Five Who Thrive

About a decade ago, a couple of college kids named Jerry Yang and David Filo built a Web site to post their golf scores and favorite Web sites. Pretty soon, their Web site became Yahoo. Tens of thousands of would-be dot-com millionaires tried to follow in their footsteps, but most stumbled.

The affiliate marketing frenzy picks up where the dot-com craze ended by providing a solid business model for doing business on the Internet, but success remains elusive. Only about 5 percent of affiliates make any real money, and only about 2 percent make enough money to change their lives.

We’d like to introduce you to five members of the upper crust.

If you’re looking for billionaires, look somewhere else. But if you’re looking for people who’ve found success on the Internet, then look no further. You’ll quickly see that the trick here is not a trick at all. Anyone can do this. Anyone, that is, with the patience, vision, wits and guts to make it work.

ROSALIND GARDNER

Age: 43
Site: Sage-Hearts.com
Industry: Dating

Money is good. But is it enough? Perhaps the best place to start the story of Rosalind Gardner is to note that the title of her book is The Super Affiliate’s Handbook: How I Made $436,797 Last Year Selling Other People’s Stuff Online.

Catchy, huh?

Her story gets more intriguing when you realize most of her income now comes from helping people find true love. More on that later.

First, let’s go back to 1996 when Gardner was still earning a perfectly respectable income of about $75,000 (Canadian) as an air traffic controller in Calgary, a job she had been performing with few complaints for two decades. But the nights are long in Alberta, and Gardner soon found herself with a new hobby – creating a Web site about gardens and gardening.

Gardner, who “was married for eight months a long time ago,” then noticed something that changed her life: a banner ad for a dating service. (“I was prowling,” she confessed.) But instead of finding true love, she found opportunity.

She now runs about 10 active dating domains, makes $30,000 (U.S.) to $50,000 a month and spends most of her time traveling or hiking in the Canadian Rockies.

“I discovered who I am by running my own business,” she said with a lot of pride. “I never knew how unhappy I was working for somebody else. I’m basically an entrepreneur and that’s the only way I’ll ever be happy.”

Gardner said her affiliate work was an all-consuming passion when she first started, leaving time only for a quick sandwich and sleep. “I would go to work, come home and work on my sites. I’d ram-a-sammy and go to bed,” she said. “But now, it really is up to me. As far as the dating service and affiliate marketing go, I check my stats at the end of the month, and confirm that the checks are what they’re supposed to be.”

She estimates that now she only spends a few hours a month on the business, although it took a long time to get to that point. Asked why so many affiliates haven’t found success, she said she thinks affiliates need to work harder when they’re just getting started.

“I think the reason so few affiliates are making money is because the rest of them just aren’t doing it [right],” she explained. “They get to a point where they get frustrated and they give up. Perseverance and persistence are the hallmarks of entrepreneurs.”

She has more advice for those thinking about jumping into the business.

“If you’re serious about it, treat it like a business. Definitely take the opportunity. Don’t be afraid of it – just do it. Even if all you generate is $500 or $1,000 a month, it can make a serious difference in your life.”

It certainly made a difference in hers. Now she can’t imagine working in her old job: “I would have been miserable until I retired.”

WENDY SHEPHERD

Age: 35
Site: TipzTime.com
Industry: Retail Merchant

Wendy Shepherd is a lot like most stay-at-home moms. Married for 16 years to a drug store manager, she home-schools her three boys, ages 9, 8 and 4. That alone keeps her busy from sun-up to story time.

Then she turns into Wendy Shepherd, Super Affiliate.

Working five to eight hours an evening, often working ’til the wee hours of the morning – Shepherd updates a half-dozen thriving Web sites, researches new opportunities, tracks her earnings, writes her newsletter and finds new ways to make money. How did this all start?

“I basically taught myself everything on a computer,” said the very cheery Maryland resident. “I just made a Web site. Then I found out there was a way to put advertising up on the Web site that allowed me to get paid per click.”

That was seven years ago, when her oldest boys were 1 and 2. Today, her flagship site, TipzTime, offers a wide variety of family and household goods. She also runs “about a half dozen” other sites and still finds time to do freelance design work through a merchant site called StudioMatrix.com.

Her nightlife is profitable, generating about $40,000 last year. “I’m pretty much doubling my income each year,” she said, modestly insisting there’s really nothing special about her approach.

“I promote product links for merchants. I mostly use the ones from Commission Junction because they provide easy access to searching the database for products that are available for all the merchants,” she said. “I just group them together. Some will be from one merchant, some will be from all different merchants. It doesn’t matter.

“Then I make up a page about them, list them and announce them through my newsletter to get traffic to the page,” she said.

She makes it sound so simple, it almost makes you wonder why more people aren’t as successful. Over the years, the circulation of her newsletter has begun to resemble that of a small newspaper. Some 30,000 people have opted to receive the newsletter, including more than 7,000 from TipzTime alone. “You get new subscribers every year,” she said. “You hang onto the old ones and it just grows.”

Her best advice to newcomers is “don’t expect results right away.” But she quickly noted that results will come if you stick with it.

“I had to work at getting out of my in-laws’ house,” she said. “So I saved up and worked hard and worked at night, very late sometimes, and I finally got my house. And I can now afford car payments for my new car.”

ZAC JOHNSON

Age: 21
Site: MoneyReignNetwork.com
Industry: Free Stuff

Most 21-year-olds are content to spend money. Zac Johnson isn’t happy unless he’s making $200,000 to $300,000 a year from his own business.

This all started when Johnson was 14, way back in 1997, the dawn of the dot-com, when Johnson offered to sell Web site banners for $1 each. People started sending him dollars through the mail.

“That’s where I got the idea I could start making money on line,” he said. “Then I came across Amazon.com and I started selling stuff for them.

I made them probably around $50,000 to $100,000 in sales and I got a 5 to 15 percent cut … depending on the item sold.”

Sound good? It wasn’t good enough for Johnson: “I realized this was a pretty small proportion of the cut considering the amount of money I was making for them.”

By the end of the 1990s, at the height of the dot-com era, Johnson was getting people to sign up for “free stuff” like coupons, samples and catalogs. “You would push free-stuff items on the Web site and get paid on a CPU basis for everything you pushed through,” he said.

He saw that some companies were “pushing” newsletter subscriptions through PostmasterDirect.com and he started working with the company to collect names, addresses, email addresses and other data through a “double-opt-in” system that respects privacy rights.

“I’ve been pretty much staying with that scheme for some time now,” he said. That’s resulted in an income “in the low six figures.”

What does a 21-year-old do with that kind of money? Fast cars? Hot dates?

“I’m not really much of a party person,” said Johnson. “I invest it back into the company, pretty much … I save it for myself as well.”

His parents are delighted. His father, an engineer, accompanies him on trips to conventions and sits in on some of his business meetings. His mother sells church banners on her own Web site. Even his 14-year-old sister is getting into the act. “She has started making celebrity Web sites,” said Johnson. “But she really hasn’t started making money yet. So I’m trying to put that idea into her head.”

Johnson tried college once, and may try it again some day. “But if I want to do that, I feel there’s time later when I can do it,” he said. “Right now, the opportunity’s here, so I want to make the most of it.”

ELISABETH ARCHAMBAULT

Age: 50
Site: BuckWorks.com
Industry: Retail Merchandise

Elisabeth Archambault’s first online business flopped. She was going to sell craft patterns on line. “I was never quite able to pull that together, mostly because of the complexities and costs of credit card servicing,” she said. “But it was while doing the research and development for that that I discovered affiliate marketing.”

That was about three years ago, when Archambault was busy working part-time as a technical writing instructor at Assiniboine Community College in Brandon, Manitoba. She had already helped the college put some of its courses onto the Internet and, with what she learned from building her ill-fated patterns business, she quickly found herself selling products for other companies.

Today, her flagship site, BuckWorks.com, is a virtual mall, offering everything from auto parts to prom dresses. Her menswear section alone offers quality goods from more than two dozen merchants – mostly well-known name brands. Her writing background helped her create down-home prose, like advice from a good friend. If she can’t vouch for a product, she says so. Then, when she offers a recommendation, you almost can’t wait to click and buy.

The former teacher has many lessons for newcomers:

“Start with something that interests you, because you’re going to have quite a learning curve. With myself, I have a much easier time selling clothes than auto parts because that’s where my interest lies – although there are buckets of money to be made selling auto parts.”
Learn to calculate the return on your investment, including the time you invested in your site. “If you spend an hour doing this or that, there is an opportunity cost. You need to have some idea of what the returns are going to be.”
“You have to learn how to make your own pages … I don’t think it would ever be cost effective to hire someone else to make them for you. You have to learn the basics of HTML.”

She said her revenue “goes up and down like a yo-yo,” a phenomenon known to virtually all retailers. Shopping is seasonal and Archambault estimated her revenue can range from $3,000 in a bad month to the low-five figures in a good month. It’s enough.

“Quite frankly, I could not afford to go back to teaching. And I’m having more fun with more freedom,” explained Archambault, whose income has allowed her 53-year-old husband to quit his job and return to college.

“My business is sponsoring my husband’s midlife crisis. I’m a chief breadwinner,” she boasted. “I’m not the bread-baker any more.”

ULRICH ROTH

Age: 49
Site: Last-Minute-Reisen-Weltweit.de
Industry: Travel

Affiliates can live anywhere, and Ulrich Roth has chosen an idyllic setting – the Canary Islands – as home for himself, his son and his travel service, which focuses on travel packages, flights, rental cars, cruises and vacation homes.

“I work at home in a very beautiful area on the west side of La Palma,” said Roth, a native of Germany. “My house, with a view of the mountains and the Atlantic Ocean, is surrounded by a big blooming garden.”

Although Roth just entered the world of affiliate marketing at the start of 2002, he reported sales of $150,000 in his first year, with monthly revenues ranging from $10,000 to over $20,000 at peak season. He estimates sales are up 20 to 25 percent this year.

When he isn’t working on his site, Roth finds time for walking in the natural paradise around his home and traveling.

For Roth, the key to his success is concentrating on a niche he knows.

“I focused on the German-speaking market. I have no experience with the French, Spanish, Italian or English markets. Every country has its own specific peculiarity,” he said. “I design and program my own sites. For graphics, I sometimes employ a freelancer.”

His advice to newbies is to read Ken Evoy’s popular book, Make Your Site Sell. “It’s the best help for people to develop a basic comprehension for this business,” he said.

Beyond that, his advice is simple and straightforward: “Affiliate marketing is a job like others. To be successful, you have to work seriously and steadily. To put some banners on the site is not enough. The most important thing to becoming successful is to focus on one theme or business. If you are in a leading position, you can expand.”

Roth noted that his 20-year-old son, Dominique, is also working successfully in affiliate marketing for the travel industry, earning $1,000 to $3,000 a month. “Now, I’m teaching and consulting him, telling the secrets,” said the proud papa.

TOM MURPHY, editor in chief of Revenue, has been writing about business and technology for more than 25 years. He’s also the author of Web Rules: How the Internet Is Changing the Way Consumers Make Choices.

Taxing Issues

Beginning on June 1 the state of New York will start charging taxes for online transactions to companies that have no physical presence in that state. There has been a lot of discussion about this issue, how it impacts affiliates and merchants, and whether or not these regulations might be adopted by other states.

All the parties impacted by the statute seem to be taking a different approach to the issue.

Amazon came out swinging earlier this month by filing suit against the State of New York. Amazon’s complaint argues that the statute is “overly broad and vague.” It is impossible, Amazon wrote, for it to determine which of its affiliates are actually in New York State. Amazon says that its affiliates are not agents, but simply sites on which it places advertising. The commissions it pays the sites are simply one method of paying for those ads, it argues.

Another big online merchant, OverStock.com, has taken a very different tact and instead dropped all its New York affiliates, which caused an uproar within the affiliate community.

Performance network Commission Junction earlier this week sent an email notifying its affiliates that CJ is actively “monitoring the law and will use reasonable efforts to protect ourselves and our publishers as we deem appropriate.” ShareASale is making a report available to merchants regarding their New York affiliate-referred transactions.

LinkShare is going to be participating in a conference call with the Direct Marketing Association to discuss the issue. The call, which takes place Thursday, May 22 at 11am (eastern), will include DMA Tax Counsel George Isaacson, who will provide an overview of the bill. Email government@the-dma.org to receive personalized dial in information. Let them know you are a member of the LinkShare Network.

No word from Performics yet on how they are dealing with the issue.

ShareASale: Size Doesn’t Matter

ShareASale.com founder and CEO Brian Littleton runs what is considered to be the fourth largest performance network in the United States. Littleton has earned the respect of the industry and garnered a dedicated following of merchants and affiliates by taking a firm stand on issues. His company is the only network that does not allow downloadable applications of any kind. His personal style and outspoken views on important issues are reflected in this wide-ranging interview.

LP: How does that impact the company?

BL: We want to be very approachable to clients, merchants and affiliates. The feedback has been that everyone wants to be able get a hold of a real person to get their questions and concerns answered. We want to serve everyone and not just those that are making super-affiliate type of revenue. Even if an affiliate is making a few hundred dollars, we want to be able to answer their questions. Now we have beefed up and are able to do that. It is a core thing that is very important to me.

LP: What about the growth of the sales team?

BL: We are working to grow our base of merchants and need sales people to handle that. Right now we are at 2,588 merchants. Getting over the 2,500 mark was a big milestone for us and we are looking to continue that growth. Of those, 2,435 are retail pay-per-sales commission-based merchant programs. We are a retail-focused network, which is very different from the large variety of CPA networks dealing with lead-based offers. We have 244 lead-gen merchants. They are not the core of what we do. We are adding nearly 100 merchants every month – of course, there is always some churn in the math. But unlike the other networks, we are targeting a different type of merchant. They are smaller, non-Fortune 100 companies. We want to help anyone, no matter what size, that wants to take a shot at performance-based marketing. It’s not easy to provide a system that works for everyone – whether it’s a Fortune 500 company or a two-person company.

LP: Are you leveraging technology to help with that scalability issue?

BL: One of our main focuses is technology. It’s a big differentiator for us in the space. We are always coming up with new ways for merchants and affiliates to leverage technology – like our widgets for video. They are unique across the board.

LP: What are some of the goals for SAS in 2009?

BL: We are very focused on networking. We are always trying to find a better way for affiliates and merchants to talk to each other. It’s difficult in the network model. Often, merchants are over-eager. Merchants tend to think their offers are the best. Affiliates are more selective. They don’t want offers all the time. We are looking at better ways to make that happen. We want to let the merchants interact more without so much material that it’s impossible for affiliates to read it all. It’s a big thing for us to get it right.

LP: What are some of your challenges over the next 12 months?

BL: I think the industry will be faced with many more complex compliance issues in 2009. There will be more toolbars in 2009. Merchants are looking at a lot of different types of affiliates – coupon affiliates, PPC affiliates and loyalty affiliates. As a whole, questions will be answered as the individual networks take their own routes. We are working on PPC issues. We introduced a PPC Violation Report which allows merchants to upload a screenshot of those they feel are in violation. We then do more research into the allegation. Because merchants don’t always know if an affiliate is really bidding. We dig deep and decide if there has been a violation. We have a three strikes and you’re out policy. If the affiliate is in violation of a merchant’s PPC policy, then we remove them from the network. We give the affiliate a three month grace period to get in compliance, but if, after that, they have are not in compliance, they are out. The goal is not to cut out those that made an honest mistake but those that are continually abusing the rules and praying on merchants that have difficultly policing that activity. Toolbars and loyalty go together. More and more toolbars are coming out. It’s like everyone is seeing their competitors doing it, so they do. More are popping up. Whatever has been the position of those in the past, adware and toolbars present a unique set of challenges because they all do different things – notifications, pop-ups, etc. We feel that we need to look at each one.

LP: That sounds like a Herculean effort.

BL: There is not an easy way around that, to maintain quality inside a network. You have to make sure a toolbar’s behavior doesn’t violate the rules you have. It’s not something typically that individual merchants can keep up with. Maintaining compliance is on the network side, because we have the data. We allow the merchant to have a say, but the network should be handling those issues. It’s a lot of work, but it’s part of the network role to keep on top of emerging technologies. It happened with PPC and coupons, and happened with toolbars as well. They’ve been around for years. It’s nothing new, but there seems to have been an explosion. I’m basing that on the number we’ve seen lately and the perceived success merchants see with competitors’ toolbars. They see them working for others, so they want them. I think it will be a huge challenge in 2009.

LP: What impact have you seen on the performance marketing space because of the current economic conditions?

BL: I think affiliate marketing will increase in profile because of the depression of the CPM or ad marketing. We won’t know for sure for a while. Some merchants will look to affiliate marketing to fill gaps. That’s traditionally what affiliate marketing has been best at. That’s been a strong point of the affiliate marketing industry since the beginning.

LP: Do you have any specific goals for SAS that you can share?

BL: We don’t have any specific goals as of yet. We set our goals more broadly. It’s a personal style of mine. I prefer to say things like, “we like to get closer to our publisher base, rather than we are going to do X a specific number of times.” The main thing we will be doing is continual work on the technology; it is at the core of what we do. We want to come up with new tools and technology for not only those who have a greater understanding, but for the first-timers who join the network. We want to make it simple for newer merchants and affiliates to understand. It’s a back-to-basics approach. I think that will make us more attractive. On the relationship side, we are looking to get closer to our affiliate base. We are targeting affiliates that we feel historically have been aligned with other networks. We are also letting our existing base of affiliates know that we have even more stuff they might be interested in.

LP: Has style been a big differentiator for the company?

BL: I don’t know. I don’t like to make presumptions. I like to highlight what I think we do the best. Certainly, there are clients on every network that are happy as clams. But we do focus on the results and quality of what a merchant is getting out of their relationship with us. This shows in the adware discussion. We are the only network that doesn’t allow adware. I know it’s a loaded works and there are discrepancies over exactly what adware is. Years have been spent hashing that out in the industry. But for me, it comes down to making sure that the quality of sale is just as important as the volume of sales. Sales tied to adware are not true growth. It’s important to report these activities to the networks and that the networks do something about it. But that’s a choice that’s being made by each network. Not keeping up with compliance is detrimental to the industry as a whole, over the short and long term. That’s our stance.

LP: By not accepting certain types of merchants, ShareASale hasn’t grown to the same size as the some of the other networks.

BL: The size issue has forced us to be good, if not better, with our technology. You can’t be the small size we are and have that number of merchants with bad technology. You need automation. Our datafeeds are automated and registration is automated. You can’t have bad technology. Everything needs to be smooth to support that volume of merchants. We are doing things faster. We are a different type of company. There is a big difference between us, a small company, and a privately-held company.

LP: But you are competing against companies with huge resources. Have things changed for your company since Performics was bought by Google?

BL: Not really. It’s business as usual. I know people there and we have a good relationship with them. Of course, it’s important for any company to know what’s going on with their competitors. People brought up the possibility of conflict, but Google sold off Performics’ search division. The name and backing of Google may help them, but in the end I think it’s a positive for everyone in the industry – especially if the largest brands get interested in joining the performance marketing space.

LP: Would you consider offers to buy SAS?

BL: Our technology is built inside the company. I would rather build in-house. We get more value that way and so far we have built everything we have. There could be minor exceptions – if there is new technology we could get faster through an acquisition – but I like to think that building it in house gives us long-term value. I’m conservative with our assets. We have grown organically and we are profitable. I’m not going to put that at risk for a new technology.

Key Cogs in the Affiliate Machine

In May 2008, JupiterResearch analyst Patti Freeman Evans published a study on affiliate marketing that indicates online marketers will spend $2.1 billion on affiliate marketing fees, with U.S. online affiliate marketing spending reaching $3.3 billion in 2012. That figure includes the aggregate cost of running an affiliate program: affiliate network fees and affiliate commissions. Evans estimates that the affiliate space is growing at 9 percent.

A report from Evans in December 2008 says a growing number of retailers will increase spending on holiday sales-driving tactics like promotions and online advertising. Twenty-seven percent of online retailers will increase spending on affiliate marketing (a 14 percent increase over the previous year) whereas 18 percent will increase spending on banner advertising.

Sitting smack-dab in the middle of that affiliate equation are the networks. The networks’ job as trusted third party means they are acting as an intermediary between advertisers and publishers. Serving multiple constituencies requires being a lot of things to a lot of parties. The networks are partners, matchmakers, facilitators, data keepers and more.

The major networks have many things in common and perform most of the same basic functions, including tracking technology, reporting tools, payment processing and payment aggregation.

The networks each use slightly different terminology to deal with e-tailers selling products and those that receive the commissions as part of the programs. Commission Junction, LinkShare and Google Affiliate Network all refer to them as advertisers and publishers, while ShareASale calls them merchants and affiliates. All of the terms are acceptable and interchangeable within the industry.

While each network also has its own specific terms and conditions that must be adhered to by advertisers and publishers, most of the networks have agreed to some basic rules about overriding affiliate commissions and what constitutes flagrant violations of the basic tenants of affiliate marketing.

However, each of the major networks has developed a slightly different flavor. Some are geared towards big e-tailers, others focus on lead generation and still others tend to work with major catalogers. The reasons why an advertiser or publisher chooses a specific network can depend on a variety of factors.

It’s like having a choice, between Pepsi, Coke, and RC Cola – and in some cases, Fresca.

For advertisers, the choice to work with one network over another can depend on a range of factors, including additional services offered, the technology platform used, the cost of setting up a program, the customer service and the quality of publishers in the network.

Each network has its share of loyal advertisers – large and small. Although there is some amount of churn, where merchants switch their programs from one network to another, that process can be complicated, disruptive and time consuming, so it’s not all that common (like customers switching mobile phone carriers). Some advertisers run programs on multiple networks, but in most of those cases one of the networks seems to act as the primary one. LinkShare is the only major network that requires merchants to sign an exclusivity contract and work only with them.

Most affiliates tend to maximize their earning potential and work with several, if not all, of the major networks. Some affiliates work with just one or two based on preference about payments, advertisers in the network and commission rates.

One of the biggest jobs of the networks is to facilitate relationships between advertisers and affiliates. All of the Big Four networks do that in some form through annual face-to-face gatherings, and most have facilities within their respective platforms to allow contact between those two parties. Commission Junction is the only big network that does not provide merchants with the names and contact information of their affiliates. While merchants can use a variety of techniques to get around that and also have contact with publishers, they are not given direct access through the CJ platform.

Some of the other differences – and the most hotly debated – often surround the issue of network compliance.The major networks have teams of various sizes that work to ensure advertisers and publishers are not in violation of their respective terms and conditions. However, those levels of policing infractions and ejection from the network varies widely. In addition, each network seems to have its own ideas about what activities are acceptable within the network. ShareASale stands alone as the only network that forbids merchants from offering any type of downloadable applications or software. That stance means affinity and loyalty merchants are not allowed within ShareASale. It also means that the company has greater control over ensuring that its affiliates are being fairly credited for commissions.

Increased competition from ad networks and vertical networks are forcing the major networks to step it up with their offerings, which is likely to result in increased innovation and better service for advertisers and publishers. That should be a boon for the entire industry.

Merchant Advantage: eBay Partner Network

In mid-March of 2008, eBay announced it would be transitioning away from having its massive affiliate program run by a network and instead they would take it in-house.

eBay began its affiliate program in 2001 and had since grown it to the second largest affiliate program in the world, behind Amazon.com’s Associate Program.

The eBay Partner Network launched on April 1, and the company started to transition its affiliate program away from Commission Junction. eBay also brought Half.com over to the new network.

Speculation that eBay might be thinking of a transition began back in September 2006, when it announced the launch of their own affiliate linking infrastructure called Project Rover. At that time, eBay claimed the new linking structure would provide a variety of improvements, including reduced ad and cookie blocking by using an eBay hosted domain; limited redirects, thus reducing the risk of user drop-off and improving speed and performance; and global infrastructure improvements by enabling eBay and Commission Junction to develop increased global tracking capabilities, allowing for more seamless international affiliate promotions.

That migration, which angered some affiliates who had to swap out links, was the start of eBay’s transition to bring its program in-house.

Senior Manager of the eBay affiliate program, Will Martin-Gill, emphasized the move had nothing to do with a dissatisfaction with CJ or ValueClick.

“CJ was great when the program was with them. They also were really helpful with the transition – from talking us through the public announcement, to helping with the messaging to the affiliates, to transitioning the team. Once they understood where we were going, that gave us the support to get there,” he says.

More Control Over Data

For eBay, according to Martin-Gill, it was simply time to bring the affiliate program in-house the same way eBay brought their search services in-house three years ago.

“When we did that, we were able to do more things than SEM agencies and use our internal conversion data,” Martin-Gill says. “We were able to determine the value of a click and what constitutes a good click. We learned so much from the data. That helps us make more informed decisions and is a tremendous advantage. We wanted to do the same for our affiliate program.”

Martin-Gill also noted that eBay was looking to build more flexibility and innovation into their program, to reach and sustain the more diverse crowd of affiliates and publishers on the Web today, and to have a direct relationship with those affiliates. Thus, it gave the company increased control over data across various marketing channels.

Martin-Will comes at this with some insight given that, prior to leading this effort, he was responsible for leading key advertising and search engine marketing initiatives for eBay. Before that, he was senior manager of corporate strategy, which being responsible for strategy development,mergers and acquisitions and various projects across Marketplaces, PayPal and Skype, including Internet marketing strategy.

eBay’s massive worldwide affiliate base was also a factor in the move. eBay was looking to turn its program into a global platform where publishers and affiliates can sign up to all the various country-specific programs at once, through the same interface.

eBay didn’t completely move away from ValueClick and is using MediaPlex’s tracking solution for the eBay Publisher Network. In addition, Tradera AB, ProStores, Reseller Marketplace, Media Marketplace, eBay Stores and StubHub continue to be on CJ’s platform.

There was a two-month overlap between the two platforms during April and May so that affiliates could make all the necessary changes to their links. eBay also paid an extra 5 percent commission to affiliates that transitioned their links and ID to eBay Partner Network by May 1. The company claims that by the end of May over 90 percent of its active affiliates had followed them to the eBay Partner Network, and eBay’s program also retained 90 percent of its volume.

“This was a big effort. It was an undertaking that required a huge effort that we didn’t take lightly,” Martin-Gill says.

He adds that it took over a year to put together all the technical and organizational elements required to get up and running. It required creating groups and systems to handle customer service, network quality and fraud detection,finance and payment, and account management. Martin-Gill won’t disclose the exact size of the team running the network, but did note that it has tripled since bringing the program in-house. The technology group responsible for the infrastructure and development is a shared group at eBay.

So far the biggest challenge for the network, according to Martin-Gill, was the volume of initial customer service inquires. “People have lots of questions,” he says. “This was a big growing pain for us in the first three to four months to get customer service up to speed. I don’t think we did too badly.”

To get its message out there, eBay launched a blog, relaunched the affiliate discussion boards, had a booth at both the Affiliate Summit and Ad:Tech conferences. The Partner Network also gave a presentation to a large group of eBay sellers recently.

Turning a Corner

Martin-Gill says that it wasn’t until October that the entire EPN team began to feel really comfortable. “We felt like we turned corner,” he says.

Early on in the program’s history there were some affiliates that questioned if tracking discrepancies had occurred in the transition, as some affiliate experienced a drop in commissions. Ironically, tracking was not one of the core infrastructures that changed the move. MediaPlex,which is owned by CJ’s parent company ValueClick, continued to handle all the tracking.

Martin-Gill says that EPN conducted audits both internally and by hiring third party firms, and in same cases issued “make goods” to affiliates.”We take tracking really seriously,” he says. Now he’s confident that after an exhaustive three month study, everything is on track.

The other thing EPN has learned over the last nine months is that a lead is not a lead is not a lead, according to Martin-Gill. “Some leads are more valuable than others,” he says.

Under CJ, eBay was paying $25 to $35 for each new user registration. He claims that there were those affiliates attempting to game the system by getting a customer to sign up and then buy a $2 piece of plastic jewelry – and then collecting a $25 commission.

To curb that behavior EPN created an algorithm that accounts for the lifetime value of a customer and pays the affiliate accordingly. In August, eBay moved to a value-based pricing plan for Active New Registered Users. The move was intended to better reward top affiliates,provide incentives for other affiliates to improve the quality of their traffic, and pay fair compensation for users who have low lifetime value to eBay. Under the new arrangement, they pay affiliates $1 to $50 per new user.

The new pricing structure took effect on August 1 for new affiliates and November 1 for all existing affiliates. At press time, more than one-third of their active affiliates are now earning $28 or more for every new user they drive to eBay, while several hundred affiliates are qualifying for the new $40 and $50 tiers.

Other enhancements since the transition include providing additional data to affiliates including a campaign quality report that shows affiliates which of their tactics and campaigns are driving the most engaged users. There is also a new report showing affiliates which categories of products their users convert, so they can improve targeting.

In addition, eBay has added tools for customer banners, as well as special creatives associated with particular deals and holidays.

“We want to give affiliates more tools and better ways to promote us, such as the customer banner where affiliates can specify pixel length and width. For 2009, EPN is also planning to roll out coupons in the banners. Martin-Gill says that they will build-in unique coupons that are offered to high-frequency users. In addition, EPN is looking to offer affiliates more product feeds.

“We are making a push toward finding highly valuable publishers – we are not just about volume.”

Merchant Advantage: CSN Stores

When Brent Elias began working at CSN Stores.com in 2002, the Boston-based online home furnishings retailer didn’t have an affiliate program. Elias began his career at CSN working in the advertising department on the keywords team. Like many e-tailers, CSN Stores was afraid that affiliate marketing would cannibalize sales from its main online store.

But as the privately-funded company grew, it began to see that affiliate marketing might add some value. No one at the company knew much about affiliate marketing, so Elias, who showed interest, started researching the best way to start a program.

Beginning in July 2005, Elias spent several months researching all of the major networks and which would best fit with the unique business model of CSN Stores. He knew that it would have to be a long-term relationship and didn’t want to jump into anything. He did his homework looking at sites that discussed affiliate marketing and pouring through online forums such as ABestWeb.com to help educated himself and make a better decision.

By October of that year, CSN Stores was ready to dip its toe into the waters of affiliate marketing. The company chose ShareASale as its network. Elias says that he spoke with all of the other major networks but none was able to accommodate CSN’s desires to have a single merchant ID that let affiliates work with any of the company’s 250 online stores. Most of the networks claimed that the stores would have to be grouped together by categories and CSN would end up having something like 20 or more accounts.

Make it Simple

Elias knew that would be too confusing and troublesome for affiliates. He also couldn’t imagine how his company would log into and manage so many accounts efficiently. Elias says ShareASale was the only network willing to host all 250 stores under a single merchant ID – giving affiliates a single place to get creative. It also allowed CSN to set things up so that affiliates could work with the main CSN store or just pick the niche stores – like CSN Rugs or CSN Baby – that they were interested in promoting.

ShareASale was also willing to work with CSN Stores to create custom data feeds, along with a unique tracking system and custom designed analytics. Elias says that level of personal service was “a breath of fresh air” and won CSN over.

Wanting to jump right into things, Elias attended ShareASale’s first annual ThinkTank retreat in 2005, just two weeks after launching the CSN Stores program. He says it was an eye-opening experience and set the tone for how he deals with his affiliates.

“It wasn’t that we were doing things wrong, but we were still figuring out what affiliates wanted,” Elias says. “At ThinkTank when everyone gets into a room and seasoned affiliates lay it on the line and don’t hold back, you take that information and feedback to heart.”

Elias says he learned right off the bat about being fair to affiliates, and that the merchant-affiliate relationship is a partnership. “I don’t think all merchants see it that way,” he notes.

Because ShareASale is a smaller network and many of its merchants and affiliates prefer to work exclusively with them, Elias says that was a selling point. He figured that the network’s stance on adware and downloadable applications (it doesn’t allow it) meant he wouldn’t have the headaches of policing a lot of issues related to cheating and bad traffic. “In addition, I figured that it would also give our affiliate peace of mind that cookie were set for them and that there would be no cross-tracking problems with other networks.”

By inviting feedback from affiliates, Elias learned CSN’s affiliate interface was confusing and he was able to work quickly to get that changed. He was also told that CSN’s data feeds were overwhelming and contained way too much information. He worked closely with SAS to change the data feed structure so affiliates could get only the information they wanted – whether it was by product category, specific stores or master feeds.

Forums, Feedback and Facts

CSN Stores has an active forum on ABestWeb.com and Elias is always there to post information and answer questions, or just take feedback. “I love it and have learned a lot there,” Elias says. “It has a family atmosphere. It can be rough around the edges, but what I love is that people put their heart into affiliate marketing. In the end, I respect that.”

A while back, CSN Stores made a decision to pay coupon sites a 2 percent commission on an order when they were last in the click stream. That decision did not go over well with all his affiliates. Elias says that for CSN’s business model it wasn’t an ideal situation to partner closely with coupon sites. He’s not convinced of the overall value of the traffic the couponers bring to him, but CSN decided they deserved a small cut of the commission on an order. On ABestWeb, CSN took some heat, but Elias says that he was able to give his reasons for the change in policy, “talk people down from the ledge,” and be honest and forthcoming about the business decision.

As an affiliate manager, he believes it’s important not to get defensive or mad, but instead to be open and honest and communicate with affiliates. “That way it remains a discussion rather than a fight,” he says.

He also claims that taking accountability and admitting mistakes is also key for affiliate managers. “Everybody makes mistakes. We are human. Affiliates know that. And if you approach situations positively and honestly and make moves to set things right, then affiliates are forgiving – they respect that. Of course, you can’t make everyone happy but you do what is best for affiliates while balancing the concerns of your business.”

That attitude has served CSN’s affiliate program well. In 2008, the affiliate program will bring in more than $10 million for the company – a significant jump over last year. He says that winning the Affiliate Summit Pinnacle Award in 2008 for Most Ethical Merchant also helped boost the company’s reputation and bring in more affiliates. The program now has more than 4,000.

Growth of the program has slowed a bit, but Elias attributes that to the economy and the natural stages of growth. “You can’t grow 100 percent year-over-year forever. I’m happy with our growth, which continues to be steady month-over-month. The program has really got some steam.”

The growth of the CSN Stores affiliate program has not gone unnoticed within his own company. Elias says that every now and again, he’s forced to field questions from his bosses about expanding the program even further and possibly doing that by switching to a bigger network. All of the big networks have tried many times to lure him away from ShareASale.

But Elias is adamant that ShareASale helped him achieve success and he has no plans to leave. “I’m not budging. The selling point of the program for affiliates is that we are exclusively with ShareASale. And from my perspective, we have their attention. When I want something done there are no questions asked. Plus, I never have to question the type of traffic I’m getting. I know I’m not being cheated or that cookies are not being dropped. With one of the bigger networks, I would have to take a huge chunk of my time to police the program and I don’t want to do that.”

And for Elias, time is at a premium right now. After three years of running the affiliate channel on his own, he’s also recently added SEO Manager to his duties. However, Elias says CSN has shown its continued commitment to the affiliate space, by recently hiring an assistant affiliate manager to help out.

That’s a good thing, because CSN Stores has some new projects on tap for its affiliate program over the next 12 months. The company wants to continue refining its data feeds by partnering with Golden Can. There are also plans to create an affiliate Web page. Currently, the most complete information about the company’s program can be found on ABestWeb, but Elias says CSN needs a formal affiliate spot on its own site as well. The company is also beginning to expand beyond the U.S. into the U.K., Canada, Australia and Germany, which could represent even more opportunities for affiliates.

For Elias, running a good affiliate program means understanding affiliates and what issues are important to them. “I feel an obligation to support those affiliates that have put their faith in my program to help them make a living. It’s all about being comfortable and trust. You can give affiliates all the tools they want, but if you don’t have their trust, you won’t have success.”

Crossing the Line

The roles played by each of the key parties in the affiliate marketing space are very clearly defined. Just like a well-oiled machine, each component has its job to do, each ensuring that the industry as a whole functions, if not in harmony, at least in synergy.

Affiliates should drive value added traffic and consumers to a merchant’s site.

Networks are considered to be the middlemen that track affiliates’ traffic and merchant sales.

Merchants convert that traffic and consumers into sales.

Affiliate managers are there to oil and facilitate the whole process.

Each group enters into relationships with the other parties with the presumption clear boundaries will be maintained. For the most part it works, and each group wants to keep it that way. Affiliates don’t want to see affiliate managers doing their job and merchants don’t want to see networks becoming merchants.

The only potential for crossover is the job of the affiliate manager, as they can exist with the merchant’s organization or within networks or as outsourced program managers. An affiliate manager could certainly boost their personal revenue rather nicely if they started playing all sides of the business,but at the same time they are likely to destroy trust with their affiliate partners.

Trust is the key issue in all of these roles. This complex ecosystem functions because it is based on trust. Trust is not something that people should take lightly or for granted.The presumption of trust exists within each party’s responsibilities, but still, each group needs to earn and continue to foster that trust.

One of the most complex and debated roles in the industry is that of the affiliate network. They are considered to be a trusted third party that is meant to remain neutral and ensure everyone is working in a fair field of play. That’s not an easy task given that there are widely differing opinions on various sides of what constitutes fair play.

Both LinkShare and Commission Junction have previously bought affiliates, and while this has caused concern, it didn’t raise any real alarm bells at the time. And those moves have since faded from the limelight. But let’s face it – many of the larger CPA networks are affiliates that turned into networks,and most still operate as affiliates.

The PepperJam Network has progressed through the affiliate business from merchant,to affiliate, to affiliate managers to affiliate network – presenting them with a serious challenge in how they separate and manage their industry role. The mixed reviews and acceptance PepperJam has received from the affiliate community shows it’s not an easy path to travel. It’s a very difficult journey to take while keeping all constituencies happy. And the larger a company becomes the harder it is to ensure boundaries inside the company are enforced and trust is kept in place.

So it is perplexing when a “Trusted Third Party” network such as LinkShare recently began allowing OneCause, an affiliate, to operate in violation of its’ own terms and conditions, overwriting affiliate codes without a consumer action and targeting direct-to-site traffic from organic search results.

What makes this even more upsetting to the delicate balance of affiliate marketing trust is that OneCause is owned by Rakuten, LinkShare’s parent company.

The industry has long argued whether BHOs (Browser Help Objects) should be part of the affiliate channel and how they should interact with the consumer. That debate continues to rage on. But the real question here is, why is LinkShare (or any network) now operating as an affiliate?

Extensive tests by members of the affiliate community showed that, not only is the LinkShare-owned BHO failing to follow LinkShare’s own Terms and Conditions, but it is also going beyond other BHOs, such as the ones from affiliate eBates, and overwriting affiliate tracking that is meant to be protected by the industry standard afsrc=1 code. This means LinkShare is being credited for commissions that should have gone to its own affiliates. It is wrong on all levels.

LinkShare wrote in its blog that the issues were immediately addressed, but continued testing shows the same results as prior to the fix.

LinkShare isn’t the first to do this, but as the company likes to state, it is a market leader. So, why is one of the three largest U.S. affiliate networks seemingly going out of its way to cannibalize its own affiliate base? In fact, CJ and Google Affiliate Network all cleared OneCause.

Economic conditions are tough in the U.S. market, but it’s hard to believe that business is so bad that networks can’t find other ways to increase revenue rather than undermining affiliates and slicing up their affiliates’ revenue. This is ultimately bad business for the long run because it undermines the basic rules of trust between a network and affiliates.

Merchants need to ask themselves if they want to be working hand-in-hand with networks that are cannibalizing their valuable affiliate sales channels and undermining core affiliate partners. And affiliates must consider if they want to be promoting merchants that allow their traffic to be cannibalized for someone else’s profit. The affiliate business exists because of synergy and trust between all parties. Cannibals have no place in that equation.

Chris Sanderson is the owner of AMWSO.com, an Outsourced Affiliate Management Firm, with an international team of dedicated affiliate managers supporting clients programs on a global basis.

Commission Junction: Putting the Pieces in Place

Kerri Pollard took over the helm of Commission Junction as general manager over a year ago. Pollard’s rise through the ranks – starting at BeFree back in the day and then at CJ as director of publisher services – gives her a wide variety of network experience to draw upon. Since Pollard took over, CJ has undergone some changes.

Lisa Picarille: You’ve been running Commission Junction for over a year now. What’s changed at CJ?

Kerri Pollard: It seems like a cliche, but the first order of business was to get the right people in place. Our emphasis is customer focus on the advertiser, publisher and agency side of the business. We didn’t spend a lot of time on agencies in the past. Making sure we had the right people gave us greater focus. Everyone is now aligned and focused. On the agency side, we have a support team and the resources on the sales end. I’m happy to say that coming off CJU we’ve gotten positive feedback about the increased support and partnership. Also, both the advertiser and publisher sides made alignments in the marketing and products teams. There is ownership and accountability within their teams. That is reflected in the product groups. I grew up on the publisher side of the business at BeFree and we have added more support on that side of the business. Mike Ouellette, a former BeFree-er from back in the day, has also joined us as director of publisher developments.

LP: What has resulted from the personnel changes?

KP: Those changes give us a couple of different things. In this business, it’s all about bringing in new advertisers to the CJ Marketplace and retaining them. Organizationally, we are focused on retention and acquisition. We are really trying to re-emphasize customer outreach.

LP: And the biggest changes?

KP: They’ve been on the technology side and the marketing and product sides. We are becoming better at product marketing. We hadn’t been marketing ourselves. We are also able to focus on Web Services. We launched that two years ago, but there are more opportunities for third party developers and to get traction with developers.

LP: Have the changes allowed you to attract more developers, advertisers or publishers?

KP: We tend to err a little more on the conservative side. But we continue to bring in new clients in each quarter when you look at the year-over-year numbers. It’s all about how we track it and we are also very conservative about sharing that data.

LP: Has the fact that Performics is now part of Google impacted your ability to bring in new clients?

KP: No. It’s been no different thus far. That could change. But it hasn’t impacted the sales process of anything with our existing clients. As far as we are concerned, it hasn’t changed from when they were Performics.

LP: Now, the inevitable question about the impact of the economy on your business?

KP: Because our business is tied to the online process we have been looking at the forecasting process. A lot of people are in the dark about what the holidays will bring. Analysts are all over the place with predictions – anywhere from 12 to 13 percent growth, but we’ve also seen numbers as low as just 3 percent growth for online sales. On the positive side, we are seeing that companies are definitely redirecting money from other channels into affiliate marketing because it is cost effective. Even if a company or retailer has laid off workers, they can’t shut down that channel. But they need our help on the services side of the business – especially if they don’t understand that when they pay out more to publishers, that’s a good thing. That it’s tied to increased sales. But it all comes back to the consumer. More and more consumers are coming online and shopping, and the adoption rate will continue to increase. Will that fact offset what is happening with the economy? Not sure. And we definitely won’t know for sure until a couple of weeks into 2009. We are doing what we can, but things like Citi Bank filing for bankruptcy and more consolidations at financial institutions are beyond our control and they do have an impact.

LP: What’s the impact been on affiliate marketing overall?

KP: I do know affiliate marketing is the safest business. It’s measurable and cost-effective. But businesses are also in hunker-down mode. But I think we can grow the affiliate marketing pie. We are helping our existing clients with greater education, so they can really understand performance marketing. We are also looking to areas like BtoB. People tend to take a shot and need the support for publishers. That business can be tracked and we are looking into what role we could play. We are also looking at doing more tracking retail outlets and VARs (value-added resellers). We are having conversations about how, as a business and technology platform, we can track other things within an organization.

LP: And you have the technology to do that?

KP: We have a lot of technology initiatives. We were the first to launch Web Services domestically. We are revitalizing that initiative, making it more of a community and a mashup. We want third party developers and others to make widgets. We are also working closely with some of the other ValueClick properties to leverage their technology – Media Convergence and MediaPlex. We want to move beyond the methodology. ValueClick is already doing behavioral and contextual targeting. The biggest challenge is the amount of heavy lifting involved.

LP: Are you leveraging other technologies as well?

KP: We want to make it easier for existing clients to do business with us. Publishers get excited when it comes to optimization. Big publishers have made a significant investment. We need to make things easier for the great diversity of publishers. We are looking at creating more push network features for new publishers. So, we are looking at the core fundamentals. This is a relationship-based business. There are social networks out there and communities. We also want to have more automation on the reporting side. We are open to leveraging other developers. We don’t have to build everything ourselves. We just launched a pay-per-call beta test with CallWave. It has a branded CJ look and feel.

LP: There have been issues around network compliance and those that continue to override affiliate commissions.

KP: Network quality is important to us and we are very diligent about it -maybe more than anyone else. We’ve put an increased focus on it. Jeff Randall is handling our network quality and developing that even more. Adware and spyware have been difficult and more egregious, but when it comes to adware, there are customers that are still supporting it. We will still continue to watch it and stay one step ahead. In addition, trademark bidding is a big piece to monitor. The focus for us is staying on top of it. To do that, we are adding more regulations and policies.

LP: A while back, you were expanding into countries outside the U.S. Is that something CJ will continue?

KP: ValueClick has a big global presence. CJ launched in Spain this summer. We also have offices in the U.K., France, Germany and Sweden. We are looking to continue expanding in 2009 and looking at different ideas. We are also seeing more client interest in the Asia-Pacific.

LP: What are some of the specific goals for CJ in 2009?

KP: There are economic factors in play, but we’re focusing more on what we can control. In general, we are seeing greater focus on profitability and margins for our customers. We think that by educating our clients and being focused on technology we can grow distribution beyond the scope.

LP: Are you seeing larger affiliates get bigger and the gap between the largest and smallest affiliates get wider?

KP: Large publishers – especially couponers – are having their best year ever. But double digital growth year-over-year is going to be more difficult. It’s getting more difficult to be successful in this business. The small guys are trying to compete, but it is survival of the fittest and there is a huge increase in competition. The changes to search engine policies this fall hit hard for a lot of people. Search engines determined that content was ranked higher based on what was compelling to consumers. That hit the smaller guys hardest.

LP: Do you feel pressure from the CPA networks?

KP: No. Not really. It’s just arbitrage to an extent. They have not made an investment. It’s not a relationship. I see them as here today, gone tomorrow. They are ankle-biters. I think when you think about networks it really comes down to the Big Four.

LP: What are the other major challenges for CJ over the next 12 months?

KP: It’s been an interesting year. I’m excited about all the things that we’ve been able to do. It’s like we’ve been cleaning up the stable and the horses are ready to hit the racetrack. We are making sure that we stay focused on the customers and the products and services they need the most.

Google Affiliate Network: Big-Time Backing

The performance marketing landscape changed dramatically last year when Performics, the third largest network, was sold along with its parent company DoubleClick to search giant Google. After more than a decade in the online marketing space, Performics became the Google Affiliate Network – gaining all the cachet of an association with Google, along with concerns from the privacy advocates about Google having too much information on advertisers and publishers. Chris Henger, group product manager for Google Affiliate Network, addresses those issues and talks about where GAN is headed.

Lisa Picarille: Let’s talk about the changes that have occurred since Performics was acquired by Google.

Chris Henger: We’ve moved to the Google Chicago office – three blocks from our old office. Speed and being fast is a good thing at Google. Phase One was the integration. That is done. And it was done well.

LP: So now what?

CH: I think Google brings a tremendous amount of vision, infrastructure and philosophy in their approach to market and business problems. We can apply much of Google’s core business to our business. Google is about making it simple, easy and fast and doing no evil. We have been thinking about how we can bring that to our channel. We really want to embrace that. We need to be relevant to create a great experience for our publishers, advertisers and end users – the whole ecosystem.In CPA and affiliate marketing, we are always thinking about how to convert better and what can we do that will make more money for us, advertisers and publishers. In affiliate marketing,we are continuing the integration to leverage Google’s technology infrastructure. It’s in our best interest and that of our customers (advertisers and publishers) to embed our systems into core Google software. We have access to great software. We were told by Google to engineer for the long term and not for the short term. Be smart about why you integrate into the system. Make sure you are enhancing the core platform. For example, we can use the payment and billing system of Google’s on the back end. This can benefit publishers by offering payments with more speed and transparency. We can send one, common check to AdSense and network publishers. It’s also important because we can now pay in 47 different currencies across many countries.Operationally, it’s important to understand the synergies with our publishers and advertiser and AdSense. There is overlap. There’s an opportunity there to make publishers happy. We can also centralize reporting and use Google Analytics. It’s our long-term vision to offer a centralized dashboard to their affiliate data, mobile, etc., in a single dashboard. We are leveraging Google’s focus on technology and innovation.

LP: What else is on your radar long-term?

CH: We want to make the platform easy and fast, integrate with Google and be more open for advertisers and publishers to communicate with each other. Open communication and the concept of transparency only work if the network is fully open and shares publisher information with advertisers. We think there is value from us, but that we shouldn’t stand in the way. Google has Blogger, Gtalk, Google Group, GMail, and many other communication tools.

LP: It’s great to leverage Google, but is there a downside to that?

CH: People are worried about Google having too much information. I understand the potential perception of conflict but we haven’t had any customer feedback along those lines. They don’t see it as a problem. From a long-term perspective, why would Google do things that are not in the best interest of the end user? It’s funny because the U.S. is known as a capitalistic country with an entrepreneurial spirit – the whole rags-to-riches thing – but America also loves to see the Big Guy fall. Some think Google is too powerful. It’s an unrealistic fear that is not in practice.

LP: How much emphasis do you place in compliance, and will Google play a role in that effort?

CH: Compliance is always important and remains very important.I don’t feel a seismic shift. We believe in quality in business. We have invested in technologies and methodologies.It’s a huge differentiator for us and will be more so in the future. We are working closely with Google on this. It has many technologies for malware detection, and if you combine that with our focus on quality, we have strength. We also hand-screen all affiliates and reject 50 percent of the publishers who try to sign with us.

LP: Does GAN have specific goals set for 2009?

CH: There was a lot of marketplace momentum for us that was very strong in 2007 and 2008. We were taking shares from competitors – which can singularly be attributed to affiliate marketing. Google is committed to the affiliate business as important. Over the next year, we want to continue to grow GAN through that same single-focused effort – driving publisher and advertiser growth. We want to grow programs and have already proven that we can do that. When advertisers and publishers are happy we are ultimately all winning.

LP: Do you think growth could be challenging in this economic climate?

CH: Current economic conditions are impacting online advertisers and all advertisers in the ecosystem. But advertisers are not naive. Online marketing is a vehicle that can help them and is accessible to them in tough times. We want to let them lean on us.

LP: Does that mean you are reaching out to a more diverse group of potential advertisers?

CH: A while back, we began a program to focus on small-to-medium-sized advertisers in addition to our big brands and catalogers. Google works with every advertiser on the planet – across all verticals. At the same time, affiliate marketing works for online e-commerce objectives – leads or sales, the big verticals, retail, financial services, travel and technology. We want to work with companies in all of those areas. It’s important to us to be diverse. For example, we know that in these times, in affiliate marketing and offer-driven channels, advertisers retreat on offers because of margin pressures. It could be right for one or two companies. But offers that are properly structured when the customer is price sensitive or ticket-size sensitive and consider the price point that consumers are fearful of, can work – and work well. So let’s put offers out there that are attractive. We should be talking.

LP: Google has a large global presence. Are there more expansion plans for GAN?

CH: GAN is ultimately a global business but right now we are going through a prioritization process to decide about further expansion. We are evaluating that.

LP: Where will GAN be in a year?

CH: We think that over the long-term we can bring about a real, fundamental change in the industry to make it easier and faster to do what is right for advertisers, consumers and publishers. Give us time. Google’s not out to hurt the affiliate marketing industry. Let us operate with these good intentions.We are part of a big company and things could take a little longer. But there is excitement, enthusiasm and support. The right things are in place. My team is 110 percent committed to do the right thing by customers and good things are going to happen.

LinkShare: Leveraging Technology and Global Markets

Nearly a year ago, LinkShare president Steve Denton stepped down. The company named co-presidents. Jonathan Levine and Yasuhisa “Yaz” Iida are both veterans of LinkShare’s parent company Rakuten.

Lisa Picarille: LinkShare is the only major network to have co-presidents. Give me the break down of your duties.

Jonathan Levine: I used to be the chief technology officer at LinkShare. My primary focus is still product and technology development and to work with our chief marketing officer. I make sure we track, report and pay out commission – basically the nuts and bolts of the technology operations.

Yasuhisa Iida: I came from LinkShare’s parent company Rakuten. My role with LinkShare is just five months old, but I have been with Rakuten for 10 and a half years. My role is the business side – mainly client facing. I’m looking at sales and client development.

LP: When there are two people making critical decisions, can’t that be problematic since there is no real “the buck stops here” ruling?

JL: The benefit of having co-presidents is that two brains are better than one. Yaz and I came from Rakuten at different times and my background is products and technology with some business development.

YI: I was heading up the sales organization. I can bring the best practices from our parent company.

JL: Also, I think Yaz and I are in sync on most things. We are pretty careful when decisions overlap that we have time to have discussions and come to consensus. We are co-presidents of a bigger company. The buck stops with our board of directors and the CEO of Rakuten. Were there to be a case that was perceived as passing the buck, there would be no tolerance for that at Rakuten.

LP: What’s changed at LinkShare since you two took over?

JL: I think the world has changed since we have become co-presidents. LinkShare is still a great company, but I think the U.S. economy is really difficult right now. Retail sales are challenging and lead generation is challenging. We are still profitable and a great company, but we are going through the same issues as the retail and financial sectors.

YI: Rakuten is a very successful company that constantly brings best practices. LinkShare is not one company. It is part of a very strong Internet company. That gives LinkShare employees comfort and confidence. And because Rakuten is in other markets outside the U.S., we have a broad international perspective. We are in a good position.

LP: Is performance marketing poised to withstand a recession?

JL: In a world where things are not certain, for advertisers they want to know whether or not their dollars will be effective and they want the lowest risk possible. If you are a direct marketer you can measure on a performance basis. It will minimize the risk. We have started to see among the big advertisers that they are using comparison shopping engines. There is now more power for advertisers. They are pushing comparison shopping engines back to CPA from CPC. That trend is pushing the risk back to the publishers. Advertisers are in the driver’s seat right now. We do see an overall trend away from CPC and CPM to CPA – it mirrors what we are seeing in the economy as a whole. Credit cards are down. Loan and debt counseling are way up. The retail side is trending lower as consumers are seeking deals to save money. Cash back is attractive to consumers this year.

LP: Given those factors, what are LinkShare’s plans for this year?

JL: We will continue to do in 2009 what we did in 2008. We are continuing to lay the foundation for a broader variety of distribution tools to make performance marketing practical for a wider array of publishers – like those in social media. We are also working with outside companies as vendors to build WordPress plug-ins. We are enhancing our Web Services that syndicate out to ToldYa and Yahoo. Also, using an API to pull URLs for CPA distribution. There will be more interactive links. We will keep enhancing our Flex Links. It’s not just for video and can be used for other things. My roots are in writing code, so we want to develop an ecosystem around a critical mass of products for other developers as well. To be fair to the other networks, Google is also very technology focused as well. They have an army of people writing widgets and they are opening up APIs to the network. Time and again we see that folks who build a platform and open it up to others create a robust, survivable ecosystem for everyone.

LP: Since you brought up Google…

YI: We feel like we have superior service over all of our competitors. We are focused on what we do best, what we can do for clients and what makes us different. Our differentiator is superior service.

LP: What are some of the biggest challenges for LinkShare and the industry at large?

JL: For us, I think as a smaller company, there is always more stuff you want to do. Your reach often exceeds our grasp. That’s nice and natural. You always want that desire to do more. It’s nice to have a parent company like Rakuten. They are the largest e-commerce company in Japan and extremely profitable. They are making investments in areas where we need to be. That helps since it’s going to be a big storm in retail and financial services this year.

LP: LinkShare has gone from a privately-owned family company started by Steve and Heidi Messer to be part of huge Japanese company. How has that impacted business and the LinkShare corporate culture?

JL: One of Rakuten’s biggest distinguishing factors is that everything is fact-based and transparent. If something is good, they say so. If it’s bad, they say so. Rakuten’s founder, Hiroshi Mikitani, has founded the company on five corporate principles that guide the culture of Rakuten and LinkShare including; be professional at all times; it’s not about personal opinions; what matters is the data. That makes for an egalitarian culture. It’s the kind of place I like to work.

YI: We are good at building a strategy. It’s fact based. We have good management and skills and can execute. It’s not all talk and no action. We think, and then we act. We think, act and then make everything into a system. That makes us stronger.

LP: How will you apply those principles this year?

JL: Products and markets continue to diversify outside the U.S. We have a growing U.K. network and there are other markets to get into. We will continue to work on distribution tools and realizing the power of APIs. We feel that we will make the network more useful for a wider range of publishers.

YI: The U.S. economy is tough. We will continue to help clients grow on the retail side – online and offline. We will stay closely working with existing customers and gain new customers by expanding our global footprint outside the U.S.

LP: Any plans to leverage different technologies to facilitate better communications between advertisers and publishers?

JL: It’s all about relationship building. We have our LinkShare Symposiums – East and West. Like the other networks, we use events to effectively put advertisers and publishers together and let them do deals. We are trying to expand the deal-making parts over time to help drive revenue for all parties. The traditional method of a network development sales organization is reliable for relationships. We believe in that and want to expand it. We have a lot of data that we can mine and make those network development people more successful at getting good publishers. Technology can help us with the matchmaking side of things. There are social media tools. We have a joint venture with LinkShare Japan that has been successful in using social networking to connect publishers and advertisers. We like the idea that we are already seeing Facebook and LinkedIn data in the network.

LP: So what does 2009 hold for LinkShare?

JL: I’m excited about 2009. I think it’ll be a challenge. I think we can build a number of new, compelling products and services. Some that are completely new and then also build on existing technology – like out Easy Links and Merchandiser APIs. I’m also excited about bringing on some smaller advertisers. Historically we have done a good job of serving big advertisers and publishers. But some of our new processes will help us handle everyone from Best Buy to small companies like Peet’s Coffee & Tea. 2009 is going to be a good year.