Click-throughs – UtilitesDB

Poaching Prohibited

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

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

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

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

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

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

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

WHY IT’S ATTRACTIVE

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

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

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

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

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

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

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

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

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

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

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

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

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

TRACKING THE POACHERS

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

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

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

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

THE CASE FOR AND AGAINST

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

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

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

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

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

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

The Big Decision

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

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

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

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

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

The Role of the Networks

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hooking Search Talent

“As search marketers, we are the insiders. We are supposed to know and understand search in all of its dimensions. We are moving into uncharted territory. It is not territory that I am excited to explore, but I will go there nonetheless,” writes Amanda Watlington of SearchForProfit.com.

Despite her status as an expert on blogs, RSS and search marketing, Watlington is still trying to put a finger on what may be coming down the pike for search this year. Her pondering may sound a bit gloomy – because in many ways, things have never been better for search.

According to GroupM, search will make up about 65 to 70 percent of the measured online advertising in 2008. That’s up from 50 percent in 2005. Also consider that search budgets within brands have become bigger; search marketing professionals now easily have three to five years’ experience handling search initiatives; and most excursions on the Web start at a search engine.

Yet there are really no guidelines on what search-related skills a search team must have in order to propel a company forward – not written down in the company manual anyway. “Knowing” search and running a search team for your company are entirely two different things. Knowing how to budget for search and staying abreast of search innovations is something few teach.

A recent survey by the Search Engine Marketing Professional Organization (SEMPO) stated that in-house search managers are now handling budgets on average of $200,000. However, up to 40 percent of those managers are shepherding that money with three years or less of professional search experience. About 26 percent have five years of experience or more.

Keeping Up With Search

The uncharted territory is the constantly changing nature of the search game. Many search veterans will say that learning search is an ever-changing discipline, fraught with a learning curve that never straightens out. They say that to hire a search manager or search team means upper management must look beyond the experience they have on paper and judge a pro by their passion and innate intelligence.

It’s paying off for some. SEMPO says that about 49 percent of SEM professionals earn $50,000 or less. About 43 percent earn between $50,000 and $100,000 per year. Only about 4 percent of those with five to seven years of experience make more than $200,000 per year. “It’s a respectable career path. I know I wasn’t making 70 or 100 thousand dollars a year when I was three years out of college,” Rob Crigler, co-chair of SEMPO’s in-house committee told SearchEngineWatch.com.

“I equate it to sports – the people who don’t sleep and work really hard get ahead. As a numbers-based job, they attract the hard workers,” says Wil Reynolds of Philadelphia- based SEER Interactive, a search engine optimization company. He says that the tools – software and Web-based analytics and helpers in choosing keywords – are all pretty good now. The ones who rise to the top are the ones with a kind of “street smarts.”

There are some recent attempts to educate the search-interested. Google recently launched a program called Google Online Marketing Challenge, which partners with marketing college professors to teach Google’s popular Ad- Words. Students take a $200 budget and apply it to a PPC campaign for a client. Students then manage the AdWords campaigns including coming up with a pre-campaign plan, manage the ongoing campaign and evaluate post-campaign numbers. The students select keywords, write ads and keep tabs on their clicks. Google then judges the work on up to 30 different criteria and offers an actual prize – a week at Google’s headquarters.

SEMPO also offers distance learning courses in search marketing. Students are introduced to the “foundations” of search marketing; advanced how-tos on SEO; and PPC training. The courses are offered online and can include interaction with “SEM professionals” and grading by SEMPO volunteers. SEER also offers some SEO online video tutorials on its site covering keywords, competitive tools, link building and best practices.

SEM expert Todd Malicoat at stuntdubl.com helps organize an SEO class and an online marketing training class using online courses, podcasts and some PowerPoint. However, he points out that there is really no regulation within the industry and that anyone can build a website and say, “I do search,” and have it be technically true. He notes that the search community has an active base, and learning from these people would be different from the trial-and-error training someone may get when they do it alone.

Reynolds says this kind of education is out there for people to use, “so tenure isn’t important.” What people should really have, he says, is marketing acumen. “If you want to be second place, you go to search training,” he says. “The same materials are available anywhere. But the people who rise are the people that take the basic info and go to the top.”

Matt Spiegel, CEO and founder of Resolution Media, an SEO and PPC consulting firm, says that those with higher educations in marketing have received “little exposure to this new marketing world. The vast majority of recent graduates in advertising and marketing have had little course work specific to online advertising – much less search.” He says to not assume institutions of higher learning will adapt quickly. “Instead, we need to look within the industry for help.”

Rand Fishkin, CEO of Seattle-based SEOmoz, a search marketing consulting company, says that three years’ experience is “quite a bit and is good given the industry.” He says that if he were to interview a search pro for a job, he’d simply ask the candidate to explain how Google works. “How does Google do its rankings and what makes a difference; and how did you pick up these things?” The analogy he draws is with medicine: A doctor should be able to tell you how the nervous system works off the top of her head.

Spiegel says there is a talent shortage. He says to work for his company you do not need a shopping list of skills. “You have to invest in people in this business,” he says. If you are new to the industry, he adds, and learning from the ground up – you get about 18 months to learn nuts and bolts. “When we hire, if they come from another agency, I expect that within 90 days they will be up and running – that you will know enough about search to manage a client list but you may have to learn keyword placement, etc.” He says he has hired one-person shop owners. He looks for attitude as well as skills and a need to “thrive on uncertainty and realize they are at the beginning of an industry.”

Evolving Search Skills

Among the skills that SEER Interactive’s Reynolds looks for is the ability to problem-solve. “Do you like to solve puzzles; things that stimulate and test the mind?” he says. “I would follow that skill with a lack of fear. There are tools are out there to do short-term tests. But are you not afraid to fail? I continue to see more come into the space, but that doesn’t mean they are all going to be good. Anyone with a Net connection and phone can be a search firm tomorrow. That glut can lead to substandard talent.”

Since search seems to be one of those areas that is changing and improving all the time, a search pro needs to stay locked in step with the new. Mike Grehan, CEO of Searchvisible, experts at organic and paid search headquartered in the U.K., has said that it’s getting harder to keep good organic search results on the first page. “What used to work in the good old SEO days won’t cut it in the future.” He notes that while search engines themselves are innovating all the time, search engine optimization is not – meta tags, alt tags, some social media and header tags are still the rage but are seeing their results wear thin.

Constant adaptation is a valuable watchword held by Danielle Leitch, executive vice president of client strategy at MoreVisibility, a search, design and interactive marketing company. She has said that she sees “adaptation of the industry as a whole shifting from just acronyms – SEO, CPC, SEM – to ‘interactive marketing.’ As a result, I believe agencies will become more full service than they had been – which could lead to mergers or partnerships in that area too.”

As the changing landscape continues to shift, SEOmoz’s Fishkin actually sees a constant in search professionals’ qualifications. “To me, the most desirable are those people who started a site in 1998 and have learned from doing. I am always impressed with those guys. They are rare guys.” The other breed of search marketers are those who may have a background working at another agency doing search or with a portfolio of sites they have launched. They may have been a junior marketer on this or that team and they did a search campaign and now they say, “I’m lost.” Now, companies have to spend six to 12 months training this person. He adds that MBAs may spend too much time projecting and doing nothing. “In search, we have to do.” In the end, you can only lose revenue for a few weeks and still correct it and change, he says.

Spiegel says too many companies may hire one person to head up search and leave it at that. “If I were running a company and had to hire one person, I wouldn’t want to put all my eggs in one person. I would hire an agency,” he says.

Searching for Education

Fishkin has put together a primer for those looking for search pros. He states that recruiting might be the hardest part of the work. While portals on the Web offer loads of candidates, the passionate ones are usually found in the Web places where the “young, Web-savvy and tech-obsessed” hang out. In addition to their skill set, you and your company will want to ask how long you will need this pro for; what are the primary priorities for them; and do you want this person or team to grow with the company?

When building the team or fitting the search person into the structure of your company, you need to measure the scale of your search efforts – is your company large enough that you will need more than one person or team? Measure what kind of ROI you want for each segment if you choose to break up the search division into many platforms. And as you carve up search areas and responsibilities, you will still need a person to oversee the divisions.

For training, he recommends letting team members build their own BlogSpot or Yahoo360 sites and experiment with trying to rank them. He likes to give them two to four weeks to “read, learn and get involved.”

SEER’s Reynolds uses himself as an example of the kind of search pro he’d admire. “I loved the game,” he says, “so that’s why I know it well. In the beginning, I loved computers and marketing but also had the cajones to knock on doors.” He says when he got started in search it was a constantly changing and highly competitive field with no rules written. Still is. “Three-year tenure is about all you need – now I have eight.”

MoreVisibility’s Leitch has stated that in the coming year the focus should be on colleges and universities injecting “real world” classes into their business classes. “Those that we will hire in the future need to have solid fundamentals in interactive marketing and search ” regardless of your role in a company or field of interest.”

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.

The Tangled Web of Link Spam

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

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

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

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

Link Farms

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

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

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

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

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

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

Hybrid Auctions Are Taking Over

As author Robert C. Gallagher observes, “Change is inevitable – except from a vending machine.” And so it comes as no surprise that paid search engines are changing too. The biggest change is one of the most fundamental, affecting which paid ads are shown first in the results. The tried-and-true high bidder auctions, pioneered by Overture (later acquired by Yahoo), are being phased out in favor of hybrid auctions, introduced by Google.

High-bidder auctions are just what they sound like – the search marketer who bids the highest per-click amount for each search keyword gets the top spot in the paid search rankings. But high-bidder auctions are starting to seem so 20th century.

The new thing is hybrid auctions, which set the paid search rankings based on a combination of the bid, the clickthrough rate and sometimes other factors. For example, if one search marketer bids $2 per click to show an ad with a 1 percent clickthrough rate, another bidder could outrank the first with a lower bid – perhaps by bidding $1 for an ad with a 3 percent clickthrough rate. In a high-bidder auction, the $2 bidder would always rank higher than the $1 bidder.

Google has been using hybrid auctions for years, but until recently, all other paid search engines were the high-bidder type. That’s all changing now. Earlier this year, MSN Search introduced new paid search technology that uses a hybrid auction. Yahoo has announced plans to follow suit late this year or early next year. Given Google’s longstanding use of hybrid auctions, the changes at MSN and Yahoo will transform the paid search industry, and nearly a whopping 97 percent of all paid search queries will use hybrid auctions.

Hybrid auctions usually provide more relevant results to searchers, because the most-clicked ads tend to rise to the top of the rankings. And hybrid auctions make the search engines more money, because the combination of clickthrough rate and bid price maximizes the total fees paid by search marketers.

More Complex Planning

If you’re a search marketer accustomed to planning paid search campaigns for high-bidder auctions, hybrid ones bring you some new challenges. With a high-bidder auction, you can see what your competitors are bidding at all times, and can take an educated guess as to what bid could get you ranked No. 1, for example.

Hybrid auctions, however, demand pure guesswork; not only don’t you know your competitors’ clickthrough rate, but you don’t even know your own, so you can’t predict where your ad will land no matter what the bid. Without that information, you can neither project the number of clicks your campaign will get, nor the amount you’ll pay in total, which hamstrings your ability to plan your paid search campaigns.

Google and MSN could help predict the number of clicks you’ll get with your bid, but they don’t, instead merely projecting the number of clicks to expect with an average bid. If your bid is higher (or lower) than average, you’re out of luck.

In contrast, Yahoo has publicly stated that they will provide predictive information based on your bid when they convert to a hybrid system, so we may be able to use Yahoo to help plan campaigns.

Simpler Operations

While hybrid auctions can pose new campaign planning issues, they also make operating your paid search campaigns far easier than high-bidder systems do.

To understand how much is changing, we need to remind ourselves of the work required to manage high-bidder campaigns. The very predictability of high-bidder auctions that aids campaign planning also makes operations tougher than with hybrid approaches. Because changing your bid in a high-bidder auction directly changes the search rankings, search marketers can use bidding tricks against their competitors to manipulate those rankings.

These high-bidder tricks include bid jamming (intentionally bidding 1 cent below a competitor’s bid to force them to spend as much as possible); gap surfing (bidding 1 cent more than a competitor to steal a higher spot); and friendly URL (bidding just under a specific opponent to avoid a bidding war).

Search marketers managing campaigns in high-bidder auctions must be aware of these techniques and must use them for highly competitive keywords. These techniques require constant monitoring and tinkering, raising operational costs for high-bidder campaigns.

In contrast, none of these tactics are needed for hybrid auctions, because the rankings can’t be changed simply with a new bid. And because clickthrough rates can’t be adjusted at will the way a bid can be, hybrid auctions are far less volatile than high-bidder auctions. The combination of fewer bidding tactics and less volatility means that search marketers can spend less time monitoring every ranking fluctuation.

A New Fraud

But all is not rosy. Search marketers are familiar with click fraud, but hybrid auctions have spawned a new kind of fraud, called impression fraud.

Impression fraud is almost the opposite of click fraud. With click fraud, competitors or unscrupulous search partners use low-paid workers or automated bots to click on paid search ads, draining the victim’s search marketing budget. Impression fraud occurs when competitors enter search terms to display your ads and then don’t click on them.

Confused? Stay with me now, because this is a bit tricky. Because hybrid auctions consider clickthrough rate in their rankings, anything that lowers your clickthrough rate helps your competitors. So, when they cause your ad to be shown and then don’t click on it, your clickthrough rate declines, which lowers your rankings (or forces you to bid higher to retain your ranking). It may scare you that some folks have nothing better to do with their time than to dream up such schemes, but it’s apparently the case.

While some observers estimate click fraud to affect as much as 20 percent of all paid search clicks, no one knows how rampant impression fraud may be. Because impression fraud cannot enrich anyone, it is likely less prevalent than click fraud, but its rise demonstrates how every change in search technology has unintended effects.

Despite the specter of impression fraud, the shift to hybrid auctions is generally a boon to search marketers, by making campaigns less work to monitor and operate, even if they are more difficult to plan for. The less time you spend in short-term bidding tactics, the more effort you can devote to improving your clickthrough and conversion rates and finding new keywords your competitors have not yet discovered. It’s better to focus on being more effective than more efficient, and hybrid auctions help you do that.

MIKE MORAN is an IBM Distinguished Engineer and the Manager of ibm.com Web Experience. Mike is also the co-author of the book Search Engine Marketing, Inc. and can be reached through his website (MikeMoran.com).

Danger: Clicking Ahead

Sometimes a click isn’t really a click. Sometimes the person knocking on a website’s door is really a wolf in shopper’s clothing, perpetrating a fraud that wastes marketers’ advertising dollars or steals commissions.

Skip Pratt says his Web hosting company BAPort.com was being defrauded on 20 percent of its clicks. He was so frustrated by the problem that he developed a click fraud analysis application and started PPC Trax, an analytics company.

While most agree click fraud is a growing concern, there is no consensus on just how widespread or costly it has become. Depending on whom you ask, the amount of advertising dollars lost to fraudulent clicks ranges from negligible to as high as 40 percent.

The Interactive Advertising Bureau estimates that from 20 to 35 percent of ad clicks are fraudulent. When asked about click fraud, 25 percent of online marketers say it is not a problem, 45 percent say they are concerned about it and 6 percent view it as a serious problem, according to a 2004 Search Engine Marketing Professional Organization (SEMPO) study.

The study also indicates that the majority of the click fraud is thought to occur on publisher and affiliate sites, not on search engines websites.

Chris Henger, vice president of marketing at Performics, says click fraud is not occurring on a large enough scale to have a material impact on the return on investment of advertisers that are Performics partners. He says click fraud is analogous to shoplifting in the retail world: companies have to watch out for it, but it won’t ruin the industry.

“I recognize that it is an issue, but it has gotten blown out of proportion,” Henger says.

He says that if click fraud really constituted 20 percent of advertising, it would show up in advertisers’ ROI and would cause search-marketing prices to fall.

But some think click fraud is a much bigger deal. ClickRisk president and CEO Adam Sculthorpe says the click fraud he has observed for his clients ranges from 15 to 70 percent of the total traffic. Sculthorpe has detected click fraud occurring on more than 1,200 websites and says his random sampling of log files indicates that “potentially there has been several hundred million dollars of total click fraud since 2003.”

Regardless of the actual numbers, there has been more media coverage of click fraud over the last several months. That media attention fuels the perception that click fraud is on the rise, and that is creating a real problem for search engines and threatening the pay-per-click model.

“After The Wall Street Journal published its article (in April), there was panic in the streets,” says SEMPO president Dana Todd.

Todd says that while the majority of smaller companies have heard about click fraud, many feel they do not have the resources to compare their performance with the reports they get from their search engines.

“Thousands of businesses that spend less than $1,000 a month are not going to spend the time to go through extensive reports,” she says.

Unfortunately for online marketers, there is no surefire technology solution to prevent click fraud from occurring, and it is becoming increasingly difficult to detect. “Despite what anyone tells you, it is technically impossible to stop,” says Steve Messer, CEO of LinkShare.

Messer says click fraud first became rampant in 1998 and 1999, causing LinkShare to shut down its pay-per-click TrafficShare network. “We had Ph.D.s working around the clock on click fraud defense technologies,” Messer says. But like many other cost-per-click networks at the time, LinkShare could not maintain a profitable business.

Commission Junction similarly ceased its pay-per-click advertising in 2001 because of click fraud, according to Elizabeth Cholawsky, the company’s vice president of marketing and product development.

Fraudian Slip

Companies that generate revenue for themselves by clicking on their ads use websites both created expressly to defraud as well as legitimate destinations, according to Ben Edelman, a Harvard law student who tracks online activities. Edelman says legitimate websites that artificially raise their revenue by a small percentage are very difficult for search engines to detect. “The system is set up so companies should be a little dishonest,” Edelman says.

While there are many not-so-bright fraudsters who do not mask their IP addresses and are easily identified, other more nefarious types are developing sophisticated software applications to commit click fraud.

LinkShare’s Messer says software that covertly requests advertisements or other Web pages is freely available on hacker message boards. Clever click fraudsters embed that code within other software – such as chat applications – so that each time a user sends a message, a “click” is also made.

Such click fraud software can be distributed through viruses that exploit software vulnerabilities and permanently reside on users’ machines, creating a network of unknowing accomplices with IP addresses that look genuine, according to Messer.

While ISPs can somewhat protect against spam by blacklisting known spammers and blocking messages with phony IP addresses, there is no automated mechanism for identifying click fraud in real time, says Messer. He says the only way to protect advertising dollars is to identify what appear to be fraudulent clicks after the fact by sorting through server logs.

Also, because advertisers and search engines are unwilling to share information about who is committing click fraud, there is almost no industry coordination in fighting it. Industry groups are talking about it more openly, though, including the Dallas/Fort Worth Search Engine Marketing Association, which has made click fraud the subject of several recent monthly meetings.

Defensive Measures

Along with Pratt’s PPC Trax, several other startups including ClickDefense, WhosClickingWho and VeriClix now offer fraud protection services that separate the wheat from the chaff in Web traffic data. These companies place snippets of code within ad pages that capture and analyze data from the computer requesting the page to look for signs of click fraud.

Pratt says PPC Trax’s software algorithm compares 22 to 24 characteristics of a click, including IP addresses as well as other factors that he considers proprietary information. However, sorting legitimate clicks from fraudulent ones is an imperfect science at best. “It’s virtually impossible to prove click fraud,” according to Pratt, who says he has more than 35 clients.

VeriClix offers a free pay-per-click auditing service that monitors ad programs from Google, Kanoodle, Overture and others. VeriClix founder Jeff Martin says he was working for an advertising agency when he saw an “obvious need” for a service that scrutinizes clickthrough rates. VeriClix is able to provide the service for free because it receives funding from search engine optimization firms Zunch and Search Engine Optimization Advantage.

VeriClix determines suspicious activity based on an algorithm that tracks the frequency of clicks, originating IP address and other identifying information. Advertisers can adjust the number of repeated clicks that are observed before a warning of suspicious activity is generated, according to Martin.

Foxes Guarding the Henhouse

At the heart of the issue for many Web publishers is the role the search engines play in click fraud. Internet advertisers spent $9.6 billion in 2004, and because the lion’s share of advertising dollars are spent through search engine marketing (over $4 billion in North America in 2004 according to SEMPO), the heat is on Google, Yahoo and others to act to limit click fraud.

Search engines have an obligation to monitor clicks as part of the service that they provide to advertisers, Martin says. However, he notes that the search engines have an inherent conflict of interest, since actually identifying click fraud reduces their revenue. Instead Martin suggests that combating click fraud requires an unbiased third-party auditor.

“Yahoo and Google have created a new business model that has grown beyond the proportions of what they ethically should be handling themselves,” Martin says.

But search engines have been slow to address click fraud, according to Greg Sterling, managing editor with analyst firm The Kelsey Group. “Click fraud threatens to erode confidence in the pay-per-click model,” he says. “Search engines haven’t done a lot to counteract the negative publicity.”

LinkShare’s Messer says that, for now, Google is growing faster than click fraud so it is not as noticeable, but advertisers’ return on investment may depreciate over time. Messer tells his customers not to bid on Google’s keyword program. “We won’t work with AdWords,” he says.

Performics’ Henger says that Google and Yahoo have always paid attention to customer concerns and are doing what they can to fight click fraud. “Google would not be so foolish as to turn a (blind) eye to click fraud just to make a few extra million dollars today and jeopardize its long-term business,” he says. Henger notes that Google and Yahoo have the proper financial incentives to control click fraud.

Google’s Role

Google CFO George Reyes shook up the search world when he told audience members at an investor news conference that click fraud poses the single biggest threat to the company’s business model.

Google business product manager Shuman Ghosemajumder wouldn’t say how much click fraud the search engine sees on its website, but contends that the amount is not increasing. “Overall losses due to click fraud are very small,” he says.

Google employs Web analysis software that automatically filters out any traffic that the company considers fraudulent before the company sends reports to its advertisers, according to Ghosemajumder. “We can’t prevent it from happening, because the action comes from an external source, but we can prevent the action from having an effect on advertisers,” he says.

Google has scientists and artificial intelligence experts on staff to fight click fraud, but Ghosemajumder declined to say how many employees are involved in the effort.

Google provides free conversion tracking software so that its customers can look for suspicious fluctuations in clickthrough ratios, and the company has a department dedicated to resolving customer disputes over click fraud. Detecting click fraud “is all about finding patterns,” and Google is spending a lot of money researching how to identify those patterns, Ghosemajumder says.

Ghosemajumder says that fraud (such as inflating circulation numbers) occurs in print media as well. “We provide one of the most accountable forms of advertising available,” he says.

Click fraud perpetrators may be unafraid of their actions because thus far there have been no criminal prosecutions. Ghosemajumder thinks that may change someday, noting that people have been successfully prosecuted for writing viruses or denial of service attacks, which are similar activities aimed at interfering with the operation of a business.

The Price of Isolation

Finding broad patterns of click fraud across the advertising universe has been a challenge because companies consider Web analysis data proprietary information. Unlike group efforts to combat spam and track computer viruses, search engines, advertisers and click fraud analysis companies have not shared information about when and how fraudsters are acting.

PPC Trax’s Pratt says his company does not compile click fraud statistics because the data is the property of his clients. VeriClix’s Martin says that search engines should provide more data to give advertisers a better view of their clicks.

“Google is holding information [about click fraud] close to the vest,” says Martin. He believes that search engines should make public all information about click rates that are not trade secrets.

Martin says that search engines should provide an application programming interface that would allow click data to be automatically extracted and compiled by third parties.

The data would not identify the advertiser and makes it possible to identify patterns of click fraud across the Internet. Impartial clearinghouse companies could mediate between advertisers and search engines and give advertisers greater confidence in the pay-per-click model since search engines have an inherent conflict of interest in tracking fraud (each click identified as spurious reduces their revenue).

Requiring search engines to turn over click data to third parties would be a reasonable request, according to Henger of Performics. Akin to the debate over global warming, some parties will continue to say that click fraud is an imminent threat of apocalyptic scale, while others say it is merely a mild irritant. However, search engines wanting their industry to continue its incredible growth will have to persuade the court of public opinion that click fraud is not a significant problem, and that they are doing all they can to fight it.

“Search engines have a responsibility – it’s a trust issue,” says SEMPO’s Todd. She says search industry participants should work together to “create a massive anonymous data pool” that would enable click fraud to be more easily tracked. “We don’t want to go back to the insanity of the ’90s where ad dollars are taken for granted.”

Regardless of where you rank click fraud on your scale of big cyber offenses, most agree that some level of action needs to be taken to help stop it and to move online marketing forward.

JOHN GARTNER is a freelance writer in Portland, Ore. He is a former editor at Wired News and CMP. His articles regularly appear on Wired.com, AlterNet.org and in MIT’s TechnologyReview.com.

Tag: Click-throughs