What’s in a Name?

Buying domain names of real live people can be manna to the unscrupulous.

Anne Fognano is not a newbie in the online marketing world. She has run a successful affiliate business since 1997. She’s the force behind CleverMoms.com and has registered a raft of variations on the "clever moms" domain name to safeguard her valuable brand. But she never bought the domain for her own name – AnneFognano.com. When someone else did, all hell broke loose.

While domain squatting is as old as the Internet itself, the practice of buying a dot-com name and waiting for someone with a bag of cash to offer to buy it from you has lost some of its cachet – especially since pretty much all the good common names and brand names are taken these days.

However, this hasn’t stopped some folks from getting creative. Many call it "domain extortion," where someone buys your name, sets up a rudimentary Web page of you with dummy copy and then contacts you to sell you services such as Web design, hosting and other services for bloggers. This is what exactly what happened to Fognano.

"Not much I can do about it," she says, "because I don’t have my name trademarked." Since she is not a "public figure" like George Clooney or Paris Hilton, it makes it harder to make a case that her image has been co-opted for monetary gain. The FBI and her local District Attorney’s office in Virginia told her that unless she could prove that someone was looking to profit from her name, they could do little. Besides, they told her, the payout would be so little that it wasn’t worth the authorities’ time.

Domain parking in general is fairly big business, thanks in part to the popularity of PPC programs. Anyone can buy a domain that is either a name someone may type into the address bar or is a misspelling of a brand name (called typosquatting) and put nothing but Yahoo or Google PPC ads on the sites. The ads on these types of sites actually generated $400 million in sales in 2006, according to Susquehanna Financial Group, and looks to hit the $1 billion mark by the end of 2007.

Updated Version of Cybersquatting

In the domain extortion variation, someone grabs a name of a living person who has a blog or is an affiliate marketer for as low as $6 or $8 per name through an inexpensive domain registry such as GoDaddy.com. If the person that bought the domain offers to sell services to the namesake on top of giving them back their name, there’s nothing illegal that’s been done, according to authorities. In addition, the person who registered your name generally gets more than his $8 if you decide to at least take your name back.

In Fognano’s case, she decided to fight back. Going to the popular online forum for affiliates, ABestWeb.com, she posted her dilemma and let the members know that a "blog consultant, John Kitovitsu" of PurchaseMyBlog.com emailed her to show her what using his services would look like and that she could buy the domain from him. ABestWeb members, a large, vocal and tight knit community of savvy online marketers, suggested sending him a "cease and desist" letter to remove the content, which include her image and an article taken from Revenue magazine. They also suggested bringing him up before the Internet Corporation for Assigned Names and Numbers (ICANN) and even paying him a personal visit. ABestWebbers also helped her document all the text and images on the fake site and tracked down the IP address for the hosting company serving up the site. They also determined there was no business active on the Web using the PurchaseMyBlog name.

Not a Crime?

Fognano called the local police, the FBI, her local District Attorney and even the dubious website’s hosting company (in Germany). Since "Kitovitsu" had also set up a WordPress blog page for her without her permission, she got WordPress to pull down the page for violation of their terms of service. Fognano said the FBI pulled the site for her and said it would put an "FBI investigation tag" on the website. "I actually didn’t care that much," she said. "How many people are going to type my name [directly into the address bar]? But only when they use my name and image is it a big deal."

Thus far, the authorities she contacted are not calling this a crime. New York State recently signed a law providing a $1,000 fine per day for violation of people registering domain names of known people purely to sell them their own names for profit. The law goes into effect in early 2008. While it is not known if other states will follow suit, the terms may be just vague enough not to quash the practice entirely.

"It’s almost like they are taking your identity," Fognano says. "It seemed strange that it isn’t a crime."

Domain name registrars say they can only do so much. In 1999, the Ninth Circuit Court of Appeals ruled that registrars, such as Network Solutions, could not be held liable for registering a domain of a "known trademark." Network Solutions – which used to be the exclusive registrars of domain names in the U.S., says it used to purge "domain speculators" from its registry, especially those who registered thousands of domain names at a time. But it adds that most domain names can only be reclaimed if those who registered the names do not pay on time.

After inquiries were made, Fognano heard again from "Kitovitsu." "It’s not our intention to pose as you or use your blog for material gain," the email said. "If you decide to join our network we can have a professionally designed template made to enhance the look and feel of your blog."

"Oh, I see. It was a sales pitch," said a poster on her thread at ABestWeb. Another poster wrote that it sounded like "a scam with a bit of extortion thrown in."

Registrars and Revenue

Now that lower-cost domain name registering companies such as GoDaddy.com have entered the field, the competition for registration fees is much greater. There are hundreds of accredited registrar companies internationally that deal in the more popular .com, .net, .biz, .org, .edu and .mobi top-level domains. A new domain is registered at GoDaddy.com every 1.3 seconds, the company says. That figure comes to 12.8 million domain names every five months, according to Netcraft, up from 7.5 million in a five-month time frame last year.

Selling parked domains is also still big business. Business.com famously sold in 1999 for $7.5 million. Sex.com changed hands last year for a reported $14 million, although some reports said it was more like $11 million. Domain name sales generated $29 million in 2005, according to Zetetic. Some are just in it for the names. NameMedia, for example, apparently has more than 750,000 domain names in its marketplace. Sedo.com also acts as a kind of eBay for the domain space, selling $3 million worth of domain names per month.

"A domain name isn’t something you own, it’s just something you have a right to use," says Elizabeth Beal, director of the Communications Law Centre at Victoria University in Canada. "So it’s not like [a cybersquatter] has been using somebody else’s property."

In this age of security, some companies are enhancing their products and discovering revenue streams in the process. Retail domain name registrar Dotser offers "domain name security" with its NameSafe and TransferLock products. NameSafe restricts actions such as account updates, name server updates, contact name changes, domain account changes and registrar transfers without prior authorization through email. They charge a small annual fee for the service. Its TransferLock prevents domain name transfers without being logged in to your account. This service is free. Dotser itself, however, was named in a typosquatting lawsuit by retailers Neiman Marcus and Bergdorf Goodman a few years ago, saying that Dotster put up ad-filled pages in misspelled domains of the retailer’s name and then only paid to keep the misspelled URLs that were generating any revenue. This is called domain kiting.

Some critics also charge that the extra fee-based services don’t prevent someone from snapping up your domain if the registrar goes bankrupt or registers a taken name by accident or if the registrar deletes your domain through a process error. That’s what happened to Gary Kremen when Network Solutions was conned into giving up his Sex.com domain – a destination that was reportedly earning him $8 million per year. It took him three years to get the name back, but he was pretty much bankrupt by then.

Because of the competition between retail registrars, it isn’t surprising that companies are trying to entice you to add services or register more versions of a domain than you may need. One variation on the hard sell is getting a fax from a "domain name monitoring" organization stating that someone was registering the dot-net version of a dot-com domain name you owned. Saying they were checking on possible trademark conflicts on domains they have registered, the company offers to register the dot-net domain for you instead. Sometimes the materials are marked "final notice" with that day’s date as the deadline.

Lapses and Losses

Members of ABestWeb also suggested Fognano file a complaint with ICANN. You can make a case and request the domain be transferred to you. In most cases, when you register a domain, you are also agreeing to mandatory arbitration. Arbitrations through ICANN can also be far less expensive than litigation, and the judgments through arbitration can be quicker – about 60 days. While ICANN recognizes the need to keep the processes for transferring domain names tight, it is well aware of the chorus of complaints from those hijacked or extorted. "The registrant may lose an established identity and be exposed to extortion by name speculators," ICANN has stated. "Domain hijacking can disrupt or severely impact the business and operations of a registrant."

Generally there is a process by which a domain name can fall back into the unregistered pool to be snatched up by any attentive domain buyer. You register YourName.com on a given date: 1/11/06. The domain expires on 1/11/07. There happens to be a 30-day grace period to allow for renewal of the domain for the standard renewal price (until about 2/11/07). If that date passes, the domain is tagged as in a "redemption grace period," during which time the domain is put in "registrar hold" and then "pending delete" – about 30 to 45 days, depending on the registrar.

ICANN allows the registrar to charge its own fee for renewal from then on, which could go as high as $160. GoDaddy charges $80 and Network Solutions charges $160. If those fees aren’t paid, the domain name is released into the pool to be bought by anyone.
Rich Miller, blogger at DomainWorks.com, says to treat your domain as a brand. Network Solutions agrees – that domains left to expire run the risk of being co-opted by anyone, it says. Miller says that you should register your domain for more than one year. This way it’s actually cheaper to register and you won’t have to remember to do it every year. There are some who say that domains that have been registered and active for a while get better Google page rankings.

Miller also suggests that you should look for the best registrar, not just the cheapest. Look up the reputation of the registrar. You may not see a difference in the features of a registrar who charges $30 versus $9, but you will see a big difference between the $9 and the $5 registrar. He always recommends registering "alternates" of your name in other top-level domains. If you own the .net but not the .com, the .com owner can trademark their name and potentially force you to give yours up. Also, he says, don’t forget to brand your name within the social networks – set up pages in MySpace and other destinations before someone else does.

And whatever brand name you are operating under, always remember to try to buy your own name as a domain. Recently, Fognano decided she would offer "Kitovitsu" $10 to buy her domain from him. She has yet to hear back from him.

Blurring the Lines

Recently, I posed my question to a diverse audience: “At your company, who is in charge of social media marketing? Raise your hand if it’s the marketing group.” A few hands went up. “The public relations team?” A few hands again. “Market research?” Once again, only a smattering of hands was raised. “So I guess most of you aren’t using social media at all?” I suggested. “Must be your lawyers are in charge.” That struck a chord. Laughter all round.

So, who’s in charge of social media marketing at your company? At many companies, no one’s in charge because the legal team is still assessing the risk. The first thing to do is to fi nd an appropriate executive to accept the risk. That tells the legal team that you’ve heard their advice but that you believe the business value of social media outweighs the downside. But who is that appropriate executive?

It’s Marketing

It seems obvious. If it’s social media marketing, shouldn’t you put the marketing folks in charge?

Perhaps, but whether that’s a smart decision depends on what kind of marketing people you have. Traditional brand marketers steeped in television advertising might struggle a bit with social media marketing. Word-of-mouth marketing has migrated online to be christened viral marketing, but most marketers have never lifted a finger to get customers to talk to other customers. Marketers accustomed to paying for advertised messages might be shocked at how much harder it is to foment word of mouth.

Social media marketing depends on your customers wanting to tell other customers something good about your product or service. What you’ve been paying media outlets to say about you won’t cut it. You need a message that is interesting, entertaining, appealing, and just plain hard to keep quiet about.

It’s rare that trained marketers pull this off. As discussed in my last column, Blendtec launched a terrific viral marketing video series, obliterating iPods and other unlikely objects in its blenders. But it was not a marketing plan that started the series – grinding up weird stuff was part of their product testing.

Marketers who’ve grown up screaming, “Act now and get, free, an ice crusher!” doubtless have little chance of getting their messages listened to, much less passed on.

It’s Public Relations

So, if not marketers, then should it be public relations? Or Corporate Communications, as they so often like to be known nowadays? Good reasons exist for such a decision.

PR folks have long faced the problem of enticing others to pass along their messages. PR people have spent their careers talking editors, producers, and reporters into covering their “news” and getting customers to pass along a story seems like a similar challenge.

Moreover, social media requires listening, not just talking, which any good publicist knows how to do. Tracking what’s being said about your company in cyberspace is just as important as in mainstream media. Someone who knows how to respond to a media crisis has valuable skills that can be employed when the blogosphere and message boards light up over some issue.

But PR people have limitations, too. For one thing, they tend to respond to a problematic press story based on how much influence the source possesses. They burn the midnight oil when the New York Times prints something, but don’t break a sweat when it’s the Picayune Press. That approach works fi ne for mainstream media, but it’s harder to judge the effect of a customer’s opinion in the social media space.

A public relations professional might not be the best person to assess its influence.

It’s Market Research

So, who could gauge the importance of a customer’s opinion? Perhaps market researchers, because they have spent their lives understanding customer feedback – divining the importance of opinions based on prevalence.

Market researchers use focus groups, surveys, and other techniques to tease statistical signifi cance from the noise of customer feedback. They collate the information and analyze it so that your company can take action. Surely that’s the right kind of experience, yes?

Well, maybe not. After all, market researchers are great at listening but not terribly experienced with sending messages. They don’t know how to convince an audience, preferring to find out what the audience thinks without contaminating their opinions. Marketing depends on getting customers to buy what you are selling, which requires some persuasive powers.

It Requires Cooperation

So, we’re back to where we started. Social media marketing requires the persuasiveness of a marketer, the media savvy of a PR pro, and the listening ability of a market researcher, all rolled into one. Now, maybe you’ve got someone like that lying around at your company, but I’d call that a long shot. What can you do instead?

Break down the walls. It’s not easy, but social media marketing, like many types of Internet marketing, require that you abandon the traditional barriers that cordon off each profession from one another.

Perhaps you need your market research people to learn to use reputation monitoring technology to listen to the Internet conversation about your company. They can use their well-honed analytics expertise to assess the meaning and importance of what your customers are saying.

Then you need your communications people to step in. Some of that Internet chatter might be coming from blogs – your PR folks can help you treat them like press. But they can also use their experience to concoct the kinds of messages that customers will pass along.

Your marketing team can work with the market researchers to understand what kinds of stories might persuade your target markets, and your PR folks can help design them. In fact, IBM has just reorganized all three teams under the same executive – more companies might take that same approach.

Now, will having your teams work together solve all your social media challenges? Of course not. Even the best teamwork will leave you with normal challenges of crafting appealing social media campaigns. But at least you’ll have every possible person working together to do so.

Owning Up

Social media technologies can be a powerful tool, but it’s important to know who within your organization should be taking the lead for your social media marketing strategy, which includes responsibility for everything from budgeting to staffing.

It’s commonplace for executives and managers to ask about social media leadership and inquiries stem from the growing desire to get involved with communities of customers, partners, and employees.

However, this question of who within an organization “owns” a specific community isn’t easily answered because it’s really three complex questions that need to be answered first: who interacts with the community; who pays for it; and who champions it?

Who Interacts with the Community?

Organizations have many questions when they get started with social media. They want to know who will write the blog, who will run the forum, who will manage the Wiki. These are all good questions about who you entrust with the responsibility of being your spokesperson to a specific community.

Some companies, such as General Motors, have high visibility bloggers (like GM’s Vice Chairman Bob Lutz). Other companies have a general manager overseeing its community efforts (like Intuit’s Scott Wilder). And other businesses field an team (like Southwest Airline’s Nuts About Southwest blog, which includes contributions from a diverse group of employees including Gordon Guillory, a Structures Mechanic in the Heavy Maintenance Department).

These different approaches show that any employee can interact with communities that they never deal with face-to-face with in their regular work. Community contacts shouldn’t be determined by title or department, but rather, by the mindset and judgment of the person in the job. It must be someone deeply passionate about developing that specific relationship – even if it means challenging long-held corporate culture and standards.

Natural places to look for these individuals are in marketing, public relations, and corporate communications. But don’t overlook customer support, market research, and product management as well.

Who Pays for Community?

The easy answer is that it depends on the goal of the community and who benefits most from the community. For example, a company may form a community for the express purpose of gathering insights into its customers. In this case, market research could work with vendors (such as Networked Insights, Passenger, or Communispace) to create a private community that can be polled and asked questions. These interactions can be used to supplement other sources like surveys and focus groups. In this example, it’s clear that market research should fund the community. However, companies can also allocate back the expense to other departments that also tap into that community for insights.

Communities can also be formed to provide better support. For example, through the use of discussion boards where customers, as well as company representatives, can answer support questions, the customer service department can eventually see decreased costs. In that case, customer service should pay for the community, as well as provide focus and direction.

One circumstance demands additional detail — when the IT organization should pay for (and control) community. IT usually gets involved when there’s a need to have a company-wide adoption of social and collaboration technologies. Historically, this has meant enterprise deployment of collaboration platforms like Sharepoint. In contrast, most social technologies are point solutions, designed for easy adoption by business users and requiring minimal IT involvement. IT typically becomes involved in social technologies when integration is needed into existing corporate systems and databases, where the role IT plays is one of ensuring security and systems maintenance. At some point, there will be enough point solutions where IT may also need to get involved to ensure corporate consistency in identity, data structures, and security, as well as in vendor and platform selection.

In the end, who pays for and thus controls the community should be fairly easy to determine because the formation of the community should be based on concrete goals that benefit the organization. If the goals are unclear, then the question of who pays for the community is the least of your worries.

Who Champions Community?

Deploying social media and creating communities is hard work that often challenges long-held company beliefs and cultures. But social media and community managers typically are younger, and earlier in their career, and thus they don’t always have the skills or the clout to be a change agent within an organization.

What’s needed is the third area of community ownership – executive sponsorship. Take for example Ben and Jerry’s. CEO Walt Freese is deeply involved in social media at the ice cream maker and not because he thinks it’s cool, but rather because he believes social technologies are crucial to deepening relationships with core customers – the lynchpin to increasing customer lifetime value.

Freese’s office title is Chief Euphoria Officer and he is the bearer of the social media torch inside the company, encouraging the integration of social media into all aspects of customer relationships, from marketing to customer service.

And at H&R Block, Paula Drumm, vice president of Interactive Media, has been the executive champion. She’s been educating executives while steering her team to engage with customers in multiple social media channels. Like many companies, H&R Block executives are conservative and come from a generation that’s generally skeptical about social technologies. Drumm’s change management skills have helped the company become a model of how to develop customer relationships with social media.

A key skill of this champion is the ability to understand far and how fast to push. In Naked Conversations by Robert Scoble and Shel Israel, the authors write about the importance of understanding the “corporate membrane” – how to stretch it to accommodate social media but not to the point of breaking.

The hard part of about this particular question is that it’s hard to appoint someone into position — usually, this person volunteers because they see the need and have the passion and energy to lead change within the organization.

Everyone owns Community

It’s a mistake to treat community as a separate, distinct asset because you’re talking about relationships that are core to the form and function of a business. In the end, everything that a company does flows through some sort of process that touches a relationship be it with a customer, partner, or employee. Thus, there’s opportunity for everyone in the company to own a piece of community, if only they are given the chance to do so.

I believe that a company that can spread the wealth of community involvement and ownership widely throughout a company will always be better positioned to win than one that doesn’t. After all, all companies want to be closer to their customers.

So, think hard not only about who will own community today in your organization, but also who is best positioned to open and share that ownership throughout the entire organization. The future health of your company may well depend on it.

Participation Is Not Passive

Elvis has left the building and he took the audience with him.

The only people left are fellow participants. Social media has made everyone an author, creator, director, developer, editor, critic and media outlet. There are millions of voices, but they are all saying the same thing – listen to me.

Participants do not consume passively. They do not sit silently ready to have their eyeballs converted into cash. Participants participate. They create their own original information, entertainment and art. They remix their own version of mainstream pop culture – copyrighted or not. They post their thoughts, publish their fears and fact check faster than any newsroom. They share with their friends to discover the quirky and interesting, making it an instant blockbuster- at least for 15 minutes.

Participants have ideas to be declared. Each of them is a market of one. Collectively they are a trend, a publishing powerhouse and a voice to be heard; a voice that has something to say. Participants have changed the way media is published and interactions are monetized. But more broadly and importantly, they have changed the flow of global information from top down to bottom up. They are changing the tone and tempo of the conversation.

Who’s Listening

While there are so many buzzwords surrounding this topic – social media, Web 2.0, conversation – many are overused, misused and misinterpreted.

The word conversation comes up over and over, but it’s a concept that is as old language itself – maybe even older. It is not a new construct invented by the social media advocates.

And while the medium for conversation has changed and evolved over time, the fundamental human need for conversation remains the same. We want to connect to each other. We want to express ourselves. We want to hear authentic voices engaged in a dialogue with us. Everyone wants to be heard and feel valued.

But who is doing the talking is also important. The conversation between customers and businesses must include people that are empowered by businesses to make decisions. This is not just about your support staff or marketing department interacting with customers. CEO’s, vice presidents, product managers, and other executives must be part of the conversations.

The Art of Conversation

It’s also what is said and how it is said that is key. With social media, you must treat these conversations as you would any face-to-face interaction – act like you would at a dinner party. After all, this is a social setting like any other. You say what you would say in any face-to-face conversation at a dinner party. Respond respectfully to criticism. Escalate the feedback. Act on it. Thank people for compliments. Elevate them. Ask them for more information. Reward them for their efforts. Empower them to spread the word.

That all sounds great, but ultimately for businesses, it’s about the return on investment or quantifying revenue generated by these conversations. At this point, it’s hard to put a specific value on a human connection or word or mouth. But imagine the value if all this “idle chatter” was publicly documented, archived and spread around to thousand of friends and connections. With social media and the web, it is.

The return on investment is nothing short of identifying your weaknesses in a rolling and real-time focus group. It is finding your friends in the marketplace and turning them into evangelists for your product or service. It is the new marketing – one-on-one influence of your market.

More importantly though, it’s beyond influencing your market; It’s about your market influencing you – shaping your product or service. It’s about making your stuff worth having a conversation about.

Getting Started

First, do some homework. Read some books – The Cluetrain Manifesto and Naked Conversations – are a good start. Then move on to Blink and Now is Gone. Then get off the beaten track. Start using the tools and services your market is using – Facebook, MySpace, Twitter, Seesmic and FriendFeed, to name just a few.

But having a Facebook profile or a presence is not enough. That’s just like walking into a dinner party. The next step is finding someone interesting to talk to. Participate. Find Facebook groups that matter. Search Twitter for people talking about your company, product, service, industry, competitors and pain points. Respond to them. Listen to them. And respond again. You just had a conversation. A dialogue between two participants where one communicates something, the other digests the information and responds.

It’s not magic, but it is magical. It is basic. It is human. And it works.

Incentivize Your Audience

Budgets are tightening, and advertisers need to boost ROI- fast. The social Web is gaining value not only as a medium that delivers measurable results, but also as a resource for gaining insight a company can use to make all of its advertising (TV, print, online) more effective, to increase ROI across the board.

Social media is known for its wealth of useful information. Using relevant analytics can pinpoint audiences and learn more about them. Need to reach adults who are interested in European travel? How about people in Los Angeles who like spy novels? Done. You can even aggregate more information along the way and optimize your ads as you go, to fine-tune your reach and make your campaigns more effective.

But as important as such targeting is – and it is significant – there’s another valuable aspect to social media: the level of engagement of the consumers with the social “medium” itself (compared with any other medium – TV, radio, print or even traditional online).

People choose to spend time on social sites. They’re not passive observers – they’re active participants. They’re playing games, sending messages, reading blog posts, poking their Facebook friends, commenting on someone else’s photo, and the list goes on. They’re typing, thinking, laughing, and conquering their enemies (only in the games, we hope). They’re engaged.

Use social media to provide access to enough data about demographics, traffic, interests and social actions to pinpoint a target audience and understand them better, and the attention that users give to this medium while they’re engaged.

What you get is the potential to gain unprecedented levels of information about your audiences and your messages by offering people incentives to give some of that attention to you.

The Payoff: Increased ROI

The idea of incentives isn’t new. Most of us have handed over our contact information for the chance to win a trip to Hawaii (or name your destination), or responded to a handful of survey questions to get a free soda with our next meal. The virtual world is no different. In this virtual economy, people still have wants – someone playing a game wants extra points, someone with a virtual pet wants extra gold to buy toys for it, someone in love wants to send a gift of a dozen virtual roses.

The new opportunity for advertisers is to apply the principle of incentives that we’re all familiar with offline to the virtual economy. Offer game points, gold for virtual pets, or a free gift, in exchange for taking a certain action.

It’s in this action where the real gold lies, thanks to the two characteristics of social media mentioned above. No longer are the actions limited to collecting a consumer’s mailing address or surveying for opinions that aren’t tied to any demographics.

The action is to view your ad (banner or video) and answer a few questions about it. The incentive is whatever the publisher is offering as a reward (the points, the gold, the gift, anything).

The payoff to the advertiser is intelligence that will help you increase ROI within all types of advertising.

Your survey can be designed to measure consumer perception:

Awareness – Who has heard of my brand?
Attitudes – How do people feel about my brand?
Favorability – Do people like my brand?
Intent – How likely are people to purchase my products or services?
Preference – Do people prefer my brand or products over others?

The right analytics partner can couple those results with user demographics like age, location and gender, along with interests and social actions. For example, anonymous User A is a 45-year-old woman who lives in St. Paul, reads murder mysteries, plays Scramble on Facebook and says she is “very likely” to see the next James Bond movie.

That is a significant amount of actionable intelligence for any company. In our fictional example, using aggregate (and always anonymous) audience information, the movie studio might discover that while it’s been concentrating ad dollars on reaching the male audience, perhaps there’s value in targeting females that match certain demographics.

Beyond its significant value as an advertising channel in and of itself, the social web is becoming a giant testing ground for companies to discover who their audiences are and how to more effectively reach them – from any medium.

The social space is evolving into a place that offers advertisers an efficient way to understand audience behavior and perception – and to reach people with precision targeting like we’ve never seen before. You couldn’t ask for a better incentive to get social.

Poaching Prohibited

What’s in a name? According to Shakespeare’s Juliet, not much, but if the name is trademarked it has value worth protecting. Successful companies spend millions developing a brand name and promoting their Web domains online. Some publishers, however, treat others’ trademarks like their personal ATMs by generating commissions through misleading ads.

This practice has become alarmingly present during the past few years and is often referred to by a variety of names: trademark poaching, trademark bidding, domain name poaching and PPC domain name bidding. Kellie Stevens, president of Affiliate-FairPlay.com, says it’s a difficult issue to discuss because the terminology is still not clearly defined or even completely understood.

Some in the industry say it’s actually misleading to call it trademark poaching or trademark bidding. Instead they refer to it as PPC domain name poaching because it’s really a subset of a merchant’s trademark-type words, namely their domain name. Some industry watchers say that using the phrase “trademark poaching” or “trademark bidding” has connotations of it being a legal issue under existing trademark law, but it is really a violation of the terms of services contract between the merchant and the affiliate.

Regardless of the various terminology (which is often used interchangeably), in its most conservative definition, this practice involves a keyword search on a trademarked term or the merchant’s domain name that triggers a pay-per-click ad. The ads use a merchant’s trademark in the copy, and through clever coding, the display URL appears to consumers to be from the merchant.

The way it works is that consumers type an address in places other than the URL bar – such as the desktop Google bar or into their favorite search engine – and are taken to the merchant’s site or an affiliate site via an affiliate link, thus giving an affiliate a commission when none is deserved.

The basis that this commission is unwarranted is the idea that if a consumer types in a merchant’s URL or domain address, it is clear they were seeking that merchant and the affiliate provided no added value in getting the potential buyer to that destination. Therefore, the affiliate should not be compensated.

The origin of today’s trademark poaching problem dates back to 2004, when Google changed its AdWords policy to allow keyword bidding on trademarks and associated Web domains. Cunning individuals began joining affiliate programs and designing PPC ads to appear to come from a well-known merchant. When clicked on, the ad directs the consumer to the trademark owner’s site through a link that inserted the affiliate ID, therefore generating a commission for any resulting purchase. Voilà! No website is required – the ad creates a straight path to easy commissions.

WHY IT’S ATTRACTIVE

Trademark poaching is attractive because of the low barrier to entry. For just the price of a PPC ad, publishers can quickly generate handsome commissions without the usual affiliate administration overhead, and reducing the steps from click to purchase increases the likelihood of a purchase.

One PPC affiliate, who asked not to be named, says there is a “pack of about 30” PPC affiliates that closely monitor the list of new merchants at every network and “crank up campaigns on them all” in order to profit from this behavior.

The anonymous PPC affiliate says “it takes less than four minutes to create a new campaign for a new merchant,” and that this pack of rogue PPC affiliates “don’t read the terms of service” from the merchants and they “don’t care about size – they cover them all.” He says it’s like a competition among this “pack” and that they do this for hundreds of merchants.

“There’s a trickle of others trying it from time to time as well, but the way Google and most search engines work, historical performance and clickthrough rates determine who gets the spots. They’re all competing for the one spot that lands on the merchant’s domain,” the PPC affiliate explains.

He went on to note, “That’s a ton of commissions paid out for almost nothing. If a merchant can easily do this PPC themselves, why pay an affiliate a large percent commission for doing it? It’s the branded traffic the merchant has earned; giving it away to a lazy poaching affiliate is just ignorant.”

Scott Hazard, who runs the website Cooperative- Affiliates.com, says ads that mask their origin in this manner confuse the marketplace and take money away from the merchant and the affiliate channel.

“It’s more of a problem for big brands” with recognizable names, Hazard says, as the popularity of the name as a search term will generate the high volume of traffic needed to create sizable commissions.

However, another school of thought says that although big brand merchants are often targeted more – thus losing more money overall – it’s a problem for merchants of all sizes. In fact, many smaller merchants are less aware of the issue and how to police it, making them easy marks.

While determining exactly how widespread this practice has become is difficult since it’s hard to track throughout the entire industry, a PPC consultant, who asked to remain anonymous, says, that “in some smaller programs I have worked with, as a merchant consultant and/or as a PPC consultant, as much as 40 percent of their registered affiliate sales are coming from this poaching.”

The only penalties for being caught poaching is getting kicked out of an affiliate program and having your commission withheld. That’s a small price to pay compared with the upside of undetected revenue. (See the “Trademark Ads in Legal Limbo” sidebar on page 048″ for details on other potential penalties.) Trademark poaching challenges merchants because as quickly as affiliates are kicked off, others are ready to take their places, according to Hazard.

Hazard launched the website TrademarkPoachers.com in August of 2007 to provide advice and education about the practice. While his site has increased awareness of the problem, “It doesn’t seem to be happening any less,” he says. Some say that they have anecdotal evidence that nearly 50 percent of pay per click is based on trademark poaching.

Chuck Hamrick, an affiliate manager for AffiliateCrew.com, started noticing trademark poaching in mid-2006. He could see that it was impacting overall revenue for some merchants because after he removed the poachers, the affiliate channel earnings went down, while organic and paid search revenue increased by larger amounts. This showed that trademark poaching “was cannibalizing our other efforts,” he says.

In the last two years, Hamrick caught a number of well-known affiliates poaching. He gave them “two strikes and they were out” of the program. If they didn’t take down the offending ads, he would reverse their commissions. “If it happened again, it was not by accident,” he says.

TRACKING THE POACHERS

Still, merchants that do not protect their trademarks from poachers are like retailers that allow customers to walk out with the price tags still on the clothes – if you’re looking the other way, someone will inevitably take advantage of you. Although networks can help with detection, it is the affiliate manager’s responsibility to function as the security guard and prevent these losses.

Fortunately for merchants, tracking this nefarious activity is relatively simple. Reviewing commission reports is one effective method for identifying trademark poachers. High conversion rates or affiliates who rise too quickly in volume of referrals are signs of potential trademark poaching, according to Dave Osman, senior vice president of operations at Commission Junction. “[Trademark policing] is one of the biggest challenges that the affiliate channel has had,” Osman says.

Managers can bid on their trademarks through Google AdWords to see the affiliates that are also bidding as another method of identifying potential poachers. Checking data for the location and time of day where commissions are generated can also help to identify poachers. To head off potential poachers, merchants can specify with AdWords that bidding not be allowed on their trademark or the trademark as part of their domain name.

Google will take down ads from affiliates or competitors that include domain names or URLs if the trademark holder complains, according to the policy stated on the AdWords website. However, Google will not block keyword bidding on trademarks and will not otherwise mediate disagreements over trademark poaching.

THE CASE FOR AND AGAINST

However, there are some merchants that will ask their PPC affiliates to do trademark bidding. AffiliateFairPlay’s Stevens says that there are pros and cons to this tack and merchants that allow it employ the rationale that they would prefer to see their affiliates ranking higher in the search engines than their rivals.

However, these merchants often fall into two categories – those that understand the issue and allow it to happen; and those merchants that are not aware of the implications.

When a merchant understands it and still allows domain name bidding, it’s usually because the affiliate manager can make themselves look good to superiors by showing lots of sales; or the merchant wants to inflate their EPC and sales volume to make their program’s metrics look attractive; or the merchant has made a deal with someone – such as a legitimate consultant – who in exchange for the sweet, low-hanging domain name fruit, obligates themselves to do something else, like pump those margins into deeper product and general keyword PPC on the merchant’s behalf, according to a PPC expert.

For those who don’t completely understand the issue, the reasons to allow it are slightly different: The merchant believes these posted sales are the result of “power” affiliates’ magic and doesn’t understand they’re allowing their brand, via their site name, to be leveraged by someone who does only that; or they have no idea what’s happening and believe these are actually their best affiliates; or someone such as a PPC agency or an outsourced program manager has them hoodwinked into believing this is a good practice.

However, there are instances when this type of bidding can be helpful, according to some PPC experts.

If a merchant has chosen to have coupons, then a search for “merchantname coupons” will be filled with SEO coupon affiliates ready to meet that need in the engine’s natural organic listings. The same principle works for reviews of merchants’ product or services. Most often, consumers seeking reviews don’t want to visit a merchant’s site. Instead, they want a supposedly unbiased view. Therefore, allowing an affiliate to bid on MerchantNameReview.com might be desirable to the merchant.

The Big Decision

One search expert, who asked not to be named, says there are two questions a merchant must ask before making the decision on domain name bidding.

No. 1: Do I allow my affiliates to bid on “MerchantName.com” where they send people directly to MY MERCHANT website and where they earn a commission?

No. 2: Do I allow my affiliates to bid on “MerchantName.com” where they send people directly to THEIR AFFILIATE website and where they earn a commission if someone clicks through to my merchant site from their affiliate site?

Most observers say the answer to the first question, should be – “No way, this is the merchant’s traffic and they earned it. It’s fat with ROI (often a 19x return) and it’s theirs.”

On the second question, the answer is not as clear. Allowing affiliates to do this might keep competitors from squatting on the name with their PPC ads. Search engines could see the merchant’s ads as more relevant because the domain name is the same word as the keyword, meaning that the merchant should be able to still occupy the top search spots with ease.

The Role of the Networks

Networks including Commission Junction offer trademark policing as a value-added service, and specialist companies such as Trademark Tracker and Name Protect can search out poaching ads as part of their broader trademark protection services.

While the industry is in agreement that trademark poaching is unacceptable, there is little consensus on related trademark use by affiliates in their advertising efforts. From keyword bidding on trademarks to the use of trademarks in ad copy, merchants, ad networks and affiliate networks each have their own rules and perspectives on what is permissible, and often those vary depending on individual contractual relationships.

“Ultimately, trademark poaching is in the eye of the beholder,” says CJ’s Osman. “The burden is on [affiliates] to learn each of their [merchants’] rules and to receive permission before incorporating trademarks into their ads.”

Buying a trademark as a keyword in conjunction with other words, such as “iPod and covers” is often allowed or encouraged because search engines do not want to exclude “broad match” terms. With the permission of the trademark owner, trademarks are also permitted as part of the affiliate’s display URL (e.g., www.affiliatesite.com/coupons or /reviews).

Through statistical data and the ability to observe dozens or hundreds of merchants at the same time, the networks have the power to stop this practice, but some think they don’t go far enough in their efforts.

“Good networks will show the referral URLs to the merchant, making it easy to find these poachers if they look, and reverse their orders [don’t pay them] and remove them from their affiliate program for violating the rules,” one PPC expert says.

According to one PPC consultant, who asked not to be named, the networks don’t ban this bogus practice for a variety of reasons – all related to money:

  • Merchants who want to shine their metrics (and show their bosses how well their programs are running) would go to another network.
  • Unscrupulous OPMs (outsourced program managers) would suggest alternative networks for new clients.
  • Unscrupulous OPMs would migrate programs to other networks, and when the reported sales went up, they’d be proven “right” about suggesting the migration.
  • Some merchants would not be able to make deals with their PPC consultants or agencies, and a new network that allowed this practice would be the only alternative.
  • Many less-than-savvy merchants would accuse the network of firing their “best” affiliates.

Because merchants have a right to run their own program, networks don’t and shouldn’t take an all-encompassing stance against it, the PPC consultant says.

Commission Junction’s policy is not to allow the use of trademarks in third-party ads without the express permission of a merchant, according to Osman. The rules that each merchant sets depend on their individual objectives, with some opting to be more flexible in allowing trademark use, he says. “All [merchants] do not view their [affiliates’] use of their trademarks in the same light: They have different marketing needs and therefore make allowances when necessary. For this reason Osman says, “I don’t think consistency [across the industry] is possible.”

Affiliates bidding on a domain name and sending the traffic to their own sites is seen by some but not all in the industry as trademark abuse. “One type of trademark poaching – typo squatting – is the intentional use of a misspelling of the trademarked URL, and is considered trademark infringement by most marketers,” says Osman. In recent years, companies Dell and Lands’ End successfully sued affiliates for generating commissions through typo squatting and direct linking.

Merchants can best protect their trademarks by spelling out what is allowable in their contracts with affiliates and by educating their network partners. Network ShareASale provides a dedicated area for posting banned keywords and text explaining the merchants’ choices, easily available referral URLs marked on every sale so the merchant can see the details, a feedback system for merchants to tag terms-of-service-violating affiliates to others, and other mechanisms making implementation of a merchant’s choices easier and more effective.

“Each merchant has different ideas when it comes to this issue, so our goal is to try to make as much information as possible available to both the affiliates and merchants on our network so that they can run their programs as they wish to run them,” says ShareASale President and CEO Brian Littleton. He encourages merchants to upload their individual agreements as well as a list of prohibited keywords so that all parties are clear on what is allowed.

One observer says that merchants need to ask the networks different questions instead of just asking for advice on whether or not they should allow domain name bidding in their programs. Rather, the merchants should be posing questions to the networks such as: What will the networks do for me? What tools will they give me to support and facilitate my choices on these issues? How will they help me police a decision to disallow it and what repercussions/tools will they give me to stop people who do it and won’t stop?

Domain name poaching is not going away anytime soon, but search experts promoting best practices say that savvy merchants and affiliate managers that educate themselves on the complex issues will realize the practice is a shortsighted path to profits, and ultimately bad for the entire industry.

Going for the Gold

If asked to identify the characteristics of an ideal product to market, most would likely put at the top of the list broad appeal, the ability to evoke strong emotion, a venerable brand – and something very, very, sexy.

If this sounds a lot like the Olympic Games, then it’s easy to understand why TV advertisers line up from Beijing to Burbank with large checks in hand to get a piece of the action.

Capitalizing on the Olympic hype online isn’t nearly as competitive as buying TV spots, but not because of a lack of interest. Restrictive and complex licensing rules and requirements have kept many marketers on the sidelines. However, by marketing around the athletes and the teams instead of the Games themselves, online marketers still have a shot at bringing home some gold.

With nearly 3,000 years of history, the Olympic Games have an unparalleled tradition in sports. The images of the athletes ascending the podium clasping their medals while listening to national anthems evoke strong emotions. Sinewy athletes who push themselves to unparalleled physical achievements are the embodiment of sexy.

No wonder that every two years corporate sponsors spend billions around marketing the games, the national teams and the athletes themselves. The Beijing Olympics will bring more than $900 million in additional advertising to China in 2008, and $3 billion to the global market, according to media company ZenithOptimedia.

“We estimate that the last Olympics added about $2.5 billion to the world ad market, so [Beijing] will add about 20 percent more,” says Jonathan Barnard, the head of publications for ZenithOptimedia.

Millions of Chinese residents are also getting Internet access for the first time. In the first half of 2007, 39 million residents of China began logging on, a nearly 32 percent increase over the previous year, according to the People’s Daily Online. Marketing firm GroupM predicts that because of the Olympics, China will surpass the United States as the leading contributor to the worldwide growth in advertising in 2008.

Because the 2008 games will take place in China – a land of intrigue to Westerners and a land with a booming economy due to a new appreciation for capitalism – Beijing will translate into gold like no previous Olympics. The opportunity is also greater for this Olympiad because of the games being held in one of the world’s most populous cities (15 million people). Top-tier sponsors such as Coca-Cola and McDonald’s – who pay $50 million or more every four years to be associated with the winter and summer Olympics – are hoping for greater participation in the opening of the Chinese market to international companies.

“Athens and Sydney [the locations of the prior two summer Olympic Games] were in small markets,” says Ed Hula, editor of Olympic marketing site Around the Rings. “This is the largest market with the biggest potential,” … and companies see “more potential to use the Olympics to boost their market in China,” he says.

Since Beijing is relatively unknown to the rest of the world, the Games offers a chance to connect the region to a new audience and bring cultures together, according to Carter Westfall, vice president of consulting firm Helios Partners, which has worked with cities applying to host the Olympic Games. “Every city has a story to tell,” says Westfall. Similar to Berlin during World War II, “seeing the athletes competing inside Beijing is a unique opportunity given the current political climate,” he says. Westfall says that because of the location, nontraditional Olympic sponsors such as Australian energy company BHP Billiton, which is building a dam in China, are participating.

Beijing also presents a greater opportunity than the last Olympics, not only because of the size of the country, but also because of the changes in Internet technology and marketing vehicles. The new opportunity is “hard to quantify because there have been so many advances, such as blogs, virtual reality and social networking,” notes Westfall. During the last Olympics, websites such as SecondLife, YouTube and MySpace either didn’t exist or were not useful online marketing tools. While top sponsors will continue to spend millions on TV, “the online component is the way for sports marketers to differentiate themselves,” he says.

Jimmy Vee, a marketing consultant and co-author of the book Gravitational Marketing, recommends using athletes prominently in online marketing campaigns. Advertising on enthusiast blogs, athlete’s MySpace pages and posting training videos on YouTube are inexpensive marketing methods, Vee says. “Consumers don’t connect with companies, they connect with people,” he notes.

Getting Out of the Blocks

Early 2008 is the perfect time to begin marketing around the Olympics. Most initiatives surrounding Olympic marketing begin between three to six months before the games. Around the Rings’ Hula saw very little marketing activity off-line outside of China during his travels around the globe in 2007 and also noticed few online campaigns.

Top-level Olympic sponsors including Samsung, GE and AT&T began their marketing efforts online and off-line in early- to mid- 2007, but they have yet to start their sprint to the finish. Samsung used an online promotion to recruit torch bearers for the Olympic relay through an exclusive arrangement with the BOCOG (Beijing Organizing Committee for the Olympic Games). GE launched a micro website with videos detailing its involvement in building power, lighting and water systems in Beijing.

The small pool of Olympic licensees with campaigns active in the fall of 2007 includes Jet Set Sports, which has exclusive rights to sell Olympic hospitality packages to Beijing, and merchandising companies XP Apparel and Roots.com.

For merchants, getting the governing Olympic Committee to approve merchandising deals can be a marathon of negotiations. James Connell, the director of e-commerce and new media for Roots.com, says merchandising Olympic apparel “… is complicated because you have people with competing interest in what the products look like and how it should be worn.” The retailer, which is based in Toronto, obtained a merchandising license from the USOC (United States Olympic Committee) instead of the IOC (International Olympic Committee) and can therefore only sell apparel online to consumers within the U.S., Connell says. Recruiting for new affiliates to sell products around the Beijing Olympics will begin in early 2008, according to Connell. Consumer promotions won’t start until about 100 days before the games begin, he notes.

Roots.com is partnering with existing sports sites, and Connell recommends that publishers add content about individual athletes’ performances and their lives to increase traffic. The company does not have marketing agreements with any USA Olympic teams or athletes currently, so they can’t sell USA Gymnastics bags, for example. In the past, the company has signed marketing agreements with individual athletes such as skater Apolo Ohno.

AT&T, a sponsor of the USOC, began its marketing activities in the summer of 2006, according to Mary O’Connor, the director of Olympic marketing for The Marketing Arm, which represents the company. In addition to the marketing programs with the USOC, AT&T also indirectly markets around the Beijing Olympics by supporting two USA Teams.

Though marketers who partner with USA Teams cannot use the Olympic Rings or Beijing logos, they gain an association with teams and sports that have fans that match the attractive Olympic demographic. AT&T’s “Blue Room” website tracks the year-round exploits of the USA Diving and Gymnastics teams. The site provides results of pre-Olympic competitions and behind-the-scenes videos of the participants in training to engage the audience with the personalities, O’Connor says. The website will encourage fans of gymnastics to start talking about Team USA’s prospects for success in early 2008, in hopes that “the passion can come around Beijing,” according to O’Connor.

Amateur sports enthusiasts “have no mainstream outlet for their sports” and are hungry for content, according to Matthew Pace, a partner and chairman of the sports business at the law firm of Duval & Stachenfeld. Pace, who previously worked on Olympic marketing for General Motors at agency Eventworks, says marketing to a fan base can create an affinity. For example, if an automotive company sponsors the USA Swim Team and the fan also likes that sport or team, then he or she is more likely to buy from the company, Pace says.

Pace says sports enthusiast blogs and news sites that cover but are not affiliated with sponsored teams are a great place for “ambush marketing.” For example, automotive competitors can market to the same audience of sports fans on other sites to attempt to win over consumers.

Marketing in conjunction with USA Teams and enthusiasts sites provides access to a desirable demographic without having to pay premium Olympic sponsor dollars, according to Robert Prazmark, executive vice president of sales and marketing at the Wasserman Media Group. Prazmark, whose company markets for the USA Gymnastics, Swimming, and Track and Field teams, says that the USA Teams and their fan sites in aggregate create a larger marketing opportunity than the Games themselves.

While the Olympic TV audience has dwindled, interest in swimming and gymnastics clubs is growing, Prazmark says. An individual webcast may only draw tens of thousands of viewers, but collectively, online coverage of a team’s activities and competitions can surpass the viewers of Olympic events, he says. Prazmark notes that USA Team fans offer a desirable demographic because of higher relative incomes. “The audience is larger and deeper than a more generic Olympic audience,” he says.

So just like the journey of the Olympic athletes – persistence, preparation and training are required for marketers to take home gold.

UPDATE:

Media services company ZenithOptimedia released its forecasts for advertising expenditures in the U.S. It projects a banner year for Internet ad spend including a good year in 2008 for TV ad spend because of the Olympics – but predicts ad spend down overall.

Some of its projections include:

  • U.S. ad market has been downgraded to 2.5 percent growth in 2007 from the previous estimate of 3.3 percent – mostly because of the credit and housing market slump
  • The Olympics will lift TV’s share of the global ad market to a record 38.2 percent in 2008
  • Online video and local search will make for a 30 percent growth in Internet ad expenditures in 2007 – that’s nine times faster than the rest of the ad market
  • Between 2006 and 2009, Internet ad spend will grow 85 percent and raise its market share from 6.1 to 9.5 percent
  • It projects 29.9 percent growth this year in Internet ad spend – that’s up from 28.6 percent from its last forecast a quarter ago, and 85 percent growth between 2006 and 2009 (up from the previous forecast of 82 percent)
  • Internet advertising is expected to account for 9.5 percent of all expenditure in 2009, up from 9.4 percent last quarter

Getting a Reputation

If you didn’t see it, you probably read about Snickers’ Super Bowl advertisement, “The Kiss,” which featured two men unintentionally kissing after they were both eating the same Snickers bar. Immediately after the Super Bowl, much of the feedback in the blogosphere was that the ad was funny. But the next day two gay civil rights organizations denounced the ad as homophobic. The blogosphere reacted again, much of it negative about Snickers. By that evening Snickers pulled the ad and took down its website. The day after that, Snickers issued a statement expressing that they did not intend to offend anyone. For the remainder of the week, much of the mainstream media coverage was negative for Snickers and there was much debate back and forth on the Internet.

For weeks, the conversation raged online, which affected search engine result pages (SERPs). Meanwhile the press, including The New York Times and USA Today, picked over Snickers’ bad judgment and missteps. More than two months after that commercial aired at the Super Bowl, four out of the top 10 listings for the search term “Snickers” in Google’s SERPs were about “The Kiss” and three of them were negative.

“The Kiss” is the latest high-profile illustration of the long-term repercussions online conversations have on a brand’s reputation. The content of what is written on the Web not only affects the people who read it, it affects the rankings on the search engines and what the media chooses to cover.

The advent of consumer-generated media (CGM) has transformed the concept of brand management. Nowadays it is possible for a consumer to never encounter information created or endorsed by a company, but instead to rely completely on CGM for recommendations and insights. The bottom line, explains Rob Key, CEO of Converseon, is that “you no longer own your brand – your customers do.”

CGM includes community scoring programs like eBay, feedback rating systems like Yelp, opinion sites like Epinions, social networks like MySpace sites, and blogs. Blogs range from the very influential and highly trafficked, like TechCrunch and Jeff Jarvis’ BuzzMachine, to millions of average blogs that in the aggregate can reach tens of millions of readers.

When a company does something considered egregious, such as produce an offensive commercial or provide bad customer service, bloggers often react harshly and create a far-reaching buzz called a blog swarm, which can cause damage to a company’s reputation. In 2006, there were blog swarms that had serious long-term consequences for companies including Dell (dubbed “Dell Hell”), which started when Jarvis complained about Dell’s customer service on his blog, and another surrounding AOL, which began when a subscriber posted his phone conversation with a rude AOL representative to his blog.

Key explains that because blogs are spidered well (due to their large amount of refreshed content and inbound links) they can rank higher than other sites, including corporate sites. In the past, a brand could control the placement of their site with tags and by the way it designed the site’s pages. But Jim Nail, chief marketing and strategy officer of market influence analytics company Cymfony, says that currently corporate sites are getting outranked by consumer-generated sites “and frequently those are the ones that are negative.”

However, it’s not just the first or second listing on SERPs that brands should be worried about. Holly Preuss, principal of Granular Solutions, an online customer acquisitions services company, says companies should be managing the top 10 and particularly the top five because “above the fold is crucial.” Key agrees. He says it’s similar to how companies must manage their brand on the shelf in the supermarket: Companies must manage their top listings – “their shelf space” – to maximize their brands’ positioning.

Brands have to make their top listings a priority. An April 2006 study conducted by iProspect found that when users perform a search, 62 percent of them click on a result within the first page of results, and a full 90 percent of users click on a result within the first three pages.

Andy Beal, creator of the site Marketing Pilgrim, says sometimes companies find a negative post and think, “it’s only one blogger; it won’t have a long-term impact.” But then a blog swarm begins and the negative buzz ranks high in the SERPs. Then the issue reaches a whole new audience as mainstream journalists increasingly use search engines to research new story ideas.

Because consumers rely heavily on the Web as an authoritative source of information, managing a brand’s online reputation has become a top priority for companies. Strategy consultant Amanda Watlington says the participatory environment of Web 2.0 requires companies to monitor and measure their public perception so they are able to take necessary actions to preserve brand equity and maintain a brand’s personality. This necessity has spurred the development of new strategies, tactics and tools.

Monitoring Tools

Agencies like Converseon and Nielsen BuzzMetrics have tools for monitoring social networks, blogs and communities. They measure the volume of buzz, track the source and gauge the emotions of a comment – whether positive, negative or sarcastic.

But monitoring systems don’t need to be expensive or complicated. Granular Solution’s Preuss recommends that companies “think like a customer” and Google themselves. Companies can create RSS feeds based on keyword searches and narrow down the results to a specific domain with tracking systems like Technorati and Feedster. Sites like BlogInfluence.net and SocialMeter. com provide a snapshot of the credibility of any blogger by showing the audience-reach and popularity for the entered blog URL.

New tools are popping up all the time. Pronet Advertising launched Serph, a tool to find what is being said on social media websites. Do The Right Thing is a community that rates companies positively or negatively. Its goal is to hold big businesses accountable.

Once You Monitor, Then What?

Converseon’s Key says that once companies mine the conversation for detractors, they can separate them into two groups. Some are “reasonable” – they have a bad impression or a company had a bad experience with a company, such as poor customer service. And some are “determined,” such as the site StarbucksSucks.com, which feels Starbucks is ruining independent companies.

Catherine Seda, Internet marketing expert and author of the book How to Win Sales & Influence Spiders, says there is nothing a company can do about determined detractors, so companies should focus on the reasonable ones. There are a variety of ways to do this.

Companies need to reach out to bloggers. The sooner they react, the better it is to prevent potential longterm damage, says Marketing Pilgrim’s Beal. Preuss adds that when there is a complaint about customer service, the company needs to fix the problem and then engage the customer immediately by responding to that post.

Noah Elkin, vice president of communications at interactive agency iCrossing, says his company offers “proactive customer engagement” for their clients by responding to posts with helpful information, such as a link to a technical support page. Elkin stresses that they always indicate they are representatives for a company – “the No. 1 rule is to be honest about who you are; then you can participate in the discussion.”

An option for promoting a company’s brand online is to pay bloggers to evangelize it through a service such as ReviewMe. PayPerPost.com offers this service, but is requiring writers to include a small graphical button that denotes that a post is being sponsored. One of the tenets of Word of Mouth Marketing Association’s (WOMMA) code of ethics is that bloggers must disclose for whom they are blogging. To help craft disclosures, affiliates can seek advice at DisclosurePolicy.org, which was created and funded by PayPerPost.

Some experts recommend monitoring the buzz instead of trying to manage it. Cymfony’s Nail explains that there is no controlling what people say and the best you can hope for is to have your side of the story told. He says that “The Kiss” exemplifies this. It created an ebb and flow on the Web of people that started out attacking the ad and then started defending Snickers. Due to that, Nail says Snickers did not need to issue a statement.

For matters that require a timely response, some experts recommend using paid search (pay-per-click links). Preuss says that on the plus side, PPC links can show up in a couple of hours and they let the public know the company is aware of the situation. The downside, says Seda, is that people who might not have been aware of the problem will likely find out about it.

Some experts say that paid search is underused. For example, searching on the term “Wal-Mart sucks” yields negative results for the first 10 listings. Cymfony’s Nail says it is “foolish” that Wal-Mart does not have any paid links to sites where it could tout Wal-Mart’s economic benefits.

“For a company to protect its brand, they should be buying those words,” Nail says. But Marketing Pilgrim’s Beal warns that paid search “is a Band-Aid” and does not replace reaching out to bloggers directly.

An affiliate could mine blog buzz through a monitoring tool such as Relevant Noise’s pingMe notification system – so when someone posts about a product that an affiliate sells, the affiliate could buy relevant keywords.

One tactic for dealing with negative buzz, such as a product recall, is to issue a press release that addresses the concerns. Press release distribution companies such as PRWeb send releases to journalists’ email boxes and optimize press releases, which helps to increase the rankings in news engines such as Google News as well as in the general search results. When a press release ranks high in a search engine, it is one more spot a company’s competition or a negative listing won’t get.

Knock Out the Negative

Issuing a press release is one way that company information can gain a top search engine ranking, and when this happens, negative sites move lower and get moved off the page. Converseon’s Key describes this as pushing detractors off the “visibility cliff.” There are other ways to try to do this.

Post to top-ranking sites: Postings to sites such as Wikipedia or Squidoo can help a brand or affiliate push negative results down and get more exposure. When an affiliate posts to advice sites like LifeTips.com, it allows them to be seen as an industry expert on the things they are attempting to market. Granular Solution’s Preuss says if an affiliate blogs about cars and posts affiliate links on their site in a CPL deal with automakers and has rev shares with accessory retailers, then they could post on LifeTips.com a top 10 tip list for shopping for a new SUV.

Create a blog: Another tool for creating a positive listing and monitoring a brand is to create a blog, which can humanize a company and present its side of the story. If the comments are enabled, companies can get in touch with their most passionate visitors.

Optimize your site and create multiple domains: Author and IBM search expert Mike Moran explains that search results never contain more than two listings from any one domain, so brands should make sure their pages are optimized for the legitimate two listings (#1 and #2 are ideal). If the company has multiple domains (i.e., for subsidiaries) a brand can ethically optimize those sites for the company’s target keywords. Many companies have mini-sites, for which each has its own URL; for example, Starbucks has one for music, one for locations and one for its online store.

Use affiliate programs: Affiliate programs are a way that brands can get additional positive listings on SERPs. But affiliates pose risks because they can threaten the control of a brand. Watlington says brands have to make sure that affiliates, who are custodians of their brand, are in step because “companies spend a lot of money creating a brand and if an affiliate does something like use outdated creative, the brand is then altered.”

If a merchant does decide to have an affiliate program, it’s imperative for a merchant to monitor affiliates and make sure they are compliant with a program’s terms and conditions. For this reason, Converseon’s Key recommends that merchants start with tightly managed and honed programs.

The Merchant Mind-set

Merchants will need to decide if they are going to allow their affiliates to bid on their trademark terms, which tend to convert very well. Benefits include having offers for different types of users on the SERPs, keeping competitors off the SERPs and keeping competitors’ affiliates off the SERPs. 77Blue’s David Lewis says that merchants need to evaluate what is right for their brand and find trusted partners who will work with them to protect their brands through trademark bidding.

Many merchants are so wary of affiliates bidding on their trademarks that they completely forbid it for all affiliates. Super-affiliate Colin McDougall recalls an instance when an affiliate manager admitted that McDougall’s bidding had made a huge difference for their sales but still would not make an exception to the company policy – it was the “if we let you do it, then we would have to let everybody do it” mind-set.

This mind-set might be changing, however. A 2007 Marketing Sherpa study reports that merchants have become more lenient with the use of their trademarks in keyword campaigns. In fact, 29 percent of merchants say they allow bidding on use of their trademarks and 36 percent say they place some limitations on trademark bids.

Companies no longer have an option about whether they should participate in online communications. These conversations are going to take place regardless if the company is involved or not. For this reason, reputation management has become one of the most talked-about topics among merchant and affiliates. Just this spring, Neo@Ogilvy, Ogilvy Group’s digital and direct media unit, acquired GSI Consulting Group, which specializes in brand reputation. TNS, a provider of strategic advertising intelligence, acquired Cymfony.

The good news is that there are tools to monitor buzz and ways to push negative conversations from the eyes of the masses. Creating a blog, optimizing a company’s website, buying PPC, issuing quality press releases, contributing to high-traffic forums and becoming a part of the conversation on user-generated content sites are all methods whereby an online reputation can be managed.

Presidential Performance

Obama’s got one. So does Hillary. As does McCain. John Edwards has a good one. Rudy Giuliani, Mitt Romney and Bill Richardson also each have one.

It will come as no surprise that all the major 2008 presidential candidates have websites this election cycle. While they are not all of the same quality and some have way more bells and whistles, the sites carry news, video clips and the all-important areas for donations. What is surprising is how well the candidates have harnessed the power of the Internet and what tracking data can do to help their victory. And while the candidates gear up for an astonishingly early election season, it also means marketers and affiliate marketers can take advantage of the interest in this political period to further their cause or add a few ducats to their sales. But challenges still lay ahead.

The Internet as a political platform is not new – just look at the various blogs that have sprouted up since the 2004 presidential election, not to mention the various other new conduits for candidate conversation such as podcasts, user-generated video and cell phone text messaging. Remember that Howard Dean was the first – then virtually unknown – candidate to blog in 2003. This season candidates have more ways to get their talking points out.

Performance marketing network Performics in fact, recently completed a survey that said 42 percent of Americans will seek more information on the 2008 elections from the Internet.

“Campaigns have embraced Internet strategies to stay competitive,” Alexis Rice, project director of CampaignsOnline.org, says. Not only campaigns, but also mass-audience destinations have launched political areas such as MySpace.com’s Impact Channel, where users can drag candidate ads onto their own MySpace pages.

A Burst Media survey found that more than 20 percent of likely voters have actually already gone to a presidential candidate’s website. Of those, one-quarter have clicked on a candidate or advocacy group’s online advertisement. The study also found that use of the Internet to understand the positions of candidates outpaces all other forms of media. A quarter of likely voters said that going online was the best method to learn about the issues, which beat out TV (21 percent), newspapers (17 percent), radio (7 percent), magazines (4.4 percent) and other paper material (3.3 percent).

Back in 2000, before the dot-com bust, pundits and publications made fun of most candidates’ websites, singling out their old information, lack of transaction abilities and their stupefy-ingly bland sense of Web design. Today, just like outdated ASCII art or “site of the day” home pages, political sites have seriously evolved. Now the candidates and the third-party companies that help their digital campaigns are more than savvy; they are refreshingly cutting-edge and Web 2.0 in their approach.

The amount of money being spent and raised online for the elections is also evolving – albeit a little more slowly. Although PQ Media predicts the online campaign ad spend will top $40 million this cycle – up from $29 million in 2004 – it is still dwarfed by the $2 billion to be spent on TV ads alone. And while 38 percent of registered voters received telephone calls from campaigns in 2006’s midterm election push, only 15 percent got email from the candidates, according to Pew Research Center. Advocacy website MoveOn.org raised upward of $28 million in 2006 – the majority of that through online donations. The Center for Responsive Politics measured more than $100 million in online fund-raising by election day. Still it seems a drop in the bucket compared with the $2.6 billion in total 2006 fund-raising.

It may not be huge, but the revenue stream from online is worth tapping into. Candidates for House and Senate seats in 2006 were pleasantly surprised by how much they raised via the Internet. Democrat Joe Sestak earned a House seat in part from the nearly $900,000 he received in Internet donations; $88,000 of that from a single email blast. Democratic advocacy group Act- Blue touts the fact – in big numbers on its home page – that it has received $19,918,240 (at press time) through online donations since 2004. Not to be undersold, the John Kerry campaign in 2004 claimed it owed $80 million of its campaign funds to donations made via the Internet.

While no candidate is likely to refuse money from Internet donations, the biggest realization the Republican and Democratic parties have made – the Democrats more so because they were so challenged by muddled messages in 2004 – is that data is king. Since around 2001, the Democrats, after being demoralized by their defeat, have become conscious of the fact that the GOP simply had better voter data.

One result is that the 2008 democratic candidates have sleeker websites. Another is the Democratic National Committee hired Plus Three, a “progressive” digital marketing firm to build out a database of voters.

The data that Plus Three is going after is basically the most detailed demographics it can get by law; most urgently, email addresses, phone numbers, income and birth dates. Plus Three and the Republican counterpart – Voter Vault – together hold information on more than 165 million folks in their respective hard drives. The most coveted are email addresses because, as Plus Three states, it can mount email campaigns for a fraction of the cost of phone campaigns or TV and print advertising.

Fast Fund-raising

With the data at the ready, campaigns can send email blasts as news happens. Following on the heels of John Edwards’ morning announcement that his wife’s cancer had returned, an email went out that afternoon with a personalized message to all who had registered at Edwards’ website. He was the first presidential candidate to join Twitter (the mini-blog social network) and the first to announce his candidacy online by way of YouTube. On his website, Edwards has all the tech bells and whistles – with profiles on social sites 43Things.com, Bebo.com, blip.tv, Capital Hill Broadcasting Network, Care2. com, Collective.com, Essembly, del.icio.us, Facebook, Flickr, gather.com, hi5, LiveJournal. com, Metacafe, MySpace.com, Ning. com, PartyBuilder.com, Revver, TagWorld, vSocial, Xanga.com, Yahoo360 and YouTube. Edwards also has a Store button on the home page where T-shirts, buttons, mugs and stickers get their showing. Additionally there is a download area for podcasts and RSS feeds.

The week after Edwards broke the news about his wife, ActBlue reported the Edwards campaign received $540,000 through online donations. However, fellow democrat Hillary Clinton raised more than $1 million in online donations the week after her husband, former President Clinton, asked for contributions at the end of February.

The intersection of this highly charged political election and widespread technological advancements is something that marketers can also take advantage of.

CEO of search engine Powerset, Barney Pell, points out three examples of opportunities for online marketers: “First, a bookseller could create a special section on their site that organizes books according to political topics, issues and personalities,” he says. “Second, a company specializing in clean and environmentally friendly products could create a website focused on these issues,” adding that they could then track what the candidates have said or how they voted and then link the issues back to the company’s products. “Third,” he says, “companies could take a stand on issues or back candidates from social media properties. This level of authenticity, while risky, can connect with target audiences in a whole new way.”

Not to be discounted, search marketers can grab ballot-fever by the handle and utilize the “mind-set” of the voter. “Search marketing is a fantastically underutilized area for political candidates to demonstrate their qualifications beyond the status quo,” says Todd D. Malicoat, a search consultant who runs the site Stuntdubl.com. “When someone does a search for a candidate’s name they are volunteering their attention versus the normal approach of a candidate interrupting a voter for their attention.” He says that the information found through search can “actually sway a voter’s opinion” because they are infinitely more receptive to the information. He adds “the difficult opportunity for search marketers is mostly in finding a way to market themselves to the candidates by demonstrating how valuable these services could be to a candidate’s campaign.”

Whatever a marketer’s commitment to showcase political topics or products, Gary Marcoccia, Marketing Director of affiliate network AvantLink, suggests choosing something you’re passionate about. “This makes it easy to maintain and add content on a regular basis,” he says. “Publishers should shoot for 20 to 30 posts a month and think hard about including keywords in the headline and a couple of times in the post itself.” He says, for example, on an eco-friendly blog, a publisher could write a post on how to save energy in the home, categorize it appropriately and then send the traffic on to a merchant that sells low-energy light bulbs.

The other changing face of campaigning in the digital age is commerce versus community building. Hillary Clinton’s site has a good number of videos with her message on her site, as does Barack Obama’s site. But McCain, Mitt Romney, Clinton and Richardson have no online stores.

What the major candidates lack in storefronts, they gain in grassroots efforts online. Democratic-leaning Party- Builder.com lays claim to 10,000 virtual volunteers since September of last year and its Republican counterpart MyGOP says it has “thousands” of online volunteers as well. The Edwards campaign has its OneCorps, a virtual volunteer network that plans and executes grassroots Edwards house parties and serves as a platform for launching other campaign actions. Gone are the days when simply having a website was enough. “The organizational aspect is transformative,” says David Plouffe, a political consultant. When Maryland candidate for comptroller Peter Franchot emphasized his presence on MySpace and Facebook, his campaign got 80 percent of its volunteers from there.

When Maryland candidate for comptroller Peter Franchot emphasized his presence on MySpace and Facebook, his campaign got 80 percent of its volunteers from there.

In a month his volunteers – most of them obtained through online efforts – made 15,000 calls and distributed 50,000 campaign flyers. Franchot did win. Online experts have called this effect the “new virtual playing field.”

Online Voter Army

The site has pulled in 10,000 volunteers since September 2006. The Republican National Committee’s counterpart, MyGOP.com, also claims “thousands of people” and shows Web pages chartering each individual volunteer’s fund-raising progress. When Democrat Ned Lamont ran for Connecticut Senate he set up a space on his website where supporters could type in personal endorsements or “virtual postcards” and send them from the site. He got 25,000 visitors to do this. He beat incumbent Sen. Joe Lieberman.

Another lesson that campaigns still need to learn is the power of performance marketing. As noted, online stores on candidate sites – at least at this stage of the election cycle – carry inconsistent content. More importantly, the stores are mostly populated by products sold by third-party companies, which are either mom-and-pops or come from the direct marketing world.

John Edwards’ store, for example, is run by The Progressive Store, which is owned by Keith Shirey in the Los Angeles area. Shirey, a former janitor who touts the fact that his political buttons were banned on eBay, also sells stickers for Obama, Gore, Kucinich and Clinton. However, he doesn’t offer links to his store like Tigereye Design does. Tigereye sells Obama, Clinton, Richardson, Kucinich and Edwards campaign products and offers cut-and-paste link code for anyone to put a store link on their site.

Data Determination

As mentioned, the Republicans had made great and precise use of data before the 2000 election. Their Voter Vault database is drawn from voter registration and from other public and private records. What shakes out is a potential for the database to have hundreds of pieces of demographic information on every single voter, such as what cars they drive, what churches they go to, what magazines they subscribe to, what political organizations they give money to and even whether they hunt or fish. The data is run through a computer model and a prediction is made about how they are likely to vote. These folks can then be targeted with very specific messages, be that via letter, phone call, email, TV or other collateral. This form of “microtargeting” essentially won the GOP the White House in 2000, pundits say.

Democratic online efforts are motivated by trying to match what the GOP has built. Democratic online volunteer campaigns are aimed at amassing a virtual army of advocate foot soldiers. Voters with personal websites and affiliates can take advantage of the political season by linking to the candidates’ stores; however, there is no commission. If education and awareness are important to the affiliate, a candidate store section would not be out of place on a site selling retail goods or a site or blog that is opinion-based. If an affiliate runs a travel site or coupons, the links might be out of place. Certainly MySpace and other user-generated social sites are an ideal place for store links. One could even link to the candidates’ donation pages where visitors can pledge funds from the bare minimum to the maximum allowed by federal law. Throwing in a few well-chosen keywords at the new areas of a website could increase traffic overall and may generate a sale or two.

“Studies in the retail sector, where users who are served ads get a cookie placed on their machine ” provide a glimpse into how effective online ads can be in planting ideas in peoples’ heads that shape future behavior,” said political blogger and executive director of the Internet Advocacy Center in Washington, D.C., Alan Rosenblatt. Colin Delany of political blog e.politics.com notes, however, that “what the Internet excels at is relationship-seeking and relationship-building,” meaning those who seek out a candidate or sign up for a candidate’s RSS feed are probably already followers of that campaign. But once a potential supporter is in the door, so to speak, the campaign can leverage email and viral messages to help solidify support and donations. The next big step is to track them and target them as well as the online marketing sector has with analytics and what the Republicans did so well with microtargeting.

The multimedia aspects of a candidate’s site have proven popular and engaging. Burst Media reports that 50.7 percent of likely voters stated they would watch a video clip on a candidate website that features him or her talking about the issues. That number held for all age groups, including 55 and older. A quarter of voters said that they would hear a podcast by a candidate outlining his or her platform. Podcast listeners in the 18- to 34-year-old category scored far higher on that question than other age groups.

Right now, the bigger blogs such as RedState or Daily Kos may pull in a wider audience demographically on the Web but are still small numbers compared with the reach of a single campaign email blast. And with a solitary email, Rosenblatt notes a campaign can reach a whole array of donors who give small amounts – $25 to $50 – who wouldn’t otherwise give off-line. As one campaign finance expert noted, “It’s the only way you get a million people to each give you $10 on the same day.”

Virtual Worlds, Real Opportunities

They hang out for hours on end, actively seeking out new people and things to experience. These “residents” of online worlds – who also aren’t afraid to buy online – match the definition of a desirable audience. With millions of registered users and thousands of dollars changing hands every minute these virtual worlds provide ample opportunity to enhance e-commerce and bolster your brand.

However, marketing to virtual-world participants is very different than in the real world. It requires carefully assimilating into the community of pixelated people and tactics that are more about nuance than numbers. Those who buy not-so-real estate before understanding the culture could cause damage to their brands that carries over into the real world.

Virtual worlds enable people to escape the doldrums of school, work and home life by using altered egos (avatars) to navigate terrain where almost anything goes. Virtual worlds such as Second Life, World of Warcraft, There.com and Kaneva are among the fastest-growing (and most-hyped) destinations for online entertainment, and marketers have been quick to stake their claim.

Second Life has grown from 100,000 to more than 4.4 million registered users within a year, and often has more than 40,000 people online simultaneously. World of Warcraft, a massive multiplayer game, has more than 8 million subscribers.

Console makers are getting into the act as well, creating virtual- world extensions of their gaming platforms to retain their customers when they take a break from killing or competing with each other. The Sony Playstation Home world will launch later this year, while Nintendo has developed a virtual world for owners of the Wii console.

Buying In

Today most of the money to be made from virtual worlds comes from subscriptions and selling virtual real estate. According to analyst firm Screen Digest, online virtual worlds surpassed $1billion in revenue in 2006, but most of it (87 percent) stems from subscriptions paid to the worlds’ creators.

Marketers are spending on in-world events to increase their reach, and most importantly, to get access to a desirable demographic. If you imagine that these worlds are primarily a respite for socially awkward teens, think again. Because the sites require a faster-than-average computer and broadband Internet access, users tend to be somewhat computer-savvy and more educated, according to marketing consultant Sam Harrelson.

“They are not your typical audience,” says Harrelson, who counsels clients on marketing strategies for Second Life. Participants tend to also use many social networking sites such as Flickr and del.icio.us, and because they buy virtual goods such as clothing for their avatars, they are comfortable with spending online. Screen Digest projects that commerce (both business to consumer and consumer to consumer) transacted through these sites will top $1.5 billion annually by 2011.

There.com, a virtual world created by Makena Technologies, has more than 600,000 registered avatars, with participation equally split between males and females, according to Betsy Book, director of product management. The median age is 22, and 70 percent of members are between 13 and 26, she says. Shopping for items for avatars is one of the most popular activities, according to Book.

Learning the audience

Before deciding whether to establish a corporate presence, companies should create avatars and join the virtual world as individuals to learn how people communicate and what their tolerance is for marketing. Virtual-world residents have developed their own culture that must be understood before marketers establish a presence, according to Harrelson. Residents would prefer to learn about companies from their peers rather than be approached by advertisers or overwhelmed with graphic ads. “If you buy a building without a marketing plan you can be wasting a lot of money,” Harrelson says.

Opening a storefront and expecting avatars to cruise by and start shopping is an unreal expectation. Sporting goods and apparel company Reebok did just that and had their store defaced by Second Life activists who are rebelling against the commercialization of their escapist distraction, according to Harrelson. (Buildings can be reset in Second Life, so the damage was only temporary.) The company erred in not doing any community outreach before setting up shop, he says.

Companies must be sensitive to what are considered acceptable levels and aggressiveness of advertising in virtual worlds. “If brands go in and assume that you can have ‘in your face’ advertising, it could potentially be very damaging,” says Greg Verdino, who blogs about online marketing. Companies must “join the community and add value” or risk anti-brand backlash, he say. “A bad brand impression in Second Life can follow you into real life.”

A virtual presence must be interactive and offer some entertainment or incentive to be accepted by the community and to garner traffic, Harrelson says. Just as in the real world, free music, sporting events and item giveaways are the best methods for attracting a crowd.

“If you are not authentic and do not offer anything to the community, you are likely to be ignored, at best,” according to Catherine Smith, director of marketing for Linden Lab, which operates Second Life. “However, those firms who commit to a long-term, creative presence in Second Life have an opportunity to interact with their community in new and innovative ways.”

American Apparel, a Los Angeles-based casual clothing company, was the first retailer to establish a Second Life store, in June of 2006. The younger audience of people who “are into leading-edge stuff” was a good match for American Apparel’s customer base, according to Web director Raz Schionning.

American Apparel held several events to generate attention on Second Life, including a launch party that surpassed expectations. Avatars were lined up outside their store in a four-hour queue, according to Schionning.

He says the company thought a Second Life storefront would be a better investment than advertising in an online game. “I’m not sure that a billboard in a racing game would get us much notice” because of the speed of video games, he says. The virtual storefront is modeled after a Tokyo store and costs a few hundred dollars per month to maintain, Schionning says.

Revenue Slow to Grow

Virtual worlds sell real estate in the form of buildings and islands, which can cost tens of thousands of dollars to set up and maintain. IBM purchased 24 islands on Second Life and has committed to spending $10 million on virtual-world marketing.

MTV set up a virtual Laguna Beach island on There.com to promote its TV show of the same name. Reuters, Cisco, Dell, Wired Magazine and General Motors established virtual-world stores or offices, and Calvin Klein launched CK IN2U, a virtual perfume.

Land speculation is becoming big business in virtual worlds. Companies that don’t want to buy an island or take the time and resources to develop an attractive property themselves can buy or rent a building or office space from a virtual landowner. Second Life real estate developer Ailin Graef of Germany claims to have made $1 million developing and selling virtual properties.

So far the majority of the commerce transacted within virtual worlds is consumer to consumer. People are happy to spend a few dollars to buy a skateboard or outfit designed by a fellow resident. More than $1.6 million changed hands in a single day on Second Life in March, according to the company. Companies such as American Apparel are testing the waters of selling virtual goods to generate revenue, but more importantly, to get more exposure for their brands.

American Apparel sells items (virtual jeans or T-shirts) to avatars to wear while cruising Second Life. The clothes are all modeled on real items, and American Apparel offers coupons for 15 percent off real world items when someone purchases the virtual equivalent, Schionning says. The virtual coupons link to its online store, but the transition between the websites could be smoother. “The technology is a bit too clunky,” he says.

While the 12,000 purchases of American Apparel garb in Second Life currency (Linden dollars, which are purchased with real money) aren’t enough to boost the company’s bottom line, the attention from the media and access to Second Lifers has made it a worthwhile investment. “The value is in the exposure,” notes Schionning.

People tap into their inner consumer through their avatars without the restrictions of the real world. While you might not be able to own a tricked-out sports car or diamond necklace for financial or practical reasons, your avatar can, and marketers can use the boundless possibilities to broaden their branding opportunities.

Residents of There.com can buy or rent apartments and adorn their online homes with furniture or art designed by residents or sold by retailers that represents the life they would like to have, according to Makena Technologies’ Book. Shopping is the most popular activity on There.com, she says. “Your online self represents what you are, and where you live says who you aspire to be,” Book says.

The growth of virtual money-changing got the attention of a congressional committee, which is studying the possibility of taxing virtual purchases. Profits made from selling virtual goods are required to be reported as taxable income when converted into currency, and Congress could tax individual virtual transactions in the future.

Brand aid

While companies should not expect a virtual store to convert its visitors into millions of dollars in online commerce, participating in virtual worlds generates buzz and creates brand awareness that can justify the investment.

“Real-life businesses are generally not looking at Second Life as a revenue opportunity, but rather as a way of extending their brands,” Linden Lab’s Smith says.

Brands that create a positive impression in the virtual realm can transfer that interest to their real-world products, according to Book. For example, Nike sold virtual sneakers that enable avatars to run faster, she says, which reinforces the company’s message of its products’ enhancing performance.

Determining an accurate way to measure the value derived from a virtual store or event is a work in progress, according to Book. “We’re still trying to figure out what works in metrics,” she says. The company is developing methods for tracking avatars’ presence in commercial areas of the virtual world to provide demographic data to marketers.

While a company might be happy that the avatar of a young woman is flirting with others at their virtual party, they can’t be sure that it is not an older married man behind the avatar, making it difficult to be certain who is being exposed to your brand. “There is no way to be sure if the registration [information] is actually who they are,” says Book.

Virtual Cottage Industry

While anyone can join and do business in an online world, creating an experience and brand identity that is worthy of residents’ attention requires an insider’s insight. Hot on the heels of the virtual worlds craze are marketing consultants, ad agencies and graphic designers specializing in building and monetizing in the faux environments.

Companies such as Electric Sheep, Millions of Us and The SL Agency provide consulting services that enable companies to create a virtual presence that is consistent with the rules and culture of virtual worlds. Hiring a graphic artist who has experience building offices or islands in a virtual world will expedite the process for companies looking to build a virtual presence.

Joe Mastrocovi and his partners at Long Island- based Moderne Promotions thought their 25 years of event marketing experience would translate well to the virtual realm. After spending time learning the ins and outs of Second Life as residents, the company launched The SL Agency, a marketing company focused on developing events such as volleyball tournaments, concerts and parties in Second Life.

The same tricks of the trade to entice young audiences that work in malls and clubs (free music, free clothes) also work on Second Life, according to Mastrocovi. The SL Agency purchased an island named Activ8, which provides avatars with a place to ski, wager, dance or cruise the boardwalk.

The company sells virtual outdoor advertising such as billboards on Activ8, as well as sponsorships of events. Mastrocovi says virtual and real-world events can be held simultaneously to maximize the press potential and viral buzz.

Similarly, There.com holds events that match what is going on in the sports world, such as skiing events during the winter, and a virtual grand prix in March, according to Makena Technologies’ Book. Companies can purchase sponsorships to expose their brand to virtual world participants without having to commit the resources needed to establish a permanent presence, she says.

But companies expecting to host a DJ-ed virtual party for a song are mistaken. “The costs aren’t much cheaper than a real-world event if you want to hire talent,” Mastrocovi says. By combining in-world and real-world events, companies can create millions of impressions to websites as well as drive customers to brick-and-mortar stores, according to Mastrocovi.

Just as event companies hire beautiful 20- somethings to hand out merchandise in the real world, Mastrocovi recommends that marketers pay well-known avatars to walk around Second Life and promote a company’s brand. These “brand ambassadors” are people trusted in the virtual environment, and an endorsement for them holds weight with other residents, he says.

Participating in online worlds today provides access to an influential younger audience, but it is a challenge to quantify the return on the investment. In the future the companies that administer these sites will develop better ways of tracking the time that residents are exposed to a brand as well as offer more in-depth demographic data. Makena Technologies’ Book says the company would likely develop methods for sharing details about the people behind the avatars that are attending events and making purchases.

The popularity of virtual worlds is encouraging more companies to create alternatives, including kid-themed universes and even a world based on Shakespearean characters. However, blogger Verdino says consumers will have a limited appetite for virtual participation. “No one is going to join 57 different virtual worlds.”

The technology to make virtual worlds interesting and interactive places to while away the hours has arrived. By getting in early, companies can help to set the course for marketing in these burgeoning worlds.

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