19 – September/October 2007

Home Office Advantage

Many online marketers started out working from home as a way to escape the Dilbert-like cubicle farms of corporate life in favor of a flexible schedule. And while these home-based workers may have managed to avoid rush-hour traffic, endless meetings and the watchful eye of superiors, their work life is hardly about hanging out in pajamas.

According to 2000 U.S. Census data, more than 4.2 million people choose to work at home on a daily basis. And while the solitary work life can pose unique challenges for the self-employed, there are even more distinct technical, organizational and social skills needed to be successful (and remain sane) while working from home when you are part of a larger entity.

Online commerce has multiplied the opportunities for working as part of a virtual organization. Since technology (in the form of fast Internet access, file sharing and Web-based applications) has made it relatively easy to earn a living online, virtual office managers should focus on implementing strategies that often differ from what occurs in corporate America. You need to concentrate on sharing documents online, streamlining communications and organizing your time.

Put Your Work Online

In the corporate world of days gone by, workers kept their files on their PCs or on password-only accessible servers, protecting their documents as if they were the launch sequence for nuclear weapons. Now personal lives – through blogs, photo sharing and MySpace – are rapidly moving online, and work life should not be any different.

Making your relevant business documents and files available to peers will increase creativity and enhance productivity. From business strategy papers to spreadsheets to brainstorming notes, sharing documents online is essential to getting input from co-workers who aren’t in the same ZIP code.

Sharing your documents also eliminates the clutter of emailing documents back and forth and the frustration of sorting through folders to find out where you previously saved attachments. Maintaining a shared calendar through Google Calendar or Apple’s iCal can eliminate email strings that attempt to nail down an open time for a conference call.

Virtual office workers don’t usually have an IT department or top-heavy applications such as Lotus Notes to store and share their files, which many workers will consider a blessing. By organizing a common set of online folders, co-workers can quickly survey all aspects of a project and stay on top of progress.

Several secure online services simplify making files accessible to co-workers. Free services Google Docs and Spreadsheets and Microsoft’s Live Folders allow you to store up to 500 megabytes of content, while Apple’s iDrive permits 1 gigabyte of storage. The services enable you to specify the people (via their email addresses and passwords) with access. Subscription services such as Box.net offer additional security, storage capacity (up to 15 gigabytes) and workgroup features for around $20 per month.

“I feel like I know what my team is doing much more than I did when I was in an office,” says Sam Harrelson, general manager for the U.S. for search marketing firm Clicks2Customers. “I can access [what I need] at any time instead of having to go down the hall to ask someone for a document.” Getting into the habit of storing files online and using a Web-based email service also provides access to files when you are away from your virtual office.

Harrelson, who works from his home in Asheville, North Carolina, manages staff in other states and reports to management in South Africa. He recommends putting documents online through social network sites to save time. He and his peers use a private Facebook group to share files and store contact information, thus creating a public Rolodex. Clicks2Customers uses a private wiki to trade ideas, and it also enables individual contributions to be identified. Harrelson also recommends setting up an RSS feed to track a project’s evolution.

Basecamp, an online service developed by 37 Signals, provides extensive workgroup functionality including project management, file sharing and messaging, but at a much lower price than the corporate applications that often require IT interventions.

Bambi Francisco, the founder of Web startup Vator.tv, says her company uses filesharing service Basecamp to manage its software development effort, which is primarily done in Pakistan. The site includes to-do lists, milestone tracking and messaging/ comment threads that can automatically generate emails or RSS feeds. Centralizing all of the files and messages related to a project in a single location will keep everyone on task and makes the necessary information always available.

Controlling Communications

Francisco says written documents and messaging can simplify communications between people with accents and for whom English is not their primary language. Her peers were all born outside of the U.S., and reading an email or online status report can be easier than phone conversations. “Email has never been more important [for her business communications],” she says.

The isolation of the virtual office requires the most dramatic change in work routine and psychological adjustment. For a “people person,” having only the office furniture (and perhaps a pet) for company can create a yearning for the digital approximation of human contact. Virtual office workers need to become comfortable with cyber relationships and appropriately using instant messaging and telephone/videoconferencing.

In many cases, instant messaging is the most efficient method of getting questions answered or discussing a pressing matter. Making a phone call is a commitment – social convention dictates the exchange of salutations, and ending a conversation after just a few minutes can feel awkward. IM doesn’t have these limitations, and keeping an IM window to a peer open enables both parties to continue working in between messages.

Because of the usually immediate feedback, IM is replacing email as the most effective communications tool for virtual office dwellers. Email has become “more of a social application,” according to Harrelson, who uses it as a last resort if a peer isn’t online.

Shawn Collins, co-founder of the Affiliate Summit, who runs his company with partner Missy Ward, from New Jersey while she’s in Florida, also has another employee in Virginia, and some event staff in Colorado. He agrees that his biggest challenge is not having face-to-face interaction with his team. However, he estimates that he only speaks with Ward a few times a week, but emails her at least a dozen times per day. He also says they IM constantly and if one of them is on the road, the text messages are flying fast and furiously.

IM applications such as Skype, AOL’s AIM, and Yahoo or Windows Live Messenger can also be used for internal voice and videoconferencing, but the free services don’t take the place of an in-person client meeting. Vator.tv’s Francisco relies on Skype as her primary instant messaging and voice connection in her home office in San Francisco. Since her co-workers in Denver and Austria also use Skype, there is no need to pay for conference-calling features and the $35 annual fee for a business line enables her to call anyone.

A landline may not be necessary for virtual offices looking to keep costs down. Between Skype and a cell phone, Francisco is able to sufficiently stay in touch with peers and clients. However, virtual office workers cannot fully rely on instant messaging and voice communications. Meeting people in person or at least seeing their faces provides important but unspoken information about co-workers and business associates.

Videoconferencing, which can be done through inexpensive webcams, can provide a greater comfort level with peers whom you rarely or never meet in person. “It’s a visual world, and you want to see images of people,” says Francisco, whose company introduces entrepreneurs to venture capitalists through videos. She uses her webcam in conjunction with instant messaging chats and voice calls during many of her online discussions.

While videoconferencing suffices for many co-worker conversations, meeting in person is preferred when starting new business relationships, although she has signed one business deal without ever meeting someone from the company in person. “For partnerships I like to meet with people,” she says.

A New Approach

Communicating with affiliates who are accustomed to an independent work life can require a different approach. “Affiliates are not required to be good communicators; they just need to build a legitimate site or service that makes money, and they’re in,” says Mike Kansa, an affiliate from Arcata, Calif. Kansa is part of the FlamingoWorld.com team, which started as a one-woman affiliate venture. Connie Berg, the founder, has become a super-affiliate and her business has grown to such successful proportions that she now employs seven workers scattered all over the U.S.

Kansa, who has also worked as an outsourced program manager, says being effective can be more important than personal communication skills. “Today someone could probably grow to super-affiliate status and not talk with a single person along the way.”

Some affiliates who have never experienced cubicle life “may lack the organizational skills of working in a fast-paced, deadline-oriented office,” so the importance of deadlines must be reinforced, Kansa says. But he believes “individuals working from different environments help to add diversity to our industry.”

Organize the Day

Keeping focused on work despite the temptation of a sunny day or laundry that needs to be washed can be too great a challenge. “Some people have been a disaster; they can’t do what needs to be done because of distractions,” says Anne Fognano, the “Momma in Charge” at CleverMoms.com, who left the corporate world in 1999 to spend more time around her children. She finds it is easier to get work done outside of the corporate environment. “I used to have a lot of distractions … people would hang out in the cubicle to chat,” she says.

One of the biggest advantages of maintaining a virtual office from home is the convenience of being able to work at any time. That can also be a downside. The convenience of working at any hour can also be ruinous, and your co-workers may not share the same schedule.

Virtual office workers tend to work more of their hours outside of nine to five than the corporate set. This can be an advantage if you use technical people who live in different time zones, especially the growing number of qualified programmers and designers in Asia. Late night (U.S. time) can be prime time overseas, and planning ahead to work late and give yourself a break during the day will reduce the likelihood of burnout.

Recruiting technical help when you don’t have an office near an urban center can be a time drain, and since so much work is done remotely, there is no need to limit the geography of contract workers. Vator.tv’s Francisco posts available positions on her websites and asks candidates to submit video applications.

oDesk, a website for finding global technical talent, has an extensive database of local and international contractors. The site assigns “virtual team rooms” to coordinate project activities and takes care of international currency exchanges, according to CEO Gary Swart. The company manages the hourly billing, and oDesk customers provide ratings of the contractors. oDesk charges a 10 percent premium on top of the fees earned by the tech workers.

Scheduling regular videoconference or phone calls with team members will encourage people to meet their deadlines since no one likes to be caught unprepared at a meeting. Scheduling phone calls can reduce the number of spontaneous conversations that were meant to answer a single issue, but often turn into productivity-chewing marathons.

The biggest challenge for virtual workers is fighting the urge to check email or do “just a few things” during what is supposed to be leisure or family time. “I try not to be in my office unless I’m working,” says affiliate Kansa. “If I want to do personal stuff on my computer, I take it outside of my office.”

Collins says he’s very flexible about his schedule, but attempts to adhere to 9:00 a.m. to 6:00 p.m. “office hours.” He will only take calls during those hours and stops working at 6 o’clock to spend time with his family, which includes four young children. However, by 10:00 p.m., when the rest of the family is in bed, he starts his “second shift,” which typically lasts until 1:00 or 2:00 a.m. It’s at that time that he answers emails and gets a lot of his busy work accomplished.

Collins says that time zones aren’t an issue for him, since he’s flexible and works with like-minded people. “Both Missy and I keep somewhat unconventional hours,” he says. “So if we need to have a call with someone in Australia at midnight our time, that’s fine.”

He also notes that for the Affiliate Summit in the U.K., he and Ward are partnering with Jess Luthi, who lives in the U.K., but that the five-hour time difference has yet to be a problem. “She’s in London, but she keeps odd hours. We see her online at all hours of the day and night, so there hasn’t been an issue with communicating.”

Clicks2Customers’ Harrelson says relying on a cell phone as your business line lets you answer questions as they arise, but makes getting away from work a challenge. “It’s all about balance,” he says. “Overdoing it doesn’t help. But then I find myself working some days until 2:00 a.m., and starting again at 6:00 a.m.”

The Trust Issue

Working in a virtual office involves a greater level of trust since you rarely, if ever, get together with co-workers. Home workers don’t have the hearty handshake or leisurely lunch to bond with peers or clients, so they must have faith that their digital communications provide an adequate representation of the people with whom they interact. Being skeptical when a person is out of touch is natural, and virtual workers have to fight the urge to assume the worst if an assignment is missed or someone goes missing for a few hours.

“When I first started my business, I was more trusting about whom I hired. Now I get non-compete and confidentiality agreements,” says CleverMom’s Fognano. Fognano has never met a woman she manages who lives hundreds of miles away but, “As long as she does her job, it works out well.” Fognano makes a point of attending several industry events each year to get the necessary face time with partners and peers.

Those who have successfully worked from home are attractive candidates for employers, should they choose to reenter the corporate life, according to Harrelson. Virtual office workers who perform can be trusted to work independently, a desirable trait, he says, “… If you are producing results in a remote environment, [that means] you are a flexible person who can get something done.”

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

Video Goes Viral

Thanks to social networking sites such as YouTube, online video has quickly become an everyday part of the online experience. While marketers have been slow to capitalize on video so far, the low cost of producing content and potential for increasing reach will make it essential to performance marketing.

The audience that watches Web video skews younger, but nearly everyone online is doing it. According to market research firm comScore, nearly 75 percent of U.S. Internet users watched video during the month of May, viewing more than 8.3 billion video streams. Consumers are interacting with video more frequently in a wide variety of destinations, from “newspaper” websites to social networking to blogs. The most popular viral videos can garner millions of views, and video ads have proven to be more effective than their static counterparts in prompting user actions.

In 2008, more than half of the total U.S. population will be watching video online, according to eMarketer, and advertisers will spend more than $775 million in 2007 on video ads, up 89 percent over the previous year.

Since interactive video will catch and hold viewers’ attention longer, marketers are beginning to use the technology in four ways: on their primary websites; on microsites designed for specific campaigns; syndicating them through advertising networks; and releasing them to video search engines in the hopes that they go viral. The first step is to create professional and compelling content.

The Medium and the Message

Video starts with a camera, and MiniDV (digital video) is the industry-standard format for recording video on tape. MiniDV or hard-drive-based cameras are the best match for transferring video to a PC. To make it easy to transfer the video to a computer for editing, the camera should be able to record in MPEG 2 or 4 format and pass it through a FireWire (also known as IEEE 1394) or USB 2.0 (universal serial bus) connection.

These cameras range in cost from a few hundred to several thousand dollars depending on the features, including optical zoom; size of the LCD panel to preview the video; and the technology used to steady the image. Sony, Panasonic and Canon offer high-quality digital video cameras at a variety of price points and options.

For companies that want to tell a personal story in a vlog style, Jim Kukral, who blogs about using video at HowToDoVideo.com, recommends purchasing a set of lights that cost between $150 and $400 and a photo background (or green screen) that sells for approximately $50. Kukral, who produces videos and distributes them via YouTube, also recommends buying a tripod to provide a steadier image than with handheld shooting.

Kukral says videos about a company provide a more personal experience than blogs, and posting them on YouTube can drive traffic to your website. Publishers can “engage customers and illustrate things with video as opposed to [relying on] bullet points,” he says. Kukral posted videos on YouTube with tips on creating videos that generated new clients, several of whom commented that from his videos they “got the feeling that I knew you.”

Editing software ranges from free to more than $1,000, depending on the sophistication of the special effects. Macs include the intuitive iMovie, which provides basic functions for cutting and splicing together clips, adding titles and controlling sound. Similarly, Windows Vista PCs include a drag-and-drop video-editing application, Windows Movie Maker 6.

QuickTime 7 Pro ($29.99) is available for Mac OS X and for Windows, and includes more sound- and video- editing features, including the ability to export videos to iPhones. SimpleMovieX ($30) from Aero Quartet is a QuickTime competitor for Macs that works with more formats and larger files.

Marketers willing to learn more sophisticated programs so that they can add effects such as modifying the lighting, integrating multiple audio tracks and working with more file formats have several not-so-inexpensive options (see sidebar on page 048). Adobe Flash is becoming ubiquitous as a browser-friendly application that enables publishers to integrate interactive elements into their videos.

Kukral says the biggest mistake companies make in creating videos is insufficient branding. Videos should introduce the company at the beginning and reinforce the brand within the content.

For videos that are distributed outside of a corporate website, adding the URL in a title card at the end of the video is recommended. The videos should also be tagged with the URL and contact information, and keywords should be added to optimize the videos for search engines.

Marketing videos can range from a few seconds to several minutes in length depending on the type of content and target audience. Keeping the message short is essential to retaining the viewer, according to Michael Hines, the U.S. manager for network Zanox. Videos that are to be distributed as ads “can’t be 30 seconds long,” Hines says. He recommends that video ads be no longer than 10-15 seconds in length, while videos that introduce a company or illustrate a technology can be longer.

Publishers looking to create video marketing content without investing in editing software or expertise can refine their videos with a drag-and-drop online tool. Launched in August, Digital Canvas is a Flash-based service from Flimp Media that integrates interactive elements into a marketing microsite, according to company CEO Wayne Wall. These customized pages, also called flimps, can be shared as viral content, and built-in tracking mechanisms enable measuring their effectiveness, Wall says. The videos can tell the story of a company, or be used as an interactive component of marketing collateral, he adds.

Companies that lack video expertise or desire the highest-quality production values should consider using a video production service familiar with the optimizing content for the Web. Many of the companies that produce corporate training videos or video news releases are adding online services, with costs ranging from a few hundred to a few thousand dollars depending on the complexity of the shoot.

Putting Videos Online

Putting videos online that have been created on a website is not difficult, but finding an audience for them often requires manually uploading them to other sites or hiring someone to do so for you. Videos in the most common formats (MPEG, QuickTime and Windows Media) can be embedded on Web pages with a minimum of coding. As a more sophisticated alternative, embedding a Flash player on a site provides access to multiple videos and enables publishers to link to other interactive components or Web content.

For publishers with substantial traffic, adding videos provides an opportunity to retain visitors and to satisfy those who would rather watch than read content. If the videos become a runaway success, however, you may need to purchase additional bandwidth from your Internet service provider. Although the video quality can be compromised, uploading videos to YouTube and embedding their video on your site can reduce Web-hosting costs, according to video guru Kukral.

If you want videos to drive traffic to your website, they need to be optimized for search engines and syndicated through a growing number of video-hosting and search sites. As part of the upload process for submitting videos to search sites such as You- Tube, Revver, DailyMotion and Blip.tv, and syndication sites including Veoh, Brightcove and Maven, publishers fi ll out forms on each site and enter tags, descriptions and keywords. This painstaking process can take hours to reach just the most highly trafficked sites.

Companies such as TurnHere and Medialink work with networks of local video production companies to create the content and will also take care of the upload and submission process to sites including Google, AOL, MSN and Yahoo.

Through a partnership with RSS distribution company Pheedo, Turn- Here distributes content to sites looking to add video, including blogs such as BlogCritics and AlarmClock, and publishers including Slashdot, Red Herring, InformationWeek and ABCNews, according to CEO Brad Inman. Inman says travel, automotive companies and book publishers are among the early adopters marketing through online videos. TurnHere client Simon & Schuster has created hundreds of videos with authors talking about their latest books, and Inman says the top authors’ videos are viewed 50,000 times per month.

Local publishers are beginning to experiment with using video to tell their stories directly to customers. Superpages and CitySearch have recently introduced videos into their local listings. Marketing videos are “… really about long tail – not about a million streams, but [marketers] want 100 relevant streams,” Inman says. He recommends local business owners get in front of the camera because “no one can tell their story better.”

Getting the media and bloggers to write about or incorporate your videos can create signifi cant brand awareness and drive traffic to your website. Medialink, which has more than 20 years of experience in connecting companies with print and broadcast media, has video distribution services that start at $2,500. Medialink will host and present a video online and distribute it to local and national media including bloggers, and will also distribute the videos to aggregation and syndication sites, according to COO Larry Thomas.

In the fall of 2007, Medialink is launching Mediaseed, a Web platform that hosts and optimizes corporate marketing and communications materials for distribution. The platform contains tracking features for measuring a video marketing initiative’s reach online as well as on broadcast TV.

While accurately labeling videos will increase exposure on YouTube and the other top video sites, how to optimize content for video or general search engines remains largely a mystery. Google’s incorporation of video results into its universal search will increase the exposure of videos, but search engine marketers are still catching up.

Browsing videos and referrals from other users remain the most common methods by which people discover new videos. Being found on video search engines is not that easy, according to TurnHere’s Inman. People had a “false sense several months ago that ‘I can create a video and have it go viral on YouTube and it will go big,'” according to Inman. The reality is that most videos submitted to video sites will languish in obscurity. “The key is to start creating and experimenting,” he says. Search engines will take 18 months to catch on to the importance of video and properly index the content, according to Zanox’s Hines.

This fall Zanox will launch Zanox.tv, where publishers can post videos that will be used to attract partners. “The intent is to allow publishers to do an alternative to a text ad to encourage people to join as an affiliate,” says Hines. The video ads will likely pay on a cost-per-action basis, with Zanox and publishers sharing the revenue, according to Hines.

Ad Networks Monetize Video

Advertising networks are matching content companies with publishers large and small who are looking to use video to increase their audience. Startup video ad network Affliated.net is betting on a new video advertisement form opening a door into affiliate marketing. The borderless videos hover next to content and feature an actor or actress pitching a product or service. Since the video ads reside in the pixels along the edges of a Web page, publishers don’t have to give up their existing ads, according to Affiliated.net president Chris Skretvedt.

The videos, which range in length from 30 seconds to 5 minutes and will be paid for by Affiliated.net, are created to prompt user action such as generating leads or making a purchase, Skretvedt says. The ads launched in August and are to be sold on a CPA basis. The company is pursuing relationships with the major affiliate networks.

Tremor Media has combined forces with video distribution company ClipSyndicate to match content with relevant advertising. Tremor Media inserts in-stream ads with videos from sites such as DrPhil.com and making the content available to publishers, according to vice president of publisher relations Daniel Scherer.

Scherer says online video is hampered by a lack of technical standards in how to publish content. De facto standards for formats exist, but there is “no standard that supports integration of in-stream dynamic advertising,” he says. Content owners today are stuck in the struggle between controlling the advertising and monetizing their videos, according to Scherer. “The big puzzle is the upside-down reliance on You- Tube,” he says. If you want a video to be popular, put it on YouTube, but then you can’t monetize it; and if you want to control the ads, then you can’t put it on YouTube, says Scherer. Within the next year, You- Tube parent Google is expected to roll out a new video advertising service to address this problem.

Another opportunity for monetizing videos is to make them interactive so that the products featured within can be highlighted and sold via performance marketing. VideoClix provides technology that makes areas of a video clickable, according to Brent Stafford, the vice president of business development. “If you don’t make [your ads] interactive, you are underutilizing the medium,” he says. VideoClix has created ads for Levi’s and Honda, and shares revenue through CPA, CPC or CPM campaigns.

Once the science of increasing the search rankings of video has been significantly refined, publishers will rapidly increase their efforts to acquire or produce videos to place on their website. This strategy will be similar to how images of celebrities or top search terms are currently used to attract an audience, and will assure video’s place in the spotlight.

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

Search Marketing Is Direct Marketing

When I say the word “marketing,” what do you think of? Probably some kind of advertising – maybe a TV commercial for Coke. That’s brand marketing, and it’s gotten the lion’s share of attention from marketers for decades.

Far fewer people are direct marketers – the folks behind the catalogs and mail solicitations that fill our mailboxes. If you know any direct marketers, you may want to hire them to run your search marketing campaigns. Let’s look at the basics of direct marketing to find out why.

The Name of the Game Is Response

Direct marketing is truly measurable marketing. Unlike most TV commercials, every direct marketing message is designed to evoke a response, such as “call this number now” or “mail your order form today.” The return on direct marketing investment is based on how many customers respond to those messages. A very successful direct marketing campaign might sport a 4 percent response rate; a failure, less than one-half of 1 percent. Direct marketers make their money by increasing response rates.

Think about it. It doesn’t cost any more to mail a catalog that drives 4 percent response as one that drives 2 percent. The creative costs, paper costs, printing costs and mailing costs are about the same for each mailing, so smart direct marketers focus on raising response to bring more return from the same investment. Direct marketers spend their time figuring out just what causes more people to respond. A different offer on the outside of the envelope might get more people to open it. A different picture and product description in a catalog might cause more people to order. A yellow sticky that says, “Before you pass on our offer, read this” might cause a few people to do just that.

But how do direct marketers know what worked? They measure the response. They measure changes in response to every small variant of their sales pitch. And they keep the changes that work and throw the rest away.

When credit card marketers send out a million pieces of mail to sign up new customers, they don’t just write a letter and mail it out. Instead they write 10 or 20 different letters and mail them to 1,000 people each. Then they mail the version of the letter that generated the best response to the rest of that million-person list.

Direct marketers constantly tweak their messages to become more persuasive. They continuously experiment with new ideas. It may seem picayune to focus on raising response rates from 2.2 percent to 2.6 percent, but just such increases mark breakthrough direct marketing campaigns.

Another way to increase return is to cull your mailing list. If you know that certain customers never seem to buy, you can eliminate those addresses from the list and add new ones that might prove more profitable. Your mailing costs are the same, but your responses will go up.

You can see that the basics of direct marketing revolve around experimenting with your messages and your mailing list to drive more and more sales for the same cost. You can apply those basics to Web marketing, too.

Web marketing, done well, is the biggest direct marketing opportunity ever, because the Web is infinitely more measurable than off-line direct marketing. Off-line direct marketers can measure only the final response – the mail order or the phone call, for example. They can’t tell the difference between those who threw the envelope away without opening it and those who read the entire message but still did not respond. If they could, they’d know whether to change the message on the outside of the envelope or change the letter itself.

The kind of measurement the Web offers is the stuff of direct marketers’ dreams.

Passing the Test

In the May/June Affiliate’s Corner column, I wrote about the ways super-affiliates prefer to be approached by affiliate program managers and merchants for the purpose of program recruitment.

Wooing a super-affiliate over drinks and dinner with offers of exclusive landing pages, significantly higher-than-advertised commission rates, or showering them with free product samples will certainly get their attention, but it does not guarantee that you will get the heavy hitters to join your program, however.

Even if your product is a fabulous fit for the affiliate’s audience and your commission rates are more generous than your competitors’, no super-affiliate will send copious amounts of targeted traffic (read: their highly valued subscribers with whom they’ve worked hard to develop loyal and lasting relationships) to your site unless it first passes an affiliate’s Merchant Site Test.

This test evaluates many aspects of the site from both the affiliate’s and a visitor’s perspective. I personally start with factors that will affect a visitor’s experience, and keep the following questions in mind as I peruse a merchant’s site for the first time.

Does the site load quickly or does the server bog down under graphic-laden pages? If there is a Flash home page, is there an obvious “skip intro” link or am I forced to watch the video to the bitter end? Is the site attractive and professional in appearance or are there broken links, graphics and scripting errors? Is the sales page comprehensive and well written, or is it fraught with spelling and grammatical errors or “holes” in the sales copy?

I also check to see whether the site uses excessive newsletter sign-up popups or advertising fly-ins. Do site preview pop-ups such as Snap Shots block my view of the text each time I cursor over a link? Does a new window open every time I click a link? Although I may understand a merchant’s motivation for using such tactics, I am more concerned that visitors to the site will find such intrusions confusing and/or annoying to the point that they are likely to exit the site and kill any chance of a sale.

Appearance, functionality and copy rarely pose problems with professionally designed and maintained sites. Nor are they an issue for ClickBank affiliates who can code links to send traffic directly to the order form. However, having to bypass a merchant’s home page means that pay-per-click arbitrage isn’t an option for some affiliates, while others will have to write sales copy rather than a product review. Although some affiliates may be willing to make that effort to promote one exceptional product, most will pass on the program if the merchant offers a diverse or large selection of goods.

Another significant factor that I will evaluate is search functionality. Visitors must be able to search for and find what they want quickly and easily. For example, does a clothing site let visitors drill down to choose between designers, color and function, or does a click on the “Dresses” link slowly load a page that displays 50 thumbnails of cocktail, evening and wedding dresses?

If the visitor can find a product that she wants to buy, good affiliates will check to see whether the order process is functional, intuitive and secure. Does the site post a “Hacker-Safe” logo and a privacy policy? Are shipping policies and prices easy to locate, or does a customer have to go through the entire order process to determine the cost to ship to Canada or if GST and PST will be added to her order? Can the customer ship to an address different from the billing address and can she have that dress gift wrapped for her cousin in Amsterdam?

What happens if our customer has questions about either the product or her order? Is there a sizing guide or a customer FAQ? Does the site offer order tracking? Is there a contact link, Live Help badge or telephone number displayed on every page for support?

I’d be thrilled to see all but the last item on that list, as a prominently posted telephone number that encourages phone orders means that potential commissions will be lost through traffic leakage.

Traffic leakage occurs at any point on a site that allows visitors to leave the site without making a purchase through the affiliate’s link. Affiliates that pay for their traffic are particularly sensitive to this problem, and most affiliates will not join a merchant’s affiliate program if there is any leakage at all.

Phone orders must therefore be tracked to the referring affiliate – which does not mean asking your customers from which site they originated. Merchants who aren’t equipped with the technical wizardry to track phone orders should allow affiliates to send their traffic to a version of the site that does not post a phone number, and trust that their super-affiliates’ promotional efforts will more than make up for any sales that may be lost by doing so.

Most traffic leaks occur when merchants link to other sites that may be of interest to their visitors, or to partner sites with which they have reciprocal link agreements. Traffic leakage also occurs when a merchant with two or more online stores links to those other sites without compensating affiliates for sales from any and all of their stores.

The most offensive type of outbound link traffic leaks are affiliate or contextual advertising links (i.e., Google Adwords ads) from which the merchant hopes to profit. Most affiliates consider this practice more “traffic theft” than traffic leakage and will not only not join the program, they will also warn other affiliates of the merchant’s commission-stealing practices.

That’s not to say that as a merchant you shouldn’t promote other merchants’ products. You should. But do it on the back end or from within the secure area of your site, only after your own affiliates have had a fair chance to earn a commission for sending traffic to your site.

As you can see, the Merchant Site Test is comprehensive and super-affiliates are picky to the nth degree! If any aspect of the site misses the bar, most super-affiliates will go on to consider your competitor’s offer and promote their products without so much as a TYBNTY (thank-you-but-no-thank-you) note for your time and treats.

If you’re lucky enough to have a super- affiliate take time from her busy promotional schedule (or lounge chair) to explain why she’s chosen not to join your program, consider implementing her recommendations as soon as possible – and let her know as soon as the changes have been made.

Don’t stop there

Visit a Web developer’s forum and ask for feedback about your site. Ask your site visitors for their comments and suggestions as well. Check the affiliate networks for clues about what your competitors are doing right. For example, ask yourself how a merchant that pays only 8 percent commissions has an EPC that is triple that of the merchant who pays 12 percent. Do your own Merchant Site Test to find out why affiliates love to promote their program.

Getting just one super-affiliate on board can substantially increase a program’s earnings. The first super-affiliate in a program will generally use this advantage to heavily advertise the site or product using pay per click.

As other super-affiliates join the program and competition between affiliates increases, most will rise to the challenge and step up their promotional efforts using a diverse array of creative methods. Exposure to both the product and the affiliate program tend to increase exponentially at that point – which makes for very happy merchants and managers.

When you design your site with a view to building long-term relationships with visitors and potential super- affiliates, you too can get that kind of happy – perhaps even rich.

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

Making Over My Own Site

Being “Dr. Makeover” comes with plenty of pressure. There’s an expectation that everything I touch will be inherently beautiful and optimized for peak performance. I have a dirty little secret, though: I rarely spend much time working on the design aspect of my own sites. What’s that old saying about the cobbler’s children?

So I’ve decided to put some shoes on my own kids’ feet and I’m making the process public. For the next two issues, I’ll provide a behind-the-scenes look into one design firm’s struggle to redesign its own site. I’ll share failed designs. I’ll ask for your objective opinions. And, hopefully, when it’s all said and done, I’ll have a better site and you’ll have a clearer understanding of what it takes to design a successful online venue.

While I generally recommend redesigning websites every 12 months, the site for my design firm – SostreAssoc.com – has had the same look since early 2005. That’s right, over two whole years. Well overdue from a time perspective, but does it really need a redesign?

The current site has a pretty good conversion rate for this type of business. Although I don’t feel it’s the best it could be, some people still like it and by most accounts it doesn’t seem to be overtly hurting sales. If it ain’t broke, don’t fix it, right? Wrong.

Just because sales are coming in at a normal, healthy pace, doesn’t mean the website is performing optimally. Industry- standard conversion rates are often in the single digits. Three percent. Six percent. That means that roughly 90 percent of your site’s visitors are choosing not to do business with you (or me, in this case)! Of course, a 100 percent conversion rate is nearly impossible for several reasons, but setting your sites to that lofty goal can be more beneficial than simply striving for industry standards.

A good way to determine if your site could perform better is to review how it performs against its transitional goals. Start with a list of all the elements that contribute to the success of your site. Of course, there is the main conversion goal (in our case, increase the number of contacts we receive), but there are also a number of transitional goals we use to get users to take that conversion action. In our case, the list looks like this:

Goal: Communicate our services

Besides the overtly generic tagline, “Consulting, Design, Development,” it’s not immediately clear what services our company provides. If people don’t know what we offer, how can they buy it? Grade: D

Goal: Establish our credibility

The site uses third-party references (citations and client testimonials) to establish credibility. Grade: B

Goal: Convey our thought leadership and expertise

Our clients are always surprised at the level of thought and expertise that we bring to the table, but our website does very little to communicate that expertise. Case studies that explain exactly how we solved tough problems for our clients could help in this situation. Grade: D

Goal: Showcase our product

In the Web design industry, our client websites are our products and they have to shine. While we have a news section that highlights when a client site goes live, there is not even so much as a thumbnail of one of our client’s sites to be found on the home page. This is very, very bad. Grade: F

Goal: Make visitors aware of my writings and conference appearances

Some people visit the site not to hire Sostre & Associates, but to find more of my writings or see me at an industry conference. I wrote a book for a major publishing company. Can you find it on the home page of my site? No. I spoke at several conferences in the past two years. Were those events highlighted on the site? On a good note, I do include a link to this Revenue magazine column. Grade: D

Goal: Foster strong search engine rankings

The current site gets a fair amount of traffic from search engines but it still doesn’t come up for many top-tier, highly trafficked terms. Grade: B

Based on that evaluation, my cumulative grade is a D, and that means it’s definitely time for a redesign.

In the same way we used transitional goals to evaluate our existing site, we’re going to use those goals to drive our redesign priorities. The “problem” with transitional goals is that none of them are really more important than any other one.

In addition, we have outlying goals like generating SEO traffic and promoting my writings and conference appearances that are not directly related to the main goal of getting users to contact us.

The typical, old-school conversion process involved a linear conversion funnel where you took prospects from Step 1 to Step 2 in progressive order to close the sale. Online, there is no linear funnel. Visitors don’t always go from one Step 1, to Step 2, to Step 3 in orderly fashion. Some visitors only want to see the work, while others want to see what services we offer and still others want to start out by reading about our expertise.

Think of it this way: Traditional sales are like being a chauffeur. You drive visitors from one place to another, taking them where they want to go. Online, the visitor is in the driver’s seat and you aren’t even sitting in the car. All you can do is post road signs and hope they’re clear enough to lead the user where they want to go. And that’s where it gets difficult.

Individually, it’s easy to design a site that executes one of the transitional goals. Create a site that communicates services? Easy. Design a site that showcases a product? Simple. Develop a site that improves search engine rankings? No problem. But how do we put it all together so that everything is in balance? That’s exactly what we’ve been struggling with for the past 12 months. Since I started the redesign over a year ago, I’ve designed about 30 different layouts for the site, but I haven’t been happy with any of them.

This is where you come in. Send me (pedro@sostreassoc.com) your thoughts on the current site, or on any of the failed designs. Then next issue, we’ll take this discussion to the next level.

PEDRO SOSTRE is pioneering Conversion Design and its ability to turn online shoppers into online buyers. He is the co-author of Web Analytics for Dummies and serves as CEO of Sostre & Associates, an Internet consulting, design and development firm, which also promotes affiliate programs on its network of websites. Visit www.sostreassoc.com to learn more.

Search Wars

Even though Google would prefer not to be a verb, the search giant is just that and more. To Google is to search for products, maps, healthcare plans, cars for sale, images of Britney Spears, coupon sites, new mobile phones, the population of Moscow, blogs on gardening – the world really. And more so now.

As of last May, Google changed the way it serves results pages. It isn’t one of the ongoing tweakings to its famed algorithm to help you find what you are really looking for, but a much more significant change.

Search results pages are no longer sectioned off into categories for more targeted searches – its tabs for news, video, blogs and maps are still there but its main search results now pull all of those categories together into one results display. This is called Google Universal Search.

Google wants to provide more relevant search results by offering not more choices but better choices in the possible niches a user may be searching for. If you type “healthcare” into Google, you don’t just get providers of healthcare, but also blogs on healthcare and even local providers by ZIP code. Universal Search is supposed to make it easier to find what you want – a mandate that is the heart of Google’s mission.

“With universal search, we’re attempting to break down the walls that traditionally separated our various search properties and integrate the vast amounts of information available into one simple set of search results,” writes Marissa Mayer, vice president of search products and user experience of Google on the company’s blog.

Google co-founder Sergey Brin has said in the press that Universal Search is the first major revamp of the site and its underlying architecture in several years. He said the work began more than two years ago and that more than half of the company’s “search efforts” developed it. He said the changes will give people more exposure to “underutilized” Google services such as Book Search and Video Search, and that they will help raise Google’s market share. Brin finished off by saying that “our data says we not only are the best [search engine] but we’re widening the gap.”

In Google’s Shadow

The myriad of niche search engines on the Web, however, take issue with this new feature. Marketers and custom search engine companies believe this reform to the results pages will cut into their business. “There is a lot of money being thrown at the category, and so many players, they are not supportable in the long run,” says Chase Norlin, CEO of Pixsy, which hosts custom image search engines for other sites. Marketers are simply afraid that all their SEO efforts will have to change dramatically to retain their hard-won rankings, being pushed lower by popular blogs and YouTube.com videos of cats. Currently, Pixsy gets 60 percent of its traffic through Google.

“I don’t think it changes a thing for the top search marketers,” says Matt McGee, SEO manager for Marchex at SearchEngineWatch.com. “The best have already been using all these verticals to drive traffic – video optimization, local search, blogs, news and press releases, and so forth. Search marketers who’ve been sticking to the basics like on-page optimization and simple link building have some catching up to do. I’d say they already had some catching up to do even before the Universal Search announcement.”

John Tawadros, COO of iProspect, suggests marketers relax and focus on the opportunity Universal Search presents – a call to diversify your digital content to include more additional media types, adding that a truly good search strategy goes beyond just changing your ways to suit the engines. Kris Jones, CEO of PepperJam, supports that view. “I have watched advertisers double their sales volume via search by focusing on marketing initiatives outside of search. Conversely, I have seen advertisers in just about every vertical space leaving massive dollars on the table by refusing to see the big picture,” he says on his blog.

“The moral for search marketers is,” says David Berkowitz, director of emerging media at 360i, “they need to take a holistic view of search. For those who get it, this gives them an unprecedented chance to dominate entire search engine results pages and gain sizable competitive advantages. Marketers need to consider every digital asset of theirs as an opportunity to gain more visibility in Google, whether it’s an image, video, press release, store listing, blog post or anything else.”

Norlin points out that since Pixsy has a large business-to-business component, Universal Search does not largely have an impact on those current customers. In fact, there is a healthy amount of vertical search in the business-to-business space. Research firm Outsell recently stated that the business-to-business vertical search market would probably top $1 billion in revenue by 2009. Also, vertical search engines that use different “contextual crawling methods” or integrate specialized databases that are not routinely interpreted by a Web search crawler may be unaffected by Universal Search.

Finding a Niche

Wil Reynolds, associate at SEER Interactive, thinks niche search engines still have a place and are not going to be crushed by Google. “We don’t need to be the biggest SEO company out there, for example. We only need a piece of the pie. [Search companies] go out there fighting for a third of a percent and that can be profitable for them.” Mike Solomon, vice president of Search123, says that they do well because “we know who we are and what we do well. We see business that Google and Yahoo have left behind in the second-tier clients. ” We are not saying one size fits all. Google says ‘this is one size fits all and if not, too bad.'”

Image search engine sites such as Like.com, Picsearch.com and Pixsy will probably never catch Google, but they may not need to. “We don’t really compete with Google right now,” Norlin says. “Universal Search isn’t really a big deal.” He says that Google is too concerned with having a negative impact on their revenue to change results that dramatically. “They have too much to lose. That’s what happens when you are up.” He adds that an engine like Ask.com has nothing to lose and, therefore, is the most innovative in terms of universal search, Norlin believes.

Search sites such as Ask.com and Snap.com are trying to appeal to the Google masses by displaying search results in an interesting way. Ask.com has incorporated a preview in which thumbnails of the home page of a site pop up when the cursor slides across the result listing. Snap.com’s preview has a bigger pane that slides to reveal the home page without having to click through at all. Ask.com also combines search results Ã la Google Universal Search but presents the results in three ways – as Web links; as news items, pictures, video clips, weather reports and local results; and finally, a pane to help you refine your search. Snap CEO Tom McGovern says, “We’re not delirious in thinking that we are going to displace Google. We want to be the secondary search engine of choice.”

Since Universal Search’s launch, there has been a change in traffic patterns on the Web. According to Hitwise, Google Maps saw visits rise by 20.34 percent from May 12 to June 2. Google’s video results meant YouTube got 8.26 percent more visits in the same period and Google Video was up 1.41 percent. The Google Image Search and Google News areas actually lost traffic by 7.22 percent and 7.84 percent respectively. As of June 2007, Google still gets 52.7 percent of all searches, according to Nielsen//NetRatings.

SEER’s Reynolds believes that Universal Search is just an outgrowth of a really innovative company. “At Google,” he notes, “they really allow you to invent there. They encourage their employees to try new things. The result is Google has built an engine of ideas.” He says that Google Maps was a side project of certain Google teams and “now look at it.”

The Size vs. Substance Issue

Some experts think the one-size-fits-all model can actually help vertical search firms. Products that never ranked high can now see better traffic and buyers from placement in a Universal Search result. It means the broadening of SEO efforts instead of the daily micromanaging some businesses still do to their sites. It will force marketers to unify their different channels so that everything ranks equally. Some pundits think this was a long time in coming. Finally, the most obvious benefit to Universal Search is that with more personalized results comes better traffic for everyone. Norlin says that there are “only so many kinds of destination sites. These are the early days of Universal Search. Personalization of search and automation of that is the next trend.”

The innovative ways Ask.com and Snap.com have used Web 2.0 technology to craft interesting user experiences, experts agree, is a trend, and could chip away at Google’s business. FlickrStorm, for example, allows you to search Flickr image tags and displays thumbnails of all the pictures with that tag. You can then choose to view the full-size image at Flickr or add to your personal slideshow. FundooWeb.com presents search results from Yahoo, Yahoo News, Yahoo Answers, Yahoo Maps, Amazon and Flickr. If you search from all sources, the results are paned as collapsible headlines and a Flickr photo strip.

Other vertical search engines using Web 2.0 include Whonu, which pulls from more than 300 search sources and an interface that contextualizes what you enter. For example, type in a ZIP code and you get a set of links to maps, weather maps and even public events in Google Calendar. KwMap calls itself a “keyword map for the whole Internet.” Type in a keyword or phrase and an interface lists related key phrases with a graph that shows related terms. Clicking on a term reveals another layer of related terms. Like.com is a “visual shopping” engine that displays images of products or people. Click on an image and the engine shows related products by analyzing the image and not text tags. The interface lets you focus on areas of an image to find similar products by shape or color. Blinkx TV is a search engine that searches audio, video and podcasts using keywords and phrases but also content from inside the clip that you’re looking for – be it a phrase sung in a song or a product name mentioned in a podcast.>

While marketers will probably have to learn new methods to keep their results high in Universal Search, it seems clear that niche search engines can offer unique ways to appeal to everyday searchers, too. SEER Interactive’s Reynolds trusts the Web audience is a savvy one. “When you get to very specific niche engines, the consumer is very knowledgeable. They are more likely to convert. ” Google got people hooked for years before they started serving ads.”

Getting Into the Mashup Mix

It’s become a new art form to combine various existing elements to create something totally new. However, it can also be dangerous creative and legal territory to navigate when particular items are protected by copyright laws.

Some online marketers, eager to leverage new technologies for promotional purposes, are uploading and sharing video creations with copyrighted materials despite concern about potential copyright infringement, because they want to beat others to the punch.

Founder of the site HowToDoVideo.com Jim Kukral explains there is a belief in the first-move advantage – those who get their videos up on YouTube first are the people who will win. Kukral adds, “online video is the wild, wild West ” it is how search engines were in 2000.”

The first mashup to garner significant attention was not a video, but “A Stroke of Genius,” by Freelance Hellraiser in 2001. It combined the vocals of Christina Aguilera’s “Genie in a Bottle” with The Strokes’ “Hard to Explain.” In the next few years, a deluge of similar attempts followed. Freelance Hellraiser went on to record a single for Sony, while artist and producer Danger Mouse famously teamed up with musician Cee-Lo to form the group Gnarls Barkley, whose song “Crazy” was one of 2006’s biggest hits.

Mashup is a loose term that means to remix more than one source of data to form a new combination of information. But music is not the only type of mashup – there are also video and Web mashups. John Musser, founder of the website ProgrammableWeb, which catalogs mashups, says that the goal is “to create something new that is unique and greater than the sum of its parts.”

The mashup movement has exploded over the past three years, taking many by surprise. Many industry watchers consider the emergence of mashups as a proof point of Web 2.0 – because it involves widespread sharing and mixing of online content, many of the basic Web 2.0 tenants.

Video mashups also are becoming increasingly popular – users are mixing their amateur video with copyrighted video or audio and adding these new creations to their own sites, uploading them to video-sharing sites, or sharing them through social networks.

Affiliate Summit co-founder Shawn Collins says that when he creates a mashup, he makes sure the sources of data are not copyrighted. He uses royalty-free music from sites such as Stock20.com and royalty-free video from sites like iStockPhoto. com and FreeStockFootage.com. For a recent mashup Collins made, he grabbed a laugh sound effect that comes with the Sony Vegas video-editing software program. He got the audio from a podcast that he understood to be open for use, as he didn’t see any claims to the contrary.

Beth Kanter, a trainer, coach and consultant to nonprofits regarding technology, uses Web tools such as video blogging, screencasting and virtual worlds. When Kanter creates a mashup, if she finds something she thinks is absolutely perfect and it is all rights reserved, she asks for permission. She also looks for materials that have been resourced under Creative Commons – its tagline is “some rights reserved.” Creative Commons’ licenses enable copyright holders to grant some or all of their rights to the public while retaining others through various licensing and contract schemes, including dedication to the public domain. Creative Commons is a nonprofit founded in 2001 by a group of U.S. copyright experts who became concerned that the default copyright laws were restricting creativity in the digital environment by preventing people from accessing, remixing and distributing copyright material online.

The ease by which any song or film can be pirated onto the Internet caused an intellectual property rights debate that picked up momentum with music-sharing site Napster eight years ago. As sampling and sharing online becomes more widespread, intellectual property and technology lawyer Denise Howell wonders if copyright rules are out of sync with the values of the day – she calls current copyright law “quite Draconian concerning infringing and sampling.”

The DMCA

In 1998, Congress passed The Digital Millennium Copyright Act (DMCA), which made major changes to copyright law and attempts to address copyright in the digitally networked environment. The DMCA Act shields Internet companies from liability for copyright infringements if they act promptly to remove the clips.

YouTube.com constantly receives DMCA Takedown Notices from copyright owners – asking it to take down videos that claim to infringe copyrights. In March, Viacom sued YouTube for $1 billion, accusing the video-sharing site of “massive intentional copyright infringement” based on 160,000 unauthorized Viacom clips that were uploaded onto YouTube.

In August, eight more parties, including the Rugby Football League, charged that YouTube encourages copyright infringement to generate public attention and boost traffic to its site.

This fall, YouTube plans to deploy a system to filter out copyrighted content by using digital fingerprinting technology to compare user-submitted videos to copyrighted materials, but critics say that this technology has not come fast enough.

The DMCA has been criticized for making it too easy for copyright owners to demand that website owners take down infringing content when it may not in fact be infringing. Electronic Frontier Foundation (EFF) senior intellectual property attorney Fred von Lohmann claims the DMCA is unfair because some copyright users are misusing it for censorship purposes.

Copyright holders have to consider the provisions of Fair Use, which is a doctrine in the U.S. copyright law that allows limited use of copyrighted material without requiring permission from the rights holders. It can be invoked when the value to the public outweighs the cost to the owner of the copyright. Under Fair Use, copyrighted material can be sampled – it is what allows short clips of copyrighted material to be included in documentaries under the name of scholarship and parody.

So the big question many are asking is, can mashup creators sample from copyrighted material and be protected under the provisions of Fair Use? Howell says that if a sample is used noncommercially and has a strong parody or commentary component, “the Fair Use odds improve but there are no guarantees.”

Von Lohmann says the consequences of sampling copyrighted materials for mashups is unpredictable. He calls it a “gray area” because there has never been a court case about mashups. Von Lohmann explains that sampling under the protection of Fair Use depends on the creation’s purpose, how much copyrighted material the user took, the nature of the work (factual or creative) and the effect it has on the original. “Most mashups are creative and noncommercial, so those things favor Fair Use,” von Lohmann says.

But if a marketer were sampling copyrighted material to promote her own product, it could be argued that it is not covered under Fair Use. “If the work is commercial and promotional, then it will be harder to defend,” von Lohmann says, adding the warning that if marketers are going to be using other people’s copyrighted materials, they need to understand the pitfalls and they should consult an attorney.

Legal Changes Afoot

There is evidence that the way copyright law is enforced on the Internet could change eventually. At a session on copyright and social media at June’s SuperNova conference in San Francisco, one of the panelists, Viacom lawyer Mark Morrill, said that Viacom is only interested in pursuing infringement of Viacom material on YouTube for nontransformative, verbatim use. Viacom is not pursuing transformative uses – which is the description that mashups and remixing fall under. That means if you are using copyrighted material without altering it, you may be in legal trouble. However, if you are transforming that copyrighted material (adding other elements, etc.), Viacom is not coming after you.

Regarding all of the amateur videos using various clips of The Rolling Stones songs that have been uploaded to YouTube, attorney Howell explains that YouTube has had great success convincing the major record labels to adopt strategies for approving works for this kind of use, “thus hopefully making the takedown issue for mashups and sampling irrelevant,” she says. YouTube has deals with Warner, Sony BMG, EMI and Universal Music Group that enable people to legitimately incorporate works from these record labels’ artists into their user-generated content on YouTube.

And in August, online video-sharing site, Veoh Networks, preemptively sued Universal Music Group, asking a judge to prevent the music company from filing its own copyright infringement action – even if users upload videos to the Veoh site that contain unauthorized music from Universal artists. Veoh argues that it is protected under the safe harbors provisions of copyright law because it does not encourage its users to infringe copyrights and actively investigates and takes down infringing material.

Creating these mashups is getting easier with the tools that let users overlay images and text on top of copyrighted video. This can be useful to marketers and affiliates who want to add their own promotional content (see sidebar above).

Yoni Silberberg, CEO of PLYmedia, claims his company is not worried about infringing copyrights because its services are overlays – the original content is always kept intact. Experts agree that because services from Cuts, PLYmedia and others like AffiliateVideoBrander don’t host or store the video, they are not liable for copyright infringement.

Howell says PLYmedia’s BubblePLY gets around copyright infringement issues because they rely on the commentary component of fair use, and the fact that it does not copy or host the commented-upon works. Howell says it’s the same for Cuts – it’s a commentary addon, with no copying or redistribution of the original work.

Mapping Out a Course for Mashups

The most common type of mashup is a Web one. ProgrammableWeb’s Musser says that in the past, mashups were only accessible to programmers because they involved writing some code, but that has changed due to the advent of new tools. To date, ProgrammableWeb. com lists 2,100 Web mashups, “but that’s only a fraction of the mashups out there,” says Programmable Web’s Musser.

Types of Web mashups include mixing data from different sites like one that shows data about the musician Beck and combines that with audio snippets from a music site, videos from YouTube and Beck’s album covers from Amazon.com. But the most common type of Web mashup is mixing data with a map. As of July 2007, 42 percent of Web mashups were maps.

There are thousands of personal map mashups that plot text, links and data over the digital globe. In the past two years, map providers like Google, Yahoo and Microsoft have created tools that let users layer their own geographic interests on top of maps and satellite images. With certain restrictions, map providers offer mapping software to users through feeds, called APIs (application programming interface), which can be combined with data from other sources.

In April, Google launched its own mashup software, My Maps, which allows users to personalize their Google maps by attaching images, text and video without writing any code. Greg Sterling, founder of Sterling Market Intelligence, says that currently Google is giving the maps away – users just have to have the Google logo on the map in the lower-left corner.

Musser says Google is investing in maps because half of all ad dollars are local – it leads to contextually based local advertising and it can run AdSense as well. It is also a way for Google to build its brand.

U.S. general manager for Clicks2Customers Sam Harrelson says that mapping is one of the areas of tremendous opportunity for affiliate marketing because it is relationship- based and reliant on the element of trust. When deciding on an entertainment venue, people rely on recommendations. With reviews of particular places introduced into Google Maps, Harrelson sees further growth potential for affiliates looking to monetize their communities in a relationship- based paradigm.

Visualization tools developer IDELIX Software offers Lat49, a map-based advertising model targeted at online, Ajax-based map applications. In addition to using the map APIs from Google, Yahoo and others, publishers can use a JavaScript API from Lat49 to drive contextually relevant ads – as users drag maps around, the ads can dynamically change based upon their zoom level.

Experts say that today’s media companies seem to understand that the times are a changin’ when it comes to enforcing copyrights on the Internet.

Mary Hodder, founder of Dabble, a video search site, predicts that media companies are going to be more flexible about their copyrights than the record companies were in the 20th century. “These music companies are keen to believe that they own everything forever ” but I don’t think the rest of the entertainment business will do that,” she says.

Demonstrated by the popularity of Creative Common licenses, the current zeitgeist is that users don’t agree with restrictive copyright laws, and believe in the benefits of sharing, repurposing and remixing. Like the repealing of prohibition in the ’30s, laws change when they no longer are in step with the ideals of the people.

Attorney Howell says that for media companies, enforcing copyrights is a question of business reality. In terms of sampling for commercial use, media companies will continue to take a hard line because the courts have said they can and there’s a sufficient financial payoff. When it comes to pursing a similar strategy for noncommercial mashups and sampling, Howell says the math doesn’t add up. “What makes sense instead is adopting fine-grained ways to both authorize and benefit from creative reuses of copyrighted works.”

Shaping Up Your Business

Facebook, of course, is the social networking site college students used to call their own. Since the site opened up to the general public, its profile has definitely been on the rise. Bay Partners’ Facebook program – called AppFactory – will be aimed at giving entrepreneurs microbursts of funds as they need it, from $25,000 to $250,000 in as little as a few days’ turnaround.

That venture capitalists would sustain a program for such a niche field as social network applications on a single website speaks volumes about how strong the tech sector is these days.

In fact, most non-manufacturing businesses are riding pretty high. Venture capitalists are bolstering this image with their wallets, putting $25.5 billion into companies in 2006, according to PricewaterhouseCoopers, Thomson Financial and the National Venture Capital Association. That’s up 35 percent from the previous year. While that is less than the $52-plus billion VCs put into firms at the height of the dot-com boom in 2000, it is still 85 percent higher than the lowest of low points for investment five years ago.

In the online advertising and performance marketing industries, there is similar reason to celebrate. Venture capitalists and equity firms are in a buying mood, too, as they realize that many start-ups are making their funds last longer, having learned their lesson from the outrageous burn rates of the go-go late-1990s – companies such as Pets.com went through $110 million in about two years.

While start-ups are getting less from VCs (about $8 million, on average; down from $11 million in 2000), their ideas are better, fulfill better-defined business goals and, more importantly, stay lean enough to make them very attractive to larger companies looking to buy adjunct technologies and services. ValueClick, for example, owners of Commission Junction, Search123 and others, has acquired several companies this year and “are clearly not done yet,” according to company officials.

This wild west of mergers and acquisitions in the online advertising and performance marketing space means great opportunities for smaller and mid-size companies with three to five years since launch and profits or a road map to profits. Of course, it isn’t that simple. Start-ups can’t just have a cool technology and a funny mascot anymore. Being acquired or becoming a target for acquisition is a lot more difficult than calling up a big ad network and asking if they are interested.

It’s About People

More often than not, VC firms are the ones spearheading these complicated dances and advising smaller companies with an innovative technology or compelling business plan on what to do to make themselves attractive to buyers. Consultants say that one of the most important signs of a strong company, ripe for acquisition, is a talented team. Sara Holoubek, who consults with companies looking to be acquired, says, “Strategically you need the right vision, but tactically you need – especially if you are the sole owner – to know what you need when you sell. Do you want to sit on a beach or do you want to stay and grow the company?”

She says larger companies looking to acquire prefer when a founding executive team wants to stay and grow the firm. A start-up might have a good idea, she says, but the founders might be very young and not really know when to hire people smarter than they are. Early on in the life of a company, a few people do nearly everything and often they have a hard time giving up those roles. But, she says, those workers are more likely to stay on and be passionate about the business.

Mike Kwatinetz, a founding partner at Azure Capital Partners, which invests in early-stage companies, says the hardest decision to make is to determine whether a CEO and founder can “take it all the way.” In a transition from founder CEO to IPO, the easiest road to success is to have the founder stay. But it’s an unknown quantity, he says.

Sam Paisley, chief administrative officer at ValueClick, who has spearheaded about 13 of the company’s recent acquisitions, says, “Our criteria are that it must be complementary to the online performance marketing world. Our aim is to be a full-service company.” Beyond that, ValueClick is definitely interested in the people at the businesses it buys. “Sometimes you think that when you acquire an entrepreneurial company you expect them to stay nine months,” Paisley says. “And some stay three years or more and some others are still here.” He says it is the people who know how to make the assets work.

Profits Get Noticed

Profitability is also very important and crucial for a deal – with ValueClick anyway. “We love companies that are growing even faster than us,” Paisley says.

Profitability helps a company receive a strong valuation, ultimately making for a better purchase price for the seller. “We love unfinished businesses that can finish it with us. We put heavy emphasis on postclose and integration. We have a reputation of being fair with the deals. We pay a fair price that treats them fair and our shareholders fairly.”

ValueClick has vetted more than 700 companies to close on 14 deals. Holoubek, who was iCrossing’s chief strategy officer, says while her advice is solely strategic and not financial, profitability is way up there on her list, too.

Profitability and a great outlook to profits driven by rapid growth could mean a greater valuation and indeed a higher purchase price. Paisley says that they “insist that a potential target have a same profitability growth as us,” if not more. He admits that a target company with a better valuation will ask for a higher purchase price and that they may be willing to pay more, especially if you fill a need the company may have strategically or technologically. He says ValueClick recently paid $95.5 million in cash for Mezi- Media because of its presence in China.

Azure’s Kwatinetz says he advises companies that want to be sold that they should never say they are for sale. “We will try to form strategic partnerships with companies that may be buyers down the road,” he says. “You get yourselves known to buyers without putting yourself on the block.”

Holoubek confirms, “Nobody really wants to know that you are looking to sell.” Kwatinetz says that there is a lot of danger for an entrepreneur who can make a mistake by trying to appease someone who could be a buyer later. “It’s hard enough building a company without going down a rat hole.”

Todd Dunlop, president of British Columbia-based online marketing company Neverblue, brought in KPMG to help advise them when they thought they were ready for acquisition.

“We wanted to see what would be the best market condition,” he says. “When would be the best time to be acquired? We leaned on them a little bit.” Direct marketing services company Vertrue bought Neverblue in February. During the six to eight months it took to close the deal, Dunlop says the hard part was staying focused on “keeping the company going forward while doing this process.”

Get Your House in Order

Going forward means keeping your financials in order. Devon M. Cohen, COO of Customer Acquisition Network and who was CEO of FordDirect, says having a strong financial and management reporting system will make a deal more seamless. “Lots of companies are built on QuickBooks [accounting software],” he says. “And that’s OK, but realize that if you are acquired, you need good financial statements and that they will be reviewed.”

Bruce Kreindel, CFO of Customer Acquisition Network, adds that “young entrepreneurs know their business but don’t know how to measure their own operations.” He says a beautiful core diamond could be muddied by bad bookkeeping.

Conversely, says Holoubek, a company can look great on paper but the principals stumble over explaining the business. This is especially true in marketing companies where services and products can be somewhat intangible. “Marketers are the worst marketers,” she says. They sometimes have “a hard time explaining what their company does.” You want everyone to talk about you but in a positive way, she says.

“Everything is a story,” says Cohen. “What are you selling and what are you buying? What are the strengths and weaknesses of your business? How can we strengthen them together?” Holoubek says to “get your story down tight and understand the process before talking about it. Bankers can’t be fooled.”

Speaking of bankers, a common mistake entrepreneurs make is inflating revenue when they sit down with investors, banks and suitors. Holoubek says that may work well at industry conferences when no one is checking your numbers, but doesn’t when the books are open. She says that a banker may get a call from a company who says it is probably worth $2 million to $5 million, but that banker’s going to say to come back when they are worth $10 million. “If a CEO can’t admit that he doesn’t make $100 million, I walk away,” she says. Kreindel says that, “We may still buy them if they aren’t ready, but the valuation will be different.”

Make Sure It’s a Match

Just as the talent is really with the people behind a company, Cohen says that corporate culture is more important than first thought. “Blending corporate cultures can really be bad for the merger,” he says. His first business sold to Mercedes- Benz but when it came time to integrate the teams, they could not blend them together. ValueClick’s Paisley says, “If you don’t ever have that chemistry, you will never close.” Entrepreneurs who are one of only three people in a company may have a more difficult time not being in charge, not being the one to run the FedEx packages down the street, not being able to pick up the lunch check without approval. Neverblue’s Dunlop says that the similar corporate cultures helped close the deal between them and Vertrue. “We were both very entrepreneurial companies.”

Part of that start-up culture may include a determination to grow the company without any outside help – VC or otherwise. One downside of VC money is the potential control they take of your idea. Just ask Jim Kukral, online marketing consultant who runs AskTheBlogger.com. He hates the idea of start-ups taking VC investment. A recent blog included: “Taking money from anyone besides yourself is risky and complicates the issue. Yes, yes, yes. Perhaps you must take money to grow to a certain level, etc. In my experience, owning what you build is 1 billion times more important in the long run than the money you raised and the control you had to give up to get it.”

Along those lines, experts suggest that just because a VC firm is willing to invest in a company doesn’t mean they are doing so wisely. A company should also do just as much due diligence on the funding firm as they do on you. Equity investment firm Golden Center for Private Equity and Entrepreneurial Finance at the University of Illinois Urbana-Champaign says companies should ask for references from a potential investor, meet up with other CEOs the firm has invested in and grill them on how involved the investors are – do they meddle, do they know the industry, do they come to meetings knowing about your business?

Neverblue’s Dunlop acknowledges that when being acquired, the greatest fear is fear itself. “Fear was around every corner that there would be a problem,” he says. “Or if you let your guard down the acquirer would take advantage of it. We were lucky and smart in our choice of acquirer. Vertrue bought seven or eight companies over the last several years and we talked to some of them. They gave us great insight.”

There were 399 company acquisitions or mergers in the media and information industries in the first half of this year, on track to beat out last year by more than 20 percent, according to The Jordan, Edmiston Group. “Are you ready psychologically and strategically?” asks Holoubek.

Marketing Reality: Q & A with Joel Comm

Joel Comm has been building websites for over 12 years. He sold his first business to Yahoo in 1997 and it became Yahoo Games. Comm is the author of several best-selling e-books, as well as The AdSense Code, a New York Times best seller. His next venture is as the creator and producer of the online reality show “The Next Internet Millionaire.” The show, which is an “Apprentice”-type reality show being filmed in Loveland, Co., will air only online. The show features 12 contestants vying for a $25,000 prize and chance to start a business with Comm. It began taping in late July and started airing on the Web in mid-August. There will be 12 episodes and the winner will be announced in November. Comm spoke with Revenue Editor-in-Chief Lisa Picarille about the stigma of e-books, why the time is right for an online-only reality show and why viewers find marketing as compelling as he does.

LISA PICARILLE: Given the success of your books, are you making most of your money as an online marketer or as an author?

JOEL COMM: Many people got caught with their pants down when the bubble burst in 2000. I learned my lesson and have become a believer in multiple revenue streams. I now generate revenue through books, affiliate programs, courses, content sites, public speaking and advertising. The more you can position yourself as an authority, the more options become available for monetizing your brand.

LP: How do you get your books noticed with all the noise out there?

JC: I think it’s important to stand out from the rest of the crowd by creating a product that is more than another “me too” book. You have to give people original content and deliver it in a way that makes it accessible to a larger portion of the population. Of course, it never hurts to have great affiliate partners who believe in you and are eager to promote your products.

LP: Also, there is somewhat of a negative stigma associated with e-books as get-rich-quick schemes. What do you do to combat that image?

JC: There have always been snake-oil salesmen. There will always be snake-oil salesmen. Just like the television preachers who make legitimate evangelists look bad, there are so-called marketers who use legitimate techniques for illegitimate business models. People can frequently see through the game of the charlatans. I would hope the public would not throw out the baby with the bathwater. The best I, and other legitimate infopreneurs, can do is provide quality products that really help people. That’s one reason I post testimonials on my pages with full names, and audio when possible. It lets people know that there are others who are really succeeding with my material.

LP: Just curious ” there are many people who sort of bash the ‘gurus.’ What you think about people out there like RichJerk.com?

JC: It’s all just a show for those guys. I don’t care for RJ’s style of marketing. I guess there is money in condescending to people, but I sure wouldn’t want to have that as my claim to fame. If what I do doesn’t have a positive influence on people’s lives, I should probably be doing something else.

LP: You have a coaching club. Explain exactly how it works and what prompted you to start it.

JC: Once people have my book or course, they sometimes request assistance consuming the material. Having a coaching club where members can receive new material and teaching on an ongoing basis can make a huge difference in whether or not they succeed. It’s one thing to have information that can make you money. It’s another to implement what you have learned and take action on it. The same thing that attracts many people to making money online is the thing that can become one of the biggest obstacles to success. In other words, we want to be able to work at home in our pajamas, but it is difficult to stay motivated and disciplined when you have no one to answer to but yourself … in your pajamas. A coaching club and other continuity programs help people stay on track so they can reach their goals faster and with greater efficiency.

LP: Your newest venture is ‘The Next Internet Millionaire.’ How did the idea come about?

JC: Early this year, I began playing with the concept of producing my own reality show. As a reality TV fan, I realized that no one had attempted to do a competitive show on the Internet. As I spoke with my joint venture partner, Eric Holmlund, I discovered that he had a desire to get into video production. Our discussions led to planning, and here we are with the world’s very first competitive Internet reality show.

LP: Why do you think the time is right for this show right now?

JC: Reality shows are a cultural phenomenon. Video on the Internet is all the rage. And regular people are looking for ways to leverage the power of the Internet to bring in some extra cash. It’s a perfect storm whose time has come.

LP: Do you think that having the show air only online negates some of the legitimacy? If it is a good idea, why not try and get broadcast TV to pick it up?

JC: Broadcast TV is losing viewers faster than you can say dot.com. The Internet is the new medium of choice, and one of my goals is to prove that there is a significant audience who is eager to embrace original programming on the Web, provided it is compelling and professionally produced. I don’t believe that anyone has created a production solely for the Web that is of the scale that this project is. If the TV networks want to pick up the series in syndication, I’d be interested in speaking with them, but I’ve never considered selling the show to a network out of the gate. I guess you could say that I am on a mission to prove that the time is right for this concept.

LP: OK, I hate to admit it but I’m a reality show junkie. I’m also a marketing junkie. Yet I’m not sure that I’ll actually watch this show, because it is only online. What do you say to those who may share my opinion?

JC: You’ll be missing out. Having spent the past two weeks of my life on the set with my guests and crew, I can tell you that this is going to be an incredibly entertaining and educational series. Every speaker and sponsor who has visited the set has been overwhelmed at the scope, uniqueness and professionalism of the production, with several people staying longer than intended just to hang out on the set! We’re breaking new ground, and those who watch will see a historical event online unfold before their eyes. Yes, it’s that cool.

LP: What is the target demographic for the show? Who do you think will be watching it?

JC: Our obvious base is the Internet marketing and affiliate marketing crowd. However, we have designed the show and our promotions to appeal to a more mainstream audience. I have never wanted to spend time in misery on a desert island, but I enjoy “Survivor.” And most people will never be pop icons, but millions watch “American Idol.” In the same way, “The Next Internet Millionaire” will appeal to a broad segment of the population, with the additional benefit of reaching an audience on the other side of the world via the Internet.

LP: You have a group of a dozen well-known marketing folks (teachers) who are working with you on the show. What is their role?

JC: I wanted to expose our contestants and viewers to some of the most successful marketers in the world. Unlike other reality shows, I wanted the content of “The Next Internet Millionaire” to go beyond entertainment into the educational realm. The experts who have been on location have been teaching our contestants about product creation, copywriting, branding, viral marketing and a number of other strategies and techniques for building a successful online business. These contestants must then apply their newfound knowledge to a relevant and entertaining challenge each day. It has been a privilege to work alongside such legends as Mark Joyner, Armand Morin, Marlon Sanders and Perry Marshall. The experts also play a role in the judging of challenges, as well as advising me on who they believe should be eliminated from the competition.

LP: The show runs 12 weeks, but you only spend a little over two weeks to film the entire show. Is that enough time to see the traits you are looking for in a winner?

JC: Yes. In fact, I’ve been amazed at how quickly we’ve been able to observe these traits. The contestants bonded on the very first day and the intensity of the competition has continued to increase. You really get to see what people are made of when put under a strict time crunch to complete a task. There are so many excellent qualities in our contestants, that while I’m certain we will end up with a great joint venture partner for me, each of the contestants will most likely go on to do some very significant things in the future.

LP: The winner of ‘The Next Internet Millionaire’ will receive $25,000 and get to start a business venture with you. Do you have a particular idea in mind already?

JC: No. I went into the audition process and the actual competition looking for a person, not a project. As I got to know the contestants on the set, I began thinking about what kind of project would be the ideal fit for each individual. Marketing is marketing. The key is to have the right partner. Once you’ve got that, there are always more ideas than there is time to execute. So I’m confident that my new partner and I will put together a fantastically successful product.

LP: How much input and financial investment does the winner have in the venture to be launched?

JC: The partner will have significant input in the venture, as well as a time investment. We will work closely together to develop the product concept and execution. It’s going to be very exciting to see it all come together.

LP: The show is called ‘The Next Internet Millionaire.’ That sort of puts the idea out that the winner will make at least a million dollars. But what if the venture doesn’t live up to those expectations?

JC: I’m not concerned about that. We make it clear that the winner will receive $25,000 and an opportunity for a joint venture with me. Certainly, I and my team will do everything in our power to build another success story with our winner. But my very first deal wasn’t a million-dollar deal. It was, however, a step in the direction that led me to where I am today. My goal is to build a success story with our winner. And while there is always the chance that we won’t make a million dollars right away, I’m confident that our work together will set the winner on the path to being the next Internet millionaire.

LP: You’ve enjoyed years of success. Does that make you more or less anxious about how this new show might be received by the public and your peers?

JC: Not at all. Once again, every one of my peers who has visited the set has been completely blown away at the scope and professionalism of this production. Several of them decided to hang around longer after they got a taste for what is happening here. The buzz is just beginning and I’m confident that we have a groundbreaking hit on our hands. How many people will have the opportunity to say that they created the world’s first competitive Internet reality show? Just one. Whether the public accepts it as a pop culture phenomenon or not, I can’t imagine ever regretting this project. If you aren’t willing to take significant risks, you will never reap the significant rewards. Besides, I’m having a blast.

Power Plays

By their brief descriptions – “online auction website” and “Internet searching and online advertising company” – it does not sound like eBay and Google are rivals for the same business. But behind the boilerplate company descriptions, many experts claim that as these giants seek to grow even larger, they are going after the same types of acquisitions, which is exacerbating tensions that already exist between them.

In June, Google planned to throw a “Freedom Party” in Boston for users of Google Checkout. The event, which was to protest the exclusion of its Checkout service from the list of accepted payment providers on eBay’s sites, was to coincide with eBay Live, a conference for users of eBay.

Irked by the timing and the name, eBay pulled all of its U.S. ads for a week from Google. Later eBay reinstated “limited” ads on Google but reallocated ad dollars to Google rivals Yahoo, AOL and MSN, a move that industry watchers say served as a proof point of the simmering tensions between the two Internet powerhouses.

To date, eBay has been one of the biggest buyers of keyword ads on Google AdWords – financial analysts estimate eBay has spent just shy of $25 million per quarter on it. It is believed that eBay has been Google’s single largest advertiser, responsible for nearly 5 percent of Google’s revenue. Despite pulling its ads, eBay claimed that its traffic actually went up that week – inferring that the ads were meaningless to their business. eBay Power Seller Skip McGrath says eBay’s decision “woke a lot of people up” – causing those who spend money on AdWords to rethink their spending – in fact, he moved his spending from Google to Yahoo PPC, Miva and Seven Search after disappointing results.

Greg Sterling, founder of Sterling Market Intelligence, notes that tensions between Google and eBay existed before June. He says that eBay has long considered Google to be a rival – more so Google considering eBay to be a rival. In fact, a popular sentiment among experts is “eBay needs Google more than Google needs eBay,” Sterling says.

Matt Hulett, CEO of MPire, an online meta-shopping service, points out that eBay is a marketplace without a search engine – making it dependent on Google. It is estimated that 15 to 20 percent of traffic generated for eBay starts at Google and that 60 to 70 percent of online shoppers start at search engines. Marketing Pilgrim founder Andy Beal notes there are few companies that can say, “If I don’t get any traffic from Google, it won’t matter.” Beal agrees that eBay, like most other companies, needs Google for revenue and users.

That seems confirmed by Google’s second-quarter earnings report showing that the pulling of eBay’s ads did not hurt Google’s business. Beal says that the amount of revenue from eBay is pocket change to Google – it’s the perception of losing eBay that could potentially damage Google’s brand, he says. “It’s more a fear of a domino effect. The last thing that Google wants is for other large companies to think there is life beyond Google.”

Rising Tensions

Scott Wingo, CEO of ChannelAdvisor, explains that Google and eBay’s relationship can’t be described in black-and-white terms – Google and eBay have areas of competition and areas of partnership (e.g., Google powers links for eBay in non-U.S. countries). He says it is new to both parties and they are feeling it out but that it has created a complex relationship that goes beyond “friend or foe.”

With its clear lead in the search market, Google is focused on determining which high-margin online business to try next. As Google looks for new areas of monetization, it has gone into some very similar businesses as eBay.

Some say this is intentional – Google wants to beat eBay specifically in its core areas. Others believe it was inevitable that Google and eBay bump into each other as each expands its empire. “When two 800- pound gorillas are in the same cage, they eventually are going to step on the same banana,” Kevin Ryan, vice president of global content at Search Engine Strategies and Search Engine Watch, says about the companies going into overlapping/competing areas.

Google Checkout vs. PayPal

One such area of contention is online payments. eBay owns PayPal, which generated a fourth of the company’s revenue in 2006. PayPal has become more important to eBay as auction sales growth has slowed. Second-quarter revenue for PayPal grew 34 percent to $454 million. It shows little sign of slowing down.

In June 2006, Google introduced the alternative payment system Checkout. eBay President and CEO Meg Whitman claims she is not worried about Checkout’s ability to make serious inroads, and says that eBay does not offer the use of Checkout because it is an unproven service. According to a J.P. Morgan Securities survey of 1,000 consumers in January, 44 percent of PayPal users reported “Good” or “Very Good” service experiences; only 19 percent of Google Checkout users said the same.

But most everyone agrees that Google has the strategy, talent and programming needed to catch up to eBay. Google has attracted users to Checkout by offering cash incentives and it is very visible at many high-traffic online retailers such as Buy.com. Checkout is putting its icons next to their paid listings and Ryan says that, “Studies show there is increased click activity ” that’s a big advantage over PayPal.”

Google has done a good job of seducing top retailers by offering margin incentives so that it’s cheaper to deploy, according to MPire’s Hulett. A study by Internet Retailer shows that 26 of the top 200 online merchants, or 13 percent, now accept Google Checkout, as of June. But in terms of users, PayPal is by far the leader in the space.

However, PayPal has others also vying for its top spot. In early August, Amazon.com opened its payment system, called Amazon Flexible Payment System – to other websites – a move that pits it squarely against PayPal. Market analyst Scott Devitt of Stifel Nicolaus wrote in a note published August 6 that he anticipates alternative payments to be one of the most active areas in the online retail sector for the next several years.

“In the long term, we believe that the card companies and certain categories in the traditional retail channel have the most to fear about the activities by technology-driven online innovation,” Devitt wrote.

Shopping Spree

Another area where Google could steal eBay’s thunder is its comparison shopping offering, Google Products, which was previously named Froogle. Sterling says that last year Google took down Froogle on its home page in favor of video but predicts that once Google starts promoting Products, it will be a top shopping site.

According to David Rodnitzky, vice president of advertising at Mercantila, for those selling products online, it doesn’t make sense not to use Google Products because it is offered for free, as opposed to CPC pricing for eBay’s Shopping.com. Google monetizes Products through AdSense, and (ironically) Shopping.com generates some of its revenue through Ad- Words, he says. “With this in place, Google can give Products away forever and cause Shopping.com’s margins to compress as a result,” Rodnitzky notes.

SES’ Ryan agrees that Google Products can make a run at eBay’s Shopping.com because shoppers do a tremendous amount of research. When users shop for electronics, for example, they go from comparison engine to brand site to dozens of product pages across many sites.

Going Off-line

Another potentially big battleground for Google and eBay is the arena of off-line advertising, where both companies have made moves in the past year. Google offers radio ad inventory to advertisers using its AdSense platform, and in April struck a deal with Clear Channel to sell ads across its 675 stations. In June, eBay began auctioning radio spots – providing advertisers the ability to buy unsold radio inventory from 2,300 radio stations in the top 300 media markets.

In April, Google got into TV advertising by announcing it will sell ads for the 125 national satellite channels on the Dish Network of EchoStar Communications through Spot- Runner. In March, eBay launched its media auction system designed to allow buyers of national TV ad time to bid for slots via the Internet.

The motivations behind Google and eBay’s move into off-line advertising efforts are very different. eBay may ultimately be trying to persuade its huge base of online sellers to promote their goods off-line – like on the radio. ChannelAdvisor’s Wingo says that eBay’s foray was put together to try and auction off TV ad time by large advertisers – the buyers would be Toyota, Wal-Mart and Microsoft and the sellers would be the networks such as ABC, NBC and CBS.

On the other hand, Marketing Pilgrim’s Beal says Google is diversifying into off-line channels as additional ways to serve small companies. By streamlining the off-line advertising model, Google enables small companies to tap in to radio, print and TV with the same efficiency and ease as signing up to advertise with AdWords.

Wingo predicts that because eBay has a team of only two or three people doing some experimentation and Google is spending hundreds of millions on their initiatives – Google will likely win this battle. But Mercantila’s Rodnitzky says it will be quite some time before we see an impact.

Skype vs. GrandCentral

Telecom is ripe for another turf battle between the powerhouses. In July, Google acquired GrandCentral Communications (for $50 million), which allows users to combine all of their phone numbers and voice mail into a single number. There is buzz that Google could build the unified communications and call-handling functionality of GrandCentral into Google Talk, its computer application for VOIP and instant messaging.

If Google successfully integrates these features with both its Gmail and Google Apps and offers them for free, Skype will be unable to compete, according to Rodnitzky. He also notes that this tact by Google could be a very effective way to reduce eBay’s ability to monetize Skype, which the company purchased for $2.5 billion in late 2005.

Lately Google has been making headlines because company officials say Google wants to spend billions to build a new, open network that would loosen the grip telecom operations have over how consumers use their cell phones. To do so, Google plans to extend its tools, which include email and video, to the rapidly expanding mobile phone market.

Acquisition Fever

Wingo says that with the exception of Skype, eBay has focused on acquisitions that enhance their core offerings. For example, eBay recently bought StubHub.com, which expands its marketplace of ticket sales. And eBay also just acquired StumbleUpon, which gives users a way to bypass search engines – it’s an alternate means of finding information online. Rodnitzky says this could be a very smart move considering Google has won the search engine war.

Speculations about eBay’s next purchase run the gamut – some say eBay could acquire advertising network ValueClick so it can compete as an ad network. Others speculate that eBay may buy a video site and compete with YouTube.

MPire’s Hulett says it could be likely that eBay forms deeper partnerships with Google’s direct search rivals – such as Yahoo. Wingo agrees that long term, it makes a lot of sense for eBay and Yahoo to merge to form a supersized entity that provides balance to Google’s rapid ascension.

And Marketing Pilgrim’s Beal speculates that Google is going to acquire companies that will achieve its goal of dominating as many advertising channels as possible. ChannelAdvisor’s Wingo agrees and notes that, “If you look at their acquisitions from that point of view, they make a lot of sense.” Google also wants to serve small to medium-sized businesses and has made acquisitions in those areas to help it do that.

Google made nine major acquisitions in 2006, and as of July had already acquired 11 companies in 2007. So far they have been comfortable paying large sums to explore uncharted territory, but some people point to YouTube when they talk about an acquisition that has yet to turn a profit. Still, most experts say it’s almost impossible to figure out the next company that Google will buy – anything from a software developer to a network to a hosting company.

The one thing that most industry observers agree on is that the turf wars between Google and eBay are only going to get more heated as each jockey for the powerhouse position online.