Performance Powerhouse: Q & A with Steve Denton by Chris Trayhorn, Publisher of mThink Blue Book, September 1, 2006 Earlier this year Steve Denton was named president of LinkShare, following the resignations of Chairman and CEO Stephen Messer and President and COO Heidi S. Messer, who led LinkShare’s development from its founding in 1996 through its $425 million sale to Rakuten in late 2005. Denton heads up all day-to-day operations including management and continuous development of the talent and processes required to drive LinkShare’s continued growth. Revenue Editor-in-Chief Lisa Picarille spoke with Denton about the cultural, organizational and other big changes that LinkShare is dealing with in order to achieve its goal of becoming a performance marketing powerhouse. Lisa Picarille: What’s changed since LinkShare became part of Rakuten last year? Steve Denton: Rakuten USA is the company set up in Boston, and the CEO of Rakuten USA is John Kim and he’s the CEO of LinkShare. LinkShare was the first international acquisition for Rakuten. It’s been great working with John and the entire team at Rakuten, including Hiroshi Mikitani, the CEO. Rakuten is now the sixth-largest Web services companies in the world from a market cap standpoint. And having access to those resources from that organization has been very rewarding and very fulfilling. When there are new products we want to roll out, new markets we want to enter, new geographic footprints that we want to establish, I don’t have to wait for two years to accumulate the capital to do that. I have an owner that has the resources and that’s why we sold the company. We also sold the company because we don’t just compete against affiliate companies. We are in a performance marketing industry – so we are competing against everyone out there that is going for inventory on these publishing or distribution sites. As far as the way we operate the business, there has been no real change. The financial results roll up into Rakuten. That is obviously a structural change. There’s a new board of directors. But as far as running the day-in-and-day-out business there’s John Kim and myself. We have seven teams’ employees working with counterparts in Japan on integration projects to see where we can find some synergies and some best practices from both organizations. That’s taken a good amount of time and we just looked at the final presentations [in June] and there have been some subtle changes there that you wouldn’t notice externally. We’ve been the beneficiaries of development resources from Japan, which again, Jonathan Levinson, our CTO, came from Rakuten. But as for the nuts and bolts, it’s all about continuing to build on what we have. LP: What impact has there been for LinkShare since the departure of Steve and Heidi [Messer]? SD: Clearly anytime the founders that established a business and an industry leave, they are missed. But as an organization we are moving forward. I run the day-to-day business or the customer-facing business. I deal with distribution services, merchant services affiliate support, marketing, product development, client development and search. All of those roll up to me. And beyond the customer-facing – tech, legal, GNA, finance – John Kim manages that. We’ve been focused on three things since this past February: the leadership transition; strengthening our core offering; and the cultural transition from being a New York-based privately held business to a business unit in a division in a large international media company. That’s been a big transition – culturally, and the leadership change, that’s been a big focus. The second big thing – strengthening the core offering – not that we had any issues with the core offering and some of the products we announced at the symposium – rolling out Link Locator Direct, which is our first Web services offering. It enables affiliates to have easy access to links, and have them defined in categories: coupons, hot products, logos, general promotion, free shipping and best converting. We’ve made some changes to our merchandising product. We have a client in beta now for whom we’ve recently categorized the data feeds; so, working with normalization and unification. Synergy Analytics has been in beta for some time. We held the affiliate and merchant advisory boards in San Francisco at the [LinkShare] Summit; we got some great feedback. And working with the development teams, and it’s our intent to take both of those products out of beta by the end of the summer, then run dual reporting for six months as the performance testing and get the feedback from the users. It’s been in beta a long time but that’s because it’s a product that’s going to change and revolutionize the way we do things here at LinkShare and send information to our partners. That’s been a big focus. LP: What changes have you made at LinkShare since being appointed president? SD: Lead generation, ad networks, AdSense itself and shopping comparison, performance- based and what used to be known as affiliate marketing deals have all evolved. I think that we need to embrace that and find a way to be inclusionary with that, rather than just watching it grow up around you. People ask me if the affiliate marketing industry is slow – no. I don’t define affiliate marketing as just what I do; I look at performance marketing. Anytime you are paying a third-party website a commission for some sort of thing that is a measurable and definable event – applications, sales, subscription – that’s inventory that a company like LinkShare should be going after. Because we’ve got great merchants, and we’ve got great distribution partners. That’s inventory we should be going after. LP: What are some of the initiatives LinkShare has planned over the next 12 months? SD: It’s been a busy four months: leadership transition, cultural changes, integration with Rakuten. The Synergy Analytic product – getting it out of beta is just step one, but then refining that product and taking the feedback from users and enhancing that product over the next six months and beyond is key for us. The work we’ve been doing on the merchandising data feeds and expanding that out. Taking this new locator direct and expanding our Web services offering in new ways of distribution of links is critical. Then we’ll be in the middle of back-to-school, then right into fourth quarter, and that’s not a time to roll out new products. So, our road map is fairly well-defined, with some of the exciting things we did last year and with Athena and enhancements we’ve been making to that – the affiliate analytics and the changes to that. It’s been busy. And launching U.K., that road map is fairly well-defined. And at the end of the day it puts us in a space where we can make LinkShare a safer, more reliable and more profitable place to do business on the Web. We’re focused on the right things. LP: Is the reign of the “Big Three” (CJ, LinkShare and Performics) over? SD: When you talk about the big three, I think Yahoo, Google and Rakuten, and we’re all going to be just fine. LP: Interesting that you don’t count Microsoft in there at all. SD: I do, but you said three, not four. I think Microsoft all the time. I spend a lot of time thinking about Microsoft. I spend a lot of time thinking about Yahoo. I spend a lot of time thinking about Google. And eBay. And Amazon. And ValueClick. That’s what changed. Because all those folks are in my game. They all have performance- based products – they are called different things. They look different, but they’re all in this space. It’s just not LinkShare against CJ and Performics. We are competing against well-funded big organizations with many assets. What you need to talk to your clients about is, How can I help you with your performance- based needs? LP: But many of the big three you talk about have mainstream mindshare. What is LinkShare going to do to establish itself among those players? SD: LinkShare is a B -to-B company – not a customer-facing brand. Although Rakuten is a customer-facing company in Japan. As a B-to-B, we need to stay focused on executing where we are. It’s new markets, new product and new ways to monetize. As we move forward there are lots of other areas we can make headway in. Like mobile. That’s an area in which we are very successful at LinkShare in Japan. We have a significant amount of transactions through mobile devices. As new platforms become available for us to work with, that’s an area where we can do really well. However, the affiliate terminology limits us. I would submit that LinkShare brought affiliate marketing mainstream. We are recognized as the pioneer in affiliate marketing. When you are the leader in any space, it’s great; people look to you for your thought leadership but you can get pigeonholed as well. The difference between lead generation and ad networks and AdSense is those are affiliate sites, but just the way you compensate them and contractually the way that the relationship is set up may be different, but at the end of the day a third-party website is getting paid to drive a commissionable action to your site. And who manages that salesforce for you – that’s where the differentiation lies. So, if an ad network is managing that salesforce for you and they’re taking a financial risk and they’re putting their money to work and they are working on a spread – then that is called an ad network. If Google is doing it and they’re sharing a percentage of it – that’s called AdSense. But yeah, it’s jargon. But the bottom line is websites are getting paid commissions to drive commissionable and measurable events. We need to stay focused on providing our clients with new ways to engage with their customers, new ways to monetize those engagements and expanding that global footprint. LP: How are you doing that? SD: We are opening our LinkShare U.K. office [on July 1, 2006]. We have space over there and we are staffing it up. We’ve got people on the ground. We already had the LinkShare U.K. network, but we’re putting people on the ground there and aggressively going after that marketplace now. There will be five to seven people to start out. Mostly customer-facing – sales, service, distribution, affiliate support, things like that. I’m really excited about that. That’s the resources of Rakuten. I can make the commitment to do that and aggressively go after that market. Our clients expect that from us, being part of a global company. LP: Give me an idea of what you think the performance marketing space will look like in three years. SD: From a LinkShare standpoint, we’ll reflect the needs of our customers, we’ll help them grow their business cost-effectively by acquiring new customers at a fair price or on a pay-for-performance basis. We’ll introduce new products, new channels of distribution and new marketing. International expansion is key in this space. New tools, Web services. The performance space in the next three years. Let’s take a look back three years. Search has transformed this landscape. And that was very new three years ago. I imagine there will continue to be transformations like that in the future. The key with LinkShare is to remain flexible enough to ensure that we can offer our customers any new performance-based marketing tactic. We do that today, but need to remain flexible to continue to give them insight to the ROI – whether it’s a click to a sale, or subscription or pay per call or mobile. As our merchants find new ways to monetize and exchange with their customers we need to be there – one dashboard – to provide that feedback. I think the methods are going to vary but LinkShare’s core value proposition will not. The performance marketing space will still exist – it will experience robust growth as we see today, continue to grow. The performance-based marketing industry outpaces the growth of e-commerce. That’s where we need to stay focused: on this platform that can track all of that and provide the markets and the channels that our clients need to get there. I think it’s a two-pronged approach – platforms and channels. Filed under: Revenue Tagged under: 13 - September/October 2006, affiliate networks, CPA networks, Features, Interview, Lead-gen, mtadmin About the Author Chris Trayhorn, Publisher of mThink Blue Book Chris Trayhorn is the Chairman of the Performance Marketing Industry Blue Ribbon Panel and the CEO of mThink.com, a leading online and content marketing agency. He has founded four successful marketing companies in London and San Francisco in the last 15 years, and is currently the founder and publisher of Revenue+Performance magazine, the magazine of the performance marketing industry since 2002.