply knocked on Edelman’s door and done so.

Edelman says he found the situation “puzzling but consistent with [his] view of the company, which likes to play hardball.”

Edelman also says the “intimidation efforts were unsuccessful.” Although, he claims the company subsequently “did some other things that were more effective.” Those are the matters he doesn’t want to elaborate on.

Others have also seen the nastier side of how unhappy companies deal with dissent. That fear makes most afraid to even broach the subject.

One PPC search marketer questioned about his experiences with a particular company – one that is often named one of the most prolific at stealing commissions from affiliates – yielded this response about the company’s CEO:

“He’s not a guy to mess with either – do your checking very discreetly. I trust you’ll be thorough as well, but honestly, I believe this guy is not someone you want to piss off. It ain’t national security, but my affiliate income depends on keeping my distance from this man. I can go no further than this and provide no details.”

Another source that was contacted via email about the same subject would only say, “This company is a bunch of thugs. Be very careful and watch your back. Seriously, tread lightly.”

So just how far outside the law will a company go to get its message across?

To put things in perspective, Edelman says, “The people that I’m exposing are powerful people, but not that powerful. They can’t rig elections or bribe the government.”

Regardless, Edelman has taken practical steps just in case a company or individual wants to take out-of-court retribution.

“In the event that my apartment building were to burn down, I have an off-site backup of all files,” he says. “It could happen randomly or intentionally.”

He recalled a story from his mother, who actively pursues nursing home reform, where a colleague of his mom’s had her home burned to the ground. “It was proved to be arson; they just couldn’t prove who did it.”

In his Search Insider column from August 2006, David Berkowitz, director of strategic planning at 360i.com, wrote, “Manage your search engine strategies so well that competitors want to kill you – literally.”

The column detailed a discussion Berkowitz had with an unnamed search marketer in the health care field whose wife reportedly fielded a death threat via the telephone from an angry competitor.

According to Berkowitz, “The victim of the threat competes with his search engine marketing firm. He owns more than a few domains related to his business and services, including a growing number of local variations on the top terms. He gives some of the domains to his SEM, keeps some others and sees which sites can rank highest in the natural search results. For more than a few highly searched terms related to his business, he and his SEM will split ownership of the first and second rankings. The funniest part is that he gets irritated when his SEM holds the No. 1 position, since he’s determined to figure out how he can beat it. For several terms, he’s cornered the market, at times holding at least seven of the top 10 listings.”

Berkowitz explains to Revenue that he was shocked to hear this story and that the recipient of the call “was caught off guard ” and they don’t know who was the source of the phone call.”

For the most part, Edelman admits that the bulk of threats he receives are legal “and don’t involve henchmen.”

“Most are threats to see me in court,” Edelman says. “But most are not followed through, because I have the documentation to back up my allegations and I am correct. The best way to protect myself is to be right every single time and be able to prove that I’m right. The bottom line is that if people want to mess with me, they will lose because I have the facts to protect myself.”

Virtual Threats

Still, that doesn’t stop other threats that take advantage of technology. The most common are DNS (denial of service) and DDoS (distributed denial of service) attacks. But someone looking to harm your business via your website can unleash a variety of deadly technical attacks using spam, adware, spyware, Windows Messenger boxes, various worms, trojans, phishing, SQL injection, cross-scripting attacks, botnets, UA porn running, traffic laundering, viruses and rootkits, according to a spyware researcher, who asked not to be named.

In February 2005, Edelman fell victim to a massive DDoS attack that knocked his server off-line for nearly two days. His Web-hosting company claimed he was the target of the biggest DDoS attack they’ve ever suffered – some 600 MB per second. Edelman says Claria did not perpetrate the attack and he still doesn’t know who was responsible.

This potentially harmful behavior is why many of those posting on public message boards claim they prefer to post anonymously.

“It’s not about saying whatever you want without backlash,” says one very vocal poster in an affiliate forum, who asked not to be named. “It’s about protecting your business and your livelihood.”

An event that took place nearly four years ago is probably the one that sparked most of the talk of goons and henchmen being dispatched to the front doors of several affiliates – most of them very vocal posters on the AbestWeb.com forum. Many of the frequent contributors to that message board and community strongly voiced their opinions on the actions of World Media.

At the time, Virus Port had merged with World Media, a big adware company and one of the first to garner people’s attention for redirecting affiliate links. World Media had a huge installed base of users for its popular bundled peer-to-peer program called Morpheus. Many of the ABW posters were not happy with the company’s actions and posted their complaints.

Kellie Stevens, the president of AffiliateFairPlay.com, was among those who received a knock on her front door – but it wasn’t “muscle.” She claims that World Media hired a local private investigator and dispatched him to her home. She refused to let him inside and instead spoke briefly to him through the cracked door so she could get his business card.

Stevens described the man as “preppy and not threatening.” Later that evening she called the PI and had a lengthy discussion with him. He told her he was hired by World Media. He didn’t know the specifics of the situation or why. He was just letting her know that the company was considering filing both civil and criminal charges against her because of something she posted on a message board. She says the conversation went on for about 20 minutes as she explained the situation and the PI, who was also an ex-FBI agent, ended their talk by saying that people have the right to free speech and that, if in the future Stevens needed any help, she could call him.

“I’m careful about what I say and post and I have accurate information,” she says. “As long as I’m accurate in my reporting they [companies] may not like it, but I’m not just trying to cause a flame fest or incite a riot, though I’m aware it can happen.”

A very successful search affiliate says there are a handful of companies that he believes are “dangerous from a business perspective but not a physical one.”

“I point out issues with these companies all the time. I post on message boards. I file consumer complaints. I send information to the CDT [Center for Democracy and Technology]. I have been a thorn in the side of many adware companies,” he says. “My sites are all publicly registered. My name and address are all there. It wouldn’t take much more than five minutes for someone to track me down and it hasn’t happened yet. So, I’m not worried they are going to show up on my doorstep, I’m more worried they are going to launch a DDoS attack and shut down all my sites.”

Still, others who received visitors to their home during the World Media matter say they were intimidated.

“People who might have taken the activism to the next level stopped,” Edelman says. “So it worked – not that those tactics are acceptable, because they are not.”

For most affiliate marketers, the idea of someone showing up at their home is truly frightening – mostly because they work alone and use only the computer to connect to others. It’s not like the typical worker who heads to an office filled with other people, where visitors come and go all day.

“Part of what is scary for most of these people is having others out in the virtual world know where they live, and usually just putting that fear into them is enough to make them stop whatever their activities were,” says one industry observer who asked to remain anonymous.

Berkowitz says this behavior definitely surprises him. Although, he explains that there may be times when a threat is slightly more “merited,” because the person being threatened is not operating in a totally ethical and above-board manner.

“At least when it comes to search there are many ways to game the system,” Berkowitz says. Still, he admits, it’s obviously something that needs to be looked at on a case-by-case basis.

On the flip side, Andy Rodriguez, president of Andy Rodriguez Consulting, an outsourced program management firm, is not at all surprised that this type of strong-arm behavior takes place.

“In this industry, the amount of cash and the revenue potential attracts a lot of people that don’t always make the best decisions and it’s easy to see why threats and violence can come up. Plus, in this day and age, people have the tools and technology to use DNS and computer attacks. It’s the same type of intimidation but they don’t have to go to your front door,” Rodriguez says. “The good news is that the government has the same tools and technology to track down the criminals and those threatening others.”

The bottom line according to Stevens is, “When there is a lot of money to be protected, people will go to great lengths and you need to keep that mind.”

Colin McDougall: The Timekeeper

This past summer, super-affiliate Colin McDougall traveled around British Columbia with his family in his newly purchased travel trailer. From mid-July through Labor Day weekend McDougall worked a grand total of about 10 hours from the road. The rest of the time he spent paddling his kids around in an inflatable kayak, feeding the ducks, building sandcastles on the beach and simply enjoying his free time.

Filling up his free time by enjoying hiking and camping is something that McDougall does a lot of these days. Recently he moved with his wife and two young daughters, ages 3 and 6, to a house on a mountain in Chilliwack, British Columbia, where their backyard is literally the vast expanse of Western Canada about 80 miles outside Vancouver.

McDougall loves the natural beauty of British Columbia’s mountains, rivers and lakes. He moved there to attend college after growing up more than 3,000 miles away on the St. Lawrence River in Brockville, Ontario, which is dubbed the City of the 1000 Islands.

In many ways, McDougall lives up to some Canadian stereotypes – he is remarkably polite and friendly. He’s a skier, climber and fisherman. He loves to drink Sleeman beer with friends and is a huge fan of the Canadian rock band Rush; such a fan that in 2004 he bought expensive second-row tickets on eBay to Rush’s 30th anniversary tour concert in Toronto, Ontario, and treated the friend who first turned him on to the band.

And McDougall has been engaging in his country’s national sports pastime – hockey – since he was 7 years old and still plays in a weekly league so he can get together with his pals.

For someone who is so affable, it’s surprising that McDougall doesn’t mind the often-solitary life of an affiliate marketer, which usually means working all day alone at the computer. He claims that when he needs to focus, he takes the new trailer that is typically parked in his yard, tows it to a nearby recreation area and spends hours working alone with no distractions.

McDougall admits being an affiliate can be a bit lonely, and combats this by getting together for coffee with other self-employed workers, primarily affiliate managers from the Vancouver area that he’s met at industry shows, which he enjoys attending.

Now that his business is going well, he works when he wants to and when he is most effective. For many years, however, McDougall did not have the freedom of working when and where he wanted and it was his frustrations about lack of free time and working at inconvenient times that motivated him into the affiliate game back in 2001.

Previously for 10 years, McDougall worked as a systems administrator – first for seven years at Nortel Networks, and then for three years at BC Hydro. Although he liked his job, he didn’t like the time that he was expected to work. As the computer guy, he was expected to be first guy in the office and last guy out. Often he would be paged at 2 a.m. and would then have to go into work. The grueling hours, in addition to more than two hours of commuting time from the suburbs of Vancouver into the city each day, put an incredible strain on him.

In March 2001, McDougall was playing hockey with a friend, Chuck Anderson, who is the ex-business partner of James Martell, author of the Affiliate Marketers Handbook. Anderson offered McDougall work writing code and building tools to manage the publishing of content for a handful of websites within Martell’s business in return for some “measly checks.”

One day Anderson approached McDougall with an idea: instead of receiving a check for his coding work, Anderson would teach him the business of affiliate marketing as payment. Because McDougall had an idea about how much money Anderson was making through his website, he agreed immediately to the deal.

Just months later, when the time came for McDougall to put his knowledge into practice and build his own affiliate site, he wasn’t sure how to determine which industry would be profitable, so he opted for credit cards because that was what Anderson was doing.

By late August 2001, McDougall was hard at work building a website for credit card merchants such as American Express and Chase. He was garnering high rankings on Google with all kinds of credit card-related terms, and his business was based entirely upon natural search. He was making lots of money, and by November 2001, just nine months after he started learning the affiliate marketing ropes, his affiliate income was about 2.5 times more than his full-time job at BC Hydro.

In February 2003, he took the nine-month parental job leave allowed to men in Canada and tacked on an extra six weeks of vacation from BC Hydro. He used that time to focus completely on his affiliate business. However, due to ranking fluctuations in Google, McDougall experienced some setbacks. His training with Martell and Anderson had focused primarily on how to make money directly from affiliate commissions by ranking high in Google. McDougall was quickly finding out – the hard way – that producing sites that were built solely to rank in the search engines with little thought to visitor experience was not a long-term business strategy.

Then a major shift occurred at Google’s that caused every one of McDougall’s sites to lose their ranking. The search giant began basing its coveted rankings on visitor experience factors such as visitor duration, quality of the site and depth of the site as opposed to easily manipulated factors such as inbound links from highly page-ranked sites. McDougall realized he was headed for trouble.

He experienced a severe drop in income over the span of a few months. For August of 2003 he earned $60,000. In September 2003 his commissions were down to $20,000. By October 2003 he’d dropped to $12,000 and when November rolled around, McDougall’s income from commissions had plummeted to around $6,000.

This substantial decrease was particularly alarming because McDougall had bought lots of expensive items based on his higher income, such as vehicles, a new house and lots of toys.

Decision Time

The diminishing income forced him to make a tough decision – either return from his extended parental leave at BC Hydro or quit and revamp his affiliate business. McDougall and his wife had started a family during his full-time transition to affiliate marketing and he was feeling the pressure of additional responsibility as well as hearing doubting comments from his friends. Still, he says it was an easy decision for him to leave his job because he felt it was no longer an option. Although his wife was worried about him leaving a position with excellent benefits and vacation time, she supported his decision.

But McDougall knew that in order to make this business really work he needed to turn to others for some new direction and decided to go directly to the horse’s mouth – Google.

So, in January 2004, he flew to the Search Engine Strategies conference in New York City.

While at the event he timed it so that he would “accidentally bump into” a high-profile senior Google engineer who was presenting (Matt Cutts).

During the encounter McDougall went through every step of the process that he was using to rank high in Google, and with every point, Cutts indicated when McDougall was on the right or wrong track and he took copious notes.

Right then McDougall decided that relying on Google as a primary source of income was a fool’s game. So he came up with a new business plan to focus only on a smaller number of sites and build multiple streams of traffic to them and work hard to establish their brand. His goal: a long-term sustainable business.

Part of his current business is The Visitor Enhanced Optimization Report, or the VEO Report. It’s an e-book McDougall sells through his website that began as pages and pages of a Word document that explained how to achieve rankings in Google. He sent these notes to a few friends who were also affiliates in an effort to save them from having to go back to real jobs. One friend suggested that these notes could be turned into an e-book and McDougall started writing the book when he wasn’t working on his affiliate sites. By late 2005 he sent it off to editors and currently it’s in its third revision.

To date, McDougall has done no traditional marketing for his e-book; its sales have largely been the result of word of mouth and mentions from influencers. He was eventually asked to write a blog for Revenews.com, do an SEO radio show and speak at some conferences.

At the July 2006 Affiliate Summit in Orlando, several people asked McDougall if they could pay him $3,000 a month to mentor them, which would entail his talking on the phone with them for two hours each week. He claims he could only ignore these types of requests for advice and information for so long. That’s when he decided to create some training programs such as the VEO Mentorship Program, which he plans to launch by January 2007.

It’s not only the lucrative benefits that drive McDougall to create training programs. He wants to share his knowledge with others. By training affiliates on how to effectively promote products, how to get traffic and how to build a business, he’s teaching them how to “build on rock rather than quicksand.”

He greatly benefited from receiving advice from top people in the field, such as Williams and Campbell, along with Rosalind Gardner (a fellow Canadian superaffiliate and author) and he wants to return the favor. “I didn’t learn this business all by myself. My philosophy is that 1+1=11.”

McDougall says that people often tell him that being an affiliate sounds like hard work. “There have been too many quick solutions where affiliates think they could make potentially thousands a month by slamming up some content with auto-generation site tools, then just sit back and push buttons, scrape content and provide results.”

Quality Time

McDougall claims if you care about your brand, you’re not going to risk that by spamming Google. He believes that behavior is giving affiliates a bad name. He warns there’s a real problem for affiliates who aren’t willing to provide quality content, which adds value for the visitors to the sites.

Quality content that serves McDougall’s visitors well in turn does well in Google. “I think the future of affiliate marketing is affiliates who provide quality content and work on branding themselves. If you’re not focusing on doing those types of activities, it’s going to be tougher to make a run at affiliate marketing.”

McDougall admits to having a lofty goal of creating some kind of advisory committee that puts together a code of ethics to which affiliates must adhere – similar to the licensing system for realtors because, “quite frankly, marketing is sales, and sales is cutthroat.”

That sort of regulation is just a dream, but McDougall says that following his dreams and keeping a positive attitude have enabled him to reach his goals. “When I saw that my friend Chuck was making three times as much as me and working a third as hard, I became very motivated to change my life.”

But the biggest motivator for McDougall has been the freedom that being your own boss provides; something he has wanted to do since he was 10 years old. When he was in his late teens, he tried to start a window-washing business because he wanted to be able to set his own hours. These entrepreneurial feelings never left him during jobs at Burger King, Godfather’s Pizza and Save-on- Foods grocery store in his school days. He also credits his college karate teacher, who inspired him to follow his dream.

He feels so strongly about working for yourself that in 2005 he wrote another e-book on the topic called The Positive Mind, which outlines everything a person needs to know to become their own boss.

Today McDougall has five sites, with 90 percent of his efforts going into two of them – VEOReport.com and Crediteria.com. He’d prefer not to reveal the other three sites because they are very niche and he does not want to create competition.

Based on his hard-won experience, McDougall has managed to carve out a very full life comprised of success and lots of free time. In early November, McDougall was in the process of buying another house so he could relocate his family to Langley, BC, to be closer to friends and relatives. The town of Chilliwack is so wary of outsiders that they are often unfriendly to newcomers and that included McDougall’s family. But thanks to affiliate marketing and some good timing, he can prioritize his family’s happiness over concerns about carrying two mortgages. That, for him, is the best example of money offering the kind of freedom that he cherishes.

Online Is Sweet

Food has recently been called everything from the new theater to the new porn. Regardless of how you think about food, you certainly can’t avoid it.

Food has become America’s No. 1 obsession and food companies – from providers of high-end gourmet goodies to those feeding the fast-food nation – are battling to get on the dinner plates of today’s consumers.

And because everybody has to eat, the opportunities are enormous. Consider this: Americans spend 10 percent of their disposable income on food. The typical American household spent an average of $2,434 on food purchases away from home.

The channels for reaching this lucrative marketplace are just as vast. Recent buzz suggests that food companies are spending or planning to spend less of their advertising budget on traditional forms of media in favor of the Internet. But just how much of food companies’ advertising budget will be allocated to online initiatives and how quickly that will take place varies depending on the brand, the brand’s audience and who’s responding to the question.

Tom Vierhile, executive editor of Datamonitor’s Productscan Online, which covers the release of new merchandise, thinks that the CPG (consumer product goods) industry, which includes food, is getting away from traditional advertising because of rampant media fragmentation, something it considers to be a major problem.

Gene Dillard, president of FoodWise, a marketing communications agency that has worked with clients such as Borden Milk and Tyson Foods, agrees that traditional forms of advertising like print are declining because “there are too many different publications that have divided the market so much.” He says advertisers are using the Web because it is more targeted and cost efficient and says there is a trend of moving more ad dollars online. He recommends his clients should “spend 15 percent of their budget online at the minimum.”

Joseph Jaffe, creator of the popular new marketing blog, Jaffe Juice, and previous director of interactive media at TBWA/Chiat/Day, says that food companies are using the Internet more but not leveraging it to its full potential.

“Food companies and CPGs have always prided themselves on their analytical marketing mix modeling and want to be able to look to what has worked for them in the past and repeat it,” Jaffe says. “But this will not work anymore because the industry is changing so quickly and exponentially and there is much that is not predicable.”

New Recipe For Success

Although food companies lag a bit behind other industries, Jaffe says he believes they are increasing their online advertising spending based on two main reasons. One is that Internet display advertising rose 18.9 percent for the first half of 2006 over the first half of 2005 according to TNS Media Intelligence (this does not include paid search advertising.) Jaffe says he believes that spending by food companies accounts for part of this substantial increase.

Reason number two: Many food companies have increased their overall advertising budgets in the last year and Jaffe believes this includes online spending. October’s Advertising Age’s Top 200 Brands found that for the first half of 2006, Campbell’s advertising spending was up 63.8 percent, Kellogg’s increased by 17.8 percent and M&M’s spent 11 percent more than in 2005.

Lisa Phillips, an analyst who covers the CPG space for eMarketer, says food companies are spending more online recently but not at the same pace as other industries such as cosmetics or pharmaceuticals.

“When it comes to product launches for food, companies are still using television.” For example, according to Nielsen//NetRatings AdRelevance AdAcross, for the period of August 2005 to July 2006, Sara Lee spent 52.3 percent of its advertising budget on network and cable television (see chart below).

Nielsen//NetRatings AdRelevance found that large food companies spent relatively small percentages on Internet display advertising (in this case, image-based impressions, which include popups, banners that scroll by, etc., but do not include sponsored search link ads or other types of Internet marketing). Altria, the parent company of Kraft, allocated 1.1 percent; Sara Lee spent 1.5 percent; while Heinz’s ketchup allocated 2.2 percent and McDonald’s spent 22.7 percent.

It’s hard to get specific numbers as analysts don’t break out food advertising separately from CPG advertising. JupiterResearch defines CPGs as food, beverages, alcohol, household products, cosmetics and beauty aids, and personal care products. Analyst Emily Riley of JupiterResearch says “CPG spending makes up only 5 percent of total online spending. Currently about 90 percent of it is display advertising such as banners, sweepstakes and sponsorships.”

However, JupiterResearch predicts that CPG spending will increase substantially in the next three years and that compound annual growth will be at 10.5 percent between 2005 and 2010 for display advertising, from $385 million to $632 million.

Aside from display advertising, what else are food-related companies doing online? Phillips says, “Food companies are still figuring out how to use the Web ” and they are definitely spending a lot of money trying to do it.” Online initiatives that attract, engage and retain users such as coupon and recipe downloads, features that foster community and sites that position themselves as information resources are among the most popular.

These bells and whistles seem to be effective ways to drive traffic. According to comScore Media Metrix, approximately 38.2 million Web users visited food sites in September – up 15 percent from last year. Comparing July 2005 with July 2006, Food Network.com had a traffic increase of 21 percent; AllRecipes.com is up 51 percent; and About Food increased by 44 percent. Many of these websites are e-tailers and are leveraging the Web with good results.

One of them is Omaha Steaks, which has been online since 1990 with CompuServe, then with its own site since 1995. Omaha Steaks’ communication director, Beth Weiss, says the online part of their business is the fastest growing and credits their aggressive affiliate campaign, which is run by LinkShare and had 2,800 active affiliates for the month of August 2006.

Weiss explains that as a direct marketing company, 97 to 98 percent of its budget is spent on things that go directly to the consumer, like sending catalogs and emails to their 2.2 million active customers who buy regularly.

“We do very little newspaper or television – only a small amount to promote for the holidays and we do no radio because historically it has not worked for us,” Weiss says. “Our target demographics are differently structured depending on where the customer shops. If they mail order or use the 1-800 number, they tend to be older; younger customers tend to be online. The thing that crosses over all the marketing channels is that because our products are high end, we market to affluent people ” they travel and read, and most are in their late 40s and above.”

What the Big Kids Are Eating

It seems that affluent people in their late 40s or older are the sweet spot for many high-end online food purveyors.

Richard Gore, president of Culinary Entertainment Group (CEG), says “food entertainment space” is driven by boomers who go to three-hour restaurant meals as an evening’s entertainment. “Boomers don’t want to stay out late to go to a concert; they have the money to spend, and they are much more interested in food than earlier generations.”

CEG’s March 2007 introduction of Food University – high-end cooking events with an accompanying website – is targeted at boomers. To reach boomers with an estimated split of approximately 60 percent female and 40 percent male in regions such as Chicago, Jacksonville, and Houston, Gore says they are using a mix of print, local radio and local cable, with “events like celebrity chef tours, where the public can mix with their favorite chefs, and provide companies involved with a huge array of experiential marketing opportunities. People see a product and how it’s being used, sample it and they’re hooked,” he says.

Food University, through a partnership with Wyndham Resorts, will engage the American public in learning how to cook more adventurous fare by providing access to celebrity chefs like Martin Yan and Sara Moulton.

Benefiting from this exposure to celebrity chefs are many high-end food purveyors, including two e-tailers, Cooking.com and igourmet.com. Both have realized revenue increases in the past year; igourmet.com’s by 50 percent. Marketing manager of Cooking.com Kari Taylor explains that “the popularity of celebrity chefs and food television has driven awareness and increased demand of cooking products”; some of their more popular products include high-dollar items like Zojirushi bread machines, Calphalon cookware and Capresso coffee machines.

Tracy Chesman, vice president of sales at igourmet.com, a purveyor of 700 cheeses and hard-to-find specialty foods such as Douwe Egberts coffee, says there has been an increased interest in gourmet foods due to the accessibility that consumers have to cooking media such as cable television and the Internet.

“We got a lot of increased traffic when Emeril was on the Food Network and talked about Maytag cheese,” Chesman says.

She adds that igourmet.com saw an increase in sales of a specific type of walnut oil when a magazine article recommended it, which showed the company there was a direct reaction from communication in the media.

The Search For Food

Both companies – igourmet and Cooking.com – credit affiliate marketing and search marketing as key drivers of their business. Cooking.com has an affiliate program run by Commission Junction and their top affiliates include eBates and Upromise.

igourmet.com has outsourced its affiliate program to outsourced program management company Pepperjam.com since 2000 and says that since its launch, sales have increased every single year.

“A huge part of igourmet.com’s success is due to the affiliates – who are essential,” says Michael Jones, COO of Pepperjam. Through igourmet.com’s LinkShare program, they can see that the amount of producing affiliates is increasing. Pepperjam says igourmet.com’s top “affiliates are loyalty programs like Upromise, Ebates, MyPoints and American Airlines AAdvantage, as well as the niche gourmet site, BacchusSellers.”

Jones adds that igourmet.com has very active and aggressive campaigns on Google, Yahoo and MSN and that search generates a large part of their business. Jones claims igourmet.com is the No. 1 listing for “gourmet cheese” and they “maximize campaigns organically on the natural listing through search engine optimization as well as through pay per click.”

Women In the Kitchen and Online

Both igourmet.com and Cooking.com say women make up the majority of their customers. For Cooking.com, their target audience is 35-to-65-year-old women with an interest in cooking, or empty nesters or mothers with younger children. The bulk of igourmet.com’s customers are mostly middle to upper class and clustered in metropolitan areas on the East Coast with a higher percentage of females (55 percent).

The 55 percent figure is in step with findings from comScore Media Metrix. They found that in July 2006, affluent females were the most popular demographic segment among food site visitors, with a 54.4 percent share.

However, vice president of research for BIGresearch, Joe Pilotta, warns that food companies should not jump to conclusions about who uses the Internet to shop for food. He said that in August 2006, BIGresearch did a survey of 15,000 people about the media influences for purchasing food and found that “the normal kind of intuitive thinking is not correct.”

Pilotta says that people who have a lower income use the Web a lot to comparison shop online before they go shopping. For example, a budget-oriented mother of young children will go online to check the food prices for items such as chicken and crackers at Safeway versus Albertson’s while preparing her shopping list before she gets in the car.

Many food sites are targeting Gen-Xers including CNET’s Chow.com, which is aimed at 25-to-45-year-olds, whom they believe are passionate about food but possibly not very skilled at preparing it. Chow.com, which launched in September 2006, includes the popular discussion boards of Chowhound.com and video tutorials on subjects like how to dice an onion, as well as recipes, restaurant reviews, party tips and coverage of food marketing.

SlashFood, a blog that is part of Weblogs.com, is another food site whose audience is primarily 25-to-45-year-olds. Sarah Gim, editor of SlashFood, says the site has easily built up traffic month-over-month since it launched in August of 2005. She says that their team of paid bloggers covers a gamut of topics, from food news to restaurant reviews to food culture, and credits the site’s popularity to the fact that “food in general is more popular than 10 years ago and many readers are motivated by issues concerning health.”

The Food Network is the most exhaustive example of a television and Web channel that has experimented with targeting everyone from foodies to newbies. The Food Network reaches 90 million homes in the United States and the core audience is 25 to 54, more female than male.

However, male viewers increase and the average age of viewers falls in the evenings, which is why shows that are similar to competitive sports, such as “Throwdown with Bobby Flay,” succeed. “Iron Chef” is one of Food Network’s most popular, attracting many from outside its normal demographic – in particular, the core 18-to-49-year-old male demographic.

In October 2006, a 20-part series and accompanying website called “Gourmet’s Diary of a Foodie” kicked off on PBS. It introduces viewers to exotic ingredients and in-the-know chefs on an international level. According to an August 2006 Nielsen Media Research poll, 38.7 percent of PBS viewers make more than $60,000 per household and 30.8 percent have a four-year college education.

So how can food marketers reach such a wide swath of users online – who range in age, gender, education and geographic location? Because of the abundance of websites, Jupiter’s Riley says “food companies typically use interactive agencies to plan their media spending for them. The agencies will often partner with well-known content sites using demographic targeting information.” While many food companies want to drive potential customers to their websites, Riley says the ultimate goal is to provide an engaging brand experience. Food companies seek to do this through a variety of interactive components.

Interactive Is On the Front Burner

One effective component that Sara Lee used for its “Soft & Smooth Whole Grain Wheat Bread” campaign was word of mouth, which was created by AllRecipes.com to reach mothers of school-age children.

AllRecipes.com, which also provided the campaign’s recipe feature, created a custom consumer panel where qualified home cooks were invited to try their new product for free. AllRecipe.com’s vice president of marketing and partner affairs, Esmee Williams, explains that “an invitation was advertised in areas of the site where influencers were most likely to spend time.” Influencers (members who submit content and share opinions) were asked to fill out a short survey; those who fit the defined target profile were provided with online coupons good for 70 to 100 percent off a loaf of the bread.

More than 15,000 people participated, most of them in the target market. Seventy percent of the audience downloaded the coupon, and 40 percent redeemed it.

“Those who agreed to participate in the ‘taste test’ panel were also provided exclusive access to a co-branded microsite where they could share their feedback, submit recipes utilizing the product as an ingredient or forward product recommendations accompanied by a product coupon to friends,” Williams says.

Many food companies have microsites, which create environments that foster a relationship between a specific brand and audience. Among the most successful is KraftFoods.com, which frequently has been the No. 1 branded food domain during the past five years. According to Jupiter’s Riley, it has become a full-fledged destination site with recipes that incorporate Kraft products to appeal to busy moms as well as community message boards where users can swap ideas, and which Kraft can respond to and monitor.

Paula Sneed, Kraft’s executive vice president of global marketing resources, said in her keynote speech at the DMA conference in October that interaction with customers is imperative.

“We need to talk to consumers to find out their underlying motivations ” to succeed, it’s all about customer insights,” Sneed says.

eMarketer’s Phillips says food companies read user-generated content in blogs and message boards “to see which way the wind is blowing before they launch a product – it is an online focus group that offers feedback.”

In October 2006, Kraft partnered with MSN to launch Chef to the Rescue segments, which are four-to-five-minute videos that can be downloaded on demand, so users watch them at their convenience. They feature celebrity chef Cat Cora creating meals based on recipes from KraftFoods.com and are a way that Kraft serves its target audience of time-crunched mothers. Sneed explains that this is “the type of next-generation advertising that adds value to its core customer.”

Kraft Foods, along with Masterfoods USA and Sheraton Hotels & Resorts are among the initial sponsors of Yahoo Food, a section that Yahoo launched in November that offers visitors recipes, food-related articles, blog posts, celebrity interviews and video.

Intended for sophisticates as well as casual cooks, Yahoo Food offers original and syndicated content including articles from the magazine Every Day with Rachel Ray, recipes from Epicurious, original posts from 13 food bloggers like The New York Times writer Ed Levine and video from Martha Stewart Living Omnimedia. The site also will include a Yahoo video show, “Cheap and Easy,” with clips advising users how to make dishes for not more than $5 in less than five minutes.

Diners Eat Up Video

Videos and webisodes are now de rigueur components of many food-related websites with the hopes that these elements will become viral. eMarketer’s Phillips explains that the goal is to have users find it authentic and pass it to each other, and says that today it is easy for companies “to post something on YouTube and see if it goes viral.” She says a great example that was sent to her is Smirnoff’s Tea Partay video, which is a send-up of a gangster rap song, set in Greenwich, Conn.

Another viral marketing campaign, “Long John Silver’s Shrimp Buddy,” is about a guy going on a road trip with a man in a shrimp suit. It has received good and bad critiques from online users, which exemplifies the dangers of viral marketing campaigns that lack credibility. One blogger wrote, “It’s the weakest viral campaign I have seen” and another criticized that “It’s about as genuine as Coke’s summer road trip commercials with a bunch of teenagers encountering spontaneous poetry reads and magic shows.”

Perhaps the most well-known viral campaign for a food company is Burger King’s Subservient Chicken site, which had a million hits within a day after being released, and received 20 million hits within a week. Users could control the movement of a man dressed up like a chicken by typing commands such as “do jumping jacks,” “dance” or “watch TV.” Joseph Jaffe explains that this type of engaging interaction with customers is incredibly valuable because it is more of an opt-in media versus TV, which is mass media that everybody sees. Jaffe says the average user of the Subservient Chicken site spent 7.5 voluntary minutes there. “That’s 15 30-second spots and I bet that’s worth 50 30-second spots because the viewer is engaged the whole time, he says.”

A Web campaign that includes a podcast or user-generated content requires the person to register and therefore guarantees interactivity. And by engaging with users, companies are building awareness and keeping their brand top of mind. Food companies like Burger King and Campbell’s Soup are not trying to sell Whoppers or cans of tomato soup over the Internet – they are trying to build online relationships with users with the hope that the brand experience will follow them off-line and make them brand loyalists. eMarketer’s Phillips says companies will use every interactive angle possible to engage with customers – from word-of-mouth campaigns, to ringtones, to sweepstakes, to advergames.

eMarketer’s James Belcher predicts that advergames and in-game advertising are “small but growing and important” and points to Microsoft’s 2006 purchase of Massive, a maker of in-game advertising, as proof of the momentum.

In-game advertising places targeted ads inside video games – such as on billboards as a player skateboards down a street – and serves different billboards to different users depending on their geography and age. The technology is now attracting deep-pocketed corporate sponsors who see video games as a great way to reach desirable audiences such as young males.

Sara Lee, department store Kohl’s and chip maker AMD are experimenting with in-game advertising with the sponsorship of a series of online games called “The Flushed Away Underground Adventure” that launched on AOL in October. The game called on players of all ages to solve a series of challenges that feature characters from the movie “Flushed Away.” Sponsors have an online presence in the games as well as plug their products in customized pre-roll video ads and banners.

Marketers will be interested to know that according to October’s comScore Media Metrix’s Game Metrix, a study that analyzes gamers’ cross-platform behaviors, 37 percent of heavy gamers agreed that featuring actual products or companies in games makes them feel more realistic, and half of heavy gamers believe that it is inevitable and will be in all or most games in the future. The study also found that video games appeal to not just teenage males or children – on average, gamers are 41 and have an annual income of $55,000; females account for 52 percent of the gaming audience.

A July 2006 report by the Kaiser Family Foundation, based on analysis of 77 branded food websites that are targeted at kids, found that 73 percent of the sites contained advergames, ranging from one to more than 60 games per site. McDonald’s Ronald.com has pages for kids to color, and Capncrunch.com, which promotes the Quaker Oats cereal, offers screen savers.

M&M’s has launched advergames designed for all ages. In October, they introduced the advergame “50 Dark Movies Hidden in a Painting,” which features a Brueghel-style painting with a series of visual riddles where players move around the screen and find the 50 movie titles represented by the characters in the painting.

Another advergame, the M&M’s Trivia Game, asks questions like, “Who drives the NASCAR M&M race car?” which for most users require them to search for the answers. Kevin Ryan, CEO of multichannel advertising agency Kinetic Results, explains that CPG companies like M&M’s are incentivizing users to search on their brand for the answers. “It is all about building an experience,” Ryan says. “It is not likely people are going to buy M&M’s online – they just want people to interact with the brand. It is a prototypical experience.”

The Search For Sustenance

Ryan believes, “There is a tremendous amount of opportunity in using search as a brand conduit ” it is the foundation for growth in the next couple of years,” he says. “There is a big value for search beyond direct response.”

Search is a very effective way of valuing and measuring the impact of investments in other types of media; for example, marketers can use search as a way of monitoring the effectiveness of a TV campaign, as they will see spikes in search activity immediately after the campaign launches.

Cam Balzer, vice president of strategy planning for Performics, agrees that search is helpful for branding efforts. He says that initially some food marketers and CPGs did not see the value in buying keywords if they did not convert, but marketers are starting to understand that consumers are not always looking for immediate gratification. “Marketers are realizing there is value in buying a keyword like ‘turkey’ because although a user might not be ready to buy a turkey at that moment, they might be searching on the word while they think about the kind of turkey to prepare for the holidays.”

Of course, some keyword buys do convert well. “Some of our clients are in the food-gifting business so they buy terms like ‘holiday pears’ and ‘holiday popcorn basket.’ Those words get costly but they convert very well and the high costs pay off. It is the direct market companies that leverage those,” Balzer says.

For the most part, it seems that food companies are just starting to realize the potential of search to engage their audiences. Balzer says, “A lot of food companies are strictly promoting their brand online and they need to reach beyond people who know about them to engage new consumers. For example, there are not many players for search terms like ‘healthy snacks’ or ‘healthy meats.’ Those words are not used by the household brand names like you would think and that is where the opportunity lies.”

Performics has worked with a meat-related food company and says that contextual targeting has performed well for building awareness of its product. Balzer says, “We have seen success with what they call ‘flavor conquesting,’ which means that one brand buys another brand’s keywords. For one client – if we were buying for a turkey product, we would buy ham in the content-targeting network so if someone is reading an article about ham sandwiches, the turkey ad pops up. We know the reader is interested in a similar food product [in this case a deli meat sandwich].”

Jupiter’s Riley says over the next few years, CPG spending on search “will grow a lot,” from $40 million in 2005 to $128 million in 2010, a compound annual growth rate of 26 percent. Search is by far the most lucrative area, accounting for 40 percent of the total online ad spending in the U.S., according to JupiterResearch.

For food companies to take advantage of search, they need to have good search engine marketing programs that are concerned with both paid and organic listings. Gary Angel, CEO of SEMphonic, a search engine marketing analytics consultancy, says, “Organic listings are an incredible value since they are essentially uncharged exposure. In addition, more clicks come from organic listings than paid; so organic listings are the No. 1 potential traffic source.”

Angel claims that paid listings provide coverage across a breadth of terms that can’t possibly be highly rated organically, scale programs to drive traffic beyond organic levels as well as allow companies to control the landing page and message given to consumers.

He says many companies have shifted significant resources into organic optimization in the last year – since this was an area that was significantly underutilized. He says that paid advertising really skyrocketed two years ago and has remained very strong – but many companies have essentially reached a plateau.

Online Offers Steak and Sizzle

Search is one of the channels through which Niman Ranch, a premium brand of meat, is acquiring new customers on a pay-for-performance basis. Niman Ranch pays its online marketing agency, LSF Interactive, only when new Web visitors buy – not for visitors that browse but don’t buy (leads) and not for existing customers that purchase again (repeat customers).

The comprehensive campaign includes search, email, banner advertising and comparison shopping engines such as Shopzilla and Yahoo’s shopping comparison tool.

Daniel Laury, CEO of LSF Interactive, explains that because they are compensated on a pay-for-performance basis, their job is to get the best conversion rates, which they do by tweaking the ad copy and landing pages and by fine-tuning their targeting. He says that recruitment through email and banners enables them to target users better.

According to Kinetic Results’ Ryan, companies have to foray into advertising on multichannels in order to reach audiences who are increasingly not only online but multitasking while they are online. Today people are on their computers instant messaging, while emailing and playing a video game. They have the television on in the background while they talk on their mobile phones. While they flip through the newspaper on the bus, they are listening to the radio or to their iPods. To reach these multitaskers, food companies have to develop campaigns that integrate several components.

An example of this is “Sara Lee’s Joy of Eating” campaign, which is being promoted on Sirius Satellite Radio’s Martha Stewart Living Radio channel and with an interactive presence on the Sirius website. The campaign also includes television ads, a Sara Lee microsite, online advertising, point-of-sale and visuals on packaging and bakery delivery trucks.

Some think that the Internet will never be a main channel for major food brands to reach customers. Datamonitor’s Productscan Online’s Vierhile believes that “There is no real compelling reason for consumers to visit food company sites except for recipes, which are really a one-off.” He believes that if anything has changed over the last 20 years, it is that food companies “have to get the products on the shelf.” To accomplish this, Vierhile thinks that food companies are focusing more on product packaging and in-store promotion.

In-store promotion includes free samples, shelf-edge talkers, in-store coupons, advertisements on conveyor belts, messages on the floor as well as in-store media on TV monitors. According to an August 2006 BIGresearch Simultaneous Media Survey of over 15,000 people, the top media influences for purchasers include in-store promotion – with the most significant influencer being coupons (see chart below).

A Mobile Feast

BIGResearch’s Pilotta says that “Coupons are still very effective even though approximately 1 percent are redeemed.” According to a Prospectiv October 2005 study, approximately 10.5 percent of consumers get their coupons from online sources, about 30 percent of consumers said they would like to receive coupons through online channels and more than half would like to receive coupons online if they were tailored to their interests.

A growing alternative to sending coupons inserted in newspapers is to send them in email newsletters. Email Data Source says that supermarkets that send email newsletters are successful in driving traffic to their Web properties. Supermarkets’ weekly newsletters offer specific targeting, can be personalized and include recipes, online specials and links to weekly ads.

Another innovative way for food merchants to deliver coupons and offers is through mobile marketing platforms including ipsh, VeriSign’s m-Qube, Motricity’s GoldPocket Wireless and MobileLime’s Mobile Rewards.

“Mobile advertising is better than online advertising – it is much more targeted,” says Bob Wesley, president and CEO of MobileLime. “The merchant can communicate with their customers before, during and after each purchase transaction, directly influencing buying behaviors at the point of sale. It is the ultimate in one-to-one communication because a person’s cell phone is a unique ID that is portable.”

For example, Chevy Chase Supermarket is using MobileLime’s Mobile Rewards platform to offer its patrons information-based alerts and instant savings on items store-wide through their mobile phones. Chevy Chase Supermarket was able to tell its customers that they were having a limited- time offer on Edie’s ice cream. This drove a large crowd of customers to stop by the store for the ice cream and also helped to increase loyalty sales on other items for which Chevy Chase sent alerts while shoppers were in the store.

In September 2006, Go-Tan, an Asian food brand, ran a marketing experiment in a supermarket in the Netherlands. Customers shopping in the supermarket (and anyone walking within a 100-meter distance) who had an open Bluetooth connection were reached by a contact request from the Go-Tan device about discounted Go-Tan products available in the store. More than 25 percent of Dutch mobile users leave their Bluetooth with an open connection, which means that Bluetooth could prove to be an appealing channel to establish direct and immediate communication with end users.

Food seems to be a natural match for the Internet. People love to talk about food and share food with others – and foodrelated sites are capitalizing on this social nature by offering various social media tools. It is predicted that food-related sites will continue to grow as interest continues – Yahoo indicated that they launched Yahoo Food because they saw it as a big opportunity and anticipate that CPG companies as well as health and diet companies will buy inventory in the section.

While the Internet is not the No. 1 channel for reaching consumers, most everyone agrees that it is vital for food companies to have an online presence. The KraftFoods.com URL is featured along with the 1-800 number on Kraft’s brand packaging, in their advertising and in Kraft’s Food and Family magazine. If food companies want to reach consumers with a multichannel campaign, Kraft Foods’ Sneed points out that all of the disciplines have to be integrated to maximize the potential for effectiveness.

For example, in 2006, Kraft Foods employed many marketing channels when they wanted to target Easy Mac macaroni and cheese cups to college kids instead of mothers. Kraft Foods used print ads, television spots and built a youthful and innovative website called Scam Some Mac, which includes short videos, an advergame and a viral element that lets you ask others to send you some mac & cheese.

Consumers can expect to see more pioneering online campaigns as food companies increase their spending on Internet initiatives in hopes of engaging users. With the growing amount of traffic to food-related sites, food companies will throw money at their online efforts although some will wonder if online exposure leads to off-line conversion.

Jaffe points out that people can tune out a television commercial with a remote control and ignore a magazine ad by turning the page, but to watch a video or participate in a sweepstakes online, users are required to register. Jaffe says that, “People are always trying to measure the value of an online campaign but maybe people should be trying to validate the value of an off-line campaign.”

In the end, it is finding an optimal mix of media, including Internet initiatives, which will move a company forward. Kraft Foods’ Sneed says, “Companies should not be afraid of trying new and innovation online campaigns – they need to be leaders, not followers.”

Search Is Getting Personal

Your phone rings. A good friend is calling, more excited than you’ve heard her in months. “My book is on the home page of Amazon! I can’t believe it. My book was just published last week and already it’s on Amazon’s home page!” Exciting? Maybe not to someone who knows how Amazon works. Your friend has seen her book on her version of Amazon’s home page, but a closer look shows it under “Items Recently Viewed.” She views her book’s page each day to check any new reviews. Based on what books she looks at, Amazon thinks she’s very interested in buying this book and places it on her home page. But it may not be on anyone else’s Amazon home page.

That’s how personalization works. Each person sees something different even though everyone is looking at the same page. We’re used to seeing personalization on Amazon, but now it’s coming to a search engine near you.

Inside Personalized Search

So how can search be personalized? By showing each searcher different results. Just as Amazon shows different content on its home page for different people, a search engine can show different content on its search results page, even when two searchers look for the same keyword.

Why do this? Money. Personalization can be lucrative for search engines. If personalized results are more relevant results, then searchers are happier and search more. And if search marketers can target ads to the right people, they’ll pay higher per-click prices.

Search engines have personalized paid results for years, using geographic targeting. With geographic targeting, a furniture store, for example, that delivers within 25 miles of its location can purchase the keyword furniture but ask the search engine to show its ad only to searchers within the delivery zone. Search engines check the geographic location of the IP address for each searcher’s computer to decide whether it is within the geographic zone or not. Paid search marketers can set geographic limits on city or zip code boundaries, or sometimes even by longitude and latitude coordinates.

Search engines are now extending personalized search beyond geography. MSN Search pioneered personalization using searchers’ demographics; all search engines will eventually offer similar programs. With demographic targeting, search marketers can raise their bids for searchers based on gender, age or other characteristics. So, you can raise your normal per-click bid 3 percent for women over 65, if that’s your highest-converting market.

But how do search engines know which searchers are women over 65? They need searchers to tell them. That’s why Google, MSN, Yahoo and other search engines are racing to provide services that entice searchers to identify themselves. Whenever people register with one of these companies, they provide demographic information that the search engines can use to personalize searches.

In personalization parlance, demographic targeting is called explicit personalization, because it’s based on information explicitly provided by the Web user, such as age. Expect search engines to also engage in implicit personalization, changing search results based on searchers’ behavior, such as what kinds of Web pages they look at.

Implicit personalization may eventually prove more valuable than explicit personalization, because so much more information can be gathered. Search engines can observe which results people click when they search, discerning patterns that allow them to rank their favorite kinds of pages higher for all their searches. If a particular searcher regularly clicks product reviews rather than manufacturers’ specs, Google could begin to rank product reviews higher when he’s searching for product information.

Search engines have other ways of observing implicit behavior. Google can analyze the message text of its Gmail users to see what subjects they write and read about. Yahoo can look at the keywords used by its search toolbar users, and even see what pages they look at. You should expect search engines to use this information to personalize search, both for paid and organic. Search engines are always looking for ways to improve relevance – the match between searchers and content. High relevance means the search results correlate closely with what the searcher has in mind. For 40 years, search engines have improved content analysis to increase relevance. Personalized search concentrates on the people side of the relevance challenge instead.

Inside Personalized Search Marketing

Now that you understand the basics of personalized search, you may want to know how search marketing will change.

One change is obvious. Personalized paid search bidding is more complex, because search marketers must consider geographic location, age, gender and other demographics when they make their per-click bids. Instead of different bids for every keyword, now you need different bids for the same keyword.

You should raise your bids for targeted demographics only because they convert at higher rates. To bid effectively, your Web metrics system must track conversions by geography and by demographics, not just by keyword, and your bidding software must adjust based on those metrics.

Less obvious changes will confront us when search engines begin applying personalization to organic search. Search marketers have always wanted to achieve the No. 1 ranking for their favorite keywords. But what does it mean to be No. 1 in a personalized world? If the organic results are personalized, then different searchers get different No. 1 results. Your excitement at being No. 1 will be no more warranted than your author friend’s glee at making Amazon’s home page. In a personalized search world, every site can be No. 1 with some searcher sometime.

Widespread personalization will doom traditional rank checking. The question won’t be, “Does my site rank No. 1?” but rather “For what percentage of searchers does my site rank No. 1?” or “What was my average ranking yesterday?”

And who can answer those new questions? Only the search engines themselves. Only MSN will know where your pages ranked for every search performed with their search engine, so only MSN can tell you. Will the search engines provide that information for free or will they charge you for that analysis? Will search engines tell you the demographics of the referrals that come to your site? Time will tell.

Optimists also believe personalization will reduce the problem of search spam. The thinking is that spam is all about content, so that personalizing results based on searchers makes it exponentially harder to spam the search results (because spammers must then fake their content for many kinds of searchers). By increasing spammers’ costs for the same number of searchers, it takes part of the profit out of these unethical techniques.

No matter its effect on spam, savvy search marketers must stay on top of the personalized search trend – it’s the biggest change in search marketing since paid search. If you focus on who your best customers are, and you craft your content to match, you’ll be ready when the personalized search revolution breaks out.

MIKE MORAN is an IBM Distinguished Engineer and product manager for IBM’s OmniFind search product. Mike is also the co-author of the book Search Engine Marketing, Inc. and can be reached through his website (mikemoran.com Posted on Tags , , , , , ,

A Call to Action

Someone is hijacking your traffic and stealing your commissions. That someone might be a competing affiliate marketer, or worse, the merchant whose products you are promoting.

To my dismay, I discovered that traffic from one of my sites was being diverted when a friend sent me some screen captures of that site’s home page. The first screen shot showed my site open in a browser window with 80 percent of the page behind an AdultFriendFinder pop-up window – despite the fact that my site does not have a pop-up to AdultFriendFinder.com on the home page.

The main domain in the pop-up window’s address bar was AdultFriendFinder.com, but the affiliate ID was not my affiliate ID for AdultFriendFinder, or for any site within FriendFinder’s network.

A portion of the URL included my domain name (preceded by .sub), which clearly indicated interest in referrals from my site. However, this was not so FriendFinder could compensate me – their long-standing, loyal affiliate – for referrals from that page, but rather to ensure that its Zango advertising campaign was returning a good ROI. This fact was made apparent from the prominent white-on-blue banner splayed across the bottom of the pop-up window that read, “This ad served by Zango software downloaded by Zango.com. Click here to learn more.”

Enter Zango, a company formed by a merger of Hotbar and 180solutions in June 2006. During its incarnation as 180Solutions, the company was dropped as an affiliate by the major networks, including Commission Junction and LinkShare, for invalid activity (cookie stuffing, etc.). 180’s detrimental effects on affiliate commissions have been well-documented by anti-spyware expert Ben Edelman and others.

Zango’s current service works as follows. In exchange for access to free programs and tools, surfers are required to download the Zango Search Assistant. With the Search Assistant installed, Zango’s advertisers’ Web pages are popped open when certain keywords are detected in Internet search or browser windows.

Now enter Zango’s advertisers. If a domain address is listed in an advertiser’s campaign and a visitor to that site has the Zango Search Assistant installed on their computer, the advertiser’s window will pop open, virtually obliterating the view of the first page visited. The situation occurs regardless of whether a Zango surfer reaches the page via paid or natural search engine listings.

But wait, it gets worse. Merchants and their competitors are bidding on their own and each other’s domain names, to ensure that their own ads are popped by Zango when their sites are visited. So, even if the Zango surfer finds your site behind a pop-up and clicks on one of your affiliate links, chances are good that the merchant site that opens with your affiliate ID embedded will be covered up by yet another pop-up window coded with an ID that isn’t yours, which means that as an affiliate you can say goodbye to your commissions.

Zango claims a customer base of 20 million users that grows by “more than 200,000 new opt-in consumers every day,” according to a September 26, 2006 press release from the company.

When you add 100 million MySpace teenyboppers who all want to redesign their profiles with VideoCodeLab’s free design tools – available through a Zango download – it’s no wonder that advertisers are jumping on the Zango bandwagon.

However, I can’t understand why a merchant partner would list an affiliate’s domain name in its Zango advertising campaign and risk accusations of commission shaving, or worse, losing affiliates by the boatload. So, I asked FriendFinder’s CEO Andrew Conru, and Lars Mapstead, vice president of marketing. Both stated that Zango supplied FriendFinder with a list of keywords that included my domain name. In another conversation, Mark Ippolito, Zango’s vice president of sales, confirmed that Zango provides its advertisers with a list of suggested industry-related keywords upon request.

To their credit, FriendFinder removed my domain name from their campaign soon after my request. The pop-ups continued, however, and further research uncovered that LoveAccess.com, another dating service with an affiliate program, was also bidding on my domain name. Steve Piotrowicz, director of marketing for LoveAccess.com, had “no comment” on my request to remove my domain name from his campaign or on how Zango’s advertising tactics impact affiliate marketers.

To find out which of my other merchants’ sites were being advertised on Zango, I opened a test advertiser account at Zango through AdConnect.Zango.com, and learned that the scope of the problem extends into every sector of the industry. Commission Junction merchants such as LowerMyBills, Esurance and Magellan’s had bids up to .518 cents per impression and up to 12 advertisers bidding on their URLs.

Attempts to enter URLs for Google, Yahoo, eBay, WeightWatchers and Expedia were “predenied” by Zango as they were insufficiently targeted, Zango’s Ippolito explained. However, he flatly refused to remove my domain name from Zango’s list. (If only it had been that easy!)

Interestingly enough, when I suggested to Ippolito that advertisers should bid on the term Zango, after hesitating a moment he replied that Zango “retains the right to refuse certain listings.” Go figure.

When asked how he would react if paid traffic to his site was repeatedly diverted to other sites, Ippolito responded that my question was “irrelevant” and “best discussed over a glass of red wine,” followed by another assertion that although Zango’s business methods are “aggressive,” they are “entirely legal.”

Legal? Let’s take that scenario off-line. How long would it take the police to arrest Zango’s workers if they showed up with 10-story sheets of plywood to block 80 percent of a storefront each time someone was poised to enter the premises?

What Zango does is legal only because the case hasn’t yet been properly made. Even given a successful outcome, worldwide enforcement would be a logistical nightmare.

So, what’s an affiliate to do to prevent shaving to the point of decapitation? Ending your affiliation with the merchant would seem to be the easiest solution. Unfortunately, giving up does not solve the problem. Merchants and affiliate competitors will continue to bid on your URLs, and their Zango pop-ups will still obliterate your home pages to divert traffic from the other merchants that you promote.

A more drastic alternative would be to give up affiliate marketing entirely and go back to work for some employer who wouldn’t steal from your paycheck. That, however, is not an option for most of us and it certainly will not make things right.

Here are a few suggestions that may help to start making things right:

  • Open up a Zango advertiser account and enter your own domains and the domain names of your merchant partners to find out which are being targeted.
  • Contact Zango at 425-279-1200 and leave a message demanding that your URL be removed from their keyword lists. They probably won’t respond, but your call will be on the record come court time.
  • Next, contact applicable merchant partners and ask that your URLs be removed from their campaigns immediately. Discuss your concerns for lost revenue, and you may want to introduce the term “commission shaving” at some point in your conversation. If your merchant’s program is affiliated with a network, file a complaint with that network as well.
  • If either Zango or your merchant partners refuse to stop popping in your territory, file a complaint with the Better Business Bureau, the FTC at http://www.ftc.gov/ and your local district attorney’s office.

Regardless of complaints from affiliates or the threat of class action lawsuits, it is time for ethical merchants to take the high road and close their Zango accounts.

As for those affiliates who cherish their little 45-cent Zango leads too much to play on the white side with real affiliates – the Zango affiliate voodoo dolls are currently in mass production.

ROSALIND GARDNER is a super-affiliate who’s been in the business since 1998. She’s also the author of The Super Affiliate Handbook: How I Made $436,797 in One Year Selling Other People’s Stuff Online. Her best-selling book is available on Amazon and www.SuperAffiliateHandbook.com.

You’ve Got Content, Now What?

I find that many website owners are divided into two camps. One camp is very good at developing unique content and garnering tons of search engine traffic, but they have a hard time turning that traffic into dollars. The other camp is great at monetizing traffic, but they can never generate very much traffic. In both cases the individuals involved eventually become discouraged with their site’s lackluster performance and move on to something else.

This issue’s makeover recipient, HomeWA.com, is in the first camp. The site’s creator, Gabe Hoggarth, spent months working on HomeWA.com, a real estate information site focused on the state of Washington. He’s crafted articles full of quality information that both users and search engines love, but despite his content-building efforts, the site just isn’t making the kind of money he’d expected.

The bottom line is, how can we turn HomeWA.com’s existing traffic into a solid revenue stream? As you know, we have always chosen a home page to make over in this column. However, the HomeWA.com home page really wasn’t that bad. I don’t evaluate a home page or landing page based on how pretty the page looks. Instead I focus on the elements that will determine how effectively it communicates with users.

The home page should communicate three basic things:

What does the site offer? The site features a clear tagline, “Washington Real Estate Information,” which makes it clear what the site is about. Also, the simple navigation options and highlighted articles really drive that point home.

Why should I use this site as opposed to a competitor? HomeWA.com, like many affiliate sites, isn’t selling anything directly. Instead, it attracts a niche audience and hopes to make money when the readers sign up for or purchase the services and goods they link to. The only product that HomeWA.com directly provides is information, and Hoggarth has done a good job developing strong articles with appealing titles like “Top Home Buyer Turnoffs” which visitors seem to like. Having unique, high-demand information, while focusing in on a tight niche (Washington state home buyers and sellers) gives users a compelling reason to use this site.

How do I get what I want from this site? HomeWA.com has a simple navigational structure and provides several entry points on the home page that take users directly to the content they seek. This makes it easy for users to move on to additional pages from the home page.

Since the HomeWA.com home page answers all three of my main questions fairly effectively, I started to wonder if this really was the right site to make over. Then I remembered that despite the effective home page, Hoggarth still had a problem – his site was not generating boatloads of money.

It was obvious that a bigger-picture approach was needed. To help understand why the site isn’t generating the type of income it should, we need to look at its traffic. HomeWA.com gets most of its traffic from natural search. This means most users enter the site at the specific article that had the information they were looking for, not at the home page. We needed to start thinking about each article page as a landing page for the site, since that’s where most users got their first glimpse of what the site had to offer.

With this new perspective, I turned my sights to the article pages, and a quick review of these pages gave me all the answers I needed. First of all, there are no links to additional articles. Although the site offers loads of content, there is no simple way to get to additional content from an article page. Since related content is not visible, users are not encouraged to click through to other pages on the site. Next, there are no links to advertisers. That means there is currently no way to generate income from someone reading an article.

Without a little help, HomeWA.com will never reach its full potential. Here are three things we did to try to rectify the problems.

  • Of course, we gave the site a visual makeover. This isn’t the most important part of the makeover – but it certainly didn’t hurt. We chose to use a nature shot of Washington as the backdrop for the site. Having a customized design helps to give the site a more credible feeling. The photo could be changed to a more iconic image – the Seattle skyline for example – to reiterate the site’s focus on the state of Washington. A particular photo may be better, but that can be done after some rudimentary testing.
  • A fairly simple, but hugely beneficial change was adding a column next to each article. The column facilitates sections for additional content. This is where we can put related articles, resources, special features and some advertiser links. The purpose of the content in this area is twofold: to get users to go beyond this article and realize that there is a whole host of information on the site that they might be interested in, and it’s also a great spot to promote advertisers that will help make the site more profitable so Hoggarth can continue to develop valuable content.
  • Finally, we added some standard advertising units within the article and at the bottom of the additional column. These ad units give Hoggarth another way to monetize the site and if he doesn’t have advertisers to put in the spots, they could be used to promote additional site features. These changes will increase page views across the site and should help make HomeWA.com more profitable.

Would you like your website to receive a By Design Makeover? Send your name, company, contact information (phone, email, etc.), a brief description of your business and its goals, and, of course, your URL to bydesign@sostreassoc.com. Dont forget to include “Revenue’s By Design Makeover” in the subject line.

PEDRO SOSTRE is pioneering conversion design and its ability to turn online shoppers into online buyers. He serves as president of Sostre & Associates, an Internet consulting, design and development firm, which also promotes affiliate programs on its network of websites. Visit www.sostreassoc.com to learn more.

Asking Permission

One of the biggest problems of mass-market advertising is that it vies for the attention of prospects by interrupting them. That’s why TV commercials have long been called "dream interrupters," because that’s exactly what they are. The TV show is your dream. The TV commercial interrupts that dream. Not good.

Of course, if nobody else is interrupting the audience, the interruption will be effective for you. But everyone and their second cousins are interrupting the audience to the point that there’s an interruption overflow. And that’s why guerrillas one and all are rapidly warming up to permission marketing.

The name of this game is to get your prospects to point to themselves as hot prospects. They literally agree to learn more about your company and its benefits. Permission marketing can transform strangers into friends and friends into loyal customers. The first and main rule in permission marketing is that it truly is based on selfishness: Prospects will grant you permission to market to them only if they know exactly how they’ll benefit.

Seth Godin, with whom I’ve coauthored The Guerrilla Marketing Handbook, Guerrilla Marketing for the Home-Based Business and Get What You Deserve! How to Guerrilla Market Yourself, admits that mass media advertising will remain a potent weapon.

"Winston tastes good… ." Can you complete that sentence? Of course you can. It’s "… like a cigarette should." And yet nearly three decades have passed since that slogan was advertised. It would cost far beyond your budget to implant such a slogan in the minds of consumers today. Maybe Nike can afford it. And Budweiser. But the list is very tiny, indeed. It does not include many affiliate marketers.

I agree with Godin when he says that marketing is a contest for people’s attention. There is so much interrupting these days that people have learned to ignore interruptions. TV is cluttered with commercial messages beyond belief, and the Web is even worse.

That means that the challenge of the day is to persuade consumers to volunteer their attention.

Tell them a bit about your company and how your offerings benefit them. Then let them tell you a bit about themselves. Then tell them some more about your company. They’ll tell you some more about themselves. Over time you create a beneficial learning relationship. They want to know what you have to say. That’s why permission marketing is marketing without any interruptions.

Of course, you’ve still got to flag the attention of your prospects, but once you have it, you can turn it into permission, then turn that into learning, then turn that into trust. Once they trust you, they can buy what you sell.

Godin says there are four rules of permission:

  1. Permission must be granted. If it isn’t, you can’t assume you have permission to market. Buying names and addresses, then sending direct mail, is not permission. It’s spamming. And guerrillas do not spam. They know spamming litters the marketing scene and is usually ignored.
  2. Permission is selfish. Your prospects will grant permission to you only if they see clearly that there’s something in it for them. You’ve got about two or three seconds to communicate what that something is.
  3. Permission can be revoked. As easily as permission is granted, it can be withdrawn. On the other hand, it can intensify over time. The intensity depends upon the quality of interaction between you and your customers.
  4. Permission can’t be transferred. Think of marketing as dating. You just can’t give a friend the authority to go out on a date in your place.

Once people give you permission to market to them – then what? Then they want to get to know you better. They want you to solve their problems. They want you to improve their lives.

Why does permission marketing make sense? These days, people have the money to spend on products or services, but they don’t have the time to evaluate your offerings and learn why you are trustworthy. That’s why online marketing is so powerful. You can use email to communicate with people frequently, quickly and unobtrusively – if they have given you permission. Get it at your website. If you list yours, be prepared for a barrage of permissions.

To get these permissions, you’ve got to remember that the Internet is not television. It is direct mail with free stamps. It allows you to create rich relationships. Web banners will wither on the online vine while email marketing becomes the real killer application of online marketing.

Interruption marketing is coming to a dead end in the road, and the future will belong only to those companies that have embarked upon a permission marketing campaign. Will yours be one of them? I hope so.

 

JAY CONRAD LEVINSON is the acknowledged father of guerrilla marketing with more than 14 million books sold in his Guerrilla Marketing series, now in 41 languages. His website is GuerrillaMarketingAssociation.com

Redemption

It all started with Asa Candler, a “prescriptionist” in Atlanta 112 years ago. A modest pharmacist who dealt in tonics and medicines, he bought an unassuming recipe for a patent medicine called Coca-Cola. When he gave out handwritten slips of paper for customers to try the new drink for free, the coupon was born.

The simple yet brilliant marketing idea Candler conceived has, of course, become a staple of American shopping. During the Depression in the 1930s, grocers fell in love with coupons as a way to attract needy families into their stores. And when the supermarket took over and coupon redemption became easier in the 1960s, half of all Americans used coupons. With the advent of the freestanding insert, or FSI, in the early 1970s, reams of colorful and enticing coupons came with the country’s Sunday newspapers.

As expected, the coupon migrated to the Web and even with technology laying the pavement for better distribution and security – it is still a work in progress. Online coupons are busting out all over but they aren’t as big as you might think. The world of couponing has survived the digital age so far and has made some unique advancements, but there are still challenges ahead.

Coupon distribution continues to prevail. In 2005, U.S. coupons set a new record of 323 billion coupons distributed, the first year to pass the 300 billion mark and a nice jump of 9 percent over 2004, according to CMS, a coupon-processing firm. CMS also states that the redemption rates of Internet coupons rose from .59 percent in 2004 to .96 percent in 2005. That may seem like a small amount but it’s a big jump for a fledgling coupon vehicle. Overall coupon redemption rates hover between 1 and 3 percent year-over-year.

While some analysts have forecasted the death of the paper coupon in as short a span as five years, the trends don’t seem to reflect that. Yes, more people are using the Internet to gather coupon codes to buy from websites instead of clipping an FSI and walking into a store – but those numbers are a very small slice of the coupon pie. A resounding 88 percent of redeemed coupons are FSIs, snipped from the Sunday edition of your newspaper.

Still, some are confident that the paper coupon will disappear sooner than we think and that coupons delivered via email or to our cell phones will dominate. “Young marketers are leading the way toward eliminating the paper coupon,” says marketing strategist Peter Sealey, CEO of The Sausalito Group.

Precision Targeting

For now though, only a small percentage of redeemed coupons come from online. But the upside is that online couponing – whether via a coupon code, printable coupon or emailed coupon – is able to reach a more precise target than the traditional FSI. In fact, recent redemption studies have borne out that Hispanic coupon users redeem at higher-than-average rates. Therefore, coupon distributors are finding ways to hit the Hispanic market with coupons via cell phone (Hispanic households use more cell phones than the general population). Sealey says the benefit for marketers is that they “can target people who can actually afford to buy a Porsche.”

The efficiency that technology brings is seeing immediate results in the online coupon world. Coupon networks, for example, use technology to help with everything from RSS feeds of coupons to organizing all their expired online coupons. But even then, the technology doesn’t get in the way. “We like to call ourselves a document security company,” says Steven Boal, CEO of Coupons.com, a network enabling printable online coupons. He says that proclamations of the death of the paper coupon are greatly exaggerated “for a very important reason. Because I print paper coupons – a business that has been around a long time. Up until three years ago it hadn’t changed much. Does it change? Yes. Small percentage shifts in this business move huge dollars.”

His Coupon.com platform runs on more than 3,000 affiliate marketers’ coupon websites and some of the most high-profile coupon websites use his company’s back end, including Yahoo, Boodle.com, NBC.com, SmartSource.com and other coupon sites in the U.S., U.K. and Australia.

It’s true that coupon redemption rates dropped 6 percent in 2005, but as mentioned, distribution rose sharply. What’s at issue isn’t that fewer people are using coupons but that products that wouldn’t otherwise be sold are selling, according to Matthew Tilley, director of marketing at CMS. “Consumers just aren’t responding to coupons at the same rate that they used to, but that hasn’t really dampened marketers’ enthusiasm for them.” He affirms that high redemption rates are not the goal, but that “moving more product than you would without promotion – but at an efficient cost – is really the goal.”

While the big online coupon networks can scale for brands, smaller affiliate marketers have also been able to take advantage of the interest in online coupons. Popular sites such as Amazing-Bargains.com, CleverMoms.com, Fabu.com, Shopping- Bargains.com and FlamingoWorld.com have all seen great success with their coupon sites.

Much like product affiliates, coupon affiliates must track the newest offers, post them, bring down expired offers and make sure the link goes to where it is supposed to – but do so on a fairly grand scale every day. Too often the monthly offers inundate the affiliate on the first of the month, so that (if he or she works the website alone) it could be two weeks before a coupon is posted.

“I don’t know how they do it,” Michael “Mikey” Yack, founder of FabulousSavings and Fabu.com, says. He built his coupon sites from the ground up, too, but now has 30 employees. He doesn’t do code anymore. “I’m on the phone with my merchants all day,” he says. That’s the only way he can up the value of his coupons. “Once [merchants] know you’re legit, they throw you more.”

Fabu.com is also a site that employs rather sophisticated methods to keep it all together. Yack says his team writes original product descriptions and uses automated software to take down expired links. Other technology involves automatic rotating codes to avoid inviting other affiliates to cut and paste Fabu links on to their sites. He says his exclusive link with Toys R Us changes every 18 hours so that a stolen link will no longer be good after a brief window of time. All his expired coupons switch themselves out automatically.

Technology: The Good and the Bad

Link stealing may be the biggest pet peeve of the online coupon affiliate community. And while it does occur, some affiliates and networks work with it as a nuisance. Others complain that merchants aren’t doing enough because for them it just means broader distribution. The other pet peeve is that some merchants tailor coupons just for affiliates and create other deals for all the other channels they sell in. Affiliates fear the better deals may be going to the other channels.

“There are many things low-quality coupon sites do that are deceptive,” wrote Michael Coley, founder of Amazing- Bargains.com, in a Web forum. “While these things may temporarily increase their [clickthrough rates] or sales, the long-term effect is that they lose customers. Who would go back to a site that they knew was deceptive, and what merchant would want to keep working with a site that was deceptive? Their antics backfire in the long run.”

For couponers who have been at it for a while – like any Web venture – adaptation is the watchword. “Technology is always changing and those who survive must change with it. Web services, RSS feeds, JavaScript, storefront generators, XML and other delivery tools are making it easier for coupon sites to maintain current content. However, much of the, heavy lifting remains manual for those who want to offer unique content and features,” Mike Allen, president of Shopping-Bargains.com, says.

The potential for technology to take more of the sting out of couponing online has generated more than a few companies ready to cash in on new platforms. RSS feeds for coupons have been a boon to companies that do it, such as CouponBar.com, DealoftheDay.com and PhatDeal.com. Couponing from cell phones is the next area of interest for some. Companies such as Cellfire, MoBull and Quickpons are startups that just deliver coupons via cell phones. And they are already getting buzz. Redemption rates for mobile coupons are very high – at about 23 percent – mostly because cell phone users opt in to receive the coupons or must register or download a piece of software to the phone to participate.

Allen thinks this will undoubtedly drive the mom and pop out of business. “Coupon sites,” he says, “have become mainstream businesses. All the major players have recently undergone extensive revisions, technology upgrades and aesthetic enhancements to better compete in what is now a very sophisticated and fast-moving marketplace.” He says that what was once “amateur or hobby categories” are now sites that can be called brands on their own. The larger the main players become the harder it will be for small affiliates to keep up, he says.

Boal of Coupons.com thinks the future is Web services and mobile. “We took our time with mobile,” he says. “We didn’t make it so difficult.” They waited until they figured out a way for everyone to use it instead of only customers with certain cell phone brands.

CMS’ Tilley outlines what keeps coupons hot. The face value of coupons has risen about 9 percent while product price inflation has risen only about 2 percent. Coupons that require multiple purchases are down, but their response rate is up. For nonfood products, shoppers are 30 percent more likely to use a buy-two coupon than a discount on a buy-one. For food, the buy-four is more popular than the discount on one item. And for both categories overall – food and nonfood – shoppers are 49 percent more inclined to use buy-four than a buy-three or a discount on one. And while coupons redeemed has slid from 3.9 billion coupons in 2001 to 3 billion in 2005, traditionally coupon redemption drops in a good economy.

What’s In Store?

The in-store coupon is also becoming very popular. About a third of redemptions now come from the in-store instant savings coupon or offer. Tilley says packaged goods marketers plan to migrate up to 20 percent of their coupon campaigns to online by the end of this year.

While some retail affiliates wouldn’t dream of dealing in coupons, some couponers like Allen simply think it’s harder to be a retail product affiliate. “General coupons are easier to deal with than many specific retail products,” he says. “Why essentially recreate the retailer’s website on your own? It’s not good for organic search and most affiliates don’t have the resources to do all the split tests and so forth needed to optimize product layouts for multiple retailers. Why compete with what they do best?”

Fabu.com’s Yack has a real simple and direct assessment. “We’ve been working on Fabu for nine months. I have ads in 180 newspapers; I have three publicists. A lot of these sites still look the same as if they came from the wayback machine. I built Fabu because times are changing ” and I’m getting paid for having a link on my site – how crazy is that?”

Out of Commission

How to Limit Commission Theft

  1. Find a trusted network and merchants. Ask other affiliates about their experiences with network partners, and if you are not being protected, take your business elsewhere. Likewise, if a merchant partner advertises via adware that is known to facilitate commission theft, you may be better off without them.
  2. Study your reports yourself for anomalies such as drops in conversion rates. Look at your server logs as well as network analytics to identify inconsistencies between the ratio of customers who appear to purchase and your commissions. If you are driving traffic but people suddenly aren’t buying, it may be a problem of theft.
  3. Test the software yourself. Even though isolating a computer and infecting it with suspicious software is a hassle, what you learn will be invaluable. Watching the activity when visitors come to you or your merchants’ websites will enable you to understand the scope of the problem.
  4. Educate yourself through affiliate marketing forums and the legal landscape. Affiliates and software experts are the best source of information available. While there is some misinformation, being well-versed in the issues is your best defense. Several court cases are pending that could decide the legality of overwriting commissions.
  5. Tell customers not to download software that you suspect is assisting commission theft. If the evidence convinces you that some free applications are harming your business, advise your current and potential customers not to use it.

We all operate to a great degree on trust. Whether you are an affiliate, advertiser, network or merchant, being able to succeed in business largely relies on others adhering to their written or implied agreements. We assume that most people will be honest and not interfere with our transactions.

“The overwhelming issue [in affiliate relationships] is about trust,” says Joseph Matheny, chief technical officer of advertising network AdValiant. But unfortunately that trust continues to be violated by some who capture commissions rightly due to others or take credit from a merchant that is not earned.

“There are those who haven’t bought into the rules of affiliate marketing,” Larry Adams, product manager for Performics, says. Subversive software, the anonymity of hiding behind affiliate IDs and sneaky scripting on websites make it easy to steal commissions and avoid detection. The potential to redirect commissions without fear of prosecution “provides a strong financial incentive not to follow the rules,” according to Adams, who says, “this is not a problem that is ever going to go away because there is economic opportunity.”

While there are reporting and auditing tools that can flag some of the most blatant attempts at padding commissions, dishonest affiliates can marginally enhance their earnings from their partners with little fear of detection or repercussions. Scott Jangro, president of marketing services company MechMedia, estimates that loss of commissions due to theft is “in the single digits” and “part of doing business that you should expect.”

Not-So-Grand Larceny

Commission theft generally falls into two categories: when tracking mechanisms meant to follow visitors from an affiliate or advertiser to a merchant are ignored or overwritten, or when someone claims a commission from a merchant for a transaction that they did not initiate. Unethical affiliates can stealthily overwrite competitors’ cookies during visits to their sites, or they can “advertise” with companies that disrupt the buying process by launching pop-up windows that falsely create commissions by erasing the true referring ID.

Like its brother nemesis click fraud, commission stealing has existed since before the Web was dynamic and will likely always plague online marketing. In 2002, networks Commission Junction, Be Free (which was subsequently acquired by CJ) and Performics agreed to address the problem by creating a code of conduct for affiliates to follow. LinkShare developed it’s own formal code of conduct.

CJ and Performics agreed that affiliates should insert a text identifier known as “afsrc=1” in their query strings to identify themselves to merchants and publishers. Affiliates and software developers should look for that string and back off from attempts to claim their own fees.

Performics’ Adams says employing afsrc=1 “will protect against software used by a lot of marketers who play by the rules,” and distribute applications that respond accordingly when they detect the code. The affiliate code of conduct has been revised twice since its inception, and Adams still advises new affiliates to implement the afsrc=1 code.

Implementing the afsrc=1 code “protects from a narrow class of programs” such as consumer rebate software like Upromise or eBates that follow the rules, according to attorney and adware/spyware expert Ben Edelman. But many adware companies do not conduct themselves along these guidelines, according to Edelman. Affiliates rely on the networks and each other for policing with “some affiliates paying bounties to those who turn in others,” he says.

The afsrc=1 parameter and affiliate code of conduct is not enforced consistently and “gave too much wiggle room to the networks,” according to Kellie Stevens, president of Affiliate Fair Play. Stevens, whose company provides affiliate consulting services, says “afsrc=1 is now a moot point,” because it is not uniformly implemented and is ignored by adware applications. “Many affiliates have no idea [about afsrc=1] and don’t know they are supposed to be using it,” according to Stevens.

Adware from companies such as Zango (formerly known as 180solutions) and DirectRevenue enable their advertisers, who are affiliates or merchants, to insert pop-up windows that can interrupt the buying process and cancel commissions from other affiliates and/or create commissions for themselves. These applications, which consumers download in order to receive free software, music or videos, have led to several lawsuits (some of which were dismissed) claiming unfair business practices. Zango recently settled a case with the FTC over charges of deceptive practices with consumers and paid a $3 million fine, but did not admit guilt.

Dave Methvin, software expert and chief technology officer of PCPitstop.com, began studying how Zango’s software works because customers who had their PCs scanned at his website were emailing him about problems browsing the Web. “It became a crusade because so many of our users had infected computers,” he says.

Methvin installed the Zango software and watched as his visit to a Verizon website was interrupted by a pop-up window that created a commission for an affiliate whose site he had never visited. “When I started the transaction, Verizon wouldn’t have owed anyone a commission,” he says.

“Clearly there are unfair things going on,” says Methvin, who likened Zango’s enabling of partners to interfere with affiliate relationships to someone who provides a criminal with a gun and bullets but doesn’t want to be held accountable when it is used in a crime.

Zango’s software looks for keywords contained on a website or for specific URLs, and when found, launches a Web page or pages from affiliate websites in pop-up windows that have been observed to generate as well as overwrite commissions.

Zango director of public relations Steve Stratz says his company’s software does not itself overwrite cookies or otherwise subvert affiliate commissions. However, Stratz confirmed that Zango’s terms and conditions with its advertisers does not prevent them from altering cookies or creating pop-up windows that interfere with transactions, and he has no intention of asking them not to. Stratz says Zango sells to its advertisers all of the URLs and keywords that are used by its clients to open up pop-ups, including pages that open up only when someone visits a merchant’s shopping cart. Zango’s software will load pop-ups when a trademarked product names appears on a page.

“For us to regulate the world of cookies and the various and sundry ways that they are used goes beyond the scope of our mission as a company,” says Stratz. He says if companies want to protect their home pages or trademarks from pop-ups, they can always outbid their competitors. “We don’t apologize for the aggressive nature of our ad network,” Stratz says, adding that 200,000 people willingly download Zango software each day.

(For more on Zango, see the Affiliate’s Corner column on page 94.)

Network Protection

Technology does not exist that can prevent cookies or affiliate links from being ignored or to proactively defend against commission theft, according to attorney Edelman. It is impossible to prevent cookies from being overwritten, although consumers can protect their computers by installing applications that detect adware or spyware.

Since there is no panacea for protecting commissions, affiliates should employ the strategies for limiting loss, which foremost requires carefully selecting and working with your network partner.

The primary responsibility for monitoring commission theft lays with the networks, according to Steve Sauve, chief technical officer of network MaxBounty. “The merchant is paying a network for a service, and it is our responsibility to do quality control,” he says.

Sauve says that on average his company terminates two to three affiliates per month for commission stealing. In his experience defrauding merchants is a bigger problem than affiliates stealing from one another. “You need to actively monitor the network and watch to see where the traffic comes from,” he says. If an affiliate’s commission is out of alignment with the historical conversion rates, Sauve says the network should investigate.

Performics’ Adams says networks need to be proactive to make certain that affiliates aren’t participating with adware software vendors. “One of the most transparent things is anomalous performance. If they’ve been in a network for a while without showing results, then jump up to the top 20,” then something is likely amiss, he says. Performics tracks daily and trailing averages, and has a network performance group to monitor how affiliates drive traffic. “Looking at geography [of the initiating IP address] is also a good clue [for identifying bogus commissions], as illicit activity is often offshore,” according to Adams.

If affiliate reports show an unwarranted boost in performance, or if another affiliate has suspicions, Performics undertakes a remediation process to determine if the affiliate should be bounced from the network.

Affiliate Fair Play’s Stevens says if an affiliate isn’t getting enough support from the network in battling lost commissions, then it is time to shop around. However, larger affiliates “have to participate with the big networks because they need big brands to draw the traffic.” She says that networks need to be more candid in instructing new affiliates about the occurrence of commission theft and more closely monitor the commission-reporting process.

Merchants should aid affiliates by terminating relationships with those who are known to steal commissions, according to Stevens, but they are constrained by a lack of information. She says that if a dishonest affiliate is part of a large network, it may be hard to identify that specific affiliate, and so the merchant would be forced to terminate the entire network; a difficult decision if the network overall is performing well. Merchants sometimes make side deals with known cheats because of the revenue they generate, Stevens says.

Networks such as ShareASale are drawing affiliates by being selective about the companies that they choose to do business with and promoting their “clean” affiliate relationships, according to Stevens.

Selectivity

According to AdValiant’s Matheny, networks could eliminate 50 percent of the lost commissions by caring for their affiliates properly. His company is developing MediaTrust, a custom link-generation technology that would make it more difficult for software to circumvent the referral process.

Matheny, who has a background in Internet security, says that the system is similar to a public and private key system used in encryption software where each side (in this case the affiliate and the network) holds part of the information necessary to complete a transaction. The software, which is due in the first quarter of 2007, would make it more difficult for an application to fake a referral transaction.

The best method for understanding if, or how, commissions are being stolen is for an affiliate to set up a test computer and install any suspicious software, according to Performics’ Adams. He recommends you visit your site and your merchants’ sites with the “infected” computer and watch for deceptive behaviors.

Since the networks have offered little details about commission theft, affiliates should search forums and message boards for links to investigations of adware by software experts. “There is not a lot of centralized factual information,” advises Edelman, who says affiliate forums are the best places to start.

Affiliate Fair Play’s Stevens says that lack of a concerted voice among those in the industry is hindering the fight against commission stealing. More sharing of information between networks would deter affiliates from bad behaviors because they wouldn’t find it so easy to hop from partner to partner, she says.

AdValiant’s Matheny says he recently spoke with a competitor about starting a consortium for sharing information and establishing industry standards. Presenting a unified front amongst competitors would have a psychological effect, according to Matheny, if commission thieves believe that “we won’t let you get away with it.”

Affiliates who take undeserved commissions “should be flagged,” by those in the industry, Matheny says. MaxBounty’s Sauve says his company would volunteer data about affiliates to a group effort, “but there would be a danger of false positives.”

Sharing too much information would reveal how commission thieves are tracked and bad affiliates could use the knowledge to avoid detection, according to Performics’ Adams. His company prefers handling issues with clients privately to establishing a blacklist of affiliates who have cheated. “We wouldn’t want to throw them under the bus.”

JOHN GARTNER is a Portland, OR-based freelance writer who contributes to Wired News, Inc., MarketingShift, and is the Editor of Matter-mag.com.

Guiding Lightly: Q & A with Anne Holland

Anne Holland is the president of MarketingSherpa, which aims to help marketers advance by sharing real-world marketing data and hard-won lessons. The Rhode Island-based company publishes a wide range of metrics guides, buyer’s guides and how-to reports, as well as a 500+ case study library. Prior to founding MarketingSherpa in 2000, Holland spent 20 years in publishing. She also served as the head of marketing for Phillips Business Media – a $100 million publishing company where she helped launch one of the world’s first profitable subscription sites in 1995 – and the trade publications Interactive Marketing News in 1994 and min’s New Media in 1995. Started in Holland’s spare bedroom, MarketingSherpa was recently acquired by marketing research firm MEC Labs out of Atlantic Beach, Florida. Revenue Senior Editor Eric Reyes asked Holland about her company’s role in moving marketing forward and what lies ahead for the performance marketing space.

Eric Reyes: What was the genesis of the MarketingSherpa idea? How did you perceive the need?

Anne Holland: Before I led MarketingSherpa I was a marketer myself, so I had a pretty good gut-level understanding of what marketers needed that wasn’t being provided by research firms or publications. However, that doesn’t mean I trusted my gut! Instead I toured the U.S. and U.K. for about six months, asking marketers themselves what information they really needed to do their jobs more easily and/or with better results. The final company – MarketingSherpa – was built directly from those suggestions. Turns out our target audience wanted lots of case studies, benchmark data, creative samples and how-to instruction at a practical yet advanced level. So that’s what we provide. We still tour regularly as well as surveying and talking directly with customers weekly to keep on track.

ER: Can you outline your inventory of content – how much is available and how has it grown?

AH: There’s a lot! Basically it breaks down into three areas – all of which are created by research and reporting teams in-house here (we don’t accept contributed content).

  • Case studies and how-to articles – based on hour-long interviews with actual marketers. We delve into what worked, what didn’t, what the data was and include creative samples. We’ve got a library of thousands of these, searchable by tactic and by company/brand name. They’re all exclusive.
  • Benchmark guides, buyer’s guides and tactical handbooks – based on research into what’s working for real-life marketers. We survey tens of thousands of marketers every year, and profile hundreds of consultants and vendors. These 200- plus-page reports come in PDF for instant question answering, and we also ship a printed-and-bound copy to every customer for easy reference.
  • Summits – every year we hold three big summits for marketers: in New York, San Francisco, Boston and a fourth city (next year it’s Miami). The topics include email marketing, selling subscriptions to Internet content and B-to-B demand generation. Naturally our summits feature loads of peer-presented case studies and new data.

ER: Now that MarketingSherpa has been acquired, what will change for you and the company?

AH: Pretty much since day one, there have always been a lot of people who wanted to buy us out or invest in us. I held out for seven years because I wanted our growth to be driven by our readers’ needs, not some board of investors. Every six months I take a few days to step back and review the progress and future of the company. When I did that this past June, I realized it had gotten too big for me to handle alone anymore. It’s a common fate for an entrepreneurial- driven company. You grow it as big as you can and then you hit the ceiling of your own desires and abilities. I wasn’t born to administer this fast-growing multi-million-dollar organization. I was born to research, write and keep in touch with the needs of the readership.

So that’s when I started looking for a new corporate parent for Sherpa. The goal was to find someone who would understand and appreciate our readers and our mission, plus appreciate the great team of employees and researchers we’ve built – not just someone who would wave a bunch of cash at me. By finding the right buyer, in effect I was hiring Sherpa’s new boss. Several organizations were in the running – after carefully interviewing several of them, I chose MEC Labs based on fit.

They are a research firm that partners with folks such as The New York Times to conduct experiments on live campaigns to discover what works (and what doesn’t) in marketing. We are a research firm that partners with our 237,000 readers via surveys and studies to discover what works in marketing. Culturally the fit works too. We are all fairly intense, hardworking people who also like the ocean. Their headquarters are on the beach in Florida. Our headquarters are about a block from the beach in Rhode Island.

MarketingSherpa won’t change much – aside from continuing to grow and serve our readership even better. We’ll just have even stronger corporate leadership to allow us to reach bigger goals and do some pretty amazing research projects. On the personal side, I’ll still be here. Only instead of being stuck in meetings with accounting, HR and IT, I’ll get to focus all my time on the things I really love – research, writing and the art of marketing. And, maybe a little more time to walk on the beach.

ER: What are some of the most important goals you have for MarketingSherpa next in the 12 to 15 months?

AH: Keep her on a steady, focused course. It’s easy to get overwhelmed with expansion opportunities, or to let success go to your head so you do crazy things, launch big new ideas that don’t hold to your core business. I’m an idea person, so it’s probably toughest for me. But our big idea is No New Ideas.

Aside from that, you’ll see several launches that have been enormously researched and several years in the making, the biggest of which is our upcoming membership site launch. At the base, it simply means instead of paying $5 to $9 per article every time you want to read something, you can pay one flat annual fee. Convenience is a wonderful thing. There are also some new features – but the dev team will shoot me if I talk too soon. Watch for December-January and you’ll begin to see.

ER: Are there industry segments that MarketingSherpa is not currently focusing on but would love to get into, and why?

AH: We set our course for a very specific marketplace from day one, and it’s a darned big one that will take us many more years to serve completely. Our chosen marketplace is marketing professionals (including advertising, PR and online) in corporate America at the manager to VP level. That’s about 140,000 marketers. We also serve the consultants, agencies and vendors who serve marketers. That’s about 10,000 folks. So it’s a total market of 150,000.

ER: How much effort is dedicated to the affiliate marketing space by MarketingSherpa ? And the performance marketing space? And do you see that changing in the future?

AH: We cover affiliate and performance marketing from the point of view of the merchant or brand-side marketer. That’s who our reader is. Although many affiliates also read us, they aren’t our target audience. So, for example, the affiliate marketing team at eBay reads Sherpa, but most of their affiliates probably don’t ” and that’s fine with us.

Our coverage in the spaces is decided by the input of our readers – they tell us what they want us to focus our research on and that’s where we go. I personally would like to cover affiliate marketing a bit more than we do, but for many of the merchant-side marketers, it’s just not all that critical to their jobs.

Often an e-commerce or lead generation site will have one marketer who is responsible both for affiliate and also managing SEM. That’s crazy – too much work for anyone to do well. But that’s the way it is. We try to educate marketers via our annual Affiliate Marketing Special (now in its fourth year) every January and other studies such as our Ecommerce Benchmark Guide. Many, however, many, especially in consumer software marketing online, are not there heavily yet, if at all.

ER: What are the next two or three things you think will turn Internet marketing on its ear?

AH: Frankly, I don’t see much changing over the long haul with the exception of a lot more mobile activity in the U.S. (at long, long last) and of course video, video, video. I’m sure what we’re going to see next is a lot of “shovelware” video [sticking your TV ad online], badly measured corporate podcasts and way too many text-voting entertainment campaigns.

If mainstream off-line marketers – the giant retail chains and consumer packaged goods firms – could easily measure Internet activity against their off-line sales, then you would see the world change. The biggies still spend single digits online. Bear in mind, all of SEM spending for this year is less than everything spent on promotional products such as embossed pens and T-shirts given out as marcom. We who research Internet quite a bit tend to forget how incredibly small the spend still is compared with other vehicles.

In the meantime, the real focus that every marketer should be spending their time and money on is not what’s new, but rather, how to make the old stuff work better. Our data show that if you just improve the copywriting on your site a tiny bit, your conversions leap up. Copywriting! That’s as old-fashioned a tactic as you can get. True success is about testing the basics.

ER: You do a lot of public speaking gigs and you also conduct many of the interviews for case studies. Is there one facet of your job you prefer, and why?

AH: My job has really evolved as the company has grown over the past seven years. Research is now run by our research director Stefan Tornquist and his team, while editorial is run by editorial director Tad Clarke and his team. We also have teams running summits and memberships. These days I’m doing less research and writing myself and far more leadership. So I get to attend departmental meetings and guide the company as a whole. I miss the old days when I was chief cook and bottle washer ” but now we have so much more capacity to serve our customers’ needs. So that’s a delightful thing.

Now my favorite things are speaking about new research studies (it’s so fun to say, “Hey, here’s info marketers are yearning to know – let’s go get it!”); speaking at shows, especially when I get to meet readers who have ideas about research studies or stories we should cover (many of our best case studies come from me meeting folks on the road); and once a week personally conducting a marketer-side interview for a story I or one of our reporting staff might write.

ER: During many of your talks you give real-life Internet shopping examples of good and bad things that you’ve encountered. How many of those incidents spark research on that topic?

AH: Actually events often spark our research because attendees will ask great questions… . Those questions drive the research. I’m way, way, way too close to the research we’ve done and the marketing world to know what marketers really want to know.

When you’ve studied something intensively for years, you’re the wrong person to come up with new ideas for studies. You’ll end up in esoteric or newfangled places that your audience couldn’t care less about. One of our biggest stories – in terms of readership and reader feedback – last year was research we’d done in partnership with CNET’s B-to-B Network on what white paper titles got downloaded the most. I thought it would be [just] an OK article, but my God, it hit a huge nerve: floods of thank-you email letters from our readers in the B-to-B space.

So, you have to let your readers tell you what’s hot and what’s not. Don’t ask your editor or newsletter writer. I’m shocked that so few email newsletters do reader surveys asking about content. They all need to.

ER: What are some of the benchmarks for maintaining the quality of MarketingSherpa research and other content?

AH: We never publish data that doesn’t have enough evidence behind it to be statistically reliable. That drives me nuts about other studies (including the DMAs). They’ll survey 10 people and then call it a “study” and make a big stink about findings. We don’t publish charts if the data has to be sliced “too thin” to get a number.

We know that many readers are using us for their budgeting, forecasting and to sell their marketing plan to their CEO. We don’t want to feed them misinformation or slanted data and mess that up.

Unlike most of our competitors, we do not publish third-party content. We don’t solicit editorial from vendors or consultants or anyone else. Our editorial is researched and created in-house. That’s a lot more expensive, but it’s worth it.

On the research benchmark side, we do create partnered studies with some folks where we survey the marketplace or examine results stats we could not do alone. We also gather best-of research from some third-party sources to fill in holes and provide perspective. But we’re not like eMarketer where 100 percent of the data is compiled from other people (they do zero primary research). With us, it’s about 20 percent.

That combination of our data plus partnered studies plus best-of-third-party data is a killer combo. You get everything in one place. It’s all about convenience.

Sometimes people question our data – for example, recently several SEO experts questioned whether our data on the industry slowdown was based in reality because, from their personal perspective, business was booming. Thing is, we had data out the wazoo – data from more than 3,000 client-side marketers, from 104 top SEO firms and from third-party studies. We had more data than anyone on the planet on search marketing. From our perspective, the industry was slowing like crazy and I was able to defend that very easily.

ER: MarketingSherpa covers so many areas of online marketing. Do you consider yourself an expert in any one area of marketing?

AH: I suppose my main personal areas of expertise would be e-commerce, lead generation landing pages and email marketing. I’ve personally been involved with research we’ve conducted in all three and met many, many of the marketers themselves in these fields. I’ve also been heavily involved in our SEM research and coverage over the years, but I think SEM is something that you really cannot be expert in unless you’ve rolled up your sleeves and you do it every day yourself. I don’t. Few of the press covering SEM have.

ER: What is the next logical evolution beyond paid online content?

AH: I am so psyched about buying TV episodes online! In a past job, I was the marketer for a paid subscription [print] newsletter called Interactive Video News. Back then in the early ’90s we were all talking about 500 channels and pay-per-view cable where you’d be able to view anything on demand. Well I have on demand at home on my cable now, but it’s a very clunky interface. However, our research director Stefan Tornquist brags he doesn’t own a TV at all ” he just buys and downloads anything he wants to watch from the Internet.

Mainstream TV networks are now cross-promoting new shows by running them on cable for a few episodes to get the word out. Broadcast TV is, in effect, now just a marketing vehicle for content that’s paid for with some ads. I buy the TV episodes directly by episode online now. Love it to death. That plus buying music song by song for iPods, and the huge long tail of that, is very exciting. Media consumption is changing hugely in the way purchasing changed in the past five years due to search engines for research and ecommerce.