Overcoming Your SEO Fears

Ask nearly everyone and they’ll say that search engine optimization is intimidating. Search engine optimization – SEO for short – should be a familiar term and practice for anyone or any commercial company with a website. SEO is what you do to your website to get a higher ranking on search engines,particularly Google,Yahoo and MSN.The higher you rank the more likely someone will click through to your site and buy your stuff. Lately, information and tips on just how to do that can fill a library.

“I don’t think you can be in business without realizing that search is a big part of the tool you need – you need to have a strategy to be found,” says John Battelle, search guru and author of the book The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture.

And yet being found is still perceived as some sort of magic formula. “SEO is not sorcery or deception; just something that requires diligent research and staying on top of changes to the way search engines do things,” says Joe Balestrino, who runs the Mr. SEO website.

If someone enters the term pizza into Google, for example, the first results are most likely the product of SEO. Pizza Hut, Domino’s and Papa John’s have all made an effort to rank in the top three spots on Google. Whether they remain there is something search engine marketers will need to stay on top of. Search engine marketing – SEM – are the tactics employed in order to rank higher, be they through paid search or other nonpaid methods. It could be by transforming a website’s look and feel to gain higher ranking.

Many Search Marketers Fail to Measure Results Take the term iPod and plug it into Google. What you get is a sponsored (or paid) search result for Apple. The first nonpaid result is also Apple. Not a coincidence. The Apple brand is so strong that it ranks very high on unpaid results, and paying for a sponsored result is just bet hedging.

People who are new to selling on the Web can get very confused by the “science” behind SEO. Talk of relevant keywords, algorithms and cost per click can terrorize Web sales newcomers. It’s an issue that continues to frighten brand-name companies as well. Since the concept of SEO is only about eight or nine years old, most companies have typically hired a chief marketing officer with as little as two years’ experience in matters of SEO.

Companies are also realizing that search engine marketing is a full-time job and have created executive positions just to monitor and enact SEM strategies. Companies that will do your SEO for you are growing as well. Books and conferences continue to provide advice whether you are a newbie or have been practicing SEO for awhile.

While trying to demystify SEO for people who have gone to a few dozen websites and have not been able to understand it, we can’t ignore the advancements in SEO and how big the market has become. Search still finished first in online ad spend in 2006, to the tune of 40 percent of total online advertising revenue, according to the Internet Advertising Bureau and PricewaterhouseCoopers. This trend of 40 percent is predicted to continue through 2010, according to eMarketer.

Back when there wasn’t a name for SEO, the tried-and-true way to rank high on search engine results pages was using as many keywords as you could in your content. If you sold cigars, putting the word cigar in your articles and written materials as many times as humanly possible would probably get you a pretty high ranking. With the ascension of Google and its algorithmic rankings, that doesn’t work so much anymore. Not to look too far under the hood, but the Google algorithm that ranks pages basically looks at who is linking to whom on the Internet and the quality of those pages. The more high-quality pages linking to you, the higher you get.

Most marketers employ a combination of SEO and paid search, also called pay per click, which results in a sponsored ad when someone searches for certain keywords. For example, that’s why searching for iPod brings up Apple’s URL in the sponsored position and as the first search result – or the “natural” search result.

Getting there has been considered by some as rocket science. And there is a current debate in the industry over whether SEO is too hard for the average Joe to execute effectively. Some consultants who do SEO say, of course, it’s a very difficult science. Critics claim that search gurus want to keep SEO sounding complicated so that they will continue to get your business.

“SEO is a new-school-of-marketing thought – switching someone’s beliefs is nearly as difficult as converting someone’s religion,” says Todd Malicoat, who consults on SEO from his StuntDubl.com site.

“I think that there’s a complete misnomer that SEO equals top position on the search engines,” says Dave Taylor, tech blogger at AskDaveTaylor.com. “In fact, smart SEO is much more about being findable for the specific keywords and phrases that will drive customers to your site, rather than just a more simplistic popularity contest.”

Job Functions Performed by Search Engine Marketers in the U.S. - 2006 That said, there is no denying that SEM efforts continue to grow. Forty-two percent of advertisers say that their SEM budgets are new, says the Search Engine Marketing Professional Organization (SEMPO), in its recent annual survey of marketing executives. The survey also found that 83 percent of advertisers prefer organic (or natural, nonpaid) search, while 80 percent put paid search at second place. Respondents stated that sales was their primary goal for SEM – 59 percent said this. Fifty-three percent said brand awareness was the primary objective and 48 percent said lead generation was the goal. SEMPO’s 2005 survey stated that the North American search engine marketing industry grew to $5.75 billion. That’s a 44 percent jump over 2004.

“Search engine marketing is growing at a faster rate than television, than radio, than print media,” pepperjamSEARCH.com CEO Kristopher B. Jones said at a press conference in August 2006.

While brands are becoming more adept at SEO, a battle is still ongoing behind the scenes between traditional advertising and search marketing. “I think the big brands are starting to get it, but yes, at a snail’s pace,” says Mr. SEO’s Balestrino. He says that while a few of the “heavy hitters” have been looking for SEO people to get them started, most still rely on the word of their SEM. “As you might imagine, few SEMs are into SEO because it can greatly reduce the need for PPC over the long haul.”

Balestrino adds that some companies are starting to see PPC “for the losing battle it can become,” especially among highly competitive retailers and service providers. “The company who is willing to spend the most can rank the highest, but the ROI is dwindling because PPC costs are rising faster than inflation,” he says.

StuntDubl’s Malicoat says that “I no longer try to claim that ‘branding is dead,’ but that certainly won’t keep me from kicking it while it’s down. It’s amazing how often I see a big brand completely blow top search rankings that could have been achieved with a little understanding, some initial planning and very little additional budget.”

Keywords are Key

The camp that believes SEO is not an intricate science say the first thing any SEO beginner needs to do is figure out what your relevant keywords are. Since the major search engines are organizing results based on the word or words people type into the engine, knowing how to organize your keywords is step one. Plus, coming up with all the applicable keywords for your site helps you understand much more clearly what it is you sell.

You can find these keywords by writing down as many as you can think of, or you can survey your core audience. You can also buy software to help you come up with words. There are sites and software to help you find the value in the keywords you have come up with, such as Overture.com (now known as Yahoo Search Marketing) and WordTracker.com.

Statistics associated with your keywords will help you decide what words get more traffic than others. Companies such as Trellian offer SEO software tool kits that help manage keywords, check your rankings, edit your meta tags and create PPC bid comparisons, among other things. For your cigar site, for example, “Dominican cigars” may get far more traffic than “Mexican cigars.” In fact, the latter may do so poorly as to warrant omission when it comes to keyword bidding.

What you are shooting for is a site that can be easily indexed by a search engine. Search engines send out automatic programs that look for new content and create an index based on the words on each website page. That means that attention to Web design and quality writing will boost your site’s chances of getting high rankings. For example, try to keep each Web page small in size, have no broken links, use correct HTML, a server that is up all the time, no identical Web pages on your site and good, clear navigation. All these elements help the site get indexed by search engines.

Some believe that little things such as title tags can make a difference in your site’s rankings as well. Title tags are the one-sentence descriptions coded into the HTML that are displayed at the top of the browser when you visit a page. Organizing your site in URLs that make sense also may contribute to rankings (URLs that show the structure of the site in words as opposed to a series of numbers). Something as simple as a sitemap page helps when you are being indexed.

Especially in Google the more sites that link to your pages the higher your ranking will be. This is called backlinking and is very effective when “high quality” sites link to you – and is even more effective if the link text itself contains one of your keywords. This may mean you will need to put on a public relations hat and send information or press releases to other sites. Joining industry Web forums can help get the word out as well.

This is how SEO has operated over the last few years. There have been many nuances along the way and those degrees of execution are what make SEO seem very impenetrable. In recent years, companies and website owners have opted to buy SEO from firms that do it for you – pepperjamSEARCH.com, Prominent Placement, Fathom SEO, SEOInc.com, EngineReady.com, Adoofa.com and iProspect, just to name a few.

SEMPO’s annual survey indicates that more companies are interested in outsourcing their SEO, but the overall numbers are still small. Only 26 percent of advertisers plan to outsource half or more of their paid-placement budgets for 2007. About two-thirds said they plan to do all of their organic SEO in-house. Only 10 percent said they would outsource all of their SEO needs. The high tech sector is also not immune to the difficulties of search. Among top software firms surveyed by marketing research firm MarketingSherpa, 25 percent were not “sufficiently optimized for search engine visibility.”

Brand Awareness

Some search pundits and bloggers continue to believe that big companies are slowly awakening to the power search brings to their brands. “Big companies are doing too little, and many small companies are too focused on SEO at the price of good content production. The magic bullet is just to produce lots of good, fresh unique content; not to play SEO games and trick people into linking to you,” says Taylor.

Having everyone on the same side of the fence would solidify search as a must-have for all companies. Currently the jury is still out about what constitutes the best approach to search. Some critics have written that SEO is a “one-time fix” – that once a site is optimized, you won’t have to touch it again. Counterarguments are that sites have to change as search engine algorithms change. “I think there are more than a few [SEO firms] that give companies the indication that over-thinking an SEO strategy is necessary, when in reality, it isn’t,” says Mr. SEO’s Balestrino. He says that most companies budget SEO expenditures pretty low, but not necessarily too low to be effective. He says to be wary of the “overly grandiose implementation.”

Others predict that the future of SEO is specialization – broad-category specialists who see SEO as “just plain marketing” and people who will specialize in areas such as keyword research, link building and analytics.

Search engine marketers are still having a hard time because so many of them working for mid to large companies are not focusing exclusively on SEO. A JupiterResearch/iProspect survey found that 88 percent of SEMs are doing SEO; however, 58 percent of them are doing website design, 26 percent do public relations, 44 percent do market research and 22 percent do direct mail. There are only so many hours in the day and only so many hats for overworked SEMs.

This is where legitimate SEO firms hope to gain ground. While MarketingSherpa research stated that SEO firms were still mostly “mom-and-pops,” staffs are growing at these firms and client accounts have doubled. MarketingSherpa says there are a handful of SEO firms reporting more than $10 million in revenues from SEM work and there are at least a few companies reporting $20 million in SEM revenues. The research reveals that most of these businesses have only been in operation for about four years at the most.

Some say that the buy-in from companies who could use search isn’t complete. SEMPO’s 2005 marketing survey stated that only 37 percent of companies said that executives were “moderately interested in search engine marketing practices.” Even companies who would like to outsource their SEM appear to be intimidated by the choices. “The biggest mistake is not doing enough homework on who is reputable and what works,” says StuntDubl’s Malicoat. “Companies should search names, company names, past company names and really be diligent in learning what is going to work best for them.”

Battelle is straightforward when it comes to telling companies what they need to do. “It is hurting companies that don’t use search,” he says. “It is our user interface. It is like a listing in the Yellow Pages.”

The Posh Payoff

Diamonds, private jets, multi-million-dollar mansions, haute couture, luxury vehicles and high-end handbags – customers looking for upscale goods and services could probably find all these items in posh places like Beverly Hills or they could just head to the Web.

The online shopping environment for upscale merchandise has been robust in recent years.

Websites such as NeimanMarcus.com, with annual sales that jumped 30 percent in fiscal 2005, and Diamonds.com, are flourishing.

This climate of vigorous sales is driving merchants, including fashion icons DKNY and Prada, to unveil e-commerce sites in the coming months and incentivizing affiliate sites like American-Luxury.com and Splendora.com to promote high-end merchandise to their niche audiences.

Initially luxury merchants had trepidation about the effect the Internet would have on their brand equity. eMarketer’s senior analyst, Jeff Grau, says, “Because the Internet is often thought of as the place to go for bargains, luxury merchants were concerned that it would cheapen their brand. Luxury brands’ emphasis is on quality and fashion rather than price ” they did not want to be associated with a channel that was for bargain hunters.”

But lucrative benefits have outweighed these concerns – the Internet not only offers a new source of sales and higher profit margins, it is a way for merchants to avoid high overhead costs of paying employees and expensive rents in tony areas. And many luxury merchants that have moved online say they did so to meet increased demand.

LUXE FOR LIFE

That demand is evident in several categories. In 2005, Forrester Research found that jewelry/luxury goods, apparel and health/beauty were making the most inroads into total sales – and the market researcher forecast apparel and home products as the two categories to grow the fastest between 2005 and 2010.

Traditionally the categories that have sold the best online have been computer hardware/software, books, and toys/video games. ComScore Media Metrix found that for the 2005 holiday season, the jewelry and luxury goods and accessories categories showed a 22 percent gain in visitors in December over November.

Apparel: The conventional wisdom about e-commerce was that apparel never would sell well online because people want to try things on before they buy. But more familiarity with a brand’s size and quality expectations as well as easier return policies are causing consumers to buy more apparel online every year, which accounts for a large segment of high-end merchandise.

“People are becoming more and more comfortable buying apparel online. For example, denim is one of our top categories – we keep adding more brands due to the demand of what clients are asking from us,” Carel Hearon, eLuxury.com’s marketing and affiliate manager, says.

Accessories/Handbags: According to comScore Media Metrix, the percentage of Internet visitors to Coach.com increased 117 percent in 2005, and a 2005 Women’s Wear Daily poll found that a large percentage of women (48 percent) buy accessories online. Accessories such as handbags and scarves sell well over the Internet because they are not restricted by size or fit requirements.

“Handbags and accessories are our strongest categories. You don’t have to try on a handbag, so there is a lower return rate,” Hearon says. Others agree.

“We get lots of winning bids for eBay on terms like Balenciaga Le Dix and Chloe Paddington for handbags,” says Michelle Madhok, who runs SheFinds.com, which focuses on shopping and fashion. Madhok notes that such handbags retail in the $1,000 range.

Shoes: Madhok adds, “We sell tons of shoes – especially from Zappos Couture” – with an average price point of $250. She says the reason is, “No matter your size, shoes always fit – that makes them especially attractive for Internet shoppers.”

Trisha Okubo, founder of Omiru.com, a style and fashion affiliate, says, “Our best categories are shoes and other accessories, likely because the fit issue is minimized in these categories. Our experience with high-end shoes is that brand name matters. Bluefly has worked for us because it provides discounts on well-known designer names.”

Lingerie: The 2005 Women’s Wear Daily poll found that women like to purchase intimate apparel online such as lingerie because they enjoy the privacy of shopping from home. Underwear is SheFinds.com’s No. 1 category. SheFinds.com partners with BareNecessities, which offers brands such as La Perla and Cosabella that sell bras that typically cost more than $100.

Jewelry: According to comScore Media Metrix, the increase in the percentage of Internet visitors heading to Diamonds.com was 223 percent, and the increase to Zales.com was 163 percent from November 2004 to November 2005.

Eddie Bakhash, president of AmericanPearl.com, which has been in business since 1997, says it has experienced a steady growth of approximately 20 percent annually for the past five years. The top-selling items are rings, earrings and necklaces, and the average price point for a product is $1,000. Brad Matson, chief marketing officer for Bluefly, says it added jewelry “based on demand,” adding, “It is an important and growing segment for Bluefly.”

Home Decor: Forrester predicts that home products will grow 8 percent between 2005 and 2010. Marilyn Olsen, who runs four sites, including American- Luxury.com and French-Luxury.com, sells a wide range of high-end merchandise including furniture, kitchenware, interior design and gardening essentials and is an affiliate for upscale furniture merchants such as Design Within Reach, Frontgate and Horchow.

She explains the success of these categories:

“As people furnish their kitchen, they want to be able to cook and entertain casually in as much style as they do in other parts of the house,” Olsen says. When people visit American-Luxury.com to buy leather armchair barstools that retail at $729 each from Horchow, they can see a Jura Capresso Impressa espresso machine that retails for $2,399 from Sur La Table.

Other Items: The definition of a luxury item is something that adds to pleasure or comfort but is not absolutely necessary – an indulgence. Merchandise in all sorts of categories could match this description – such as spa treatments, luxury travel, upscale baby clothes, gourmet foods and high-end gifts.

For the 2005 holiday season, the leaders in the luxury segment were RedEnvelope with its December traffic (2.4 million visitors) seeing a 62 percent increase over the previous month; and Tiffany & Co., up 47 percent over November with 2 million visitors, according to comScore Media Metrix.

Luxury shoppers, who make up a mere 2 percent of all online buyers, account for nearly 7 percent of online retail sales. According to Forrester, the online shopping revenue reached $170 billion in 2005 – $12 billion (7 percent), was sales luxury sales.

Indeed, some online luxury shoppers are affluent people. In March 2006, Time magazine found that of adult Internet users with household incomes of at least $150,000, 12 percent of respondents said that the Internet was their primary place to shop for apparel and 18 percent said it was their secondary place. And upper-income shoppers have been driving sales for the past two years, noting that luxury goods retailers were the strongest performers during the 2005 holiday season, according to Ernst & Young Consumer Trends Center.

Forrester finds that luxury buyers are comfortable with Internet and Web technologies and have shifted a great part of their spending to the online channel as usability has improved. Luxury buyers, in fact, are 36 percent more likely to be comfortable with online transactions involving their credit cards and are 25 percent more likely to be technology optimists than average online shoppers.

CONVENIENCE IS KEY

And the Internet is an excellent way to reach lucrative clientèle – high earners who work long hours and have little time to shop. American-Luxury’s Olsen attributes part of the growth of her site to this. “I think a lot of it is time constraint,” she says. “The sophisticated customer is increasingly very, very busy and they don’t have time to go to the mall.”

Forrester found that convenience-driven consumers make up approximately 31 percent of all online shoppers and represent nearly 35 percent of all online spending. And many of these convenience shoppers are buying upscale merchandise.

“It turns out it is a convenience thing – most of our customers live in major metropolitan cities – they could have gone to the stores,” says eLuxury’s Hearon. “We thought our top buyers were going to be in places like Des Moines, Iowa, where there were not stores to buy the latest Rock & Republic jeans.”

And for people who live in more rural areas, it is certainly more convenient to shop online than to take long trips to metro areas. eMarketer’s Grau says, “The Internet makes it easier – it brings into reach the items that people in small towns cannot get.”

Jeremy Palmer, QuitYourDayJob.com’s CEO, says he has worked with Zappos.com, and was surprised that there was a market for expensive shoes but reasons that “people in fly-over states like Utah [where he lives] want luxury shoes but are limited in what they can buy – the audience is smaller but there is demand.”

Olsen agrees. “In some areas of the country, it is harder to find upscale merchandise. I think they tend to appreciate Internet shopping more than someone who has access to brick and mortar,” she says.

In addition to convenience, Grau says the growth in luxury online sales is due to the maturation of e-commerce where consumers feel more comfortable buying very expensive things online, so there are more items offered to meet demand.

“Merchants started out with books and CDs and gained confidence to where consumers buy a watch or a ring, whereas a year earlier they never would have. There are three main reasons: trust, education and presentation,” he says.

TRUST BUILDING

The biggest tool for building trust is improved customer service with excellent phone representatives, consistent delivery of quality products and better shipping policies for easier returns.

Madhok says, “Shoe companies are great with free shipping and free returns, so there’s no risk in ordering.”

Hearon adds that, “For apparel, such as denim, people will buy two sizes and keep one and return the other so they can avoid the hassle. We have great shipping policies to do that.”

Grau explains that merchants make it possible to enter into a live chat so there is more hand holding when it comes to buying a high-end product.

“You see on jewelry sites lots of educational information that explain what to look for when buying a diamond ring – how to evaluate quality and what carats mean. They [service representatives] help a customer shop and they gain more trust in the brand that takes the time to educate the customer about how to buy a diamond ring.”

Another important component to luxury shopping online is the presentation of merchandise that websites offer.

Consumers visit websites after they have been in a store since they can often find a great range of color and sizes. Online shopping is not only about pre-shopping, but securing exactly what you want, according to Grau.

Olsen says, “I work like a personal shopper and make it easier for people to find things. I am able to show them all of the options in one place and make their decision making more simple.”

Luxury shoppers do not think of the Internet as limited or the lesser alternative to off-line shopping but as a unique way to shop, according to Bluefly’s Matson.

“At Bluefly, you can see 100 dresses in one color very quickly – you would have to go to 10 stores to see that,” he says. “Bluefly has an engine that lets you look at all of the dresses that are black, size four and between $200 and $400, from more than 365 designers.”

There are some e-tailers that allow customers to enter their physical dimensions and the site will in turn offer up styles that are suited to your figure, Grau says.

Online shopping also serves consumers who want to stay on top of the trends, making it easier to achieve a certain look. Hearon says many of eLuxury’s customers “have high household incomes but some are willing to live in a shoebox to have the latest Louis Vuitton bag and shoes. They are very fashion-conscious and are aware of the trends and want to wear them and will do whatever it takes.”

Celebrity gossip and style watcher websites have brought the demand for “it” labels to cyberspace.

“Now women want the bag they see Jennifer Aniston carrying. Before, to get their hands on the designer item, they’d have to shop in a big city. Now designer labels – even discounted designer labels – can be found on eLuxury, Neiman Marcus, Yoox and Bluefly’s websites,” Madhok says.

Omiru.com’s Okubo says that, “the growing status-consciousness of our culture encourages the gravitation towards luxury brands. What you buy and what you wear is seen as an extension of your personality, really; an extension of you. What does this mean for retailers? People want Prada or Polo, not a private-label brand. Luxury brands have an automatic stamp of approval on them.”

NICHE IS NICE

This phenomenon provides an opportunity for publishers to focus on an area of their expertise, become an evangelist for a brand and reach potential customers – whether it is for premium watches, fine crystal or evening handbags. Moreover, luxury purchasers tend to be passionate and loyal and showy about their brands and this lends itself well to merchants looking for loyalists to endorse their products.

Liane Dietrich, vice president of Merchant Services for LinkShare, attributes the increase in luxury-brand sales online to affiliates.

“There are lots of niche and content sites that are playing the role of ‘recommender’ – they recommend products and merchants to consumers and that is paving the way for luxury brands to take their place.”

Clearly affiliates are attracted to upscale merchandise for the high commissions – many luxury sites do not offer discounts and have limited “sales” or “clearance” sections. Luxury merchants report that paying full price does not deter consumers from buying.

Another reason affiliates promote luxury products is the cache that luxury items offer them.

“I think it’s very important to note that affiliates are attracted to luxury merchants for the perception of high-average- order value and high conversion, as well as the visual value that the luxury connection adds to the affiliate’s site,” Dietrich says.

But affiliates need to be sure they offer the brand that leads a potential customer to their site. Shawn Collins, president of Shawn Collins Consulting, warns, “If unchecked, affiliates will exploit the brand – they will leverage the brand names like Gucci or Dior even if they don’t sell those products. Affiliate managers should kick them out after one or two ‘outs’ if affiliates mess around with the branding. For example, in paid search arbitrage, affiliates can bid on trademarked names such as Dior but these keywords frequently get abused and affiliates drive traffic to their sites when there is no product there.”

SELECTIVE, EXCLUSIVE, DISCRIMINATING

Affiliates should be aware that in exchange for potentially high commissions, the programs are not easy to get into and will require that affiliates not only have a highly trafficked site, but a well-designed site that features other upscale sellers. And they will be closely monitored with their keyword buys and how they present brands on their site.

“Luxury affiliate managers are pretty brand-protective. They are looking for a reduced level of discounting; a clean, visually appealing site; and possibly some other merchants on the site that would help raise the legitimacy of the website,” Grau says.

“Obviously, Rolex doesn’t want to see an advertisement for Rolex watches on a Wal-Mart affiliate site,” Palmer says. “The terms and conditions of luxury programs spell out how they want their brands advertised.”

Hearon says, “We are very selective – we have 300 people apply per week and I let in three. I evaluate the ‘look and feel’ of the site and I have an intern look at every affiliate. I make sure we are not on coupon sites.”

“You have to be cautious with affiliate marketing – if you are selling a fine-quality product, you want it to be showcased in the best possible light,” AmericanPearl.com’s Bakhash says. “Consumers evaluate the company and product based on where it is – which is why we really like Yahoo Shopping and Amazon.com.” AmericanPearl is on dozens of other sites through Yahoo Shopping, and Yahoo Shopping is their best affiliate.

Sak’s Fifth Avenue and Neiman Marcus are private programs and currently Neiman’s must approve all photos used on a site, according to Madhok. “I’m hoping as they begin to trust us, this requirement will go away since it impedes the speed of Internet publishing.”

But not all luxury brands are strict.

“Every luxury merchant is going to have a different tack on it. Some luxury merchants are very open to driving revenue that is valuable additional traffic for them – whether it comes from a very high-end affiliate or a small niche affiliate might not be as strong of a concern,” Dietrich says.

Matson says Bluefly has “hundreds of affiliates, which is helping Bluefly to grow. We get 60 [applicants] per week and take 20 or so. We look at quality and fit and examine each affiliate on a case-by-case basis.”

Hearon attributes the success of eLuxury’s affiliate program to “partnering with the right companies and making sure we send out newsletters once a week and communicate as often as possible with our top affiliates [such as] ShopAmex and American Airlines.”

These types of membership and loyalty sites work well for luxury brands by playing up the benefits of being a member in addition to getting the points or rewards. In addition, it plays into the idea of a luxury brand – because of membership, because people are often getting the first crack at a newly released item.

Each of the affiliate networks has a share of luxury merchants. Commission Junction has Bluefly; Performics has RedEnvelope and Frontgate; and LinkShare has eLuxury and Blue Nile. Merchants are looking for networks that are sensitive to where their brands might be, and how their brands are portrayed in any sort of marketing. For this reason, the networks offer a variety of tools that provide merchants with the reassurance that their brand is being marketed correctly.

The days of thinking that companies such as Overstock and eBay, which sell mass-market products like books and iPods, epitomize online shopping are over. The Internet is no longer incompatible with the exclusivity of luxury goods. Retailers of upscale merchandise are and will continue to look to online shopping as an essential sales and marketing channel.

Have You Heard the Word?

Tell a friend: Word of mouth rocks. It’s how many people find a dentist, a plumber, a pediatrician and a realtor, even a shrink. You tend to trust your friends. So when one of your close pals swears by her hairstylist, raving about what a “shear” delight he is, you are apt to give him a shot rather than thumbing through the phone book and blindly calling random barbers. Then you’ll tell your friends. “

Small wonder this type of hype is highly coveted.

Now countless companies are trying to glean lessons from the phenomenon of friend-given recommendations. It’s increasingly difficult to cut through the advertising clutter, as consumers gain more and more control over the messages they receive in this world of DVRs and video on demand. Thus, companies invest an estimated $100 million to $150 million a year on word-of-mouth or buzz marketing.

Intelliseek’s “2005 Consumer-Generated Media and Engagement Study” polled 660 online consumers and explored attitudes and opinions across key consumer-generated media venues – including Internet message boards, forums, blogs, direct company feedback and offline conversation. The study found that, compared to traditional advertising, word-of-mouth behavior continues to grow in importance in consumer awareness, trial and purchase of new products.

Consumers are 50 percent more likely to be influenced by recommendations from peers than by radio or TV ads, which is a slightly higher level of influence and trust than found in a 2004 study coauthored by Intelliseek and Forrester.

Yes, everyone knows that good word of mouth can do wonders for a company’s reputation and its bottom line. Of course, the flip side is that the masses can also bad-mouth you and ruin your chances at future fame and fortune. The reality is that, while everyone wants to get good word-of-mouth buzz, not many companies understand how to garner that much sought-after street cred and high regard.

If you’re an affiliate, buzz marketing is an affordable way to generate interest and develop traffic. Even the smallest of affiliate sites can engage customers in this way. It takes strategic thinking but not an ad budget to rival Coke or Pepsi. What is required, however, is some dedication to spreading an idea, a few passionate people and a willingness to talk. A lot. The payoff is that you’ll encourage some folks to check you out online. And you might even earn better commissions as a result.

But currently, word-of-mouth marketing appears to be a fickle business, but if marketers apply some strategy, they are sure to be singing its praises. Whether you tell your friends your secrets or not is up to you.

Take a Bite From Apple’s Book

Apple Computer is one of the best-loved brands around. Even though it claims less than 5 percent of the PC market, fans are rabid about its products. And take a look down the street – see any white ear buds? The prolific iPod phenomenon is proof of how Apple is transforming the music business through good buzz.

One reason Apple got to be so popular in the first place can be traced to Guy Kawasaki, best known for his former role as chief evangelist at Apple; he helped spread the company’s Macintosh operating system through word of mouth. Soon after, other tech firms like Microsoft hired their own evangelists. Kawasaki has authored eight books on marketing, and he thinks that today’s high tech changes will make it easier to spread the word.

“The ubiquity and freedom of broadband are absolutely changing the world, making it easier to build brands, not harder. You used to have to have $3 million to buy a Super Bowl ad,” Kawasaki says. “MySpace and Facebook have been able to build great products and use word-of-mouth and guerrilla marketing to build amazing brands. Nowadays, blogging and podcasting are considerably more powerful means of word of mouth than people simply spreading the word by, well, word of mouth.”

Kawasaki’s advice to marketers hoping to build buzz is to first create a great product and then let customers try it out, let them test-drive. And maybe, just maybe, they’ll spread the good word.

G’head, Squeeze the Charmin

A couple of marketers are taking Kawasaki’s advice and letting the public experience their products in a very hands-on way in the form of “pop up” stores. It’s tough to cut through the clutter, so some brands are renting space on a short-term basis to let consumers experience their goods and generate buzz.

Kodak and Illy Caffè both wanted to let consumers see and experience their products in a hands-on environment. So each opened brief “art exhibits” at their self-created temporary galleries. Kodak’s galleries, which were open during the month of November in New York City and San Francisco, didn’t have merchandise for sale, just photos on the walls and new cameras for gallery-goers to check out.

“The vision behind the Kodak Gallery is to invite consumers in to experience photography and to feel and touch the products. It is much more about the learning experience and getting immersed in the digital experience,” says Kate Imwalle, who helped put together the Kodak Gallery in San Francisco’s Cow Hollow neighborhood. “This gallery is about the power of photographs and celebrating community.”

Kodak promoted the gallery and encouraged foot traffic, but a key component of the experiment was the lack of outright product-pushing. That way, gallery-goers could relax and enjoy the environment.

Galleria Illy at 382 West Broadway in New York had a coffeehouse vibe and tons of art events – acclaimed painter Julian Schnabel created coffee mugs, and NYU film students shot a series of films – to get American consumers hip to its brand. The rental was short term in the high-priced SoHo neighborhood; it opened Sept. 15 and closed Dec. 15. The idea was to give people a chance to experience the brand in the artsy milieu of a coffeehouse/art gallery.

“The galleria was a physical manifestation of our brand. It was like our business card,” says Greg Fea, president and CEO of Illy Caffè North America. “People got to experience Illy and education and culture. They had a full immersion experience with the brand. It was received really well. We’ve been extremely pleased. We had events around art and culture, because culture is a big part of coffee. ” People in New York got to know us better. We served 20,000 coffees, like 300 to 400 on weekend days, and 200 a day during the week.”

Kodak and Illy both advertised without being overt about it. Instead, they created places where people gather and could talk about photographs or coffee. They created communities.

Create Community

Communities happen online, too. A perfect example of how rock bands have used word of mouth to gain recognition for their songs and gigs is found at MySpace.com. Basically, MySpace combined the Internet Underground Music Archive’s song-posting service with Friendster.com’s meet-your-buddies’-buddies community model while ditching that site’s control-freakish attitude on how members can and can’t use the service.

More than 42 million members have joined MySpace.com since its inception in 2003. Rupert Murdoch’s News Corp. bought the website for $583 million last summer.

“Our band has been a part of MySpace since 2003, and we have like a million friends now,” say Pete Wentz, lyricist and bassist of Fall Out Boy, a punk/pop band that will be featured on a MySpace record compilation. “There’s a whole group of kids who are disenfranchised. So you’ve got to go to sites like MySpace.com to reach those people.”

MySpace.com founder Chris DeWolfe says that his company will remain true to user-generated, not corporate-dictated content. “Music labels now understand word of mouth. It happens in an organic manner on MySpace.”

Viral Videos

Now that broadband is a reality, videos can get passed around virally. Spending on online video advertising is anticipated to triple in the next two years, according to research firm eMarketer. Spending will reach $640 million in 2007, up from $225 million 2005. Advertisers will spend at least $1.5 billion or more by the end of the decade.

Coffee company Illy has video podcasts to immerse people in the brand. And Nike has a stealth video campaign out, too. In it, Brazilian soccer sensation Ronaldinho sits on the grass. Someone hands him a metal box. He takes out new cleats, laces them up, then juggles a ball and kicks it into the crossbar four times in succession. A swoosh is subtle but clearly visible through the 2-minute, 44- second commercial. And no, this isn’t a Nike spot on TV.

This “Touch of Gold” video was viewed at a nascent website called YouTube.com an astonishing 1.9 million times after being up on the site for only a month. Nike, a pro at underground publicity, creates under-the-radar campaigns that spread like wildfire – and doesn’t shell out millions to do so.

Nike’s latest play-for-no-pay stunt also includes “Dance with the Ball” and “Don’t Tread on Me: Manifesto.”

“If you want to talk to U.S. soccer fans, you have to go online,” says Nike spokesperson Dean Stoyer. “Soccer is a huge initiative for Nike, and the soccer community lives online. We’re always looking for new ways to be on the cutting edge.”

A few weeks ago, YouTube.com was just two guys – Chad Hurley and Steve Chen, CEO and CTO, respectively (both early employees of PayPal). Currently, YouTube uploads 10,000 videos per day, moving 12 terabytes of video daily – an entire Blockbuster store and a half worth of footage.

The site highlights the most-viewed videos and who’s linking to each clip. MySpace, BlogSpot.com and Friendster all helped steer traffic to Touch of Gold. The best part: YouTube is like photo-hosting site Flickr.com, only for videos – and it’s free. People can upload and share clips with the world.

Beware the Backlash

A word of caution to any would-be word-of-mouth marketers: Be careful what you wish for. For example, take Sony, which recently hired graffiti artists in various cities to paint comics on outdoor surfaces (it paid local merchants for the right to do so). The artwork showed kids playing with various toys with dazed, expressionless faces and hypnotized eyes. Upon closer inspection, the toys they are playing with aren’t rocking horses, marionettes or skateboards, but Sony PSP (PlayStation Portable) game devices.

The ads never mention the company or the product. The concept behind the campaign was that people would see the graffiti, recognize the PSP, think they were cool and tell others to check it out.

The only problem was that in locations like San Francisco, real artists tagged the work “Fony” and wrote scathing manifestos telling the electronics giant to leave city sidewalks alone. This is a perfect example of attempted word of mouth gone terribly wrong. Sony got plenty of buzz, but it also branded itself a poseur in the indie art community.

Likewise, the Intelliseek study found strong negative reaction to shill marketing or artificial buzz, in which consumers are paid or offered incentives to recommend products or brands. One-third of respondents said they would be disappointed if a trusted contact did not fully disclose a paid or incentive-based relationship; 26 percent said they would never trust the opinion of that friend again; and 30 percent said they would be less likely to buy a product or service.

“Trust is the currency of effective advertising,” says Pete Blackshaw, Intelliseek’s chief marketing officer who oversaw the study. “But it’s highly fragile.”

Boston-based BzzAgent has clients like Lee Jeans, Penguin Books and Ralph Lauren. Its “agents” are regular people who volunteer to receive products and plug them. Technically, disclosure is encouraged, but it’s left up to the individual. Tremor, Procter & Gamble’s four-year-old word-of-mouth division, has a group of selected “cool” teens to help hype products. Both firms have gotten a lot of buzz for the buzz they create for clients. But not all the buzz is bueno.

In October, nonprofit advocacy group Commercial Alert sent a letter to the Federal Trade Commission urging a thorough investigation of P&G’s Tremor, which has enlisted about 250,000 teenagers in its buzz marketing salesforce. Commercial Alert charges that Tremor targets teens with deceptive advertising.

“The Commission should carefully examine the targeting of minors by buzz marketing, because children and teenagers tend to be more impressionable and easy to deceive,” says Gary Ruskin, Commercial Alert’s executive director. “The Commission should do this, at a minimum, by issuing subpoenas to executives at Procter & Gamble’s Tremor and other buzz marketers that target children and teenagers, to determine whether their endorsers are disclosing that they are paid marketers.”

DIANE ANDERSON is an editor at Brandweek. She previously worked for the Industry Standard, HotWired and Wired News.

Look Ma, No Print: Q & A with Michelle Bottomley

Traditional Madison Avenue advertising agencies have taken their share of lumps lately. More companies are spending bigger bucks to advertise online than ever before. Overall spending on advertising is expected to reach $279 billion this year.

That’s a 5.4 percent jump over 2004. However, Internet advertising is forecast to grow 15 percent over last year and hit nearly $8 billion by the end of the year.

The trend has been building for years, but now many traditional ad agencies are scrambling to change or be left behind.

Ogilvy & Mather is one of the world’s largest ad agencies, with annual revenues of $752 million, and is among those that have quickly adapted to the changing online environment. The agency’s OgilvyOne is a leader in customer relationship management and interactive advertising. As general manager of consulting for OgilvyOne North America, Michelle Bottomley is at the forefront of the seismic advertising shift and is responsible for the data, strategy and direct channels (teleweb, email marketing, partner marketing) practices at the agency.

She joined Ogilvy in 1998 to lead the direct and interactive marketing engagements for the firm’s travel and transportation accounts. Two years later she branched into other areas and launched the relationship marketing practice. During her career, Bottomley has led targeted marketing initiatives on behalf of a number of brands including American Express, Cisco, DuPont, Enfamil, FM Global, Ford Motor Co., Jaguar, Nestle and Unilever.

Prior to joining Ogilvy, Bottomley was vice president of marketing at Epsilon, an American Express subsidiary, where she led teams responsible for the development of marketing data warehouses, statistical analyses, loyalty marketing programs and data-driven marketing communications as the client service director for Amtrak, BizTravel.com, Dayton Hudson, Enterprise Rent-a-Car, ITT Sheraton, Nordstrom and Walt Disney Attractions. Bottomley also managed comarketing partnerships between American Express, Amtrak and United Airlines. She began her direct marketing career at Bronner Slosberg Humphrey (Digitas).

Revenue Editor Lisa Picarille spoke with Bottomley to discuss the current state of advertising, what’s happening with big brands online and why the Net has become such an attractive option for advertisers over the last couple of years. They also discussed what Ogilvy has done to adapt to shifting client needs and where advertising – both traditional and online – is going over the next few years. It’s definitely not a one-size-fits-all world when it comes to advertising online, Bottomley says.

LISA PICARILLE: Do you think traditional creative agencies have lost their way and their relevance?

MICHELLE BOTTOMLEY: The need for a clear and compelling brand proposition creatively expressed is not going to change. Great traditional agencies define an ownable and compelling brand proposition that reflects the passions and strength of the organization. Being able to define the soul of the brand and establish a unifying message architecture that can be expressed through every communications touch point is among the most important marketing challenges and the core strength of a traditional creative agency.

LP: Why have most agencies been slow to adapt to the change brought by online?

MB: For the most part, agencies, and certainly Ogilvy, [are] leading the revolution to make online or digital marketing a more prominent part of the communications mix. A key debate in the next two years will be the role digital media plays in the overall mix among agencies, their clients and the major media-planning-and-buying organizations.

Agencies need to push this forward through understanding the target and developing innovative digital brand-building ideas to reach them, but clients and media organizations will need to reallocate existing budgets to bring these ideas to the marketplace. In 2004 Ogilvy launched VERGE, a series of conferences for the agency and clients that feature top thinkers and companies in the new media space, to forward progress in this area.

LP: What is Ogilvy doing to adapt?

MB: Ogilvy’s 360-degree branding is a philosophy and approach that integrates marketing communications to build client businesses. As an extension of our 360-degree branding philosophy we are working on ways to integrate the best of the advertising world with the best of our direct and interactive capabilities in the areas of creative, production, strategy and analytics.

This integration will improve our ability to target smarter and bring ideas that embrace broad and targeted media, including online, to our clients, as we have done already with the Dove Campaign for Real Beauty. This campaign has driven considerable business growth for Unilever, and lives online, on digital billboards, out of home and in print in the United States and around the world as one campaign.

LP: How has the change been received by your clients?

MB: Very well. Our clients will always ask for big brand ideas, but more and more for the use of nontraditional media, which includes digital marketing via online, digital phones, digital billboards, etc. – media that can surround the targets where they live, work and play. We believe that digital media are a tremendous opportunity for brands to deliver unique messages and offers to their targets and achieve superior ROI from their marketing investment.

LP: How hard of a pitch is it to convince big brands of the importance of the online adspend?

MB: Not hard at all, and it’s been getting better. Big brands such as IBM and Ameritrade have long understood the importance of digital marketing and have incorporated it as a significant portion of their marketing plans. Our largest clients are pushing digital marketing further through the use of behavioral advertising, personalized messages, long-form video and dynamic marketing responses to interactions and to improve conversion of hand-raisers to buyers. There is more experimentation than ever before around bringing the right targets into the marketing funnel and nurturing those leads to accelerate conversion to sales using a combination of digital marketing.

LP: What about branding? A few years ago most concluded branding couldn’t be done online. Has that changed?

MB: Some of the most relevant branding is happening online – in the context of where the target is already going for trusted advice and information. IBM led the way in this area through their sponsorship of the Olympics and U.S. Open years ago, using online to broadcast events and scores “powered by IBM.” Online marketing has helped brands move beyond product-specific advertising to creating branded experiences as a way to foster an emotional connection. BMW films were famous years ago for attracting and swaying the right audience online through edutainment – building the brand – while sparking hand-raisers to come in and test drive.

LP: Are big brands increasing online ad spending?

MB: Yes, and even a few percentage points from traditional budgets start to show big increases in online spending.

LP: What about the traditional ad formula doesn’t work online?

MB: The old model of one-size-fits-all messages has evolved to include more use of search and contextual messages based on where the target is seeing the ad or where they have been before online. There is more testing now to optimize clickthrough rates and conversions using search, contextual messages and behavioral advertising alone and in combination.

LP: How has the adoption of broadband changed online advertising?

MB: The adoption of broadband by more households means we can reach more people with rich media, giving marketers the opportunity to blend edutainment into their online advertising as a way to attract more eyeballs and convert them to prospects.

LP: How has online advertising changed the type of account executive agencies hire? Do they have additional talents not seen in traditional advertising?

MB: Account executives equipped for the new world understand the art and science of marketing in a way they didn’t before, owing to the fact this media is so targeted and measurable. We look for account executives experienced with target definition and brand building along the customer journey from awareness to hand-raising and repeat purchase.

LP: How important is online advertising to Ogilvy’s overall strategy?

MB: Hugely important.

LP: Define what it means to be an ad agency in 2005.

MB: Being an agency in 2005 means being flexible, assembling the right people with expertise from a number of areas to solve big client challenges. Fewer are the days when the advertising team would create the brand idea and express it as a 30-second spot to be adapted by the direct team using mail and the interactive team online.

More are the cases of bringing specialists from all three areas together up front to develop innovative ways to define and express the brand proposition in the marketplace. This is one of the best times ever to be in the agency business.

LP: What’s the downside of online advertising – for client and for consumers?

MB: While the nuisance factor of one-size-fits-all pop-ups can be a downside for consumers, the advances in technology are allowing marketers to be smarter about how to engage the consumer online without appearing to be advertising.

LP: How do brands get heard above all the noise on the Internet?

MB: Be relevant, and seek to build a dialogue with the target in a way that opens and nurtures a relationship and value exchange.

LP: Describe the state of online advertising two years from now.

MB: Two years from now online advertising will expand to really be considered digital marketing and include digital billboards, digital phones, interactive TV, digital billboards, retail signage, etc.

Smart marketers will use these channels to enhance the brand experience, delivering more relevant messages and offers – and reflecting target response and prior relationships to refine that relevance in a synchronized way across these digital channels. Measurement of this relevance and synchronicity will provide marketers the opportunity to optimize the yield of their marketing investments, focusing on those digital channels that bring in the best leads and the combination of channels that optimize conversion of those leads at the most favorable ROI. This is among the best and most challenging times to be a marketer.

LP: What are the major hurdles for companies that have never done online advertising, and how do you convince them it’s right for them?

MB: More and more brands understand the needs of their customers and finding a way to deliver on them online. This doesn’t need to look like product-centric advertising, but instead creating branded experiences that provide a call to interact with the brand. A major hurdle for companies that have never done online advertising can be perceptions around channel conflict; for example, whether a dedicated salesforce would perceive direct communications as threatening their ability to represent and deliver the brand. In this case a tremendous opportunity exists to reach the target online and can take the form less of product-centric messaging and more of creating branded experiences online.

LP: In what ways does online advertising impact the advertisers’ ability to establish relationships with their customers?

MB: Online advertising provides a great entree into a relationship with a brand. Those brands that have been able to provide a compelling offer and deliver on that with an ongoing stream of highly relevant communications are the ones beginning to unlock the potential of this medium.

We have to think of online advertising as the start of a conversation, and the more we understand from that individual the better we can make the follow-up conversations. Smart marketers are mapping out the relationship pathway from online advertising to relationship nurturing as a way to convert more of the leads at the top of the funnel into qualified prospects and ultimately customers. Thinking about online advertising as one component of the overall marketing mix with a very specific role, with defined follow- up treatment, takes little time up front and delivers big payoff in the form of a lead pool and new customers.

Off the Mark

Affiliates and Web publishers who sell goods from the most popular brand name merchants are losing traffic and revenue to Web sites that lure consumers by deceiving them with unauthorized use of trademarked products.

This happens when a Web publisher embeds the most popular brand names into their site in order to attract consumers who are using a search engine to find specific products. These visitors are often directed to Web sites that sell similar products, but not the specific ones they were looking for. Instead, consumers see rival products.

For example, a consumer types “Nike” into a search engine and is directed to a Web site that sells sneakers made by rival Reebok, but not those made by Nike. In this scenario, the consumer may get frustrated and move on to another site that does sell Nikes. Or they might buy one of the competitive offerings. This means the offending Web site profits and has less incentive to stop these deceptive practices.

This very common tactic has upset consumers, the makers of popular brand name products, as well as affiliates authorized to sell these products. In an attempt to stop such behavior, there have been several high-profile lawsuits in which brand names such as Gucci, Louis Vuitton, Nike and Geico Insurance have sued specific Web publishers and search engines to control their own brands on the Internet.

These lawsuits raise a key question: Can one corporation prevent another from linking to its trademarked, for-profit Web site?

The answer is not easy to determine. Many companies are testing the limits of trademark law by suing alleged Internet trademark abusers for infringement. So far the results have been mixed.

Terence Ross, a partner at Gibson, Dunn & Crutcher, a Washington, D.C., law firm, has represented plaintiffs in cases against adware makers Claria and WhenU. “Unfortunately, there is no more certainty as to what the law is than a year ago,” he says. “There have been a number of court decisions on either side of the issue.”

An August 2004 decision by the US District Court for the Eastern District of Virginia delivered a blow to search engine giants Google and Overture Services in their efforts to defend ad sales of trademarks as “fair use.”

But that changed in December when a federal judge ruled that Google’s advertising policy doesn’t violate federal trademark laws. Google will now be allowed to sell ads to rival insurance companies whenever Geico’s name is typed into the Google search box.

Geico sued Google and Overture in May 2004, saying that use of its trademarks when selling advertising in search engines constituted trademark infringement and raised various state law causes of action. Google filed a motion to dismiss the case on the grounds that it had no legal merit and that the state claims were insufficiently pleaded.

The August ruling, which allowed insurance giant Geico to sue Google and Overture for allegedly selling advertisements linked to its trademark, could have threatened the livelihood of the search engines. Overture, which is owned by Yahoo, and Google make money by selling ads linked to keyword-triggered search results, and many commercially driven searches are tied to trademarked brands such as Geico or Nike.

Google attorneys cited the U-Haul International v. WhenU case, in which the moving-truck company alleged trademark infringement against WhenU for displaying rivals’ pop-up ads over its Web page. The court found in favor of WhenU, because it only used U-Haul’s marks for “pure machine-linking function,” Google argued.

For its part, Geico cited the Playboy v. Netscape and Excite case, in which the Ninth Circuit US Court of Appeals in San Francisco found that the two online portals created consumer confusion when using Playboy trademarks to sell banner ads. That suit took five years to settle.

More Legal Battles

Many of the cases are settled before they ever reach the court, with smaller sites often removing the trademarked terms to avoid a costly legal battle. There are some high-profile cases that are still pending. Many are closely watching the trademark suit filed by American Blind and Wallpaper Factory against Google along with its partners Netscape and Ask Jeeves.

The suit, filed in January 2004 in a New York federal court, claims Google’s practice of selling text ads related to keyword search terms takes advantage of American Blind’s trademarks, because rivals’ ads can appear on results pages turned up by searches for “American wallpaper” and “American blind.”

American Blind had threatened to file the lawsuit last year. That, in turn, prompted Google, in a filing with the US District Court for the Northern District of California, to argue that “American” and “blind” and other words American Blind was claiming as trademarks are descriptive terms and shouldn’t enjoy trademark protection.

The company disagrees. “We spend millions of dollars annually to build brand awareness and cannot stand idle while Google allows our competitors to ride our coattails,” according to a statement from Steve Katzman, CEO of American Blind, which says it has spent more than 50 years and $70 million building its reputation.

American Blind says the outcome of this suit will have repercussions for other businesses that include generic words in their names, such as General Motors and National Car Rental System, which could also be targeted for keyword-based advertising.

What About The Networks?

And while some affiliates are relying on the courts to protect them, others think it is the responsibility of the networks to stop this practice. However, some say the networks gain from helping affiliates profit from brand confusion.

“These people are interested in making money, and when a trademark is infringed on, they are still getting paid,” said one affiliate who asked not to be named. “It’s not in their best interest financially to enforce or police rules to try to stop these unethical practices.”

One affiliate manager says that networks are supposed to be the trusted party in this equation, and they must try to uphold fair business standards.

“The industry is failing to recognize that there is widespread use of trademarked keywords,” says Alan Schneider, president of R U on the Net, an affiliate manager, who has stopped many of his affiliates from using trademarks.

However, he also notes that when affiliates in his network were asked to cease and desist from using trademarks or competitors’ URLs in their advertising, their sales often dropped by as much as 80 percent.

Search For Tomorrow

Search engines are also profiting from brand confusion. Both Overture and Google allow marketers to bid for keywords that may be trademarks or linked to trademarks. Some say they are not eager to police trademarks because they risk losing thousands or tens of thousands of dollars a month on lost pay-per-click revenue.

Paid search is one of the fastest growing and most closely watched segments of the online advertising business. According to Jupiter Research, paid search will grow from $1.6 billion in sales in 2003 to $2.1 billion in 2004, and it will continue to grow at a compound annual rate of 20 percent through 2008.

In addition, more than half the total searches are for branded keywords such as Wells Fargo, according to comScore Networks, a market research company.

The search engine companies have long had ambiguous policies on trademark-related advertising. Most refuse to actively police infringements. Instead, they opt for a hands-off approach, acting only if there is a complaint from a trademark owner.

More than a year ago, Overture changed its policy and posted a trademark notice on its site, informing advertisers that it is their responsibility to respect the trademark rights of others.

“In cases in which an advertiser has bid on a term that may be the trademark of another, Overture allows the bids only if the advertiser presents content on its Web site that refers to the trademark … or uses the term in a generic or merely descriptive manner,” according to the policy.

It’s All About The Meta Tags

Meta tags are HTML code embedded on a Web page used to identify its content. Meta tags are powerful tools because they have a direct effect on the frequency with which many search engines will find a Web site. When a search engine finds a search term in a meta tag, it indexes the Web page for display in its search results.

In the early days of Internet search engines, Web page programmers influenced Web searches by spiking the meta tags with the same word over and over to improve their standing in search engine results. Most search engines have since been trained to largely ignore these repetitions.

But not every meta tag use of another company’s trademark is illegal. When the trademark is used only to describe the goods or services of a company or their geographic origin, it is permitted under trademark law as “fair use.” For example, if a site delivers content such as music from the Amazon region of South America, it may use the word “Amazon” in its meta tags. This use would not infringe the Amazon.com trademark because the term “Amazon” is being accurately used to describe the goods offered.

Unfortunately, there is no clear test for proving fair use, and even a merely descriptive use of a trademark in a meta tag may trigger a lawsuit. Legal experts say, “When in doubt about using a trademark in your meta tag, leave it out.”

The Resolution

Most agree this issue is going to take some time to be resolved.

“I think it’ll take a couple of years,” says Jeffrey Riffer, a partner at Jeffer Mangels Butler & Marmaro, a law firm in Los Angeles. Riffer was the lawyer for defendants Excite and Netscape when Playboy sued them for trademark infringement. Playboy prevailed in that case.

“There needs to be some appellate court rulings on this before it will settle down. We are still at the beginning. There was nothing like the Internet before, so the courts didn’t know how to deal with the issue. There was tension between what the search engines want to do and what the trademark holders want. But there are still more of the fights that will happen in the trial courts.”

Riffer says that when everything finally does settle down, he believes that search engines will be allowed to sell keyword advertising.

“It’s good public policy to allow advertisers to sell advertising to the audience that is most likely to be interested in that advertising,” he says. “It’s good for consumers, pro-competitive and the right application of trademark law. Under the law a trademark holder doesn’t have a monopoly on the trademark. They are only allowed to stop other companies when there is a likelihood of confusion.”

But what if things don’t shake out in favor of the search engines?

“The world will go on if things go the other way, but it’s bad public policy, and at that point the search engines should hire a lobbyist and go to congress,” Riffer says.

Barry Felder, a partner head at Brown Raysman Millstein Felder & Steiner, a New York law firm and Playboy’s counsel in the suit against Netscape and Excite, says he expects that traditional trademark analysis will be applied, but in the context of the Internet, over the next one to three years.

“I expect guidelines for both the search engines and the trademark holders,” Felder says. “They will both have to be familiar with and adopt the appropriate conduct. I don’t know that one party or the other will prevail. The analysis will turn on whether the use [of the trademark] is confusing.”

Attorney Ross says that absent congressional action, the earliest he expects guidance from the appellate courts is late 2005. “The problem is that in the meantime, businesses need to figure out how to operate in an uncertain environment,” Ross says. “And that is creating a mess.”

Lisa Picarille is the editor of Revenue.