Double Down: Q & A with William Cooper

As the CEO of TradeDoubler – a Swedish performance network with a vast European presence – William Cooper has his eye on global expansion. TradeDoubler, with its local offices in 15 countries across Europe, is known as the biggest affiliate marketing network in the U.K. Cooper was appointed president and CEO in March of 2007, riding a wave of first-quarter revenue for 2007, up 30 percent. Previously, Cooper, a six-year veteran of TradeDoubler, was COO of the company for a year. Before that, he oversaw the company’s U.K. operations. Currently, TradeDoubler claims a network of more than 100,000 website publishers and has more than 1,000 advertisers across Europe, including a mix of local and international companies such as Apple Store, Dell, TeliaSonera, eBay and Kelkoo. Revenue Senior Editor Eric Reyes asked Cooper about affiliate marketing in Europe and the rise of globalization in an ever-shrinking business world.

ERIC REYES: Since the Sweden-based parent company seemed to launch its affiliate network almost simultaneously across Europe in 2000, was affiliate marketing considered a risky business back then?

WILLIAM COOPER: It was risky from the perspective that it was untried and untested across Europe; it was a concept that was almost completely unheard of. However, it had clearly gained some notable success in the U.S., and this gave us the confidence to succeed in Europe.

ER: Compare the opportunities and volume of affiliate marketing in the U.K. with its popularity in the U.S.

WC: I think it would be foolish of me to think that I knew enough about the market in the U.S. to make a direct comparison. However, with regard to the U.K. it is a very competitive market, and affiliate marketing is generally perceived as one of the most valuable digital marketing channels, and definitely the most cost efficient. It is held in high regard by the majority of e-commerce players.

ER: Do you run a network in Europe differently than you would in the U.S.?

WC: There are many more complexities to running an affiliate network in Europe compared to the U.S. In Europe we have to deal with different languages, cultures, tax regulations, currencies and constantly changing rates of Internet, e-commerce and broadband penetration. All this means that the need for local people in all the markets in which we operate is essential.

ER: Tell us a little about the growth of TradeDoubler UK. Have you been surprised by the interest in the affiliate space in the U.K.?

WC: No, we haven’t been surprised. We believe that we have been part of the process of raising the level of awareness and the importance in this channel. We have positioned it as “premium” channel and not a mere commodity. Affiliate marketing, if performed correctly, can be a dominant driver of e-commerce for any advertiser, so it is right that it is so well-respected.

ER: As affiliate networks become more international, are you seeing competition from U.S. firms such as Commission Junction or LinkShare, and what are you doing to keep your lead?

WC: Commission Junction has always been present in the U.K. market since we have been here. They are a very good competitor and we hold them in high regard. At present we don’t see the presence of Link- Share in our markets to any great degree but they are clearly a ver y knowledgeable and successful player outside of Europe, so it will be interesting to see how they try to gain market share in this already- competitive market.

ER: Is TradeDoubler planning to enter the U.S. market, and what would the challenges be?

WC: There are no plans at this stage.

ER: What are the regulatory and legal challenges of setting up networks in so many different European countries?

WC: There are numerous regulatory and legal challenges of setting up in all these markets. I will not make it easier for our competition by naming them!

ER: Would you consider TradeDoubler more publisher-focused than your U.S. counterparts? Why is that better?

WC: It is too difficult for us to sense that. I believe that we are more publisher-focused than most of our competitors and I believe that this is one reason for our success.

ER: Are there U.S. competitors entering your market that give you cause for concern, and why or why not?

WC: At the moment they do not give us concern, as it is a very competitive market. I just hope that players entering this market respect where we have tried to position the product since 2000. This is not just a technology play; there is much greater value that we can add as network operators to ensure an affiliate program fulfills its potential and reaches the expectations of the advertisers.

ER: What are the concerns of your U.K. merchants? Do they worry about the same things U.S. merchants fret about – trademark bidding, brand management, quality affiliates, etc.?

WC: I think they all worry about very similar types of issues. I would like to think that TradeDoubler is very proactive in trying to address these concerns, many of which can be easily managed.

ER: Are there plans to enter the Asian and Indian markets?

WC: There are no specific plans at this stage.

ER: Do your U.K. affiliates do business outside of Europe, such as with America or China? What percentage? Is it encouraged or are there stumbling blocks?

WC: Some of our U.K. affiliates work outside the U.K. and in our other European networks. We actively encourage it and there are some great revenue opportunities for them in these emerging markets. We help them address any legal issues that they might face, but in general it is an easy process for publishers wanting to work in multiple markets.

ER: Do you think specializing in certain vertical markets in the U.S. would benefit a European network?

WC: There are various ways to approach a mature market like the U.S., and becoming a vertical specialist is definitely one of them. However, the ultimate aim for any network should be to cover as many sectors as possible. This is driven by the fact that we all have interests covering many different sectors, and therefore a publisher that can deliver good results in consumer electronics can also deliver effectively across other sectors as well.

ER: Is there special technology TradeDoubler uses to track and monitor transactions and affiliates? Does technology play a role in serving geographically specific content?

WC: We developed our own proprietary technology back in 1999 and we constantly update and refine that technology. We have separate affiliate networks in all the 18 markets in which we operate; therefore, we don’t need to rely only on technology to target a specific region.

ER: What qualities make up a really good publisher?

WC: A strong publisher in the affiliate world must have a well-defined target audience, i.e., one that is interested in a particular market sector such as travel or financial services. This is why credit card comparison sites, for instance, work well. The audience is visiting with a specific aim in mind and the site is fulfilling their expectations. A loyal user base is also essential – publishers will earn more if they don’t have to buy all of their traffic. They must also have good content to allow them to feature highly in the natural search rankings. The site owner obviously has to be Web-savvy, knowing what links will work well in what place, what affiliate links work better in some places than others and they should complement rather than compete with other advertising that they’re running. The best publishers have open minds and strong ideas of what they’re looking to achieve.

ER: What qualities make up a really good merchant?

WC: A good merchant is prepared to invest time and resources into their affiliate program. As well as ensuring that their website is functioning well with a clear customer journey and reasonable conversion rate before launching a program, there are many factors which will help to ensure that their program does well. A good merchant is committed to building longterm relationships and trust with publishers. They communicate regularly with their publishers to keep them informed about all upcoming activity and will often communicate directly with top performers. They will set commission rates at the right level to ensure publishers are incentivized to promote their program while still ensuring they receive cost-effective returns. They regularly update creative and ensure that it is engaging and sales-focused. They respect their publishers and pay them on time!

ER: While online gambling is a big no-no in the U.S., gambling sites in the U.K. are OK. What types of sites do TradeDoubler frown on and why?

WC: TradeDoubler does not work with any sites featuring dubious content such as violence or pornography.

ER: Are there any new ways to monetize performance marketing?

WC: One example of how the model has adapted in response to advertiser and publisher demands is demonstrated through the pay-per-call concept. At TradeDoubler we have developed a pay-per-call product called td Talk, which enables companies to advertise more complex products online, which may require a telephone conversation to complete the sale (insurance products for example), and pay for the telephone calls that are generated. This model is also appealing to smaller companies that may not have a website of their own but want the opportunity to use the reach of the Internet to market their products or services. On the publisher side, they can ensure that they receive commissions for calls that were generated as a result of advertising on their site.

ER: AOL’s recent attempt to buy TradeDoubler’s Swedish parent failed. Is this good for TradeDoubler UK or bad?

WC: This does not impact on the performance of TradeDoubler UK in any way.

Harrison Gevirtz: The Yearling

This sounds like any hard worker in the performance marketing space, you think. The only difference is that Gevirtz is a freshman. No, he is not a freshman in college, not the next Shawn Fanning (of Napster fame) working out of a dorm room. Gevirtz is a freshman in high school – a 15- year-old wunderkind.

Gevirtz first got exposed to the world of online commerce by selling diamonds and stamps through eBay auctions and Overstock Auctions when he was 12 years old. Mostly he sold items in the hundred-dollar range but once he sold a $4,000 diamond. The experiences were exhilarating but he was not so thrilled with the shipping process – packing material filled his bedroom and the every-other-day trips to the post office were a drag.

Next, Gevirtz built a MySpace help site through a turnkey solution that cost him $12 on the Digital Points forum. He promoted the site through “basic marketing initiatives like directory submissions” and uploaded ads and also created ads that were his own but looked like AdSense ones.

He says it was his “first gallop into affiliate marketing” and he began to bring in some bucks. But because Gevirtz was on a “crummy ad network” he was getting 1/10 of a click and giving them thousands of clicks for $50-60 a day. “It was terrible but I did not know any better.”

His interest now piqued, Gevirtz started another resource site that provides code generators like profile tracker and layout generators for users to put graphics on their MySpace pages. He moved to Yahoo Publisher Networks and the ValueClick Networks and started to make a lot more money.

By July and August of 2006, Gevirtz was looking into ways that he could make money off of CPA instead of CPC because he prefers the feeling of fulfilling an acquisition – he doesn’t like taking money for a click. Gevirtz says that he once was accused of clicking on his own ads and notes that “you can’t be held liable for click fraud if you are doing CPA stuff.”

Although he does not want to reveal the specifics, Gevirtz says that nowadays he runs a few interactive websites, including graphic sites, which have thousands of pages of content, and says he specializes in things that target a younger audience. Because he is a teen, he knows what teens find appealing, such as ringtones and clothes.

He makes most of his income from CPA nowadays and he focuses on landing pages, noting that in a few years, “landing pages might be on phones.” He says he makes money with paid search and would like to leverage mailing lists to promote offers but acknowledges, “There are so many people like that already.”

Last summer, Gevirtz hired developers to work on his next big project, the details of which he is keeping under wraps. He says the site is based on the idea that “content is king” and it will be focused on getting users to create the content. He hopes to have the main version of the site done by this summer. He has a company with 38 employees in India working on it – a company he found “after hours and hours of Googling.”

Gevirtz’s experience with outsourcing work to a company in India has been very positive – he describes these Indian workers as the most trustworthy people that he has ever worked with – he continually is impressed by their eagerness and how hard they labor to get a job done correctly. He feels good about working with them – not just because they are “respectful and honorable” – but because he literally is “helping them eat.” No doubt there have been “minor problems with the language barrier” but they work through it – by communicating both on the phone and through instant messenger.

Gevirtz blogs at his site, CPAShare.com, which he started this past January, but acknowledges that he struggles to come up with topics. He says that one of his goals is to get a user base going and to get a site where other people are blogging so that he can have mixed opinions – “it would be a portal for e-marketers.” He would like to drive more traffic to his site and in fact, entitles one of his blog entries “Nobody Reads This F—ing Thing.”

A Day in the Life

Not surprisingly, Gevirtz lives at home with his family, in Santa Barbara. He has an older sister, Eloise, who is 22; a little brother, Harland, who’s 10; and a 3-year-old sister name Madeline. His California-born father is in finance and his French-born mother is a part-time yoga teacher and full-time mom.

A typical day starts with Gevirtz “waking up 20 minutes later than he should” – he has to get to school by 8:00 a.m. and his mom takes him on the 20-minute drive. His first class is science, followed by a class entitled “careers,” then a graphic design class, followed by English. He breaks for lunch, and then it’s on to math and the last class of the day, which is “stagecraft.” School ends at 2:49 p.m. – “not that [he is] watching the clock,” he jokes.

He says he does “pretty well” in school, noting that he doesn’t skip class. He says he can’t help but feel like he is rotting away and wasting time during the school day because he would rather be uploading his sites, emailing with affiliate managers or working on some aspect of his business. He says he has a pretty good relationship with most of his teachers, although his math teacher does not like the fact that he text-messages in class.

At school, Gevirtz tries to keep his business endeavors on the down-low – he believes his teachers would get irritated and suspicious if they found out about his online dealings. He recalls a time when teachers were annoyed that a student was selling shirts online and attributes their irritation to two reasons: 1) teachers think there could be a shady aspect to it, like drugs, and 2) the kid was making approximately $50,000 a year and Gevirtz thinks that’s possibly more than the teachers were making and that could rub them the wrong way.

Gevirtz jokes that his favorite class “aside from lunch,” is graphic design, which allows him to get a little bit of work done because he can check email. Recently his parents “flipped a lid” when he told them he was getting a ‘B’ in his graphic design class. They thought he should get an ‘A’ because that’s what he does for a living. He says the class doesn’t really help him because they teach Dreamweaver and he doesn’t use an application to build his sites – he writes code by hand.

He likes math, because he does well in it, and likes the writing and the vocabulary part (it’s easy to memorize) of English class, but he does not like all of the required reading. Even the class’ current read, Lord of the Flies, doesn’t appeal to him. He “hates” science, dismisses stagecraft as “a joke” and does not have a very high opinion of his career class, which is designed to expose students to a variety of future occupations. This type of class is probably the last thing Gevirtz needs; he seems to have a clear understanding of what he will do next.

When he gets home from school around 3:30, Gevirtz sometimes works until midnight or later and says he gets most of his schoolwork done during classes. Gevirtz doesn’t sound that interested in spending a lot of time at the beach (the Pacific Ocean is cold, he explains) or engaging in sports, although he does like to watch college football and root for his father’s alma mater, the USC Trojans. But he says he is not missing out on his teen years – he goes out with his friends and does all the normal things that high school students do – especially now that he has a Treo that makes him mobile.

Kidding Around

His mother tells him that when he was 3 or 4 years old, he was playing around on his family’s Macintosh and broke it. The repairman told his mother that her son had somehow tried to access the hard drive and did some serious damage to the $2,000 machine. “After that, I was banned from the family computer for awhile,” he laments.

Gevirtz says he always liked computers – he knew how to save something on the hard drive by the time he was in first grade. He says they teach kids how to type in third grade and he was recognized by his eighth grade class to be the fastest typist – approximately 100 words per minute.

Gevirtz seems to be a natural born entrepreneur and exhibited the opportunistic traits at an early age. When he was in sixth grade, he had a teacher whose friend had a supply of plastic wristbands. Gevirtz agreed to buy them from him for 50 cents each and then sold them to “drunken college kids” for $2. He says he made enough of a profit for souvenir money for his trip to France that summer.

Learning the Business

Gevirtz says that he learns the business by communicating with his affiliate managers, emailing and instant messaging with industry folks whom he meets online and keeps in touch with by talking on the phone. He keeps up with the industry from reading other people’s blogs, like Shawn Collins’ and Jeremy Schoemaker’s ShoeMoney and laments that he does not have the time to read “the thousands of blogs on Technorati.” He also learns from listening to the Affiliate Thing and other WebmasterRadio Shows and “pestering people at Ad:Tech.” He plans to go to more shows in the future because he “likes to be connected” and says that he has a mountain of business cards that he goes through when he needs “to meet new advertisers and stuff like that.”

One observation that Gevirtz has about the industry is that there are a lot of click fraud companies out there “which is kind of sad that the world has come to that.” He says that there is an overabundance of affiliate networks and says some of the networks just piggyback off of other ones – which is bad because it makes it difficult to find a direct offer.

Gevirtz says that his parents are OK with his online endeavors despite not really understanding what he was doing until fairly recently. In April, Gevirtz and his father attended Ad:Tech in San Francisco and one of the affiliate managers from NeverblueAds took the time to explain to him how the system worked and how they worked together.

He says that for the most part, being 15 has not been a disadvantage in the industry. He thinks that people have helped him a bit because of his age and that he should use that wisely because he “only has three years left.” He has had a problem with one affiliate network for not being 18 but he would rather not use them than get his parents involved, saying that he wants to keep things separate from his parents because “there are liabilities even if you are not doing anything wrong.”

Setting Goals

Gevirtz has lots of aspirations – one of which is to continue to make money. He enjoys the fruits of his labor; he owns lots of gadgets – including a $3,000 laptop and several servers – is putting his money into a savings account, buys airline tickets (which he says are expensive from Santa Barbara) and treats himself to sushi.

His short-term goal is to buy a BMW m6 10- cylinder vehicle and his longer-term one is to be the next powerhouse. “Google’s becoming a beast; I want to be the beast,” he jokes. He doesn’t feel the need to go to college and would like to continue what he is doing but increase the volume – saying he’d like to “add a couple of zeros” to what he brings in on a monthly basis.

He is ambivalent about wanting to go to college and says he has to be careful about what he says about this issue because his parents are going to read the article and says he likes to tease his parents that he is going to drop out of high school.

Despite his success and business acumen, it’s clear that Gevirtz is not an adult trapped in a teen body – or any of the other Doogie Howser cliches that are used when talking about mature teenagers. Gevirtz is definitely a teenager who complains about having to take the trash out and walking his dog – a task he sometimes outsources to his brother by paying him $10. Given his drive and ingenuity, it will be interesting to see what Gevirtz does next – that is, when he is a high school sophomore.

Sweet Charity

If you think getting people to shop online is tough, consider the plight of nonprofit organizations. They ask people for their time and/or money, but instead of receiving goods, these donors simply get the satisfaction of doing good.

Although nonprofit organizations may have a different agenda from the for-profit online marketers, many of the goals (building relationships, income, brand awareness, etc.) are the same.

During the early part of the Internet era, many charitable organizations limited their Web activities to maintaining a website that accepted donations and member registrations, but over the past few years these groups have expanded to leverage many of the leading marketing tools.

Donations to nonprofit organizations are growing but remain only a small part of overall giving. Online donations in the U.S. doubled between 2003 and 2005 to $4.5 billion, but that is just 1.7 percent of the $260 billion in total donations, according to the GivingUSA Foundation.

Most people prefer to give off-line, so organizations establish different objectives for online activities and combine their direct marketing initiatives. In addition to getting people to donate, nonprofit online marketing goals also include increasing membership, encouraging activism, making resources available to those in need, issue awareness, building community and promoting word of mouth marketing. However, nonprofits typically operate under tight budgets where success is measured in lives affected and their experiences can offer useful lessons to all marketers.

Tools of the Trade

Employing search engine marketing and banner ads may be critical for many businesses, but nonprofits are selective if they choose to participate at all. Todd Whitley, vice president of e-marketing for the Leukemia & Lymphoma Society, is a proponent of SEM and display ads if the right audience segment is targeted. Whitley focuses his group’s search marketing plans on reaching caregivers who might need the organization’s services and “to find people who have relevancy to your mission.” Purchased keywords should be as specific to the target audience (such as “treatment”) as possible, Whitley says.

Joel Bartlett, marketing manager for People for the Ethical Treatment of Animals, bought banner ads on social networking sites such as MySpace but wasn’t satisfied with the traffic generated. However, when the group made its display available for posting on individuals’ personal pages and encouraged members to share them with their friends, traffic greatly increased. “The value of word of mouth goes further than any banner ad we could afford,” Bartlett says. As with commercial enterprises, customers (in this case organization members) are the best salespeople, and giving them the tools to increase brand awareness online can be very successful.

PETA is selective in its search marketing spending, limiting the scope to the related terms that have proven to be cost-effective. The PETA website has high natural search rankings for many of the terms related to protecting animals because of the abundance of links to the site, so Bartlett doesn’t see a need to participate in SEM for obvious keywords. “We’re already the No. 1 search term [for animal rights] so we don’t need to buy ads.”

Bartlett says that instead of using contextual or display ads on general interest sites, PETA advertises with advertising service Blogads.com to reach influential Web participants. Blogads works with bloggers who have loyal readership and are more likely to get involved and to spread the message to others, enabling PETA to reach a smaller but more receptive audience than mass media sites.

While search is not a major component of many nonprofits’ online marketing strategy, another performance marketing staple has proven successful – email marketing. Through newsletters and issue-specific alerts, PETA encourages people to forward the information from its website (including images of animal abuse) to their friends that will prompt action.

When it’s an email from a trusted friend, “people get outraged” about how animals are treated, Bartlett says. During PETA’s offline events, the organization collects email addresses to expand the audience of its newsletter and outreach activities.

Habitat for Humanity purchased Google AdWords for a time but cut back on online advertising recently, according to Senior Director of Direct Marketing Timothy Daugherty. The best-performing words were derivations of the organization’s name, and since the website could be found with natural search, search marketing was deemed unnecessary.

The group, which builds affordable housing for lower-income families, now focuses on increasing communications with people who have previously donated to maximize their marketing dollars, Daugherty says. Habitat for Humanity received about 10 percent ($8 million of the $80 million) of its total 2006 donations online, according to Daugherty.

The group has been successful in increasing awareness by getting list appends (email addresses for previous donors) for their direct marketing databases to reduce costs and open another line of communications, says Daugherty. Contacting donors via email is also effective in stimulating activism online and off-line, and is part of the organization’s effort to integrate marketing efforts, he notes. For issue-oriented campaigns, email works well in getting people to write letters and emails to public officials, he adds.

The National Council of Churches has collected more than 100,000 email addresses by getting members to forward information to friends and by requesting addresses on donation forms. “We ask people to share our email blasts with their friends,” and those who respond to forwarded emails are automatically added to the distribution list, says Daniel Webster, the organization’s director of media relations. The frequent communications about issues in the news help to build a virtual community and enable two-way communication, according to Webster.

In addition to most donations being made off-line, most word of mouth marketing occurs off-line as well, but email can be effective in spurring people to talk off-line with friends about an organization or contributions. Nearly 90 percent of people who have donated to a charity say they have urged others to give in person, but just 19 percent had done so by email, according to a 2005 Donor Trends survey by Craver, Mathews, Smith & Company and The Prime Group. Email has proven successful in promoting off-line activism that inspires people to attend and volunteer at events that are an important component of nonprofit activities.

Creativity Key for Tight Budgets

Operating within tight marketing budgets forces many nonprofits to be creative in their programs and partnerships, according to the Leukemia & Lymphoma Society’s Whitley.

While working for the American Lung Association, his group created a significant revenue stream by connecting for-profits to its members who voluntarily participate, according to Whitley. The organization created a campaign that asked members with asthma to provide input about how they managed their illness. Glaxo-Smith-Kline offered information about its related pharmaceutical products and gained valuable information by collecting data from the campaign, Whitley says. “[For-profit companies] don’t have access to live communities, so we provided a benefit to them.”

Whitley says nonprofits can also maximize their resources by collaborating with peer organizations with related goals. The American Lung Association joined with the Centers for Disease Control on an online campaign to publicize public flu clinics. By sharing the costs and their collective memberships, the two groups were able to reach a wider audience more quickly than acting individually. Companies with complementary products or services can likewise team up for their mutual benefit in marketing efforts.

The American Red Cross is using online communications tools and commerce to help replace its aging membership with a younger demographic, according to Darren Irby, the group’s vice president of communications. Irby says the base of its donors is over 65 and since “those people are dying off” and are less likely to be online, the Red Cross is targeting a younger generation with its online marketing efforts.

Since the under-40 crowd spends ample time chatting online, the group is generating revenue by piggybacking on advertising delivered via instant messaging (IM) software. The Red Cross teamed up with Microsoft’s Windows Live Messenger advertising program. To encourage people to use the IM software, Microsoft is donating part of the revenue from the ads that appear during an IM conversation to the charity of the participants’ choice. Red Cross members feel good about encouraging others to use the software, and the organization gets exposure and extra income.

The Red Cross is increasing brand awareness by going retro with the branded merchandise on sale at its online store. To celebrate the 125th anniversary of the group last year, the Red Cross began selling T-shirts, coffee mugs and hats emblazoned with a vintage World War II logo. The garb, which has sold well beyond expectations, “is a way to link the older and younger generations,” Irby says.

Instead of buying banners on social networking sites, the Red Cross makes tools available so that members can provide free exposure by promoting the organization on their personal pages. The Red Cross has set up groups on MySpace and LinkedIn, and has created banners, logos and promotional widgets to spread the word.

Irby recognizes that younger people like the immediacy of being able to support the Red Cross’ response efforts to a national disaster, but so far the group has not produced any viral videos for sites such as YouTube. He says workers in the field are too busy helping to film their activities, and he doesn’t encourage people to film relief efforts for fear of “losing control of the messaging,” he says. Instead, the Red Cross has created videos and posted them on an FTP site that is accessible by the media.

The Red Cross is also reaching out to bloggers to make the blood donation process less intimidating. The organization is requesting that bloggers write about the music that they listen to while giving blood. “Charities need to engage in two-way communication” if they want to develop a meaningful relationship with members and volunteers, says Irby.

Most nonprofits do not utilize formal affiliate programs, but PETA provides merchandise as incentives for people to promote its organization online and off-line, according to Bartlett. Through the “PETA2 Street Team” initiative, the group gives volunteers missions to accomplish, such as contacting people via email, adding links to PETA on their websites, or off-line activities, and volunteers earn points that can be redeemed for merchandise from the group’s online store. By offering “posters, CDs and autographed stuff from a band,” PETA is connecting with the young volunteers’ interests through relevant rewards, Bartlett says.

PETA also employs viral marketing to increase awareness online. The group has set up a website protesting Kentucky Fried Chicken’s animal handling and created an automatic sign generator that enables people to create virtual billboards about the restaurant chain and post them on personal websites. The group created an area on the photo-sharing website Flickr for volunteers to post images. Creating tools for people to generate their own content around the group’s messaging is “part of the strategy of empowering users and encouraging word of mouth” that is highly effective marketing, says Bartlett.

Coordinating the online activities of the groups within a national organization can maximize resources and create a more cohesive strategy, according to the Leukemia & Lymphoma Society’s Whitley. Nonprofit departments (like their commercial counterparts) can be territorial at times, but sharing the online successes and collaborating on projects will unify the organization. Whitley says the Web group can break down barriers and it “is critical [for the online group] to become a leader for interfacing cross-divisionally within an organization.” Similarly, online marketing initiatives can unify the divisions within a company by sharing their experiences and using the collective intelligence to optimize campaigns.

John Gartner is a Portland, Ore.-based freelance writer who contributes to Wired News, Inc., MarketingShift and is the Editor of Matter-mag.com.

The Desire to Acquire

The new geography features auction-based ad exchanges and conglomerated companies with divisions that buy, sell and distribute ads: something that would have been unthinkable a decade ago.

The emergence of these new entities with intertwined relationships has the potential to streamline the media marketplace and drive costs down and return on investment up. Consolidation will likely enable the biggest players to increase their market share while also growing the demand for independent agencies and networks that operate outside of their reach.

Fast and Furious

To recap: In a shorter span than is required to complete the NHL playoffs, Google gobbled up DoubleClick, Yahoo lassoed RightMedia, Microsoft acquired aQuantive, WPP Group won 24/7 Real Media and AOL absorbed Ad:Tech AG.

LinkShare, a subsidiary of Internet services company Rakuten, purchased lead generation company Traffic Strategies in June. Rival Commission Junction is owned by potential acquisition target ValueClick, and Performics is a property of Google’s DoubleClick.

The acquisition frenzy has made tracking industry relationships as challenging as keeping up with the latest Hollywood romances and legal tangles. For the first time the largest media companies own ad networks and/or agencies, one of the largest agencies owns a network, plus countless smaller players also work on both the buy and sell side. (To untangle the web, see page 49 of the July/August 2007 issue.)

Consolidation, shakeout, maturation of the market: Whatever you want to call it, investment banker John Doyle of Peachtree Media Advisors says there are precedents in TV and print industries for large media companies doing a “land grab” to acquire related businesses. “It’s like getting a bigger bucket to stand under a waterfall,” he says. Advertisers are expected to greatly increase their online spend during the next few years, so it is not surprising that the top media companies attempt to expand their reach by buying companies offering related services, he says. Doyle expects the consolidation to continue as it adds value for buyers, and more midsize companies will likely want to increase their heft by scooping up smaller competitors. However, after the biggest deals are done, the largest players are unlikely to buy smaller shops, as it “won’t move the needle” in increasing their market share, according to Doyle.

Questions of Perception

The distinction between interactive/ creative agencies, advertising networks and media companies began to dissolve through smaller acquisitions during the past few years, but now the potential for conflicts of interest are as clear as they are abundant. That agencies, ad networks and publishers are owned by a single organization has many in the industry uncomfortable. “Most of the rules of online advertising are broken …” says Russ Mann, CEO of search marketing company SEMDirector.

By comparison, how would investors feel if one entity ran the stock market and owned an analyst firm and a brokerage? Not too comfortable, most agree. Not surprisingly, in May, the Federal Trade Commission began an antitrust investigation of Google’s purchase of DoubleClick to identify aspects of the deal that could limit competition.

Publishers might be reticent to partner with companies owned by a competitor, according to Dana Ghavami, CEO of CheckM8, which sells software to manage rich media campaigns. For example, ad networks could prioritize placement based on the needs of their corporate family of publishers. “My worry – if I am a media company such as Viacom or Fox [which have used DoubleClick’s ad network] – is who is looking after my interest?” says Ghavami.

Interactive agencies with ties to networks and media companies have the most at risk as they are likely to undergo the most scrutiny to remove any doubts that they are putting clients first. Trusting agencies to buy “in-house” is akin to “asking students to grade their own tests,” according to John Ardis, vice president of corporate strategy at ad network ValueClick.

Advertisers looking to optimize the return on investment from their media buys will want assurances that purchasing decisions aren’t compromised by a need to unload excess inventory from a sister company, CheckM8’s Ghavami says. That’s not a comfortable discussion for those sitting on either side of the table. These “umbrella” companies will have to institute internal safeguards to prevent the possibility or even the appearance that their actions are being influenced by other divisions of the company.

Advertisers may be unwilling to place their confidential and sacrosanct data about campaign performance in the hands of companies with divisions that are their direct competitors. For example, a liquor company might hesitate before signing on with a network that is part of the same company as an agency that represents a competing brand (see BT story on page 52 of the July/August 2007 issue).

Similarly, a media giant may not want its top advertisers’ performance data to be in the hands of a competing company. “Everyone has seen what Google is capable of when they have too much control – they start setting the rules,” says Ghavami. Giving the enemy the intelligence used to form your battle plan isn’t a strategy for success.

The Upside of Acquisitions

While organizations that span multiple aspects of advertising increase concerns about conflicts of interest, they should be able to increase efficiency and lower the cost of buying and selling. In theory, agencies would be able to buy from sister networks without the need for the sometimes lengthy approval process that slows insertion orders. Also, ad networks and their subsidiaries could combine campaign performance data with real-time analytics from their publisher properties with an ease and granularity not possible today.

“Microsoft [as one example] would be able to create bundled solutions that are more cost-effective and provide more value at the same price,” says Dema Zlotin, vice president of strategic services at SEMDirector. Advertisers would save time by working with one-stop shops and could better adjust campaigns by getting real-time site-by-site performance to complement their networkwide data.

Agencies, however, may have to rethink their fee structure if the purchase is made from elsewhere within the company. Charging a hefty commission when buying from its own network and properties won’t fly with some advertisers. Agencies that are part of other entities will have to work harder now to prove that their intellectual capital is worth paying the premium, according to ValueClick’s Ardis.

Greg Stuart, the former CEO of the Internet Advertising Bureau and co-author of the book, What Sticks, says online advertising was ripe for change. The buying and selling of interactive ads is costly and inefficient, according to Stuart, and consolidation and greater transparency will benefit advertisers. “Shame on the industry for letting it go for so long,” he says. “I am appalled at some of the things that go on,” says Stuart, stating that the failure rate (47 percent) of ad campaigns reflects poor performance by agencies.

While data sharing between organizations can simplify more “routine” buys, advertisers will continue to work with agencies for more complex purchases. The potential for conflict of interest could prove a boon to independent agencies. Some advertisers might be inclined to work with smaller but experienced shops whose allegiance can’t be questioned.

Though purchases through a single company might be more efficient, advertisers happy with an agency could go with networks from competitors, according to SEMDirector’s Mann. “Online is still best-of-breed world,” he says, adding that the various divisions of a one-stop shop might not be the best choice individually.

Rise of the Ad Exchanges

In this consolidated online environment, advertising exchanges that use auction bidding to sell ads and directly connect advertisers and publishers will see increased interest because of their transparency. Exchanges enable advertisers (either companies or networks working on their behalf) to bid for type of ad and the demographic that they would like to reach. Publishers set a minimum price for accepting the ads, and the exchange automatically matches buyer and seller.

Ad exchanges recently changing hands include Right Media, which was acquired by Yahoo, which previously owned 20 percent of the company, and an exchange being developed by DoubleClick that will become part of Google. Microsoft is said to be developing its own exchange, and independent exchanges include AdECN; Turn, Inc.; and ContextWeb.

Bill Urschel, the CEO of AdECN, says exchanges are differentiated from advertising networks because of the auction pricing, the transparency, and because the exchanges guarantee payment to the publishers. “[Exchanges] are taken from the stock exchange model,” says Urschel. AdECN’s exchange has signed up 28 ad networks since it launched in March of this year.

This transparency will attract publishers concerned about intertwined relationships since the services are (at least in theory) neutral to the source of the ad. While publishers and advertisers who compete with Google, Yahoo, etc., may not want to hire their agencies or networks, the exchanges can provide access to their sites.

Because of the negotiations involved in securing media buys, many large publishers such as The New York Times and The Washington Post often have 20 percent of their ad inventory unsold, according to CheckM8’s Ghavami. “Remnant inventory will be marketplace-driven,” he says.

Once they gain experience in using an exchange, some publishers and advertisers may bypass the ad networks and trade directly through the exchanges themselves. Ghavami estimates that 70 percent or more of major publishers’ inventories could be sold directly by exchanges. Ad exchanges will most directly compete with remnant networks such as Blue Lithium and Traffic Marketplace.

Exchanges may accelerate the shakeout of the weaker advertising networks, but they are unlikely to dominate the larger networks. Exchanges make sense for large publishers who have considerable unsold inventory, but publishers are likely to continue to get their highest CPMs through traditional sales channels.

Just as online stock trading didn’t cause brokerages to become extinct, the automated selling advertising is unlikely to replace networks. “There is a sliver of people who will be comfortable with the auction model, so auctions will have a place,” says ValueClick’s Ardis, whose company does not participate in an ad exchange, “but they won’t set the industry on its ear.”

The New Landscape

The current wave of industry consolidation will likely continue, enabling larger companies to become more powerful while at the same time providing opportunity for third-party auditing companies.

Google, Microsoft, Yahoo and Time Warner and their affiliated companies will have their hands in each step of the marketing chain, enabling them to increase the revenue generated from each client. The potential promise for advertisers is that these companies will be able to better target customers and increase by matching demographic and target data with real-time campaign analytics.

“The move away from AdSense to networks that are better at interpreting content” and matching it with advertisers makes sense, according to author Stuart. Advertisers would have greater control in distributing content to their target audience, such as being able to launch a campaign that is instantly delivered to a specific demographic (e.g., males between 18 and 35).

Though many of the sizable agencies and networks have been swallowed, the consolidation will likely continue. Networks such as ValueClick and smaller competitors could also be acquired. But analytics firms such as Visual Sciences (formerly WebSideStory) and Omniture are likely to be at the top of the media moguls’ shopping lists because of the additional insight they provide in maximizing revenue, according to Stuart.

Media companies are also likely to continue acquiring search and mobile properties (such as the recent acquisitions of Third Screen Media by AOL and ScreenTonic by Microsoft) during this continued consolidation, according to AdECN’s Urschel.

Advertisers and publishers may pressure multiservice companies to allow third-party auditing and oversight to ensure that ad buying, selling and placement are all completed without prejudice. Independent auditing firms could verify transactions between related organizations, or advertisers could request that purchases be made from outside networks and publishers. Industry groups will likely establish voluntarily privacy rules or codes of conduct to limit potential conflicts.

Exactly how companies will adapt with new services and systems to increase the efficiency of online advertising is uncertain today. But we can be sure that now that the rules have been changed, there is no going back.

John Gartner is a Portland, Ore.-based freelance writer who contributes to Wired News, Inc., MarketingShift and is the Editor of Matter-mag.com.

The Tangled Web of Link Spam

In my last column, you were warned to “Never watch sausage being made,” lest you find the process so unappetizing you’d never eat it again. But even if you find sausage links tasty, you’ll want to spit out those spam links every time.

Last time, we explored the consequences of content spam, which include bad publicity and getting banned from the search engines. This time around, we’ll explore link spam techniques so you can avoid them or notice when your competitor stoops to them.

Before we do, let’s review why legitimate links are so important to your organic search rankings. Suppose you have a page that you’d love to be the No. 1 result for the search query “digital cameras.” Tens of millions of Web pages contain the words “digital cameras,” with millions of those pages featuring those words in the title. Search engines distinguish the quality of each of these pages by checking how many other pages link to them. Think of each link as a vote for the quality of the content. To get your page ranked No. 1, you’d need to get as many links to your page from as many other high-quality pages as possible.

Links are extremely important in determining search rankings for “digital cameras” and other highly competitive queries. So it’s no surprise that spammers have come up with a bag of tricks to fool search engines about their link strength. Link farms are the most popular technique, so we’ll tackle them first.

Link Farms

Link farms are the name for a spam technique in which spammers set up dozens or hundreds of ersatz sites to be crawled by search engines. Spammers create link farms just so they can put in thousands of links to other sites that they want to boost in search rankings. Search marketers need to be able to tell the difference between link farms and legitimate directories, so they can spend their time soliciting real directories for links, rather than sites that will do them no good.

Here are a few ways you can spot a link farm:

Links R Us. Each directory category has dozens and dozens of links – more than any visitor could ever use. Your suspicions should grow if the URLs seem to be strings of hyphenated words. Or if an IP checker reveals that many of those URLs come from the same “C” block (the same set of IP addresses in the network). Or if the pages from these sites are all from companies you’ve never heard of, and those pages resemble each other.

Odd Lot. The sites linked seem irrelevant to the directory topic or seem like a set of odds and ends with no central idea. You see links about baby care and the petroleum industry on the same page. Link farms are often thrown together haphazardly, most often by automated programs that spew the links onto pages with no rhyme or reason. A cousin of a link farm, a “free for all” site, allows anyone to post a link on any topic. It’s similarly worthless for improving your search rankings.

Dollar Store. None of the links seem very valuable. They consist of pages with nothing but advertisements, or content that makes no sense. Don’t be fooled if these pages have high Google PageRank values shown in the Google toolbar. Some spammers can artificially inflate a site’s PageRank for a while, but Google eventually catches on and adjusts the value.

Before requesting a link to your site from a directory, look it over to see if it exhibits the tricky business listed above. If it does, it’s probably a link farm. Search engines recognize more and more link farms every day. When they do, they stop counting those links toward a page’s ranking, so there’s no point in you getting your site listed there.

More Spammy Links

Although link farming is the most prevalent tactic for link spam, many other tricky techniques abound:

Hidden links. In my last column, we discussed hidden text, a spam technique that hides words from people but shows them to the search engines. Spammers hide links the same way, such as overlaying the links with other content, allowing them to boost the search rankings of pages with hundreds or thousands of invisible links.

Blog and guest book spamming. Some spammers use programs to automatically add links to blog comments and trackbacks, or to guest books. Most sites have eliminated guest books in response. Many bloggers now block readers from posting comments, or they approve each comment and trackback manually.

Tricky two-way links. Some spammers try to trick you instead of the search engines. When people agree to trade links with you (linking to your site if you in turn link to theirs), make sure they are playing fair. Some spammers add the link to your site, but code that link using JavaScript to hide the link back to you from the search engines. So you see the link back to your site, but the search engines don’t. Why do spammers go to all that trouble? Because the search engines believe that you’ve added a far-more-valuable one-way link to the spammer’s site. Check out the linking site with JavaScript turned off to make sure the search engines see the link back to you.

While not strictly a spam technique, search engines are not big fans of paid links, where a site sells links to other sites. Search engines ask that those links be tagged with a “nofollow” attribute, telling the search engines that these links are not unbiased votes for the quality of the content. My advice is that paying for links is fine, but you should do so for the traffic only. Pay for a link when the visitors that click on that link are worth the cost. (This is exactly the same calculation you make with paid placement ads.) Search engines work harder and harder each year to recognize paid links and to devalue them, so I don’t recommend buying links to improve your search rankings.

This wraps up our three-part series on spam. If your site has been banned or penalized for using these techniques, you can clean up your site and request reinstatement, which is usually granted (although reinstatement sometimes requires an extended period of explanation and begging).

MIKE MORAN is an IBM Distinguished Engineer and product manager for IBM’s OmniFind search product. His books (Search Engine Marketing, Inc. and Do It Wrong Quickly) and his Biznology blog are found at MikeMoran.com.

The Affiliate Lifestyle

For many aspiring affiliates, the phrase Affiliate Lifestyle conjures up visions of big beautiful homes and shiny new sports cars. Graphic images on affiliate training sites encourage visitors to imagine themselves at their desk, dressed in pajamas and smiling the big happy smile as hundred-dollar bills miraculously fly from their computer monitor. Those images often include a picture of the loving spouse standing in admiration somewhere in the near background. Another popular image of the “rich affiliate” shows her relaxing in a lounge chair on a long stretch of almost-deserted white sand beach, a laptop perched atop her knees and some tasty tropical drink at hand.

Cynical home-based business opportunists and experienced affiliates alike may snort, snicker or even guffaw at the idyllic portrayal; however, with two exceptions, that is an accurate picture of this affiliate’s lifestyle. The “hundred dollar bills” are in fact four- and five-figure checks delivered by snail mail, and I would never bring my laptop to the beach where it might be exposed to the dangers of sand and water. Actually, I’m reluctant to tote my VAIO with me on vacation as I so rarely use it.

Case in point: I spent the month of March touring Vietnam and Malaysia. Although the resort in Sabah on the island of Borneo, and each hotel in Singapore, Kuala Lumpur and Ho Chi Minh City (Saigon) provided free or inexpensive access to high-speed Internet, I spent less than three hours at my computer during the entire trip.

I was not working during that time. I spent it uploading vacation pictures to Flickr for my personal travel blog at Roamsters.com and GoogleTalking with family and friends. The few emails and responses I sent to friends in the industry were primarily to feign sympathy for their ugly early-spring weather and to talk about enduring three-and-a-half-hour spa treatments and swims in the 86 degree Fahrenheit (30 C) waters of the South China Sea.

My month-long vacation wasn’t the “once in a lifetime” trip about which many people dream either. It was the trip I take every fall/winter. Moreover, the winter trips represent only a small percentage of my annual vacation time. In 2007, I will spend at least 4 months away from home for pleasure travel and family events – not to confuse the two. Furthermore, to make the best use of our short Canadian summer, I will work only a few hours per week during June, July and August.

Do I tell you this to gloat? Not at all! OK, maybe a little. But what’s really important here is for you to know that, a) the fabulous Affiliate Lifestyle is possible, and b) you need to define your version of the lifestyle and choose to live it before you hamstring yourself with some crazy 24/7 business that won’t allow you the time of day (or night) to enjoy what you achieve.

Take for example my friend Ray (not his real name). Ray earns seven figures a year as a search affiliate. He works with a paid assistant in rented office space where, for eight to 10 hours a day, they scramble to investigate new product offers in a vast array of markets, create static landing pages, write and place ads, and monitor their conversions to sales. His workload doubles during the ramp-up to major holidays. Simply talking to him about his frenzied business at Christmastime left me feeling frazzled and I was in the midst of a three-week break.

Despite all that money, Ray still can’t relax with his family at the cabin for the weekend without working evenings at his laptop. He told me that it was a major effort to ready his business for a week’s absence during a family emergency, and when Ray heard about my latest foray abroad, he replied by saying, “I really wish I had more time to travel.”

Ray would have more time to travel if he made more time to travel, something he could easily do if he adopted a few content publisher strategies. Although I too research new offers, write product endorsements, create landing pages and place PPC ads, I dig much deeper into far fewer markets, which means less email to read and fewer offers to research. Placing 10 to 30 offers that run dynamic ads on one theme site is considerably less time-consuming than placing thousands of individual product ads that must be constantly monitored and revised.

Rather than chasing offers, content affiliates concentrate on building relationships with potential customers through information and entertainment. Delivery is simple and cheap via blogs, email and RSS feeds. Moreover, blogging, podcasting and making videos are way more fun than ad writing. The biggest advantage, however, comes from the ability to plan our publishing schedules well in advance.

So if I suddenly required an uninterrupted month of time to respond to a family emergency or to take advantage of an extraordinary travel opportunity, I would log in to my blog, select four draft articles and queue them up for delivery – one per week. The same articles would be queued in the same order for delivery through my autoresponder. To keep my business humming along for four weeks would take about five minutes per site, or less time than it would take to pack my bags.

Making even a partial switch away from the search affiliate to the content publisher model should be easy for Ray. He could start with an existing niche in which he has had success, preferably one of an evergreen nature such as dating, skin care or weight loss. In as little as a day, he could rework and load seven of his best product reviews into an autoresponder series and put an email capture form on the applicable site. He should also take a minute to install a blog on that site, and spend $20 to $50 to have a designer work his existing template into the blog.

Next, Ray should reallocate just one day per week of his pay-per-click ad writing time and devote that instead to writing articles and product endorsements. By producing just four short articles per week, in three months Ray will have populated his blog and autoresponder with a year’s worth of messages to be published and delivered to his subscribers every week. As the size of his subscriber lists grow, not only will Ray’s income increase, but he will also be able to lower his pay-per-click advertising costs substantially.

And if Ray’s perpetual pay-per-click ad writing has left him short on prose, he could hire a ghostwriter to write those articles. Better yet, he could hire a team of ghostwriters to write articles in a half dozen of his best niche markets and get his affiliate business to the “set it, forget it and go on vacation” stage more quickly.

The last step in the process – taking a vacation – might be the most difficult for workaholic affiliate Ray, as he may be tempted to use his newfound “free” time to build an even bigger empire.

If you’re like Ray, listen up! Whether you are an aspiring affiliate or a seven-figure affiliate, making time to rest and rejuvenate body, mind and soul is the best thing you will ever do for you and your family. When you are refreshed and focused, you become even more efficient and productive in your work. So leave the laptop at home and go have fun. With practice, you’ll soon discover that living the Lifestyle and taking vacations is as easy as FTP.

Oh, and one last thing. When making your travel reservations online, remember to book through your own affiliate link.

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.

Bringing Your Website Into Focus

What can you do when you’ve invested in Web initiatives and it looks like the investment isn’t paying off? For some industries, embracing the Web as a way to increase business has been a long, slow road. The good news is that every day, companies are pushing the envelope to create online tools and features that move their industry forward in search of the revenue-altering effect of a successful Web presence. Zyloware is one of those companies.

Founded in 1923, Zyloware is a family-owned-and-operated business that manufactures brand-name fashion eyewear frames. Recently the company made a significant investment in its website. They changed the site from an online catalog to a full e-commerce site so that eyecare professionals could keep their inventory full by ordering online. Zyloware is known as an innovator in the optical industry, and developing this functionality was an innovation over what their competitors are doing online. But are they ahead of their time?

While several Zyloware customers are using the new Zyloware.com website to place orders online, the adoption rates have grown more slowly than anticipated. Marketing manager for Zyloware, Jodie Hirsch, contacted us to see if a little makeover magic could help solve the problem. She suspected that the new capabilities available to users aren’t obvious and that is the prime reason why the system isn’t getting used as much as expected.

After looking over the site, I have to agree that much of the functionality is being hidden, but overall, the issues are much bigger. I’ve said before that sometimes you can take an existing site and make dramatic performance improvements without changing the overall design very much – this is not one of those cases. Zyloware’s existing home page could definitely benefit from a complete visual overhaul.

First, these guys work with some top-notch brands. That isn’t fully communicated on their home page. Next, the company’s business is producing frames, yet they don’t show more than one on the home page. Rule No. 1: If you are selling a product, feature that product as prominently as possible on your home page.

Zyloware only sells directly to eyecare professionals, so a secondary goal that Hirsch mentioned was to make Zyloware. com a consumer-friendly site and a valuable resource in selecting eyewear. They developed an advanced frame search engine so consumers could find eyewear products on the site and then purchase the products from the partner retail locations. The problem is that most consumers have never heard of Zyloware and with the existing home page, it’s not clear what the company does or why consumers should look any deeper into the site.

So our first order of business is to rework the navigation. Well-designed navigation does more than just help users find their way around on your site; it also communicates what the site has to offer and which areas are most important. The current site has most of the options hidden in drop-down menus. We pulled out the most important links and displayed them in a standard horizontal navigation. This will make it easy for users – both consumers and eyewear professionals – to see what the site offers and to get to those areas quickly.

Next, the original design shows one brand at a time and displays the rest in small text links below. We chose to prominently feature five of their nine brands front and center on the home page. This immediately exposes users to a good breadth of Zyloware’s eyewear offerings before they dig deeper into the site. With this type of setup, Zyloware could choose to feature its best-selling brands, its newest additions or just a good cross section of their full product line.

Our next step was to expose the frame search functionality. This is something that both consumers and eyecare professionals could use, so keeping it hidden in a drop-down menu was not giving it the attention it deserved. Also, we added some information about the company so that users who don’t have previous experience with Zyloware can learn a little bit about what they do.

Finally, we made the site wider. This is a nuance that is lost when the images are reproduced in print, but the original width of the site is about 810 pixels. That is a nonstandard size and it doesn’t really make any sense. Allow me to get technical for a bit here.

Website widths should be based on expected user screen resolutions. Users with screen resolutions of 800×600, which used to be the Web standard until about two years ago, can fit 770 pixels on their screen without having to scroll horizontally. The current Web standard is 1024×768, which can fit approximately 990 pixels before a horizontal scrollbar is introduced.

Because the site was 810 pixels wide, it was effectively too big for low-resolution users, but still too small for larger-resolution users. We increased the width to a size more suited for users with higher screen resolutions, which allowed us to expose more real estate to the site visitors.

In the end, a successful home page must communicate the value of your company to your users. It must also quickly and almost subconsciously educate them about what they can do on your site. Accomplish those goals and your users will reward you by visiting your site more and utilizing the tools you have created for them more frequently.

Would you like your website to be the topic of a future edition of 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. Please put “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 is the co-author of Web Analytics for Dummies and serves as CEO 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.

Old Dog, New Tricks

Forrester’s March report, “Email Marketing Comes of Age,” finds that clickthrough rates have remained steady since 2003, at an average of 5 percent, and that email is the No. 1 activity on the Web.

And Datran Media’s December 2006 annual email study found that 83.2 percent of respondents picked email marketing as the most important advertising tactic they planned to use in 2007. British Columbia-based super-affiliate Colin McDougall claims that email marketing is his most powerful marketing channel and it accounts for approximately half of his business earning. He thinks that relying on natural search rankings is a “fool’s game” and considers his email list to be his customer base. McDougall says that when he sends an email to his list, the response is immediate, with most of the sales flooding in on mailing day, and then a trickle of sales ongoing as a result. The Forrester report finds that when email solicitations work, they work quickly: 29 percent of all online consumers buy immediately following an offer. And consumers who buy products advertised in emails spend 138 percent more online than peers who do not.

Email 2.0

Email marketing has been around for more than 10 years, but lately it’s been going through a renaissance as marketers experiment with integrating new innovations into email to make it more effective and useful. Web 2.0 has been defined as the more interactive iteration of the Web – the participatory Web, which involves user action. That’s what today’s email campaigns are designed to do – reach out to potential customers and get them involved.

Email newsletters comprised of user-generated content (UGC) are one example. Tara Lamberson, vice president of marketing and solutions for interactive agency MindComet Corporation, says that its client, Daucourt Martin Imports, has a newsletter called the Drink Pink Weekly for its brand XRated Fusion Liqueur. The newsletter, targeted at professional women, highlights UGC-like consumer-submitted recipes and drinks collected by bartenders.

Lamberson says the campaign’s results are measured by viral pass-alongs and the tone and spirit of the user feedback, and that the campaign is effective in nurturing brand evangelists.

A newsletter called the Daily Shoe Digest, by the shoe e-tailer Zappos.com, is constructed only of UGC. The newsletter, which has links to Zappos but does not appear promotional, has a moderator who edits the content. Chad White, director of retail insights and editor-at-large at the Email Experience Council (EEC) and editor of the RetailEmail Blogspot, points out that if references to other retailers were deleted, the forum would seem artificial and overly managed.

White explains that Zappos is trying to build a community of passionate shoe buyers and bask in the halo that it generates. “UGC is all predicated on the success of product reviews – and products that have received good reviews sell much better.” He also notes that allowing contributors to mention other outlets builds credibility for Zappos as a trusted source of information.

UGC in email newsletters works best for narrower categories. White says there needs to be a “niche to grab on to,” so a company like Macy’s would be too broad. AbeBooks newsletters are effective at creating a sense of community because when consumers subscribe, they choose an area like cooking or science fiction, and then are sent relevant content related to that interest and asked to contribute book reviews and participate in poetry contests.

Another popular form of UGC is blogs. Companies are establishing blogs to nurture ties with customers – and retailers are promoting their blogs in their email newsletters. In January, PETCO launched its PETCOnews.com blog and alerted subscribers to its presence in a PETCO Post newsletter the following month. PETCO has been using its email newsletter and blog in tandem to keep people updated on the pet food recall and has directed subscribers to its blog for updates.

Marketers also are promoting their RSS feeds through email newsletters. Retailer eBags entices email recipients to subscribe to its brand-alert RSS feeds, which tends to be very frequent, so consumers can see new styles as inventory is updated. Jeanne Jennings, an email marketing strategy consultant, explains that some prospects want email, others like RSS and others prefer direct mail. “Consumers can choose – they are more likely to read the information if you’re catering to their preferences.”

RSS feeds can be delivered in email form to their subscribers. Rosalind Gardner plugs her blog’s RSS feed URL into AWeber’s Blog Broadcast and it takes her blog’s content and automatically creates an email newsletter. Affiliate consultant Shawn Collins also uses Blog Broadcast – he has it set up so that when he posts two entries to his Affiliate Tip blog, the entry is sent to subscribers’ email boxes.

Going Viral

eMarketer analyst David Hallerman says that email remains the primary way people tell other people about an ad or marketing website that’s funny or fascinating or in some way cool. “Although some people communicate via community postings or IM, the “Did you see this?” kind of email message still rules.

Greg Cangialosi, president and CEO of Blue Sky Factory, says he has clients who use email to drive their audience to blog posts, online videos and wikis and from there, the dialogue continues and the message is extended. Cangialosi predicts that out of all the elements that are highlighted in email, he thinks that blog posts and video will be the most widely used and will generate the most interest.

Marketers are also leveraging video in their email campaigns. As of June, EEC’s White found that 18 percent of the 100 major online retailers tracked via RetailEmail Blogspot have included a link to video in at least one email in recent months. White suspects this number will grow rapidly and that the frequency of use will increase.

White points out that links to video can be useful for a lot of different types of marketers. Barnes & Noble uses video for book readings and author interviews, and Bass Pro Shops has video tutorials on fishing advice and trips.

Executive director and senior partner of Worldwide Email Marketing of OgilvyOne, Jeanniey Mullen says that based on case studies of Ogilvy clients over a 60-day period in the spring of 2007, response rates for emails with video links are three to 10 times higher than those for static email. More important, these email messages tend to drive even higher increases in landing-page traffic and conversion. White explains that in 99 percent of cases, email newsletters have included a link to the Web-hosted video because there can be problems with embedded video – many email clients either don’t support it or block it by default.

But Mullen says that most of the problems with video-embedded email such as spam filters stripping JavaScript from emails and lack of broadband penetration have been overcome. She says that email service providers, such as VIZmail and AviMail, are able to deliver emails with video and flash inside.

But others find there are frequently rendering issues with video inside of email. Founder of the Affiliate Summit, Shawn Collins, says that a lot of email clients don’t allow video to be played with video in email – it doesn’t work right – it gets stripped out and “comes up blank in the email.” Most experts agree the best practice for right now is to link to Web-hosted videos so the user experience will not be degraded.

Mullen agrees that the best practice is to link to Web-hosted video for other reasons: Video that opens up in emails can be wasted on a recipient who does not have the volume up, or the recipient might not want to disturb office neighbors and quickly close the email – causing the message to be lost.

One of the solutions for distributing video via email is through Magnify.net, which allows website creators to create a branded site to showcase their videos. Through an embedding option, Magnify.net lets email marketers use plain HTML to insert a static image of the video player. When it’s clicked, email recipients are taken to the page where they can view the video. Collins explains that Magnify has AdSense built in to the landing pages and they share the revenue with the community owner.

Social Media Tools

In addition to users generating and sharing content, Web 2.0 innovations also look at how users can promote and rate content that is important and relevant to them. Marketers can leverage this trend in their email campaigns to incentivize consumers to indicate what is important to them.

When subscribers receive Shawn Collin’s Affiliate Tip blog RSS in their email, they have options as to what they can do with each post. They can use “Email This,” “Digg This” or “Add to del.icio.us.” Collins explains that these methods are a way that The Affiliate Tip gets more exposure in top Web properties. This past spring Buy.com experim ented with Digg and Delicious links alongside its products in one of its newsletters so that subscribers could click on the links to recommend products to those communities.

Craig Swerdloff is the vice president and general manager of Postmaster Network, part of Return Path, which offers email deliverability solutions. He explains that for Dell’s campaign to drive customer acquisitions, they sent an email that had a four-point rating system along the side that asked the recipient how relevant the offer was to them (on a scale from “highly valuable” to “no value”).

Swerdloff describes this type of a campaign as a “win-win” – the recipient gets to provide feedback and the marketer can gather data that over time improves their ad targeting, which eventually helps to fine-tune an appropriate offer. But marketers sometimes stay away from email because of the problem of unwanted email, Swerdloff says. However, ISPs are coming up with solutions that distinguish between wanted and unwanted email and some experts predict that deliverability issues will improve in the short term.

This is good news for marketers who are experimenting with new elements to use in email to engage potential customers. White says that all the improvements we’re seeing in the Web world will be translated into the email world and that email is benefiting from the growth in content on the Web such as video and UGC. Affiliates should keep in mind that they can have an advantage over merchants that are sometimes apprehensive to try new marketing techniques.

Look Out!

Last night you read on your local newspaper’s website about how gas prices could reach $4 a gallon this summer, so you went to a car site to check out some reviews about hybrid vehicles and then visited an automaker site to learn about the car prices. This morning when you checked your email, you saw two ads for hybrid cars.

Did you think – wow, this relevant ad sure is handy or, yikes, Big Brother is watching my every move?

This question is at the crux of an issue that has ignited privacy advocates, who fear that recent acquisitions in the online advertising space will make profiles of consumers more complete and enable behavioral targeting (BT) to become more extensive.

In April, Google announced plans to purchase DoubleClick, an ad-serving service and owner of affiliate marketing network Performics. Following on Google’s heels, Yahoo announced it would complete its purchase of RightMedia, which operates an exchange for trading digital media. Then in May, Microsoft said it would buy aQuantive, which operates a variety of online advertising businesses, and the marketing services company WPP announced its intention to buy ad network 24/7 Real Media (see cover story page 44).

These deals, which vastly increase the amount of knowledge that Google, Microsoft and Yahoo have about their users’ behaviors, validate the speculation that widespread BT is just around the corner.

BT is not new. Microsoft added BT to its AdCenter in 2006, AOL has been using BT technology from Revenue Science, and Yahoo has its own proprietary BT solution. Ad networks have thousands of website clients, and segment the audiences into categories such as car buyers and health food buyers, based on anonymous user activity.

Privacy advocates are concerned that the recent acquisitions will enable Google, Yahoo and Microsoft to construct a full profile of a user’s online behavior, from their initial search all the way through to the time they close their browser. Advertisers that want to discriminate among customers could use these records of user behavior improperly.

Google and DoubleClick

Most of the hullabaloo about privacy concerns is focused on the DoubleClick acquisition because Google, which tracks user search queries and history via user IP addresses, has the lion’s share of the search market. Meanwhile, DoubleClick, which tracks users via cookies associated with graphical ads it serves, has a similar advantage in ad trafficking.

Mark Ward, software engineer for RevCube, a provider for multichannel online ad campaigns, explains that before the acquisition, Google’s behavioral data essentially stopped when the user left the search result page. “Now, if a user stays on major sites [assuming DoubleClick is on the site the user browses] and uses Google to search, it’s conceivable that Google/DC would know what page the user was on, when the user was on it, where the user was coming from, etc., for every page the user ever browses.

In the past, Google, whose famous mantra is “don’t be evil,” has indicated that it would not track its users’ behavior to develop powerful targeting capabilities for display ads because it doesn’t want to snoop on its users. But some believe Google will embrace BT because they are under pressure to find revenues beyond text-based search ads; others say Google bought DoubleClick so they can compete in the display game; and others say it was simply to prevent Microsoft from buying DoubleClick (and still others say it was a combination of several factors).

Google has denied claims of any intent to do wrong. At Google’s annual stockholder meeting in May, Google co-founder Larry Page said, “Our actions over the next 10 years will make it clear we’re not the same kind of companies as you are worried about.” And CEO Eric Schmidt added that the company has “made a commitment not to track user data.” Some point out that if Google wanted to focus on BT, they would have bought Revenue Science or Tacoda, which specialize in it.

But Jeff Chester, executive director of the Center for Digital Democracy (CDD) in Washington, D.C., says that, “Google’s entire business is about personal data acquisition and use.” As it increasingly provides an array of third-party [rich media and interactive] ads, especially for major advertisers [which it is seeking], it will use our data in sophisticated ways to market to us. Google – no matter how high-minded its mission – is ultimately a digital marketing company.”

Publisher of AffiliateFortuneCookies.com Sam Harrelson agrees that Google is already doing BT in an oblique way that ascertains the end user’s browsing habits, click choices and attention data. He says programs such as GMail and Google Reader are giving Google a great deal of quantifiable data on individual (or generic) user habits and how those users browse. “The addition of DoubleClick’s data only solidifies that ability to measure beyond the click or the impression,” says Harrelson.

Privacy advocates are not the only ones considering the profound impact the DoubleClick acquisition will have on the industry as a whole. Chester says that in addition to threats to privacy, “GoogleClick” will become the most powerful media company online, able to handpick the winners and losers of e-commerce. “Instead of robust competition, we will have dot-consolidation.”

RevCube’s Ward agrees and says that the DoubleClick acquisition should make people nervous because Google could become a monopoly that can do every part of online marketing.

The DoubleClick acquisition would give Google a network of publishers and advertisers that provides a vast amount of visitor behavior data to use to target ads across its network. This makes other ad networks worried because Google would be their direct competitor.

Some believe that the DoubleClick acquisition would reduce competition by giving Google 80 percent of the marketing for serving ads to third-party Web publishers.

Harrelson says that ad networks need to continually adapt to the marketplace and not become obsolete in their business model or place in the food chain. “If ad networks are not fastidious in their outlook, this could very well happen as Google, Microsoft and Yahoo continue to chip away at the once-separate performance marketing space.” Ali Mirian, product manager of publisher solutions at 24/7 Real Media, says there are publishers who consider Google to be a major threat to their advertising business – the data that they would run through the DoubleClick system would now be in the hands of Google.

Another disadvantage for affiliates and search marketers is the potential of increased cost per click (CPC). Affiliate Colin McDougall speculates that if Google acquires a lot of information about visitor behavior from initial search through to the shopping cart checkout, it could have an impact on CPC. “Rather than the competition setting the price in the open market bidding system that currently exists [i.e., AdWords], the base bidding price algorithm might get tied more to conversion rates than what the marketplace is bidding.” Harrelson points out that a benefit for affiliates will be a streamlined and automated process for dealing with agencies. He explains that affiliate marketing works best when the ease-of-use factor is higher than the time commitment factor. He sees the DoubleClick acquisition and others opening up the playing field of “affiliate marketing” to many more nontraditional affiliates in the social media and blogging spheres.

Consumer Pros and Cons

Critics say that consumers should be concerned that more complete user profiles will mean that relatively anonymous usage data could be leveraged to link a pattern of behavior to a consumer’s identity and that cross-campaign learning could be used to infer private information, such as sensitive health data.

CDD’s Chester says consumers’ privacy will be further at risk because Google will be in the position to track the majority of consumer actions online including through cell phones. “Such data mining will enable Google to have unprecedented insights into consumer behaviors and expenditures.”

As a result of a complaint filed in April to the FTC by privacy groups including the CDD, the FTC created a special task force and opened a preliminary antitrust investigation at the end of May. Chester says, “The building pressure will result in some policy change ” BT is inevitable – but policy safeguards will be a part of it in some area.”

But not all consumers are worried about giving up their privacy. According to the results of a ChoiceStream Personalization Survey conducted in 2006, the number of consumers willing to allow websites to track their clicks and purchases increased 34 percent from the previous year.

However, the results show no significant decline in the number of consumers concerned about the security of their personal data online, with 62 percent expressing concern in 2006 versus 63 percent in 2005.

“Consumers are starting to become more open to the idea of giving up some privacy in return for a more customized search experience,” says Marketing Pilgrim’s Andy Beal.

However, there must be a tipping point on the curve where the average consumer will start to feel as if their privacy is being disproportionately traded for personalization, “but we are nowhere close to that yet … even with platforms such as Google’s Web History,” AffiliateFortuneCookies’ Harrelson says.

Of course many online marketers are quick to point out that consumers benefit most from an increase in BT. Kevin Lee, executive chairman and cofounder of Did-it.com, a search and auction media agency, says that as targeting improves there will be less untargeted advertising and more advertising that is truly relevant to the consumer, be it text links, banners or video.

And many believe that Google will use the “if you are going to see ads, they might as well be relevant” approach because the customer-centric message complements Google’s brand.

The Ick Factor

But even if consumers do want more relevant ads, it doesn’t mean that they won’t find it disconcerting if the same ad for an MP3 player follows them from site to site. The creepy factor could risk consumer trust – which would tarnish a brand’s reputation – and therefore be a substantial risk for merchants.

Because a privacy incident could damage everyone in the advertising food chain, publishers, ad networks and advertisers are going to have to be clear to consumers that their privacy concerns are absolutely valid and that steps are taken to build safeguards into their systems. Lee says that a controversy could ensue if an ad network doesn’t adequately disclose that ads are being targeted behaviorally.

Ad networks insist they only collect anonymous data, which then is aggregated and analyzed to segment the user into one or more Internet archetypes, such as “car shopper” or “dog lover.” And ad networks are explicit in explaining what data is collected and how it is used and that they give users the option of opting out.

DoubleClick and aQuantive say they give users the ability to opt out of having data collected about them, though privacy experts argue that few people know they have that option.

In an effort to come up with a solution, the NAI, which is a cooperative of online marketing, analytics, advertising and email companies, developed the site at NetworkAdvertising.org. It is a centralized tool that allows users to verify which ad networks have placed a cookie on their hard drive and then users can submit opt-out requests for each network they prefer not to be targeted by.

It’s possible that government regulation could halt BT, at least temporarily. If that doesn’t happen, Marketing Pilgrim’s Beal says that BT implementation will likely be slow and steady to avoid any missteps that could impact the trust built up by the search engines.

Some experts believe there will be a fundamental shift from contextual targeting to BT. Revenue Science’s Basem Nayfeh says behavioral targeting changes the discussion from whether an advertisement is relevant to the content to whether an advertisement is relevant to the person reading the content.

ValueClick, an online advertising behemoth rumored to be an acquisition target, is advocating the adoption of 3D-BT, which would deliver a personalized message across multiple channels. John Ardis, vice president of corporate strategy at ValueClick, explains that 3D-BT is needed because current BT focuses only on display advertising so targets are sent messages that are relevant in display, but appear depersonalized and generic in email and on the marketer’s website.

Regardless of privacy issues and government intervention, there is too much money to be made by targeting consumer’s habits for BT not to evolve – even if those involved need to tread very carefully.

Ringing IN and Hanging UP

In the old days, a telephone came in two designs and had one ring. With the rise in cell phones, the styles are endless and so are the types of rings you can make the phone chime. There are master tones, ringback tones, polytones, monotones and they all have a price. Users can download them over the Internet and program a ring to sound only when mom or that special someone calls. Users can also send a ring out to someone to let them know who is calling. But they aren’t cheap – as much as three times the cost of one hit single from iTunes. But that hasn’t stopped people from buying the tones in droves.

The music industry loves that users will pay a premium for the 30-second melodies and still come back for more. What the industry doesn’t like is the Florida Attorney General office, which has it in for certain ringtone sellers over the Internet. Whether or not Florida officials can make a civil case for deceptive practices, the damage is done. When sites such as Blinko.com, Jamster.com and DirtyHippo.com are accused of bait-and-switch tactics by offering supposedly free ringtones that are not free, every ringtone seller over the Internet takes notice, as do consumers.

Ringtone affiliates, sites that sell ringtones and networks with ringtone sellers in their lineup are all concerned about the black eye a few misbehavers are leaving on a growing sector of the digital music revolution.

“No reason for one very bad apple to ruin it for everyone,” Steve Richter, president and general counsel for Media Breakaway, says. Media Breakaway owns CPA Empire, a network that was at the center of a ringtone firestorm a few months ago when it was discovered that an affiliate’s website offered free ringtones when, in fact, they were not free (the free tones only came with a paid subscription). CPA Empire noted that within an hour of identifying the affiliate’s website, it was pulled down. “We had no idea that this was running,” says Richter. “We took a pretty severe action against this affiliate. Any of our affiliates that are discovered to violate our terms and conditions, we take action immediately.”

Tarnished Reputation?

Matter closed. Or so it would seem until another online network is targeted. The coverage this issue has received sheds light on the power a few individuals have on the whole reputation of a budding digital music phenomenon and how hard it will be to police the vast reaches of cyberspace.

“It’s a highly competitive market and a burgeoning industry,” says David Haverly, senior executive, Mobile Vertical, at MIVA. “It’s very hard to break through.” He says that, “technically there are no free ringtones. But websites must be clear that to get the free ringtones you must buy a few; say 10 or more.”

That is what caught the attention of the Florida authorities. The alleged bait-and-switch tactics – when a seller never intends to sell consumers the advertised thing so that it can sell them a more expensive other thing – are pretty much illegal in most states. In the case of Florida, its civil investigation means that the upshot will probably not lead to criminal charges for the companies under the microscope, but can lead to accusations of fraud, which means if someone wants to sue the companies, they could have a pretty good case.

“The content provider industry has guidelines to not blur what they are getting,” says Haverly. “Sometimes, in fine print you see that if you sign up, you get the free ones.

Our goal is to give a quality experience. We have to say when an affiliate is not clear.” With a ringtone affiliate reaping as much as $15 for every new customer, the incentive is there to cut corners.

If more investigations in other states are opened, the reputation of all of digital music sales over the Internet could take a beating at a time when the ringtone market is at an all-time-high. Revenues for ringtones have more than doubled year-over- year, says JupiterResearch. Ringtones brought in about $420 million in 2006 and JupiterResearch predicts the pot will grow to $724 million by 2009. In 2005, more than 24 million people downloaded ringtones to their cell phones; that’s about 13 percent of cell phone users, according to eMarketer. IDC predicts that more than 54 million people will download a ringtone by the end of this year.

An Alternative for Record Companies

For the record companies, this is good news in the wake of its falling sales of music CDs since 2000. When Nielsen’s SoundScan launched the tracking of mastertone sales in December of 2006 (mastertones are portions of the original recording, whereas polytones are just the melody played by usually a keyboard. SoundScan has tracked polytones since 2004.), the numbers surpassed the sales of single-track songs, and in many cases at three times the price. When the first polytones numbers arrived in 2004, Geoff Mayfield, director of charts at Billboard, has said he was “floored.” The ARC Group in London has predicted that global sales of ringtones will surpass $5.2 billion in 2008 – that’s more than 10 percent of all digital music sales. Internationally, the numbers are equally big. The Wireless World Forum estimates there will be 28 million Indians under the age of 24 with cell phones by the end of 2007, and nearly 15 million in the U.K. That spending on ringtones comes to $23 million by the end of this year.

Also, with artists and their labels pulling in less from pure CD sales, other means have to be explored – such as ringtones. David Bowie was one of the first to release unique music to subscribers over his Bowie.net network. Some artists are dipping their toes into ringtone-only releases. Snoop Dog releases ringtones on his website, to name just one artist. “[CD] sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than as an income stream,” artist manager Jeff Rabhan recently told The Wall Street Journal.

Yet some vocal affiliates continue to be wary of the return ringtones offer. One forum poster stated that “I really don’t trust most of the merchants that offer ringtones; their websites have that spyware feel.” He also stated that he had “recently checked my stats and I had a measly amount, which was less than the meager $10 I made last year.” Other voices on the Internet second that sentiment. “Making money with ringtones has never worked for me,” a forum entry states.

“I’ve tried the high-paying offers; I tried the low-paying offers. I bought ads with PPC through AdWords and AdBrite and still lost money.”

In the short term, affiliates say, the term “free” always gets a higher place in a search engine result and that alone will make it hard to rid the ringtone universe of the “few bad apples.” One affiliate states that “this is actually good for some of the little ringtone affiliate players out there like myself. I always hated complying with the [terms of service] by removing the terms ‘free, no cost,’ etc., from an ad when my competition clearly wasn’t following suit. Makes it a little harder to compete and slims the margins up for a lot of markets.” Another says “all these guys are at the top of search results because their ads get much higher [clickthrough rates] than publishers that are doing the right thing and are staying away from using the word ‘free.'”

Leads from ringtones are also at an all-time high, offering no incentive to “fly by the rules.” Some affiliates in 2006 generated as many as 1 million clicks and 100,000 leads through ringtone keywords. The payout per lead has fluctuated anywhere between $5 and $15 per lead.

The Search Effect

The continued battle for high-ranking ringtone search results has had an impact. Antivirus maker McAfee rates the keywords “ringtone” and “free ringtone” in the top 10 of the most dangerous search terms to use, just after “free screensaver (per chart pg. 62)” and “Kazaa.” Clicking through to sites resulting from these searches is more likely to send the user to questionable sites or install adware or spyware, McAfee states. One of the most popular “scams” is a “free” tone site that checks a terms of service box for you when you enter your phone number. The terms of service state somewhere that you agree to a subscription price to receive the free tones. When users try to uncheck the box, they can’t.

Some ringtone affiliates have said that when they use Yahoo Search Marketing, the titles and descriptions in the ad are sometimes changed to what Yahoo Search Marketing perceives is still an accurate description. The affiliate may bid on the term “free realtone” but submit copy that leaves the “free” out. Then Yahoo Search Marketing will reinsert the “free” since that was in the keywords they bid on. The affiliate doesn’t see the change until it gets served up. In some of these cases, the affiliate will immediately cancel the campaign when they see the mistake. Sometimes, not.

Other questionable techniques include using a ringtone company’s images and logos to build a unique landing page that goes to a completely different destination when consumers go to sign up. Some advertise MP3 ringtones that are, in fact, lesser monotone files.

Ron Czerny, CEO of PlayPhone, has had experiences with bad ringtone affiliates on his network. “We are very active,” he says. “We are constantly monitoring our affiliates. We take action in 24 hours if we find bad apples and we will report them to the carriers.” The cell phone carrier may pull their short code, he says, which means that the connection between the affiliate’s ringtone servers and the customer will be cut off. “This kind of thing happens in all entertainment areas,” says Czerny.

Government Intervention

It happens with piracy in movies and music, he says, adding that the slowdown in ringtone sales in Europe in 2005 and 2006 was because of “bad customer experiences” with fraudulent ringtone sellers. What was done in a lot of European countries was the carriers imposed regulations that sellers were required to meet before they could sell ringtones. Czerny says the market over there has bounced back.

“[Regulation] is not going to happen in the U.S.,” he says, “because companies like ours are taking that right action,” adding that the bigger companies have a stake in making it work. He says that consolidation is playing a role in weeding out the troublemakers. “We will see consolidation in the top 10 businesses,” he says. “A lot of small ringtone companies are using the backbone of larger ringtone companies and are just simply giving up.” He says the larger market will be in China. Brazil and Mexico have proven they have many willing to pay for tones. Innovations, he says, will come in the way people share the ringtones and not in the tones themselves.

As with the online lead generation industry, the perception and the practice need to mirror each other. The top online lead generation firms formed an association last year to help monitor their industry and set guidelines. Currently, ringtone sellers want to keep the market unregulated. “You must have communication with the network,” says MIVA’s Haverly. “We schedule weekly calls with some of the affiliates,” so that the lines of communication are always open. He adds that if a drugstore runs a two-for-one ad for aspirin but you have to pay full price if you want Excedrin, is it a misleading ad? Does the fact that it might be perceived as fraud warrant the government or the cell phone carriers to step in? Who is going to make the judgment call?

PlayPhone’s Czerny says the government will not step in. “It will not come to that.” Richard Jesty, an analyst at ARC Group, states that ringtone sales will also see a slowdown in the U.S., but not because of fraud. “Over time, the novelty will wear off, but not yet.”