Tag: Interview

Full Steam Ahead: Q & A with Chris Henger

Performics’ new VP of affiliate marketing claims the industry is still growing and is fueled by performance-based marketing.

Earlier this year Chris Henger, a veteran of affiliate network Performics since 2002, took the helm of the company’s affiliate marketing business unit. As vice president, affiliate marketing, Henger is charged with representing publisher interests to advertisers, a role he takes very seriously. In his former position as senior vice president of marketing and development with Performics, Henger dealt with affiliate issues from a different and broader perspective. Prior to joining Performics he was senior vice president/general manager at Emusic.com, which was acquired by Vivendi Universal. Revenue editor-in-chief Lisa Picarille spoke with Henger about his new role at Performics, some short-term goals for the Chicago-based affiliate network and where the online marketing space is headed.

Lisa Picarille: You recently took on some additional responsibilities; can you outline your new duties?
Chris Henger: Running our affiliate business unit for Performics is a responsibility that I took on with great enthusiasm. I am passionate about this industry and about Performics’ opportunity to take it to the next level. I represent the affiliate business within DoubleClick’s management team and manage a talented team of affiliate marketing professionals. In my role I am responsible for the growth and prosperity of our affiliate operations and that means making sure clients are satisfied and that publishers are productive and well-compensated. The possibilities for improved publisher productivity are endless and that is an area that receives a great deal of my attention and Performics’ resources.

LP: That sort of makes you the face of Performics, at least for affiliates. That can be a tough position with some very vocal critics. Talk about how you plan to interact with the affiliate community.
CH: I am proud to take on the responsibility of Performics’ leadership for the affiliate community. I am active at industry events like Ad:Tech and Affiliate Summit and I am always looking for ways to have more direct contact with publishers. We recently established a Publisher Advisory Board and this group has already proven to be an honest and insightful sounding board for ideas. I also represent our publisher interests to our advertiser clients. It is important that they understand the implications of the decisions they make, and I spend a lot of time talking to advertisers about publishers. There are tough critics in our industry but they have good ideas and the key is to absorb the feedback and use it to make sound decisions.

LP: Do you have mechanisms in place for addressing negative comments and effecting change?
CH: Monitoring and addressing comments are a shared responsibility at Performics. The affiliate marketing director keeps careful track of the media, blogs and other forums, and the product manager is active in the community. Our publisher services team fields inquiries from publishers and they are the first line of support to quickly address comments and effect change on behalf of our publishers. I meet with these teams on a regular basis to anticipate changes we need to make. We also have an internal blog that we rely on to get the word out to the program managers if there is a particular issue or change in the marketplace that needs attention.

LP: What are some of the goals you have for Performics in the next 12 months?
CH: The next 12 months are going to be very exciting for Performics. We have an aggressive growth plan in place and a lot of innovation coming with our product road map. Personally it is my goal to ensure that our employees continue to feel good about what we are building and I want to deliver the message to our publishers that I care about their needs and about growing their businesses. Actions speak louder than words. We are a heads-down team that is always striving to do right by our employees, advertisers and publishers.

LP: Performics recently announced it is providing network-level data for advertisers in the ConnectCommerceSM interface. What other functionality is planned?
CH: Performics is committed to continuous improvement and we have an aggressive product development road map for the next 12 months. One significant feature in development has been in beta with a small group of about 25 publishers for several months. The product feature, now called OrangeLinks, was integrated into our ConnectCommerce platform in June. This feature enables publishers to sign up to receive all updated links via email or FTP and eventually via RSS. The links are pre-generated and ready to be added to the publisher’s site. We saw a phenomenal increase in sales from the beta group, and other publishers should be able to increase their commissions with OrangeLinks.
Another important feature that will be released this summer is the availability of publisher contact information within ConnectCommerce. Performics and DoubleClick have recently adopted a new product development methodology called SCRUM. With this methodology in place we are working on short “sprints” to accomplish bite-sized feature improvements or components of larger enhancements. We have dramatically reduced the development cycle and improved deliverability. You are going to see seven or eight small releases a year, instead of one or two large releases.

LP: Why does Performics work with so many catalog retailers?
CH: We do have a very strong catalog client base that goes back to Performics’ roots as the first full-service affiliate provider. When the company was founded in 1998, the vision was to fill a gap in the marketplace for affiliate marketing services. Traditional direct marketers didn’t have the in-house expertise to tap what was the wild world of online marketing in the late nineties. The full-service value proposition really resonated with catalogers in the late ’90s, and the unique agency approach we take to affiliate marketing still resonates today.
Performics is also headquartered in Chicago, the birthplace of direct marketing and the home of large traditional catalogers like Sears and Spiegel. As a matter of fact, Spiegel was one of Performics’ original clients and we continue to manage the affiliate program with the new management at Spiegel. The other aspect is that affiliate marketing is nirvana for a direct marketer; catalogers “get it.” They really understand the power of performance- based marketing. Because of our roots in direct marketing we are pushing the envelope for catalogers today and helping them understand the dynamics of multichannel marketing.

LP: I know that Performics doesn’t accept affiliates from religious-related organizations; why?
CH: Performics has a comprehensive, quality affiliate network and we ensure that quality through editorial review. Just like major search engines, we have human screening of all affiliate applications and we have to provide that group of screeners with a set of criteria. To date, we have not allowed applications for sites with religious content and the policy is meant to minimize subjectivity from our editorial review process. Performics’ policy is not to allow sites that are focused on a particular faith. We don’t want our staff to have to make a judgment on whether or not a site with content from one faith or another is appropriate for advertisers. Recently I have seen some church-specific sites that are doing some very interesting things with affiliate links and using the commissions as a fundraising effort. This is certainly an example of innovation and we are willing to reconsider the policy.

LP: Are there any other types of affiliates that you don’t accept, and why?
CH: Yes, we do screen each application and there are many, actually thousands of applications that we reject each month. The most common reason we have to reject an application is that the publisher’s website is not available for review. But upon review of the site we do have criteria about content that we evaluate. The policy is posted on our website and available to any affiliate:
Websites or publishers engaging in online activity that contains, promotes or has links to any one of the following will not be accepted into the network:

  • Pornographic, obscene or offensive content
  • Violence or hate-oriented speech
  • Extensive religious commentary or attempts to preach or solicit members for a particular church or faith
  • Gambling
  • Libel or defamation
  • Illegal substances
  • Unsolicited commercial email (spam) or trademark infringement
  • Any type of misleading, fraudulent or illegal activity

LP: Are there segments you believe are ripe for affiliate expansion?
CH: Blogs are certainly one segment that we expect to drive increasing volume. In recent years the affiliate channel has moved heavily toward commerce-driven sites. Coupons, discounts and shopping-related publishers garner a substantial chunk of sales volume and we have seen phenomenal growth from loyalty and reward sites. We’ll continue to see the bulk of the volume come from those categories. Publishers in those categories have grown increasingly sophisticated and many consumers have come to rely on shopping-related affiliates as an intermediary, as they are perceived to add value to the transaction chain. As for new expansion, we are likely going to see affiliate marketing go back to its roots and witness growth in the area of content. AdSense and programs like it are geared toward content- driven sites, and a lot of people talk about small publishers monetizing content as if it’s a new initiative. Monetizing content is what affiliate marketing is all about and that segment is ripe for expansion.

LP: You have a deep background in online music and music-related businesses. Are there any initiatives at Performics related to online music merchants or affiliates?
CH: I often rely on my experience in the early days of interactive marketing. Our business model back then is not far removed from effective affiliate marketing – build a loyal audience of consumers and at the same time attract advertisers that wish to engage those consumers with products and services. There was no question the promise of digital music was going to drastically change music distribution; the question was when. One of the core things that was lacking was a ubiquitous device, and obviously the iPod has solved that, and now the companies in the online music business are flourishing. A lesson I learned was it is critically important to stay focused around the core value proposition you provide your customer. This certainly applies to how we manage at Performics, as we stay focused on our two core businesses: affiliate marketing and search marketing.

LP: You attended the MSN Strategic Account Summit recently. What was the most important message you took away from that event?
CH: One of the underlying messages I took from the event was the importance of having aspirations and high standards. Creating an environment where people are held accountable for high performance often has a multiplier effect on the satisfaction they derive. At the end of the day, people want to feel they are contributors to the overall success of the business – that what they do day in and day out matters. I want to surround myself with the very best people, and share in our collective successes. I jotted down this quote, which rings especially true at Performics: “You strive to create excited, high-energy environments, but not exhausted ones.” In today’s fast-paced marketplace, it’s easy to get exhausted.
You need to have a definition of success so that when you get there it will be meaningful to reflect on the accomplishment. These types of moments are often understated because really, who has the time to laud achievement? The MSN Strategic Account Summit represented one of those instances. I left the event proud in the knowledge that Performics was out in front as the only SEM to share the stage with Steve Ballmer.

LP: Is Performics looking to leverage a more strategic relationship with MSN?
CH: Our long-standing relationship with MSN is certainly an asset that we value. We have been optimizing data feeds for MSN Shopping for years, and were the first to adopt the MSN adCenter API for Search. We work very closely with MSN, and strongly believe there are many opportunities for advertisers within that platform.

LP: Can you give us an idea of just what role search plays at Performics?
CH: Search plays a critical role at Performics and within DoubleClick. Performics was a pioneer in search engine marketing and among the first to realize the power of paid search. We are the leading SEM globally, and have a thriving natural search optimization practice. The affiliate and search channels are inextricably linked for Performics – affiliates use search to drive traffic, and we share many cross-channel clients. And more importantly for our advertisers, the Performics business model aligns our interests with our advertisers. A consumer who transacts with our advertiser through either channel benefits the Performics business model, whereas this is a differentiator between us and other affiliate providers.

LP: Is the reign of the “Big Three” (CJ, LinkShare and Performics) over?
CH: Absolutely not. Performics and our two industry peers are still growing by leaps and bounds. While there will always be changing dynamics in the marketplace, our target clients – retailers – are going to continue to look for affiliate marketing solutions. Multichannel marketers and other advertisers need a proven solution, a comprehensive network and reliable technology, which is core to the Performics offering.

LP: What is the biggest competitive threat to Performics’ business?
CH: We stay competitive by thoughtfully thinking and planning for the future. We recently completed an extensive three-year strategic planning process across Performics and DoubleClick. There is a very clear plan and set of priorities that the entire company shares on where we want to drive our business. Ultimately, business comes down to customer loyalty. If a company loses sight of the needs and wants of its customers, then it opens the door. We are fanatically focused on servicing the needs of our customers. Through strategic leadership, proactive service and sustained innovation we control our own destiny in creating loyalty with our customers.

LP: Talk about where ad networks and subnetworks fit in the performance marketing landscape and how they impact Performics.
CH: Ad networks sure are plentiful nowadays. They can provide value in increasing reach through one media buy, and most campaigns are on a performance-based pricing model which has similarities to affiliate marketing as well. In some cases we work with ad networks for select clients, and in other cases we produce leads for our customers directly through our affiliate network.

LP: How important is it for leaders in the online marketing space to be global companies?
CH: The Internet is a global medium and the barriers between nations, languages and communities are virtually invisible. DoubleClick is the world leader in online advertising solutions and that provides tremendous insight for our clients and employees. We are working to improve our interactions and payment processes for international affiliates because that segment is increasingly important.

LP: What are Performics’ global plans?
CH: We have an office in London that predates our integration with DoubleClick and we now have 21 offices around the world. We will certainly use that foundation as a platform for further expansion. Currently we license our affiliate marketing technology platform internationally but do not have plans to set up affiliate networks in other markets. Never say never, but we have a huge growth opportunity in the U.S. and that’s where we are concentrating today.

LP: Give me an idea of what you think the performance marketing space will look like in three years.
CH: It is going to look even better than it does today – more growth, new and different distribution and better data across the performance-based channels. In the next three years we as an industry will have answers to many of the questions we face today. I think there will be a recognized distinction between adware and spyware. We are going to have an industry-wide resolution of ad blocking. I think we’ll see more sophisticated compensation for publishers that are tied directly to delivering on advertiser goals. We are going to have a larger pool of talent to expand with because the industry will be further developed. Performance-based marketing is a key driver in the evolution of online advertising and in three years we’ll see an industry that is taking a larger piece of the overall media pie.

The New Face of CJ: Q & A with Lisa Riolo

Commission Junction’s Lisa Riolo steps into a new role with some familiar responsibilities.

As Commission Junction’s senior vice president of business development, Lisa Riolo is responsible for driving revenue for the sales and business development teams. While she’s not technically filling Todd Crawford’s shoes, Riolo will be the new face of the affiliate network, taking on many of the same challenges as the former vice president of sales, who left in February.

Owned by ValueClick, CJ is based in Santa Barbara, Calif., and has tens of thousands of publishers in its global network. In the six years that Riolo has worked there, she has led the sales, client development, search and product management teams. In her new position, she manages the 25 people who make up the sales and performance optimization departments. Revenue Senior Editor Maria Sample recently interviewed Riolo about her company’s practices and plans for the future, as well as the affiliate marketing industry and the importance of understanding people.

Maria Sample Your predecessor was very active in the affiliate community (i.e., forums, message boards, etc.). Do you plan on continuing to be Commission Junction’s face in those arenas?
Lisa Riolo Actually, the organizational structure introduced by our general manager, Tom Vadnais, positions me in a role that hadn’t previously existed. So, fortunately, I’m not faced with the challenge of having to fill someone else’s shoes. I do recognize that, since its earliest days, Commission Junction has relied upon one or two individuals to convey most of its messages. In the future, I think the affiliate community will hear and see us take more of a team approach.

MS Todd Crawford (the former vice president of sales) was considered the public face of Commission Junction. The downside of that is that he often took the heat from angry and upset affiliates. Are you prepared for that? And how will you handle those sorts of public (and sometimes personal) attacks?
LR I believe passionately that Commission Junction achieved greatness because of the publishers. I’m very open and prepared to listen to them. It’s been part of my role for the past six years.

If I end up the target of discussion, that’s OK. I’ve found that frustrations expressed reveal great opportunities to learn and improve. I tend to worry more about silence than I do about rants.

MS Part of your responsibilities include increasing Commission Junction’s market share. What plans do you have to increase market share over the next 12 to 18 months?
LR Our vision has consistently included a global perspective, and in the last 18 months, we’ve expanded our European presence from the U.K. to Germany and France. In 2006, we plan to launch offices in more countries in Europe, and continue to leverage opportunities we have in Asia.

We’re also committed to improving our clients’ experience in the CJ Marketplace. As we make it easier for them to extract information and interact with our product offering, we’ll attract new participants to our business.

MS What about plans for driving new revenue?
LR Our current plans fall into three categories. Last year, we expanded our service offering to better meet the needs of our advertisers, especially those selecting the CJ Access service level. We see additional opportunities for services that benefit other segments with our client base. Next, we’re exploring opportunities for leveraging new distribution channels created by technology innovation. And finally, we’ve reaped great benefits by collaborating with other teams in the ValueClick family of brands and plan to continue to do so.

When you look at the ValueClick products and expertise, you’ll see we have a compelling story. When you look at the metrics from just a couple of our cross-divisional efforts, you see the type of incremental lift that generates real excitement on our part.

MS What threats, if any, does the sudden proliferation of ad networks present to Commission Junction?
LR Ad networks have existed for years, some of which we’ve had relationships with for a long time. We don’t see ad networks as a threat, per se. They offer value that complements what we do at Commission Junction. We see that from our collaboration with our teammates at ValueClick Media, who run the largest independent display ad network in the U.S. The more monetization opportunities we can offer our publishers, the happier they are and the more they want to work with us.

The fact is, as heard from several outstanding publishers, they go where they get the best return on investment [ROI]. Commission Junction must understand and optimize every component of the ROI equation, from payout to time spent in our member area.

MS Can you outline the risks and benefits of sub-affiliate networks?
LR From an advertiser’s perspective, the benefits are a) you’ve potentially improved your efficiency because you’ve outsourced part of your relationship management responsibilities, and b) the sub-affiliate network may generate significant volume and extend your reach. The two primary risks of working with subaffiliate networks are a) you’re typically paying a premium for “aggregated” transactions, and b) you often do not have good visibility into the promotional methods used by the “subaffiliates” which, in all likelihood, will challenge quality standards.

From a publisher’s perspective, the benefits offered include higher commissions and often, faster payouts. The downside is productive publishers that don’t have direct relationships limit their ability to demonstrate their value. Hence, negotiating exclusive offers or higher payouts is difficult. The other risk for publishers is that, often, the sub-affiliate networks are not only outsourcing to other affiliates, but also competing with them. How often does a subaffiliate’s transaction get attributed to the network or super-affiliate?

MS Andrew Jacob, Leadpile’s CEO, seems to think his company’s Centralized Online Lead Marketplace could take the place of Commission Junction. Recently, he referred to his offering as an alternative to “traditional, old-fashioned affiliate marketing programs like Commission Junction.”
LR Isn’t it fantastic to operate in an industry where someone references a company that hasn’t celebrated its 10th anniversary yet as “old-fashioned?” Anyway, my response in these situations is usually the same: I pay attention. I never dismiss the potential importance of a future or existing player in the space. If you’re still in business, the game never ends. You’re always competing and you always have to scout and monitor what else is out there – and why. You won’t catch me not paying attention.

I do look for potential issues with other networks. For example (and acknowledging that it’s still early on), Jacob hasn’t illustrated how he plans to manage quality and scalability from the advertiser perspective. If you can’t drive and manage large-scale results on a reliable basis, you can’t drive value for your network participants. And a bid-based pricing system alone doesn’t really resolve all of the issues around quality. Nor can he simply assert, “Our sellers provide high-quality leads” with no basis. Even if the prospective customers Leadpile provided to its past advertisers were of acceptable quality, it’s a completely different thing to build a quality network.

So, it’s about quality, efficiency and scale, and no one in the affiliate marketing industry has driven all three of these as well as Commission Junction.

MS What does Commission Junction have that the competition does not?
LR The first thing we have is market-leading scale. Commission Junction is a global leader in performance-based marketing, and is the No. 1 provider of affiliate marketing managed services. Second, our commitment to upholding quality standards within our network of advertisers and publishers is unparalleled. We are the only network that has a team dedicated to monitoring and enforcing our Code of Conduct and Service Agreements. We are a trusted third party that continually strives to build and retain our clients’ (and future clients’) trust and exceed their expectations.

Third, we provide more transparency than the competition. The CJ Marketplace is the only network that openly publishes the performance metrics of advertisers, publishers and ads, allowing for a results-driven environment.

Fourth, as part of ValueClick, we can introduce our advertisers and publishers to a broader set of solutions that help advertisers meet their various online marketing goals and publishers monetize their online presence.

MS Why does Commission Junction use the term “publisher” instead of “affiliate”?
LR When we made the change from “affiliate” to “publisher,” we introduced the CJ Marketplace with the intention of influencing online marketing beyond the affiliate world. So, we adopted terms more commonly used by the ad networks. We also switched from “merchant” to “advertiser.” The strategy worked well and we have caught the attention of a broader group of online marketers.

MS How often do you interact with publishers?
LR During the past six years, my primary responsibilities involved developing our clients – both the advertisers and the publishers. When it comes to personal interaction, client meetings reflect about a 70/30 split between advertisers and publishers. Typically, though, I spend more of my time in the publisher meetings. At our annual client-facing event, Commission Junction University (CJU) and other industry events, I focus my attention almost exclusively on publishers because I need more data points from that group to understand if, and what, trends exist.

MS What makes an affiliate/publisher a “super-affiliate” at Commission Junction?
LR There are several attributes, including commissions earned, that earn publishers a CJ Performer designation. Generally, I’ve found the highest performance levels represent the top 5 to 10 percent of a program or network’s participants.

MS What traits do super-affiliates/publishers possess that separate them from the others?
LR I almost always see a balanced blend of entrepreneurial spirit, technical ability and creativity among this type of publisher. They are goal-driven and usually set aggressive benchmarks. The one unique quality I see in those with a long track record of proven results is a greater focus on flexibility than massive scale.

MS What type of online advertisers/companies do you work with?
LR We work with 1,700 advertisers. There isn’t a specific type of advertiser that we work with – we attract a broad spectrum of advertisers from small, regional businesses to global brands and from all industries.

MS What rate of measurement works best for advertisers? Publishers?
LR ROI and ROI.

MS What do you think publishers could be doing better?
LR On the whole, publishers tend to focus on attracting consumers that have already progressed toward the decision-making phase in the purchasing cycle. I think they could improve their ability to effectively move a consumer through more of the earlier phases in the purchasing cycle.

MS What do you think online advertisers could be doing better?
LR Advertisers should focus on managing their spend and resource allocation across channels. Too often I hear the statement that affiliate marketing generates the best RoAS [Return on Ad Spend] coupled with the assertion that the channel isn’t capable of producing comparable “volume” to their other channels. Managed properly, as evidenced by a number of savvy advertisers in the industry, the affiliate channel can effectively outperform the alternatives – including search and portal deals.

MS What do you like about performance-based marketing?
LR Both the left and right sides of my brain get stimulated by this work. I love the analytics and seeing the big ideas unfold. You might think the accountability in performance-based marketing, with its focus on metrics, would discourage creativity. I think it’s quite the opposite. Driving results, on a pay-for-performance basis, forces a level of effectiveness that demands creativity. I think the publishers are often at the leading edge of change and innovation.

MS What do you dislike about performance-based marketing?
LR When you compare results across marketing channels – the standards set by performance-based marketing should prevail. Yet I still see advertiser clients having to fight, internally, for budgets and resources. If the team involved is properly monitoring for quality, then blowing through a “budget” should equate to blowing through sales goals – and that’s a good thing, right? They should be feeding the revenue machine.

MS Are you involved in Commission Junction’s Internet radio show, “Affiliate Marketing Today”?
LR Yes, I participated in the decision to produce the show and it launched on March 21. Our team changed the broadcast format to take a unique approach in that it covers the continual changes in the industry, with both an advertiser and publisher perspective across beginner, intermediate and advanced levels.

MS What’s happening in 2006 at Commission Junction – any big changes?
LR This year is very exciting for us and our clients. We have some significant projects in our pipeline. Also, I mentioned earlier we plan to launch in some additional European countries this year.

MS Do you think Yahoo’s ban on trademark bidding will have a big effect on SEM?
LR Right now, a conflict exists between brand marketers and performance marketers. The assumption is that you are either creating awareness or driving sales. Actually, both channels should benefit the other. I think pricing models and ROI metrics, rather than restrictions, are the best way to manage the effectiveness of a channel. As marketers’ perspectives on this issue evolve, I think Yahoo may choose to alter their policy.

MS What would happen to Commission Junction if Google suddenly went out of business?
LR At its core, Google is a distributor of information. I don’t think Google created demand that wasn’t already there. Instead, they found a way to effectively supply the information. Initially, Google altered the way people navigated the Web. If suddenly the system being used to access information disappears, what happens? People adapt and find a new source, or sources, to access information. With respect to Commission Junction, we, through our publishers, would adapt. Publishers would find new opportunities to promote offers at the emerging information sources.

You know what? These changes are already happening, but it’s gradual, not sudden. Web users navigate and source information differently today, compared to yesterday. What are we doing about this? Sensing, responding and facilitating changes within our model.

MS How has your psychology degree helped you in your career?
LR A psychology degree wasn’t supposed to help me in business – or so I recall having heard from people more often than not. I remember thinking that studying psychology would help me understand what motivates people. And, it seemed to me, if I was going to be an effective leader within any business, I better understand what motivates people. I think my theory held up pretty well.

Optimized for the Future: Q & A with Noah Elkin

Noah Elkin is the director of industry relations at iCrossing, which was recently named Best Search Agency of 2005 by industry trade publication OMMA. iCrossing, started more than nine years ago in Scottsdale, Ariz., is jumping into new arenas, such as the mobile search market, and expanding client services to include content creation and website design.

Elkin is responsible for iCrossing’s public messaging and interfacing with high-profile analyst firms, along with sitting on industry committees, such as the Interactive Advertising Bureau, the Direct Marketing Association and the Search Engine Marketing Professional Organization, which puts him in a unique position to observe the online advertising industry from a variety of angles. Elkin, who previously worked as a senior analyst at research firm eMarketer for five years, has a Ph.D. from Rutgers University and received a B.A. with honors from Columbia University. He recently spoke withRevenue senior editor Maria Sample about winning industry accolades, providing services for the little guys and where search marketing is headed.

Maria Sample: Your company calls search marketing “reverse direct marketing.” How would you describe it?

Noah Elkin: It’s something of a philosophical shift in how customers and businesses interact. Customers are now actively searching for brands and products and services, for information. It’s a seismic shift from a typical push-advertising model where you get an email message or a TV spot or a regular print advertisement. It reflects the degree to which the customer is in control. With reverse direct marketing, a customer has already given an indication of what he or she is interested in. Search, as we like to say, is like a giant focus group.

MS: What’s the main difference between iCrossing now versus 1998?

NE: Our recent restructuring of the organization into three main service lines – marketing services, marketing technologies and marketing properties – is a major shift. Another difference is the building of expertise in these separate business units. And the addition of certain services like creative is one of the biggest changes, not only for us, but also for our space as well.

MS: What has remained the same at iCrossing since 1998?

NE: Certainly the talent of our people has been the constant, and the expertise across the board has been a constant since the start, and it’s something we’re very proud of. It will drive us forward as we expand. And as we continue to receive accolades from the industry, it will enable us to attract the top talent that we’ve become known for.

MS: What has changed since iCrossing won the OMMA award?

NE: We’ve been building really powerful partnerships with the world’s leading brands for more than seven years now, and along the way, really changing the ad agency landscape by helping clients connect with their customers anytime, anywhere, however they want, wherever they want, whenever they want. We feel the OMMA award is a great honor. We’re really proud to have worked so diligently to build these kinds of partnerships that we have with Fortune 500 companies. That’s a tremendous validation of the work that we’ve done, and it sends a message about the potential that search and commercial brand marketing have for helping businesses interact at a much higher level than ever with their customers.

MS: How is iCrossing different from its competitors?

NE: As our founder Jeff Herzog likes to say, iCrossing has been an innovator in search advertising since before Google was Google. What we have that’s unique is our full-service approach. We’re not just a search engine optimization vendor; we’re a fullservice marketing connection. I think that’s a major differentiator between iCrossing and other companies. We’ve really been growing the company with the evolution of search as a medium. I think it’s that kind of vision that puts us on the leading edge, helping to drive the future of advertising – with our in-house expertise on the services side and also on the technology side. We’re the largest independent agency out there, and we back up our tremendous talent with our market research, our strategic alliances, planning and client services with our proprietary technology. That’s a one-two punch that most other places can’t really boast of.

What makes us different is that we have this expertise in market research that provides clients with the deep-dive analytics about their company and industry. We give them the knowledge and tools to help succeed by planning how to accomplish short-term goals and long-term opportunities, using a full array of tools and services organized around search.

Another exciting differentiator for us is the creative service we offer. It’s one side of the business that we’ve really been building in the past year, and it’s really going to grow quite a lot in 2006. It’s everything from copy to actual website design, all organized around improving and maximizing both user experience and optimization of search. We see ourselves as a one-stop shop when it comes to advertising online as well as through emerging technologies, mobile included. We are launching a major mobile innovation called mCrossing, expanding our expertise from natural search optimization on the Web to global devices.

MS: What’s the most important service your company offers?

NE: The most important service is the fact that we offer all of the services, but our strength is expertise in natural search optimization. It’s been able to help prepare us to expand to mobile devices. Bear in mind that natural search results are clicked on 80 to 85 percent of the time, far more than paid search. It’s very important to have that grounding in natural search; it’s the bedrock of what we do. It’s important to have strong expertise, and we’ve been able to complement that with strengths across the board as well as market research and our agency services.

MS: What kind of search are you going to be capitalizing on in the next year?

NE: Mobile search is a very exciting opportunity in the year ahead. Global is one initiative, and certainly local search and classified search – yellow pages. We’ll have a product geared toward the small- and medium-sized business market organized for local search that will be going out toward the end of the quarter.

MS: I’ve heard a little criticism that some of the smaller businesses can’t afford the products you offer.

NE: That’s why we built this technology in-house – that’s a real differentiator as well, that we build all our technology platforms inhouse. Technology is the largest department in our Scottsdale office. Expanding on that, we looked at the small- to midsized business market as well and discovered people that don’t necessarily have either the need or the budget, but they probably want some of the benefits of visibility on the Web. If you’re a plumber in Illinois, you don’t really care if someone in New York finds you on a search for a plumber, because chances are that person is not going to use your services. What we’ve done is to build a selfservice platform that integrates our optimization and tracking software in a way that will make it more accessible for the smalland medium-sized business. Our approach is, whether you’re local, national or international, we help your brand make the connection and quantify the results. What we do best is help companies reach their consumer at their point of interest.

MS: How are online retailers missing the boat in search?

NE: There’s a growing need of the importance of integrating search engine optimization into the workflow process and ensuring that this takes place before the product is launched and before the copy for it is written. Companies and clients need to understand that products must be optimized well before they’re launched, and make sure that search is a priority and not an afterthought. You’re going to get the majority of traffic from natural search, so we strongly encourage clients to plan for that well in advance.

Another way companies are missing the boat is not implementing recommendations in a timely fashion. Clients who receive recommendations from the search agency and then sit on them really run the risk of not getting the online visibility for their products that they would otherwise get from implementing optimization recommendations. This can be particularly crucial at specific times of the year, such as prior to the holiday shopping season, which is obviously the most important time of the year for online retailers.

MS: Give me an example of a client that implemented recommendations in a timely fashion.

NE: One of our best examples is Fairmont Hotels & Resorts. They’ve been a client with us for a very long time. It’s really a great success story of crowding out the competition, like critical search engine traffic drivers such as Orbitz, to really control the user experience and the message that consumers are getting. That’s one that we’re extremely proud of because, as a brand, you want to make sure you control the experience and not the search engine. So it’s been a great partnership for both Fairmont and iCrossing.

At the beginning of our engagement with Fairmont, in terms of keyword visibility, we saw the number of keywords appearing on the first three pages of search results increase to 2,579; a total jump of 1,156 percent, from a baseline of 223 keywords. In terms of baseline search traffic, which was established at 29 percent, within a month of implementing optimized coding elements, the search traffic increased by 41 percent and booking reservations increased by 150 percent over the baseline.

MS: Do you have any studies planned for 2006 that you’re particularly excited about?

NE: We have a relationship with Harris Interactive – they do studies for us and we have three or four planned for 2006. But we’re really excited about a couple of themes that we’re going to work on from both a horizontal basis as well as some of the vertical industries that we’re targeting. One is branding search – why major companies are becoming more comfortable with this concept and how we can augment individual marketing and help branding efforts.

In 2005, there was a lot of talk about paid search, and quite a bit of money spent on it, but we really see natural search as the biggest driver of traffic to websites. We want to focus on and evangelize why and how you can provide the best return on marketing spend and how to budget and manage for a successful marketing campaign.

Another area is about marketers themselves, about what kind of website, from a design and architecture perspective, is going to really reinforce the brand. One of our goals is to optimize the creative and maximize the value of the client’s investment in natural search results for years to come. We do this by optimizing Web pages, building specialized microsites and landing pages designed to drive specific consumer actions, and deploying paid media and mobile marketing campaigns. We partner with clients to break down the barriers between them and their customers.

MS: Is that one of the reasons you joined the Mobile Marketing Association?

NE: In part, yes. For us, that was an industry-leading move, and we’re certainly the first search marketing agency to do that. We want to make sure we’re positioned to take full advantage of opportunities in the mobile space and, in some ways, to branch out our contacts and gain potential opportunities to companies that might not think to come to us.

MS: What do you want most for your company in the future?

NE: Continued growth, continued profitability and continued engagement with the world’s leading brands. A deepening of relationships with both interesting and new clients. As online advertising continues to grow, the lion’s share of those dollars is moving to search. And to really be able to apply our expertise on the agency and technology side, to really be the one-stop shop when it comes to interactive marketing. We want to be top of mind when companies are looking to embrace interactive and emerging technologies.

MARIA SAMPLE is a senior editor at Revenue. In the past 15 years, she has worked for Ziff-Davis, CNET, Charles Schwab and Restoration Hardware. This is her first article for Revenue.

An Unbridled Love of Shopping: Q & A with Michelle Madhok

Michelle Madhok has a lot of experience mixing content and commerce online. She has worked at CBS Broadcasting as a director of entertainment marketing for the new media group and was group director of editorial products for AOL. Madhok understands the power of promotion when it comes to the world of online shopping. Her latest venture, SheFinds.com, offers information to busy women who don’t have time to read five-pound fashion magazines to keep on top of the latest styles. The site, which is packed with information about the must-haves in beauty and fashion, features a daily blog and an online forum that underscores her mission and motto: “We shop the Web so you don’t have to.” With 16,000 subscribers and approximately 300,000 unique visitors per month, SheFinds.com blends Madhok’s ideas about melding editorial and e-commerce.

Madhok recently talked with Revenue writer Alexandra Wharton about the value that affiliates offer merchants for building their brands. She also expounded on her thought that sites, such as SheFinds.com, should be treated as any other form of media. Madhok claims that because affiliates can help retailers reach new customers and niche markets, they should not be limited to commission-only compensation. For Madhok it’s all part of the importance of value-add partnerships and relationships in the world of online merchandising.

The newly married Madhok talked with Wharton, also a recent bride, about her fall wedding, which she pulled together through websites – many of them affiliate sites. This inspired Madhok to purchase the URL for WiredBride.com, her latest idea to create an online shopping guide for brides.

Alexandra Wharton: What was the inspiration for SheFinds.com?

Michelle Madhok: When I was at AOL, I became the beauty director and we started a column called Ms. M. It promoted beauty products every month. It did really well. We started offering swag – we would put up some kind of cosmetic and it would sell out. One time we had to contact a factory to get more of a certain color we had promoted. It really showed me that content and commerce was going to work.

So I’ve been very interested in mixing content and commerce for a long time. I’d been pitching it at AOL over and over but I couldn’t really get any traction with the bureaucracy and its changing management. So I went home and started this business and we’ve been doing very well. It has been almost 18 months now and we have 16,000 subscribers today. It’s all been word of mouth. Every Tuesday we send a “style mail,” and every Thursday we send a “sale mail.” The thing about these subscribers is that they are highly qualified. At AOL I learned that you can have a ton of impressions and it does nothing for you. It’s more important to have really quality people, even if it’s a smaller audience, because they buy.

We launched SheFindsMom.com five months ago, because we were getting a lot of interest about kids’ clothes and maternity stuff. So we decided to separate that off. I very much believe in psychographics, not demographics. For example, you and I are both brides, and we’re interested in the same thing that a 24-year old bride is – you know, we both need to know about cake toppers or whatever.

AW: What is your biggest category?

MM: Our biggest category seller, which kind of surprised me, has been underwear. We are working very closely with Bare Necessities. We figured out how to do a “Zagat” guide to underwear. We email people about their favorite underwear. And, believe it or not, people are passionate about bras and underwear and shape-wear. So we sold a ton of underwear. Dan Sackrowitz of Bare Necessities and I did a presentation at the LinkShare Symposium. Bare Necessities has made more than $2.50 per name from the SheFinds.com subscriber list.

AW: Can you comment on the benefits of value-add partnerships for merchandising?

MM: We frequently feature eLuxury.com as a place to buy luxury goods. We’ve moved $20,000 worth of merchandise for them this year, and remember, this is on a list that just reached 15,000 subscribers. I also know that there have been thousands of dollars in non-commissionable sales because we’ve exceeded the return days. We sell big-ticket items for them – $1,000 Louis Vuitton bags. I think it’s very valuable that they are reaching our highly qualified audience. We are providing brand awareness for them, and I think that they are beginning to understand that and support us with ad buys.

AW: Do you spend most of your time working on affiliate relationships with merchants?

MM: The affiliate thing is a little bit of a conundrum for me because I feel like sometimes affiliates/retailers – they don’t distinguish between different affiliate sites and they [merchants] treat us as the sweat-shop workers of the Internet. I feel with some sites – they [merchants] only want to do things on commission and I don’t think that’s right. I feel like you’re paying to have placement in magazines, you’re paying to have placement in newspapers, you’re paying to have placement on television, why should you disregard the branding opportunity I bring you?

I’ve been saying my new thing is I don’t work on a purely commission basis. In editorial I do that. But if you want ad placement, or some special email, we work on a combination. Basically, if you do affiliate links with me, I’ll take 20 percent off my rate card. But you are still going to pay a placement fee. Because I believe that I am building your brand. We did this thing with SmartBargains.com – we did a combination. They did really well. And a lot of people told me they had never heard of Smart Bargains before. I’m building awareness, and who knows how much of a value that person is in a life span? I think that we should be treated the same as other media. On the other hand, coupon sites can live off of 5 percent commission or whatever people want to pay.

I don’t like that we get lumped into the same area because I’m trying to create a quality product and get you the best users that you want and create your brand image. If you’re going to throw yourself up on a coupon platform, yes, they’re going to make more because they play dirty. They spam the search engines, they post codes that are out of date, and they don’t keep things up. Yes, they make a lot more money than I do, so I can’t compete with it. I really feel like that’s a problem that affiliate marketing is having right now.

AW: Do you work with a network?

MM: I work with Commission Junction and LinkShare. I work with pretty much all of them.

AW: And do the networks help you to attract new merchants?

MM: Well, LinkShare has gotten to be much more helpful. I’m doing a bunch of holiday – it’s Q4 – and so they just brought me some advertisers. I think this is kind of a new hybrid of part placement fee, part brand image, and it works for everybody. They brought me Godiva and Apple. I didn’t come from a sales background so I need to figure out how to get on the brand advertiser radar.

In the magazine industry it’s clear that if I scratch your back, you’ll scratch mine. They don’t talk about it, but you will see that all the beauty products that are pitched are also advertised in the magazine. We definitely have editorial integrity; we definitely don’t pick anything that we don’t think is good. But we also think that if all things are equal, we want to go with the company that’s supporting us. Almost every company now has an affiliate relationship. For instance, we are working with Bare Necessities – they were one of our first big supporters. So if we are going to write something about underwear, then we usually use them, and also they usually can get discounts for our readers. For our 2006 underwear guide, I asked our readers, “What is your favorite underwear?” I had someone write me back and say, “Mine is Hanky Panky; can you get us one of those Bare Necessities deals?” So you see that we have built up some brand equity for them by working together.

AW: Does anyone ever ask, ‘What happened to the separation between church and state?’ Do people understand that this is an affiliate relationship?

MM: I don’t publicize it in the newsletter. But I could write bad editorial with no affiliate links and then I think people will leave you anyway. I mean look at the growth of magazines like Lucky and Shop Etc. Even the Bliss catalog has become hugely successful. You have to provide a good product no matter what. So if you become a complete shill, then I think people will turn away from you.

AW: You say on your website: “I don’t push anything that I myself wouldn’t wear.”

MM: Right. Also the playing field has become equal. Everybody’s an affiliate. At this point, it’s not like I have to pick from a small amount [of websites]. Pretty much anything I write about is [from] an affiliate site.

AW: Interesting.

MM: The shoes that we pick quite often are from Zappos.com. They have an enormous inventory, and they have free shipping and free returns. So that to me is a client bonus.

AW: So you planned your whole wedding through the Internet and a lot through affiliate sites?

MM: The No. 1 affiliate site I used was eBay. Now I think eBay is a great place to get things. I got my shape-wear through eBay, because it was sold out on my lingerie sites, BareNecessities.com and FigLeaves.com. I got my veil off of eBay. But some of the stuff was not necessarily through affiliate sites, although I did definitely peruse them and would suggest others. For instance, StyleBug.com and EdressMe .com are carrying simple wedding dresses, which is a genius thing because the wedding dress industry is a complete racket. I was invited to sample sales so I ended up buying four dresses. I sold two on the site PreOwnedWeddingDress.com.

For instance, I get hit up by jewelry designers all of the time. I ended up having one of them (www.jeannenicole.com) make custom necklaces for my bridesmaids. Another one I was looking at was on a site called Trunkt.com; they are actually an affiliate site. And I found a site through them called Indigo Handloom.com, which has these beautiful shawls. So I ended up getting the shawls for the bridesmaids and for myself. And they’re woven with this silk called mugo, which is from India, and it’s supposed to be good luck. An affiliate site for groomsmen’s ties is Fozieri.com. I shopped for cupcakes online and used Evite for the pre-wedding parties.

AW: Did you order your wedding invitations online?

MM: My parents did it, but I’m familiar with how they did it. I did order some things from ChelseaPaper.com. I ordered thank-you cards from them.

AW: Did you buy your bridesmaids’ dresses online?

MM: Everyone picked their own strapless black dress. I sent suggestions as links from BlueFly.com and Nordstrom.com.

AW: How about the location for the wedding?

MM: Well, I definitely used the Internet to search. I was looking for some type of outdoor space, like a hotel. TheKnot.com has lots of reviews. And Craigslist.com was indispensable for the wedding. I found the reverend on Craigslist. I found my wedding coordinator on Craigslist and my video guy on Craigslist. It was nice to not have to troll stores looking for things. And I wanted to have gold shoes, and I was able to set up with eBay so they would email me every time gold shoes were listed.

AW: That’s a good idea.

MM: I found my seamstress through a site called ManhattanUsersGuide.com. I found on Craigslist my makeup guy as well. As for the rings, I didn’t buy them, so I didn’t buy those online, although I did search for styles online. I left it up to [my husband]. There’s a diamond guy in the diamond district here [in New York], so that’s where everyone buys.

AW: Will your website, WiredBride.com, be an affiliate site?

MM: I don’t like the term affiliate site ” that implies we are only out to push the retailer’s promotions. We build sites to help women shop, and brides have a lot of very confusing shopping to do. We will use affiliate links where applicable.

ALEXANDRA WHARTON is an editor at Montgomery Research, Inc., Revenue’s parent company. During her four years at MRI, she has edited publications about CRM, supply chain, human performance and healthcare technology. Previously she worked at Internet consulting firm marchFIRST (formerly USWeb/CKS).

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

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

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

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

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

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

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

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

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

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

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

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

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

LP: What is Ogilvy doing to adapt?

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

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

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

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

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

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

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

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

LP: Are big brands increasing online ad spending?

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

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

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

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

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

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

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

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

MB: Hugely important.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Been There Done That: Q & A with Shawn Collins

It’s very difficult to find anyone in affiliate marketing better known than Shawn Collins, who earned his first commissions more than seven years ago.

Wearing his newest hat, as president/CEO of Shawn Collins Consulting, he provides outsourced affiliate program management. But he is, perhaps, better known as a co-founder of Affiliate Summit, as the author of the top-selling book Successful Affiliate Marketing for Merchants and for launching the highly successful affiliate program for ClubMom, a membership shopping site.

As a result of his numerous roles, Collins has not only become ubiquitous, but has helped to shape the industry through its childhood. He’s emerged as an expert for spotting new trends. Indeed, Revenue Editor-in-Chief Tom Murphy discovered some surprises when he interviewed Collins about where affiliate marketing is headed.

TOM MURPHY: You’re very well known in the industry as a superaffiliate, a guru, an association leader, a leader of an industry summit and, most recently, as a program consultant. How do you really define yourself these days?

SHAWN COLLINS: I guess I’ve been on every angle of the industry, working as an affiliate and affiliate manager. I worked with First Directory Preferred years ago. I guess, overall, I’d probably characterize myself as a cheerleader of the industry as well as a shepherd trying to push it in a direction that I think will be helpful for the industry.

TM: Do you think there’s a chance of spreading yourself too thin?

SC: I don’t think so, but my wife thinks I spread myself too thin a long time ago.

TM: You recently published your AffStat survey, which had some very interesting statistics in it. I’d recommend it to anyone who wants to know what’s going on in affiliate marketing. I had heard, for example, from a number of sources, that only about 5 percent of affiliates make any real money and only about 2 percent fall into the superaffiliate category. But your AffStat report shows 20 percent of affiliates making more than $2,000 a month. Do you think that’s an accurate figure?

SC: Yes. I had a pretty good cross-section here who were participating in the survey, from the very small mom-and-pops to some of the really big players. And I know who contributed the answers, so I think it’s a very accurate depiction.

One of the things that skews the numbers when they talk about 5 percent or 2 percent is that, in the past, there was a very big emphasis on quantity over quality of affiliates. And people are very proud to claim they had 75,000 or 100,000 affiliates. But naturally, you’re not going to have 15 percent of those being too powerful. These days, you see a lot more of a boutique approach to it, where people have 1,000 or 5,000 affiliates, so it’s much more realistic to have a good 20 percent or more be superaffiliates.

TM: I’d like to hear your thoughts on a few of the issues facing affiliates, including PPC, predatory advertising, Froogle and things like that. But, first, do you think these things taken together are really just symptoms of an evolving industry?

SC: Yeah, I really think they’re inevitable. It’s a more sophisticated industry than it was back in the ’90s. I think they’re good things. They’re hurting some of the smaller affiliates, but they’re making things easier for the affiliate managers because they’re shrinking the number of affiliates they have to deal with.

TM: It sounds almost like a natural, evolutionary process where there’s a survival of the fittest. Do you think that’s what is taking place?

SC: Absolutely. Back in 2000, and earlier than that, you really didn’t see any superaffiliates out there. You had SchoolPop and some others, but there’s been a big emergence of these sites over the past couple of years – various sites that have a tremendous amount of traffic, with membership sites and things. They’ve really taken a big bite out of the industry. They account for a big portion of the activity that goes on.

TM: Predatory advertising seems to be perceived as public enemy No. 1 in the community. Do you see that as a problem that’s getting better or worse going forward?

SC: I think it’s been limited to a degree over the last year or so, but it’s still a very relevant issue and I think it will be around for a while. Certainly, some of the affiliate managers have taken a cue from the networks. I think the affiliate managers have to be more proactive in their approach to stopping it instead of just sort of waiting for something to happen.

It is sort of a double-edged sword because a lot of the affiliate managers on a moralistic level would like to get rid of predatory advertisers. But when they have pressure from their bosses on the bottom line, they end up having to take those (predatory) affiliates because they’re seeing higher numbers with them. It puts them between a rock and a hard place. They want to do the right thing, but they want to keep their job[s].

TM: There’s a similar thing with spam. Nobody likes it. It hurts the image of the community. It hurts the consumers. And, arguably, it hurts the merchants and manufacturers, who spend a lot of time building up brand names. Do you think that’s also a double-edged sword for the merchants?

SC: With the parasites, there are some good adware products. But I think with spam, there’s never a good spammer. I think that has really hurt the industry tremendously because it’s resulted in the CAN-SPAM Act and that changed the face of affiliate marketing in one fell swoop this year.

TM: You wrote about the CAN-SPAM Act recently in a brief and in your blog. Could you reiterate your key points?

SC: Basically, a lot of the CAN-SPAM [requirements] are logical things, like you have to have an unsubscribe option and take care of things that any permission mailer always takes care of. But one of the things that makes it very difficult for affiliate marketing is the need to have a suppression list. If I’m an affiliate and I usually feature four different merchants in my newsletters, I’m now going to have to crush my entire subscriber list against their list of unsubscribes who never want to hear from them again. That makes it awfully challenging, not only to get that technology and make it work, but it throws some hurdles in front of affiliates who run email promotions.

TM: Some affiliates are feeling deeply threatened by Froogle, Google’s spider-driven shopping service. What kind of impact do you see from that in the affiliate area?

SC: Just from the power of Google, I think it’s certainly going to have a greater and greater impact on the smaller affiliates. A lot of the merchants like it because it gives them more exposure, the same as Shopping.com or Yahoo’s comparison-shopping engine. I think it’s a very positive thing in terms of affiliate programs getting more exposure and more penetration, but it’s definitely one of the things leading to a smaller world of affiliates out there.

TM: From what you said, it sounds like the number of people making some real money is on the rise, but the overall number of affiliates is declining. Is that right?

SC: Yes. Through a sort of natural selection, I guess. Since people used to take all comers, you’d get tons of sites from Geocities, and the free sites on AOL, and different free hosting services. So a lot of affiliates would be made up of free services where they never even bothered to put a link up. I wouldn’t even characterize them as affiliates because they didn’t know how to put a link up.

TM: I saw you referred to a lot of affiliates as “dead affiliates” in your report, people who haven’t provided a click in the last month or so. What sort of proportion do you think that is of the total number of affiliates out there?

SC: For the larger programs that haven’t done any sort of maintenance to clean out people who’ve been inactive for a while, they probably fall into that 95-5 rule (where only 5 percent of affiliates are making money). But (for) people who’ve tried to communicate often with the inactive affiliates, and sweep them out if they haven’t been active, it’s a much different percentage. But I think 80 percent of the programs probably have the 95-5 rule going on.

TM: That’s a pretty high proportion. And it’s contrary to a lot of other things we’re seeing going on with big business today. Most businesses in the last two years or so since the recession have been trying hard to maximize their efficiencies. And it seems like the affiliate program may be one of those areas that’s been overlooked. At the same time, I see affiliate programs contributing a bigger proportion of top-line growth to corporations these days. What’s your advice to corporations in general?

SC: It makes all the sense in the world to shrink the number of affiliates to just those affiliates who are going to be performing and who show some promise. But affiliates who have emails that bounce back and haven’t shown an impression in six months, I don’t think it’s worth carrying them on the affiliate roles. One of the reasons you see this perpetuating is that it’s all performance-driven. So even though they may be taking up some bandwidth, they’re really not costing anything for the companies that are keeping them on. But it makes more sense to me to shrink the size of the affiliate program so you know who’s promoting you and how they’re doing it, and you have a relationship with them.

TM: How do you think pay per click is changing the world for affiliates?

SC: In the last couple of years, there were a whole lot of affiliates basically using PPC – not even having their own Web sites. It was quite a successful tactic. I did it myself for quite a while, just driving activity right to the merchant. But in the last six months, a lot of merchants have been clamping down and adding a lot of restrictions because they found they’ve been bidding against their own affiliates and paying more than they have to. They’ve been concerned that a lot of searches normally would have ended at their site anyway. When an affiliate buys the keywords for a trademarked name, it’s a waste of money for the merchants because it would have been organic traffic for them.

TM: Do you think that’s an issue that will go away on its own because merchants will put a stop to it?

SC: I think what a lot of them are doing is damming the ability to bid on trademark names. Then they’re selecting certain generic keywords and saying, if you want to be in our program you can only bid a certain amount for these terms. And if you don’t like it, you just can’t do any pay-per-click promotions with us. Eventually, it will just sort of fade out and the affiliates will still do it successfully because there are a ton of words you can use without having to infringe on their trademarks. So I think that will be a strong channel for affiliates for a long time to come.

TM: Another interesting statistic in the AffStat report – I’m combining a couple of categories here – says 40 percent of affiliates have negotiated higher payments from programs. Does that fit with your anecdotal experience? And does that present a headache for affiliate managers?

SC: I was actually surprised by that figure myself. I’ve found, in personal experience, even for some smaller sites of mine, if I approach affiliate managers and tell them what I think I can do for them, a lot of them are willing to negotiate and make a special deal for you. So I think it’s really possible for just about any affiliate to do that. A lot of them never ask because they don’t realize it’s a possibility. But I don’t think the average affiliate manager would mind being asked, because then they know it’s an engaged affiliate and they can get more activity out of them.

TM: As a consultant, would you recommend to affiliate managers that they keep the door open to negotiations with affiliates? Or is there a time constraint that may limit their activities and put a lot of pressure on them?

SC: It’s something you’d have to model for. You just can’t put out projections for a year expecting to pay the rate you advertise on your site – say, a 7 percent commission. If you do that, you’re going to end up blowing out your budget. Because if you say you’re going to pay a 7 percent commission for everybody and you give 10 percent to superaffiliates, you might spend twice as much as you expected on commissions. If you don’t model for that, you’re going to be in trouble.

TM: How do you see the future for networks versus in-house programs? Do you see a bigger share for networks, or a bigger share for in-house programs?

SC: The networks still have the bulk of the activity in the space. When I did the AffStat report at the end of 2002, I think the networks had about 80 percent of the market share. But I think we’ll see an expanding role for in-house programs such as My Affiliate Program and DirectTrak. They’re getting more and more of the network programs to switch over, and they’re very aggressively recruiting new clients. I think in the next couple of years, we’ll see more prevalence of that kind of program.

TM: What do you think that means to the affiliates out there?

SC: It makes things a little more challenging to them in some ways if they have to go to a lot of different places to log onto their stats. But, otherwise, it’s a good thing for affiliates because it’s a little cheaper to run in-house programs so, theoretically, the affiliate programs can pay more to the affiliates in commission.

TM: The merger between Commission Junction and ValueClick is now a done deal. Nobody is sure what will happen to CJ in the future. What do you think is the future for big networks? And do you think this merger and other trends in networking open more opportunities for niche networks?

SC: It’s exciting to see this happen. It sort of validates the way the industry is moving, that it definitely has a future. It’s sort of surprising to some people that it took this long for there to be some consolidation because there have been rumors about various companies getting together for years and years. But it definitely sets the stage for some niche players out there who can take care of certain types of clients, with certain levels of start-up fees, because right now the bigger networks are not really an available resource for some of the mom-and-pops who are out there. It leaves an open door for ShareASale and MyAffiliate programs to capitalize on anyone who’s not in the Fortune 500.

TM: There are always new technologies coming down the pike, and I think we can all agree that’s a good thing. There wouldn’t be affiliate programs now if there hadn’t been technologies in the past few years that make it possible. Some technologies, such as the Norton firewall product introduced recently, block banners and can make links unclickable. Are there ways the affiliate community can change things when a company introduces a product that creates obstacles to what they do to make their living?

SC: I think the individual affiliates are powerless. We really have to rely on the networks banding together and going to Norton or whoever might make a similar product. One of the prime targets of these products are the domains that are serving all the banners and the clickable URLs for affiliate programs. The products are going after the URLs for LinkShare and Commission Junction and other companies, so it’s certainly in their best interest to get their hands dirty and try to take care of this as soon as possible. (See ReveNews.)

TM: Do you know if they’re doing that?

SC: I don’t know. I know in the past that was going on. Then, the end-user was asked if they wanted to block ads, and now it’s a default that I’ve just heard about. I don’t know how active the networks are. I would imagine they’re out there trying to find some sort of resolution for it.

TM: What will be coming up at your summit this year?

SC: The plan for the whole agenda is to be very focused on networking. We’ll certainly have our share of speakers and panels. But for every conference I’ve gone to during the last decade, it seems like the feedback from the people is always that they wished there was more networking, and nobody seems to be catching on to that. Every time you go to a conference you see the same cast of characters up there on a panel and running some PowerPoint, and it seems like it’s boring everybody. But the organizers aren’t seeing that. So my partners, Missy Ward and Ryan Phelan, and I figured we’d create a conference for people who hate conferences. We’ll have an emphasis on the things people love: the formal and informal networking as well as the educational sessions. And so we’re sort of expanding beyond what the past affiliate marketing conferences have been to make it more of a performance-marketing conference for affiliates.We’re also bringing in the experts on email and search to all get together for a four-day event. I don’t know if you ever heard of speed-dating, where people date for 30 seconds and then move on. We’ve sort of adapted that goofy concept to speed-networking, where you sit opposite another person for 30 seconds and give them your card and have these mini-meetings. You get a lot more comfortable and have a lot more interaction on a level that you can’t really see. (Note: For more information about the upcoming summit, please visit AffiliateSummit.com.)

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