Taking It Offline

If baseball is the thinking person’s game, then online advertising is the thinking person’s medium. Much like the national pastime, part of the draw of online advertising comes from the ability to break down performance into limitless particles of useful (and useless) information, such as batting average with runners in scoring position after the 7th inning, or the clickthrough rate differential for an ad run at 8 a.m. versus 8 p.m.

But just as it is impossible to figure out why combining the best players won’t make for the best team (just ask George Steinbrenner), determining the most effective roles that online and off-line marketing should play to produce the best possible results remains largely a mystery. Online advertising revenue continues to close the gap with off-line spending, resulting in heightened interest in wanting to figure out how best to integrate performance marketing with off-line campaigns.

Integration Issues

During the first half of 2006, online advertising revenue grew by 37 percent over the prior year according to the Internet Advertising Bureau, and the dawn of video ads will likely further accelerate growth. Advertisers flocked online because they could get more precise data about ad effectiveness than through broadcast or print.

“Before, everyone had to take [ad effectiveness] on faith,” says Mark Williams, a founding partner of San Francisco interactive agency Mortar. But after seeing the low (1 to 2 percent) clickthrough rates, some advertisers ask about putting more resources into off-line, which he views as a mistake.

Focusing only on clicks as a performance metric doesn’t tell the whole story, according to Williams, who says that as with off-line campaigns, assessing online performance should consider factors such as brand awareness and the ability to generate word of mouth. “CPM blindness” as Williams calls it, is when advertisers get lost inside the numbers of what is known about certain aspects of a campaign instead of looking at the overall picture. Many people who saw an online ad will eventually go into a store and make a purchase, and the advertiser will never be able to connect the dots, according to Williams.

One method for tying off-line to online campaigns is to promote custom URLs in print or through broadcast and track the number of responses. Advertisers have adapted the longstanding practice from newspapers that printed unique phone numbers to track leads.

Marketing services company Who’s Calling, of Kirkland, Wash., develops custom landing pages that can be promoted on-or off-line to track individual behaviors, according to CEO Stuart DePina. Newspaper or TV ads include links to pages that contain unique phone numbers, enabling the original media source to be identified.

DePina says client Chrysler sent out direct mail that included a link to custom landing pages for different vehicles, so that when online shoppers called the listed phone number, the agent answering would know in which vehicle they had interest.

Tracking customers through unique pages “helps to build demographic information from the start,” DePina says, resulting in a greater likelihood of moving the buying process further upstream.

Michael Stalbaum, CEO of marketing services company UnREAL Marketing, says promoting websites off-line can become even more effective when combined with search engine marketing. His client Synova Healthcare was running radio ads to promote an online coupon for a menopause test kit without much success, which Stalbaum attributes to the inability of people to write down a website address while driving.

After buying keywords related to menopause testing, the number of coupons downloaded per week more than tripled, according to Stalbaum. By integrating campaigns, Stalbaum says you may not reach more people, but touching them multiple times can increase the results.

Advertisers whose off-line campaigns are limited to promoting custom URLs can be disappointed, according to Mortar’s Williams. If an advertiser gets a low response rate, it “creates the opposite of what you want because it gives the impression that it doesn’t work,” so Williams recommends against the practice.

While being able to quantify the interaction of off-line and online may be difficult, Williams says every campaign – whether for a brick-and-mortar or online-only seller – should include online and off-line components to maximize its effectiveness. “Online brands that take themselves seriously have to go off-line,” he says. For example, Travelocity and Yahoo recently launched integrated campaigns with multi-million-dollar buys in print and television.

Translating Word Of Mouth

Off-line campaigns that emphasize branding can have a snowball effect when used in conjunction with affiliate programs and search engine marketing, according to Ed Weisberg, vice president of e-commerce for Pingo, a company that sells prepaid calling cards online. Weisberg says the company has been buying banners ads and keywords on search engines as well as working with affiliates for two years.

This summer the company decided to advertise on billboards and in subways in cities where there is a heavy concentration of its target customers – those who make many long distance phone calls. The hope was to expand the audience by getting people in the communities with large Indian and Chinese populations to talk about the calling card savings since “not everyone uses search engines,” Weisberg says. Pingo representatives also attended ethnic festivals such as parades and carnivals and handed out promotional materials to reinforce branding. The company saw a surge in orders coming from the cities where the company was advertising off-line.

Weisberg coordinated the effort with affiliate managers, allowing them to put their own branding on the cards, and to develop call-to-action strategies where searches based on the word-of-mouth campaign could turn into special offers such as coupons. The off-line advertising also attracted new affiliates, according to Weisberg.

“If we have someone to reach, we’ll be less successful in reaching them if we only advertise in one place,” Dave Evans, co-founder of social media company Digital Voodoo, says. Evans claims an effective method of leveraging consumer buzz is to provide information that stimulates interest online and then use offline marketing to encourage people to do word-of-mouth marketing through their online and off-line social networks.

According to Evans, online advertising can respond quickly to negative press or word of mouth. If bloggers take a company to task, their message can rapidly become widespread, so online advertising is a better method of reacting more quickly than off-line.

While off-line campaigns can help build awareness, online advertising can be more effective in prompting sales because they reach people at the time when they are looking to buy, according to Gian Fulgoni, chairman of comScore Networks. “In the off-line world it is difficult to put an ad in [search] context,” says Fulgoni, whose company measures advertising and media performance. The exceptions are advertisements in print directories such as the Yellow Pages, he says.

Because there is not a reliable method to track the effectiveness of off-line campaigns of an entire population, comScore works with a panel of representative households and tracks their online behavior, Fulgoni says. Software that tracks online journeys is installed on the panel’s computers. The company measures how many people search for and buy particular products before and after a television or print ad runs in their area. Panel members are also surveyed about their subsequent off-line purchases as well, according to Fulgoni.

The effectiveness of television advertising can be greatly enhanced by reinforcing the message through online video advertising, Fulgoni says. “Video [ads] will make things really move in search,” he says, adding that the company is developing metrics for tracking video ad performance.

To reach audiences who spend a lot of time online, video ads are becoming a substitute for TV campaigns, according to Fulgoni. “Once you have sight, sound and motion [in online ads]” advertisers may not need to run television campaigns, he says.

An integrated campaign for the 2007 Dodge Nitro SUV demonstrated the effectiveness of using video on multiple platforms. Dodge geared the car ad toward male buyers and shot a series of video spots that would be used on broadcast and satellite TV and online, according to Mark Spencer, a senior marketing manager at Dodge. To reach the 30- something male demographic that spends many hours per week online, “we needed multiple screens, not just TV,” Spencer says.

The campaign was first introduced online. Dodge built on the experience from a previous campaign for the Caliber by increasing the number of videos online so that the experience online was similar to the television spots, says Spencer. When Dodge ran Nitro ads during the World Series that directed viewers to the website, traffic increased by 40 percent, according to Spencer.

The same creatives were used off-line and online to generate word-of-mouth buzz, says Spencer. “Our strategy was to be consistent … so that enough people will talk about [the car],” he says.

The TV campaign, which ran for 90 days, included spots run during programming that skews to younger males, including the NFL, NASCAR, and NBC’s “Law and Order”. Print ads that promoted the website ran in publications geared toward African-Americans and Hispanic audiences, Spencer says. Dodge’s integrated strategy also includes promoting the Nitro through the NHL 2K7 video game, according to Spencer.

The online campaign, which represented 20 percent of the total advertising dollars, included pre-roll and click-to-play videos on MSN, YouTube and The Onion. To move potential customers from the website upstream into the buying process, Dodge introduced click-to-talk and click-to-chat features that include the ability to pass customers from Dodge representatives to local dealers, Spencer says. (The campaign was only a few weeks old at the time of publication, so results were unavailable.)

Measuring Clicks To Sales

Just as it is impossible to accurately determine the number of online purchases that were initiated in response to someone seeing a billboard ad or radio spot, the ability to track the offline purchases of those who see online ads effectively ends when people step away from the keyboard.

While it is common for retailers to ask buyers where they first heard about the company or product at the point of purchase, this practice does not indicate the true influence of online advertising as consumers who first heard about a product off-line may have had that message reinforced several times online.

Who’s Calling’s DePina says that because the Internet (largely through search) is used more frequently for research than for purchasing, tracking off-line purchases gives a better indication of the effectiveness of a campaign. For example, some keywords drive clicks used to get more information, while others prompt consumers to make phone calls, he says.

Because only 7 percent of consumer purchases are done online, search marketers need to determine how their activities can result in off-line purchases, according to comScore’s Fulgoni. For example, a survey of comScore panel members showed that 25 percent of people who searched for consumer electronics equipment online made a purchase within 90 days, and 90 percent of those transactions occurred off-line.

Some integrated campaigns mistakenly treat the online and off-line worlds similarly, according to Digital Voodoo’s Evans. For example, companies that sell beer that advertise on the websites of sports networks that they advertise with on TV are missing an opportunity. Instead of this “TV thinking” of lumping consumers together into a category, the Web offers many more options for targeting people based on their individual preferences, he says.

“I expect to be marketed to as if I’m an individual,” Evans says. For example, advertisers could employ behavioral targeting or other tracking mechanisms to better understand the audience.

JOHN GARTNER is a Portland, Ore.-based freelance writer who contributes to Wired News, Inc., MarketingShift and is the Editor of Matter-mag.com.

Hybrid Auctions Are Taking Over

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

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

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

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

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

More Complex Planning

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

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

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

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

Simpler Operations

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

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

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

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

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

A New Fraud

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

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

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

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

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

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

The Research Report

How online marketers use facts, figures and forecasts.

Studies, polls, reports, surveys, statistics and forecasts. Every day the latest data on the most current trends is widely disseminated and distributed. Want to know which demographic group is most likely to spend more online, to have broadband or to download music? There’s data out there that purports to have the answers.

There’s no dearth of data, for sure, but just how much of this mountain of market research is useful for online marketers who need to make crucial business decisions is up for debate.

Kathryn Finney, a.k.a. The Budget Fashionista, uses reports from Forrester Research and comScore to learn about the top sites in women’s apparel. This gives her an idea of “who to target, who to partner with and to get an idea of where the industry’s going.”

Joe Zawadzki, founder and president of Poindexter Systems, which provides online ad management services, is less convinced about the value of some market research. “Once that research is made public, the opportunity to capitalize on that information is gone. Private data is the key.” Zawadzki says public research does have its uses, claiming it’s good for sales and venture capital fund-raising.

Some merchants claim research is helpful to them in a variety of specific areas, including understanding the competition.

Catherine Paschkewitz, manager of Consumer Marketing at HP Home & Home Office Store, which has partnerships with Forrester, JupiterResearch, eMarketer, comScore and Hitwise, says HP wants to see how Hitwise is working with the competition, which helps to understand and plan campaigns.

“We want to see how we rate versus our competitors,” says Paschkewitz. “We also do studies around search behavior and research to see how we can further optimize our program.” HP commissions comScore to create some of this custom research, but also relies on its own customer base for information, overlaying Claritas data and performing usability studies internally.

“Research is part of a process,” she says. “One part is up-front planning – looking at affiliate sites via Hitwise to see their traffic and customer profiles.”

When the HP Home & Home Office Store launched its affiliate program, for example, the team wanted to make sure it would succeed, so they researched what was working for the affiliate market, and talked to affiliates, managers and merchants who had affiliate programs, in addition to looking at research on the subject, Paschkewitz says.

HomeGain’s Affiliate Manager Marie Nilsson says merchants often use research to start a campaign.

“[It] is actually a piece of your research project in a sense, if you document your findings, draw conclusions and use it for optimizing your future campaigns,” she says. “That’s the beauty of advertising on the Internet: Provided you have the right tracking tools in place, you are able to measure each move.”

Nilsson says that once you have some experience, the research process is easy.

“As a merchant, you understand how your channel works by launching campaigns and documenting every step of the way, noting all the details, such as placement, targeting, creative used, time of year, close rates, conversion rates, CTR, pricing, etc.,” she says. This type of data becomes your future research. “Every campaign can be looked upon as an individual test in a series which compiles a research project if you outline, structure and target your tests.”

HomeGain obtains its research in several ways. It gets monthly Hitwise information, which Nilsson says “is great for understanding what your competition is doing.” The company also internally compiles metrics and data. “We use census information, which is free. We also do consumer surveys on a regular basis, all in-house,” Nilsson says.

But not all research is relevant for a merchant’s business, according to John Joseph, Performics’ senior vice president of affiliate marketing. He claims that merchants are very interested in statistics regarding overall ad spend and retail figures. “A year from now, merchants will really start using the demographic info that’s available,” says Joseph.

However, the use of research appeared to be a sensitive subject for many merchants. Calls to BestBuy.com went unanswered. Representatives from Walmart.com and Target.com declined to comment, on the grounds that this type of information is proprietary.

The Affiliate Perspective

FatLens’ co-founder and president Siva Kumar says the research his company finds the most useful is “learning about other companies with similar challenges and business models to us. We meet with and share experiences with many of the marketing personnel of other companies.”

However, Kumar notes that, “While we have perused published research from establishments like Forrester and find the information interesting, the high-level nature of the reports is not as relevant for daily decision making.”

FatLens relies on its own traffic and revenue performance data as research, because it is the “best way of learning about what is working and what we should expect to see as results.”

He claims that this type of information is most critical to help FatLens in modifying its programs as well as experimenting with new methods of traffic and revenue generation. “Our growth as a company from inception to our current revenue and traffic levels over the last nine-month period is mainly due to the research we have done on the various online customer-acquisition techniques for similar companies in terms of market segment and business models,” Kumar says.

Melissa Salas, senior marketing manager at Buy.com echoes Kumar’s reverence for research.

“It’s essential for marketers to be well-informed about industry reports, analyst projections, shopping trends, product announcements and reviews, as well as critics’ remarks. With this knowledge, you can position your company to meet your overall business objectives.”

Salas claims that marketing campaigns benefit from research as well. “Being a multi-category retailer, it is imperative to stay on top of best sellers and new product releases so marketers can create specific promotions to gain market share,” she says.

Research = Understanding

“Consumer research leads to insight,” Greg Smith, executive vice president of media, insights, planning and analytics at interactive agency Carat Fusion, says. “It gives you ideas of where to place ads.” Smith cites a past campaign in which research led his agency to recommend positioning minivan ads on parenting and kids’ sites as well as on car sites.

Smith says Carat Fusion’s use of research depends on the client’s objective, be it marketing or branding. Marketing efforts are most always motivated by sales, so the results are measured in straightforward metrics and the agency can move from site to site until it finds the best results for the client. With branding, clients are usually looking to change perceptions and attitudes, which makes the process a bit more complex. Here, Smith would use research to define the target, and then figure out where to find that audience in large numbers. Later in the process, Carat conducts “follow- on advertising” to find out if consumers bought the advertised product. The results are then presented to the client.

Carat Fusion has relationships with AdPlan (owned by AGB Nielsen Media Research) as well as comScore, Forrester and Jupiter. Smith says the company also researches its campaigns by analyzing search results and chat rooms to find out how a product is thought of, and speaking to consumers themselves.

Going Deeper

Former JupiterResearch analyst Gary Stein, now director of client services at BuzzMetrics, has noticed a trend of late that companies are conducting deeper research on the front end. Syndicated search from companies such as Jupiter, Forrester and Fathom Online acts as “preventive medicine” for their clients.

Stein estimates that clients usually have 90 percent of their campaigns nailed down, with ads placed on high-profile sites, but that the remaining 10 percent is “haphazardly planned.” That’s where research comes in – to offer insights to fill that gap.

Some research is suspect, Stein says, such as financial surveys sponsored by brokerage houses. To find reliable data, Stein recommends finding an objective source with a good track record, looking at several studies and in the end, making your own estimates. It’s an economic issue for many companies, because to get a good survey sample, they have to pay for each person, says Stein.

Stein believes some research is misleading, not in the spin it receives or the headline it gets, but in the very questions it puts forth. For example, Stein sites one study that asked, “Would you use a Bluetooth-enabled device?” of consumers who were not likely to know what a Bluetooth-enabled device was.

The best surveys are those that are weighted properly, according to another former Jupiter analyst who asked not to be named. “Numbers are good, but demographic variables are better.” He claims that most surveys by the well-regarded resources are properly weighted (see Research sidebar).

Pulse of the People

Most research industry insiders note that the majority of statistics are garnered from the U.S. Census data, released every 10 years. One company that has census information to power its business is Claritas. Prizm NE (short for New Evolution) is the company’s signature product. Introduced in 2003, it’s updated whenever there is new census data.

Prizm NE is a segmentation tool that divides the population into 66 categories based on a “geodemographic system” revealing behavioral and consumer activities. The product uses the census as its primary source, but is also infused with data from private sources and other governmental data. The 66 categories, which include controversial names such as “Shotguns & Pickups,” change based on the census. When the last report was issued in 2000, 26 names stayed the same, bringing 40 new ones to light. The geography is based on zip codes, with the census data as the foundation.

“Our syndicated services definitely affect online marketing decisions,” claims Bill Tancer, general manager – global research at Hitwise, which resells Prizm NE data. Hitwise provides research including “benchmarks so customers can see where they rank, and click-stream analysis to see why they have that rank.” Hitwise also offers traffic information so clients can see how users are getting to their sites, as well as the sites of the competition.

The majority of online marketers obtain research from established companies in the field. But smaller companies are popping up with some new ideas. Cydata Services owns T3report.com, a site that spotlights products such as T3 Competitor Report and T3 Affiliate Report (see Revenue March/April issue). These products allow affiliate managers to get the info they need to copy competitors’ marketing plans and potentially poach affiliates.

Having worked exclusively in the adult entertainment industry to date, Cydata recently turned its attention to the performance marketing arena. While some may find the company’s tactics unethical, Cydata founder and CEO Brandon Shalton claims his company is simply providing a shortcut to success, even though he does admit it is “a very disruptive service.”

He likens Cydata’s clients to smart fastfood chains, which shouldn’t “bother with all the research – just move in across the street from McDonald’s, because they’ve already done the research.” Shalton believes the T3 products let you “advertise smarter.”

Joe Pilotta, Ph.D., vice president of Big Research, feels his company is offering a unique service as well. “We produce more of an index of what the influence is on category of merchandise purchased. Our clients don’t need click data, etc., because it’s not that important.” Pilotta says his company’s data is created by sales and future intentions, so it’s never static.

Big Research obtains its data from established panels, and occasionally invites offline participants, such as listeners from radio stations, to weigh in. The company conducts its Simultaneous Media Study twice a year, which analyzes 32 different types of media. To get a complete consumer’s point of view, the study surveys 14,000 to 15,000 people.

Predicting the Future

Just as research reports and surveys of past activities play a big role in online marketing decisions, so do predictions for the future. “Forecasts give a gauge of how to prioritize – is search as big as we think it is? People want verification that people are spending money on a sector and that it’s growing,” Shar VanBoskirk, senior analyst on Forrester’s marketing strategy and technology research team, says.

HP’s Paschkewitz uses forecasts to plan for her company’s future, but adds in the site’s own data to get a more accurate picture.

Like most industry watchers, who claim that forecasts play a more valuable role for publishers rather than retailers, Performics’ Joseph says merchants don’t really act on general forecasts, such as last year’s hype of the potential of the Hispanic market (see Revenue March/April issue).

Big Research’s Pilotta says his clients definitely use forecasts to make decisions. Since the company releases its Consumer Intentions and Actions forecast every month, his clients are working with “fresh data” from 10,000 people.

“We use forecasts and trend reports to ensure that our infrastructure planning is adequately matched to the expectations of the market, FatLens’ Kumar says. “The trends also help us judge relative performances of the various marketing channels we are using and adjust our spending according to industry directions.”

Buy.com’s Salas agrees. “Reviewing forecasts and trend reports is an important part of preparing for the future of your business. Our marketing team makes business decisions based on internal customer behavioral data in addition to accurate and reliable forecasts, trend analyses and competitive intelligence,” she says.

HomeGain’s Nilsson says her company watches trends in the online real estate and marketing fields.

“We see a big shift now from a seller’s market to a buyer’s market. It’s a nationwide trend – the question of 2006 in real estate is ‘The Year of the Buyer?'”

Nilsson’s company also keeps an eye on housing price trends in local areas, as well as changes in the competitive landscape.

“For real estate, smaller online players with great technology and VC [venture capital] backing, like Zillow.com, posed a threat in the beginning of 2006. We saw this coming at an early stage and answered with adding more local neighborhood data and by marketing our free home-valuation tool more aggressively,” she says. “Another example is foreclosed homes. A lot of homeowners have interest-only, adjustable-rate mortgages; they are going to get hit hard as rates rise, and a larger percentage will default and go into foreclosure. In anticipation of this, we’ve deepened our partnerships with the foreclosure companies.”

While many statistics are dismissed as obvious or hype, data often provides merchants, affiliates, analysts and even researchers themselves with an idea of how to improve their marketing messages and overall businesses.

Power Tools

Sometimes even the simplest tasks can only be performed using the right tools. There’s no point in using a chain saw when a paring knife will do the job.

These are not reviews, ratings or recommendations. It’s just a collection of software, services and tools that we’ve come across and wanted to share with you. Here they are in no specific order.

T3Report.com

CyData Services Inc., based in Austin, Texas, has taken its competitive analysis reports that detail the linking relationships of websites, previously sold exclusively to the online adult industry, and adapted them for the affiliate and performance marketing space.

Called T3Report.com, the subscription service performs its own spidering of the Web to gather data from more than 100,000 Web pages. The service can offer its subscribers competitive market analysis about who rivals are linking to and who is linking to them. It would allow affiliate managers with merchants to see the affiliates of their competitors. And the idea is to then target those affiliates to also join their programs or possibly emulate the strategy of competitors, according to officials at CyData.

The company claims all of the data gathered is publicly available, but previously it was hard to obtain – mostly because other services such as Google and Alexa go through only the first 1,000 pages of relevant data, leaving much data untouched.

There is a full-featured version as well as a light one of the offering, which can be subscribed to on a quarterly basis. Users pay to access the T3Report.com online system, which the company claims can be easily navigated by even novices after a brief tutorial.

The pricing is based on the number of domains in the report. For detailed analysis of less than 500 domains, the price is $2,700 per quarter. Pricing goes up for more than 500 domains.

The full version gives subscribers three levels of domain-linking information. For example, users would be able to find out who Walmart.com links to, who is linking to Walmart.com and then who links to those linking to Walmart.com. The light version does not delve as deep and offers only the first two levels of linking information for the user.

The company claims that, given an affiliate network link, the product can map that to the merchant, basically revealing what is in the “black box” with the affiliate network. This works because networks use LinkSynergy.com as the linking domain by affiliates, and then they redirect to the merchant. T3Report.com has more than 650,000 LinkSynergy links in its database, with more than 5 million added each day.

For each domain, the product can show how many unique domains link to it as well as the number of links. These statistics can reveal how many websites are promoting a specific merchant.

Company officials claim that they can spot all the websites that belong to a specific affiliate and track which products they are promoting. And given the same product on two networks, they can show which is doing better as far as promotions by affiliates.

ReturnOnAffiliate.com

These days communication is a big issue for online marketers. Return on Affiliate, an online affiliate marketing meeting space, is attempting to bridge the gaps of this industry and bring affiliate marketers, managers and associates together in a single place to communicate.

ReturnOnAffiliate.com is a community that includes message boards, instant messaging, private messaging, the ability to link to other members, invite friends and colleagues (like LinkedIn) into your circle, as well as the ability to create blogs. It’s free to set up an account, and members have access to searchable profiles of Return on Affiliate members.

Just one month after launching at the start of 2006, the site had more than 700 members. The groups include all types of affiliates, merchants and industry types. Everyone from working moms to Overstock.com executives are members. The site is attempting to use the popular social-networking concept to make managers, community leaders and even CEOs accessible to affiliates.

SimpleFeed Version 2.6

SimpleFeed (www.SimpleFeed.com), based in Palo Alto, Calif., unveiled an updated version of its SimpleFeed RSS service.

The new release (Version 2.6) rolled out in February builds off the company’s most recent major upgrade (Version 2.0), which came out in November. That edition was aimed at giving marketing departments more options for personalized content and increased control over the management, measurement and branding of RSS feeds by using templates as the basis for creating collateral to communicate with customers. By using templates, users are able to publish RSS feed that look like their websites, including the same images, colors, fonts and the like that customers use.

SimpleFeed Version 2.6 includes a handful of new features and functionality such as secure feeds and the ability to automatically import content as well as a light version of the product.

Like the previous release, SimpleFeed continues to publish RSS feeds through a URL that is unique to each subscriber. Version 2.6 now offers content creators the option to require a security code or authentication. Those feeds are also sent out over a secure SSL link. If a specific Web portal doesn’t support such authentication, such as Yahoo, then only a summary of the feed, not the actual feed content, will be sent. The next version of Windows – called Vista – along with Microsoft’s forthcoming upgrade to Explorer, will both support passwords and authentication.

The product’s new Web Import feature also allows content creators to put together RSS feeds another way. Users can choose a specific page number or a page range and the SimpleFeed software will automatically spider the user’s website to pull out the correct content. That content will then be queued up to be published on the site and then subsequently pushed out in an RSS feed. This functionality enables content creators to skip the step of putting together RSS feeds manually or with templates.

SimpleFeed is also offering a light version of the product, which gives users less reporting functionality. (Users get eight reports rather than the 48 that are included in the full-featured Enterprise version.) Users of the light version do not get a fully templated RSS feed. The feed is in a template, but it cannot be changed or fully customized. Company logos can be added to feeds, however. Company officials say the light version is a good way for smaller businesses to evaluate the technology at a reasonable price ($100 per month per feed).

The product also builds on capabilities from the previous version, including SimpleTag, a personalization technology that enables customers and prospects to subscribe to content categories using checkboxes on an uncluttered subscription page. The product’s Measurement and Analytics Suite sports 48 customizable reports providing insight on key RSS statistics such as subscribers, content views and clickthroughs. Feed Publishing and Management is a Web-based tool that allows feeds to be created and managed without any prior technical knowledge. New privileges provide companies with granular control of users and workflow and can readily comply with corporate communication policies.

The Affiliate AIM List

Here’s another way to facilitate communication via a very simple concept. Affiliate AIM List (AffAimList.com) is a list of the AOL Instant Messenger handles of people in the industry. Members opt to sign up and are then added to the buddy lists of all other members. That allows everyone on the list to see who is offline or logged into IM and then contact them directly.

The Affiliate AIM List was created by affiliate Adam Viener to facilitate communication among the many different parties comprising the affiliate community. Viener, president of search marketing affiliate IMWave, is a fan of AOL Instant Messenger from way back and thought the communication tool would be a great way to foster better and more frequent communication between people. The list is not a money-making vehicle but more of a community service, Viener says.

To date, it’s been well-received, and the ever-growing list boasts some high-profile industry leaders from top companies including Circuit City, Commission Junction, eBay, Fat Wallet, HomeGain, KowaBunga, LinkShare, Performics and PrimeQ. Viener says that while he’s getting lots of requests to be added to the list, only two users have asked to be removed.

SmallPalace.com

VentureDirect Worldwide recently launched its newest online lead-generation portal, SmallPalace.com, which is aimed at the home finance and home services markets.

Mortgage refinancing has exploded into one of the fastest-growing sectors of the financial services industry. In 2005, one-third of all homeowners used cash- out mortgages to refinance their homes, and more consumers are planning to divert discretionary spending to home improvements.

SmallPalace.com focuses on delivering Web-based, category-specific leads that are generated from applicants actively seeking information on new home purchases, mortgages, refinancing or a variety of home services categories such as home security and contractors.

The SmallPalace portal joins other online lead-generation sites developed by VentureDirect Worldwide, including Direct Degree (www.DirectDegree.com) for online education, Let’s Franchise (www.LetsFranchise.com) for franchise opportunities, and The Free Forum Network (www.FreeForum.com), a co-registration site.

Pic2Vid for Marketers

Sister Technologies, which provides applications and hosted services for the automated creation and management of multimedia marketing content for online retail and mobile environments, recently released its Pic2Vid for Marketers solution suite.

Pic2Vid is a Web-based solution that automatically generates streaming video content with voiceovers from digital photos and text, enabling online marketers to enhance each product and listing with attention-grabbing video clips.

The Pic2Vid for Marketers solution suite consists of two parts: Pic2Vid Hosted and Pic2Vid Enterprise.

Pic2Vid Hosted is a fully hosted, Web- based solution aimed at auction-site power sellers, small and mid-size retailers and service providers, and online marketers and affiliates. The company’s Pic2Vid Enterprise is a turnkey, scalable hardware/software solution for large brick-and-mortar retailers with significant online businesses, including auction sites, shopping sites and industry portals, as well as resellers such as aggregators, service providers, Web publishers and creative agencies. A demo of the Pic2Vid Consumer version can be found at Pic2Vid.com.

Sister Technologies is also working on a new tool, based on the Pic2Vid and “M- Plat” online editing platforms that will enable advertisers to create short video clips that would appear alongside organic search engine listings.

There are only a handful of steps involved in creating a video, and within approximately two minutes a user can create a 15-second clip that could appear beside their organic search listing or as part of a paid listing. Pricing is about 1 cent per minute of broadcast. A one- minute clip that receives a thousand views would cost the advertiser $10.

Casting a Wider Net

Podcasting is emerging as an interesting and potentially lucrative opportunity for online marketers who want to reach a wider audience.

The figures for podcasting vary, but by all counts the podcasting market is poised to explode and online marketers want in. A report from The Diffusion Group, a technology research consulting firm, showed that the use of podcasts is expected to grow from an estimated 4.5 million users in 2005 to 56.8 million by 2010.

Also called audioblogging or blogcasting, podcasting is a term formed from the combination of the words iPod and broadcasting. Podcasting started cropping up with some frequency in early 2004 and, despite its etymology, an Apple Computer iPod is not required – any MP3 player or computer will play the audio files that are created and downloaded from the Web.

These audio files, which can be about a diverse range of subjects (from cooking to computers and religion to comedy), are posted online and, by subscribing to RSS feeds, can be automatically detected and downloaded to a user’s computer.

Until recently, podcasting, like blogging, was the domain of those with a desire to create whatever sort of content they chose without regard to advertisers’ preferences, editorial guidelines, format or demographic targets. They were even exempt from government regulators such as the Federal Communications Commission.

Then in 2005 several events occurred in the span of just a few short months that shone the spotlight on podcasting and pushed the grassroots movement into the mainstream consciousness.

In April some impressive data emerged that showed podcasting was a large and still-growing market. The Pew Internet & American Life Project reported that more than 22 million American adults owned iPods or MP3 players. Nearly 30 percent of them had downloaded podcasts from the Web to listen to audio files at their leisure. Then in May 2005 BusinessWeek put podcasting in front of the average business Joe by running a cover story and special report focused on podcasting.

By October, Apple had announced the integration of podcasting into its popular iTunes music service software. This made it easier for users to search for and subscribe to podcasts. The move struck a chord with users who signed up for more than a million free podcast subscriptions in just two days after the announcement.

Also in October, Apple launched its much-anticipated video iPod. Users were overjoyed to find out they would be able to download episodes of their favorite TV shows including Lost and Desperate Housewives.

Marketers began jumping on board just as quickly. Only a little over a month after the video iPod was unveiled, fast-food giant Burger King sponsored a set of comedic shorts that could be downloaded and played on the new device. The Burger King sponsorship entailed a branded page for video files specially encoded for video iPods.

Also just shortly after the device debuted, a group of users of Adobe Systems’ software launched what may have been the first podcast infomercial, a half-hour tour of the company’s popular photo-editing software, Photoshop.

All of this was bolstered by surveys, data, research and reports predicting huge gains for podcasting.

A November report by radio and media market researcher Bridge Ratings estimates that 4.8 million people have at some time during 2005 downloaded a podcast from either a radio station or other source. iTunes was referenced as the most often accessed portal for podcast downloads. This 4.8 million estimate is up from 820,000 podcast users in 2004.

By 2010, conservative estimates say that 45 million users will have listened to at least one podcast. Aggressive estimates place this closer to 75 million by 2010.

The study shows that approximately 20 percent of current users who have ever downloaded and listened to a podcast do so on a weekly basis. This group downloads an average of six podcasts per week and spends approximately four hours a month listening to those podcasts. More interestingly, on average less than 20 percent listen to their podcast downloads on an MP3 player or other portable digital device.

A lot has changed since a year ago when Allen Weiner, research director with market research firm Gartner, referred to podcasting as largely a hobbyist phenomenon, attracting “anybody who’s ever had a microphone or worked at a college radio station.”

Now this burgeoning podcasting market, which had already quietly developed a huge and fiercely devoted following, was the object of interest for venture capitalists, traditional media players, advertisers and online marketers – all working overtime to figure out how to make podcasting profitable.

And that is a polarizing topic for the podcasting community.

At the Portable Media Expo & Podcasting Conference in Toronto in early November, keynote speaker Leo Laporte said, “If somebody gives you money, you owe them something. I listen to my listeners, but I don’t want to listen to advertisers.”

Laporte, an author and high-tech guru, appears in advertising-supported radio and TV shows but shuns commercial advertising and promotions for his popular “This Week in Tech” podcast.

But for most the basic questions are no longer, Is podcasting an advertising vehicle or a marketing vehicle, or is it an art form or a commercial form? The discussion has moved beyond that to acknowledge that it’s all of those things and more. Now the real question is exactly how and who will make money from podcasting.

Add Advertising and Stir

Adam Curry, a former MTV VJ from the early 1980s, is widely credited with helping get podcasting off the ground. Curry was among the first to create a podcast by working closely with Dave Winer, a programmer, who is also often acknowledged as the first blogger, credited as the father of RSS and a former resident fellow at Harvard Law School’s Berkman Center for Internet & Society.

In November of 2005 Curry’s company PodShow, which promotes podcasts and finds sponsors for them, acquired Podcast Alley, a grassroots podcasting directory that played a big role in sparking the podcast craze. Many define success as a spot in Podcast Alley’s Top 10 list. Those with top rankings are often downloaded hundreds of thousands of times.

The acquisition comes less than a month after news that PodShow, which also helps mainstream companies produce and distribute podcasts, received $9.85 million in funding from Silicon Valley venture capital firms Kleiner Perkins Caufield & Byers and Sequoia Capital. Curry’s plan is to launch a podcast network with anywhere from 30 to 50 shows that will split ad revenues.

While Curry’s been in the podcast mix since the start – he often refers to himself as “the Podfather” – there’s no lack of jockeying for position among big tech players and some newcomers, many of whom are attempting to lay the foundation for selling shows and advertisements. Technology companies including America Online, Apple Computer and Yahoo are jumping into the mix with aggregation services that collect thousands of podcasts in a single location.

Apple’s iTunes offers 15,000 podcasts, and as of press time listeners had signed up for 7 million subscriptions. Listeners confirmed more than 10,000 podcasts can be found at PodcastAlley.com.

And there’s power in numbers. Once podcasts are aggregated it is likely to be easier to sell ads across a group of shows. A lot of different approaches are being tried, including placing advertisements in actual podcasts, offering subscriptions to individual shows and in some cases, getting podcasters to actually do shows devoted to specific products or talk them up, much like the early days of radio.

Curry plans to offer advertisers a variety of sponsorship possibilities, including spots where a podcaster tests a product and then devotes an entire podcast to that product or service.

Last November, the women behind Mommycast (part of Curry’s network), a weekly show hosted by two mothers from their homes in Virginia, secured a major sponsorship deal with paper products maker Dixie, a division of Georgia Pacific. In a 12-month, six-figure deal, and repositioning that will be happening this spring.

Another high-profile sponsorship deal was also inked just before Thanksgiving. Martina Butler, a 15-year-old podcaster, snagged sponsorship from Nature’s Cure, a top brand of acne treatment. Butler’s show, Emo Girl Talk, features the life and times of a teen girl who talks about her favorite music and interviews celebrities. Officials from Nature’s Cure said in a press release, “There are a number of teens now listening to podcasts. Sponsorship is an excellent way to increase our brand awareness in an environment that is meaningful and credible to them.”

Many say these deals prove the podcasting medium is starting to gain traction among advertisers, and not just those reaching out to early-adopter males.

Sponsorships typically involve a 15- or 30-second audio ad at the beginning of the podcast. In the past, the popular podcasts usually set flat rates ranging from a few thousand dollars a month to as much as $45,000.

For example: In early 2004, Volvo agreed to pay $60,000 for a six-month sponsorship of the monthly podcast of Weblogs Inc.’s Autoblog, as well as advertising on the site itself. Over that period, the show was downloaded 150,000 times.

Some industry watchers note that because the number of listeners is changing fast, a flat-rate sponsorship isn’t always such a good deal for advertisers.

KCRW, a public radio station in Santa Monica, Calif., cut a deal with Southern California Lexus dealers for a sponsorship this summer, when the station was getting 20,000 downloads a week. Since then the number spiked to 100,000. When the Lexus deal ends, KCRW plans to charge $25 per thousand listeners, according to Jacki K. Weber, KCRW’s development director.

That new rate is considered pretty high given that one morning radio show in New York City (America’s No. 1 market) often charges between $12 and $15.

Venture capitalist Mark Kvamme of Sequoia Capital says podcasting may end up diverting anywhere from $1 billion to $2 billion away from the $30 billion radio advertising market over the next three to five years.

To fend off that possibility, some in the radio business are getting into podcasting in a big way. National Public Radio, which offers 33 podcasts, pumped out 5 million downloads in less than three months. NPR grabbed Honda Motor Co.’s Acura division as sponsor and is wooing others.

Still, some like Laporte are seeking ways to support their podcasts without directly taking ads and instead are asking listeners for donations. Laporte’s “This Week In Tech” podcast has more than 200,000 listeners and asks for donations of $2 per month. It often takes in nearly $10,000 a month, he says.

Tools and Metrics

Once ads get placed, sponsors want to make sure they are getting exactly what they paid for.

The difficulty in tracking podcasts, however, goes beyond the number of downloads and instead is about the portability of the files. Because the player software is often on a mobile device, such as an iPod or other MP3 player that is not connected to the Internet, the marketer loses track of the downloaded file when it leaves the computer.

For that reason, some podcast advertisers are turning to techniques used for traditional media like radio, such as custom 800 numbers or offer codes. And since podcasting uses RSS feeds for distribution – the same syndication and distribution mechanism used by blogs – RSS-centric technology companies such as FeedBurner are leading the way to help podcasters build the format into a moneymaking business.

There are also tools that make it attractive to launch ad campaigns across various mediums including blogs, podcasts and RSS feeds. Blog and RSS advertising network Pheedo is developing a program for advertisers looking to launch integrated multichannel campaigns across blogs, RSS feeds and podcasts.

If your advertising message is in only one of these channels, there’s a chance it will be missed by part of the customer base, according to Bill Flitter, Pheedo’s founder and chief marketing officer.

Advertising buys will be a package deal, with guaranteed impression counts for the RSS and blog inventory, while the podcast portion will be measured by the number of average downloads from previous shows.

While Pheedo has been testing integrated campaigns for a few advertisers since June, the company is still developing technology for podcast ad serving and is building its podcast network. Pheedo’s podcast ad network currently offers ads on about 30 podcasts and has run campaigns for six advertisers. The RSS and blog components are already in place. To date, technology, video game and automotive advertisers and publishers have the most success with blog and RSS advertising, according to Flitter.

While many applaud the moves to provide some basic metrics, they admit that strategic marketers are always focused on the return on investment and need to know who’s viewing the page and who’s downloading the file in order to accurately measure the impact on their own end, according to John Furrier, founder of PodTech.net and host of the Infotech podcast series.

Shelly Palmer, president and CEO of Palmer Advanced Media, a marketing consultancy in New York, says, “If you think about podcasts as marketing vehicles, you would be taking advantage of all the tools available to Internet marketers: tracking software, affiliate marketing schemas, SEM (search engine marketing), and SEO (search engine optimization) methodologies, etc. This makes huge sense since, for the moment, podcasts require a personal-computer-based client and an Internet connection.”

Palmer adds that brand awareness, lift and purchase intent are three of the most common metrics that brand managers use when calculating return on investment for advertising and marketing dollars. “What’s nice about podcasting is that the Internet enables census-based metrics. Properly used, podcasting can tell you a great deal about how effective it is for your business.”

Furrier claims that better ROI calculations won’t be possible until the different systems involved are integrated.

Many are working hard to make that possible. At the Portable Media Expo & Podcasting Conference in November, much of the focus was on tools or ways for podcasters to count audiences, deliver ads and charge listeners.

Furrier’s startup, Podtrac, announced a demographics-and-advertising program that attaches a prefix to the name of MP3- formatted podcasts that will obtain an exact count of downloads per show, thus far a vexing challenge for podcasters because some podcast directories cache shows on their own servers. The company also plans to help podcasters create sales kits and then work to connect them with advertisers, with Podtrac taking as much as a 30 percent cut of the revenue.

Audible.com, which sells audio books and news programs online, has launched a new service called Wordcast that lets podcast creators chart listener usage behavior somewhat like the Nielsen ratings do for TV – a huge step for getting advertisers to make precise choices.

By providing a way to track not just how many times the show is downloaded, but also whether it is played and for how long, Audible hopes to give podcasters some audience information.

The company will charge 3 cents per downloaded podcast to report whether a downloader listened, and for how long. Audible will also offer tools that will stop the podcast from being emailed to others. It will charge 5 cents per download to track listening and attach the access restrictions. For half a cent per download, Audible will insert an ad relevant to the podcast. Audible also would take a 20 percent cut of any subscription fees it collects.

With the tools, “you can build a bona fide rate card” for advertising, says Foy Sperring, Audible’s senior vice president for strategic alliances.

BitPass, a 3-year-old Menlo Park, Calif., company, showed off a similar process that enables podcasters to sell their content, while Taldia unveiled its podcast-production service. The Altadena, Calif., company has a deal with the Associated Press and other news outlets in which Taldia’s army of voice talent, which is spread across the nation, records audio summaries of printed news reports. For $5 a month, subscribers can select what news topics they want to hear about, how many minutes of content they want and at what time of day they want it delivered to their computers.

Microsoft has also announced plans to integrate support for RSS throughout the Windows Vista operating system to make creating, viewing and subscribing to content of all types, including podcasts, easier. Microsoft is also working with companies like Doppler, a podcast aggregator, to ensure it can take advantage of the open architecture in Windows Media Player for its podcast applications.

Lukewarm

Still, not everyone is convinced podcasting is the next big, big thing. Many are tempering their enthusiasm with a healthy dose of skepticism.

Mark Cuban, owner of the NBA’s Dallas Mavericks and an avid proponent of blogging, wrote in one of his posts at BlogMaverick.com that he expects podcasting to level off soon.

Here’s the picture he paints: “The number of podcasts available individually or through aggregators will explode beyond where they are today.” Then, “that will create a massive dilution in the audience size of the early-entry podcasters. Everyone’s audience will fall as the marginal listeners find something they like better. Yes, there will be some podcasts that get more listenership than others, but most of them will be repurposed content that already has demand.”

Finally, “Individual podcasters who don’t have some other means of generating demand other than being on aggregators will fall off first and the fastest. They will just go away, the only trace remaining will be tiny Web pages on the Wayback Machine. So in about three years, the podcast phenomena will have run its course and will just be a normal part of the digital media landscape.”

Ted Schadler, vice president at Forrester Research, says, “Podcasting feels like the Internet first did: a whole new way of experiencing the world. But at the end of the day, radio is radio and consumers will only listen to things they find valuable.”

Schadler says there are many people with various agendas. “To the rising tide of podcast hosts, podcasting is better than blogging for becoming famous. To venture capitalists like Kleiner Perkins Caufield & Byers, Charles River Ventures and Sequoia Capital, podcasting is a bet on the next big thing. To commercial operators like Clear Channel, it’s yet another channel for selling advertisements,” he says. “Each of these groups expects podcasting adoption to mirror Internet adoption with giddily exponential growth. Alas, there is another precedent that all must consider: Push. Push exploded on the scene with Pointcast, landed faddishly on millions of desktops, and then just as quickly died away. (Of course, push has been rehabilitated as RSS, but push’s big problem – content overload – remains.)

Schadler’s bottom line: “Podcast listening will follow a natural progression: enthusiastic experimentation, disenchanted abandonment, and value-driven adoption.”

By the start of 2006, Schadler says, “Enthusiastic experimenters will find that most podcasts aren’t worth listening to and even the useful ones pile up unopened in the podcast corner of the hard drive. After all, who has an extra hour a week to listen to a radio show? Disenchanted, consumers will abandon most podcasts.”

However, it’s not all so grim, according to Schadler. “Somewhere in the midst of the experimentation and abandonment phases, podcasting will become valuable to consumers that want control over radio or access to niche content. Thus, value-driven adoption will characterize the mature phase of podcasting.”

And based on a historical analysis of Internet radio adoption and a forecast of broadband and MP3 player adoption, Forrester expects 12 million households to be regular podcast listeners by the end of the decade. That’s a far cry from Bridge Ratings’ estimates of 75 million users by 2010.

That kind of conflicting data is likely why some advertisers are also not jumping into the deep end with both feet.

A survey by the American Advertising Federation rated blogs, podcasts and Web-enabled cellular phones as newcomers in the market that are worth watching, but have yet to prove they’re worth major investments.

On a scale of 1 to 5, respondents rated the three new Internet-based channels in the middle of the scale, which is considerably lower than where they placed traditional media and other forms of online advertising.

An AAF representative says that because these media are so new, people are more cautious and are taking a wait-and-see approach. The “cornerstone” of advertising remains the 30-second spot on television, but consumer adoption of new technology is forcing ad execs and marketers to look beyond newspapers, magazines, TV and radio, and question their return on investment.

Pod Porn

One market segment that is always lightning fast to react to new media and new technologies is adult content.

Andrew Leyden, founder of Podcast Directory.com, is quoted in a Newsweek published report saying, “No matter what the technology is, sex finds a way to get involved.”

This shouldn’t be surprising since 85 percent of those who use the search engine’s podcast directory are men according to Yahoo senior product manager Joe Hayashi.

At PodcastDirectory.com, six of the top 20 shows are adult-oriented. On Apple’s iTunes store, “Open Source Sex” is No. 11 and climbing. “Porn” is the second-most-searched-for term at Podcast.net; “BBC” is tops.

Industry watchers also say the plentiful storage capacity, portability and privacy afforded by MP3 devices make it enticing to listen to such titillating adult content. The video iPod is only expected to increase the amount of X-rated content available for download since anyone with a microphone, a video camera, a computer and some privacy can create such adult content, according to Violet Blue, the host of the Open Source Sex podcast. “You don’t need big breasts or big advertisers.”

The flip side of the emergence of sex-related content is religious programming. There are already many religious-themed podcasts – often referred to as godcasting – including Dharma.net, GospelAudio.com, Catholic Insider, Pray-station Portable and Pagan Power Hour.

“Casting” is also being co-opted by all sorts of other industries, market segments and groups. There have also been suggestions of food marketers looking into gastrocasting, music marketing called rockcasting and pharmaceuticals delivering medical education to physicians via medcasting.

In the end, it looks like everyone, including God, is looking for podcasting to pay off in a big way.

Danger: Clicking Ahead

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Fraudian Slip

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

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

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

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

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

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

Defensive Measures

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

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

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

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

Foxes Guarding the Henhouse

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

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

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

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

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

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

Google’s Role

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

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

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

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

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

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

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

The Price of Isolation

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

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

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

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

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

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

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

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

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

Analyze This

Affiliates are capitalizing on the predictable behavioral patterns of consumers by using Web analytics tools to decode customers’ habits and boost revenue.

So if you’re a publisher and want to know who exactly is visiting your site, how different types of visitors come back, what they are looking for when they arrive and what specifically makes them want to leave, you should be thinking about tools that help you sort, analyze and understand your customers.

Web analytics is an emerging category of software that purports to answer all those questions and many more that could help you identify the steps for your site to reach the top of its game.

“Affiliates have tremendous opportunity,” says Barbara Poole, a revenue improvement consultant at PoolResources.com, “because they already understand what it is to drill down to the specific customer relationships.”

And if you find the right software to help with that decoding you’ll already be ahead of the curve.

That’s what Miami-based affiliate Pedro Sostre did. Through a collection of analytics software that includes AWStats, ClickTracks Pro and WebSideStory’s HitBox, he has determined the success of ad campaigns, discovered new opportunities based on analyzing what keyword terms are being searched and routinely improved overall performance for his sites including FreeBookClub.com, iTravelMagazine.com, AudioBookDeals.com and Tax-Stuff.com.

“We use Web analytics every day,” Sostre says. “When we found that 88 percent of that search engine traffic wasn’t converting, we where able to save $2,000 per month at FreeBookClub on pay-perclick advertising alone.”

These tools don’t cost much: AWStats is free, HitBox is $30 per month and Click- Tracks’ basic level is a one-time license of a few hundred dollars.

“Eliminating pay-per-click listings at Aha and Kanoodle alone saved me the cost of the software,” Sostre says. “And then there is the value you get from seeing what people are looking for as far as clicks and what campaigns are working. I absolutely could not do what I do without being able to analyze the sets.”

New analytics tools actually create a snapshot of who your ideal customers are and what makes them tick. And it even can determine the different types of customers your site might draw. Once you can do that, “you get the ability to really use that information,” says Brent Hieggelke, vice president of software analytics company WebTrends.

Merchants and affiliates are catching on to this power. The Web analytics market grew 13 percent in 2004, marking what global market researcher International Data Corp. calls a “second coming.”

Analytics has officially grown up from its beginnings a decade ago, when eyeballs and unique page impressions were all that mattered, or at least all that were measured. “Who really cares if someone is sitting on a page for 20 minutes? People have realized how dirty those metrics are,” says SAS Web Analytics’ Richard Foley. “Basic metrics just aren’t cutting it.”

So what is? There are several Web analytics advances, some still in beta, that could be huge for affiliates. Segmentation, intuitive analysis and 360-degree views are among the latest advances that have affiliates applauding.

“We just started using [analytics], and we’re just blown away by the power of seeing day-to-day metrics,” says Joe Beruta, director of interactive marketing for Jenny Craig, which gets anywhere from 5 to 10 percent of its online registrations through affiliates. “We used to look at the month after the fact, with no real-time metrics. Now we’re looking at things like clients versus non-clients as they come to the site – and we haven’t even gotten into segmentation.”

Segmentation

Segmentation is the hottest way to analyze customers on the Web, and at as little as $35 per month it’s finally affordable for small publishers. The technology records and visually tracks a single visitor’s interactions at every touch point. Assigning each visitor a unique identifier, it compares its findings with its growing database of other users’ patterns. Similar users are grouped into one segment. The more a visitor interacts with your site, either by clicking links or making purchases or answering questions about interests, the more data the technology collects on what makes that segment tick.

“It’s a little bit like taking a helicopter and flying over a freeway to see where the bottlenecks are,” says Michael Chavez, vice president of analytics maker ClickFox. “It’s not about predicting a user’s behavior; you’re looking at what they actually did. And you now can link that to actual demographics.”

One of the first companies to make segmentation accessible is WebTrends, which rolled out version 7.0 of its program a year ago. The latest version includes actual breakdowns of how profitable each link is and all of its segmentation tools. There’s a free 14-day trial at WebTrends.com.

Today “this broad, comprehensive picture of the process is one of the absolute hot spots in the market,” says WebTrend’s Hieggelke.

This type of analytics can even help you find new merchants or improve the deal you have. “You get to know based on buying habits what someone wants from your company,” says Mark Bradley, vice president of product shopping at shopping comparison engine NexTag. “If you know people are heading off to buy another product from a third party, then you negotiate with that merchant to get a special deal to sell it yourself.”

Intuitive Analysis

With intuitive analytics, you also get recommendations specific to respective goals for sales, IT, marketing and Web design. Now, if a certain segment of customers are spending three times more time on your site, but buying half as often, the software automatically searches for commonalities like coupon codes, free shipping offers or site navigation and tells you what about your site or where the customer came from influences their buying behavior. It tells you what to keep doing to get more customers (including determining the best advertising avenues) and what to start doing to get them to shop more often.

“That’s what analytics is,” says Stephen Messer, CEO of LinkShare, which in May launched its Synergy Analytics application for its network of affiliates. “It says: ‘Let us do the analysis that you would otherwise do on your own.'”

With basic analytics, you may conclude you bought the wrong keywords if your search engine results are down – with nothing in your reporting to tell you exactly what you did wrong. Intuitive analytics will point out six, nine, maybe 10 different things that might be affecting why search engine returns were low. It may be that your landing pages were too slow or down, it might be the time of day, it might be that you actually do have some keywords that aren’t effective. Intuitive analytics does a report for each and more of these things, providing an immediate blueprint for what steps you could take to improve search engine conversions.

360-Degree View

The third big analysis development builds its reports not only on your site’s Web data, but also on all of your other campaigns. Email, direct mail, traditional advertising, search engine placements and keyword buys are all cataloged online using distinctive links, coupon codes, SKU numbers, even unique telephone extensions. It integrates offline and other marketing and sales data for a complete view of your business activities and a complete read on what works and what doesn’t. It is, however, the most expensive of the Web analytics tools: SAS, which released its 360-degree SAS Web Analytics product in mid-2004.

“A 360-degree view can really determine what people are doing on your site, by digging through and mining the Web data so you can see ‘these are my specific segments,'” says Evan Shelby, product manager for SPSS’s Web analytics products.

SPSS bought NetGenesis several years ago and has integrated it with another SPSS product – Web Mining for Clementine – to offer a 360-degree view. Its SPSS for Windows 13.0 is $1,499 for a business customer and $599 for a single academic user. SPSS server licenses start at $15,500.

“We look at things like affinities, segments, what activities might be associated for cross-selling and upselling – really digging into the data,” Shelby says.

In the end, most site publishers use a combination of tools like Urchin and ClickTracks, says Chris Winfield, president of 10e20, which concurrently manages hundreds of search engine marketing campaigns for clients like Virgin and Coldwell Banker. Other than high-end analytics like SAS, “there isn’t one package yet that we’ve found to truly meet the need to really be able to track all of these things at once,” Winfield says.

Analytics in Action

“It’s a very unusual combination of sophisticated technology and sophisticated math and analytics, when integrated together with merchandising and marketing communicating,” says Matt Moog, president and CEO of CoolSavings, an online direct marketing and media company.

Using analytics software from SAS, SPSS and Coremetrics, CoolSavings was one of the first to give online retailers a holistic view of customers that includes strategies for acquiring consumers, lowering churn and retaining consumers.

“It all starts in knowing what data to collect about the consumer, and storing that data – whether self-reported, behavioral or transactional data – in such a way that it can be used for those purposes,” Moog says.

It’s something Erick Barney, marketing manager for Medford, Ore.-based MotorcycleSuperstore.com, knows well. He added WebTrends 7.0 one year ago. “It’s amazing to see what kind of product you get from a company where that’s what they do,” Barney says. “It’s just leagues beyond what we had. We had all the basics. We knew where we stood, but we didn’t have the nitty-gritty. We didn’t know all the screws to tighten, all the design elements to tweak or all the things to do better – bidding on keywords or writing sales copy. Now, we dream up our metric and [our analytics provider] help[s] us put together the reports to analyze it.”

Using WebTrend’s overlay feature, which shows click-through and revenue numbers above the actual links on a screen capture of each page, Barney has been able to analyze everything from the placement of tables to clickthroughs on email communication links and automatically sees a red flag on those pages with frequent cart dropouts. Since adding WebTrends, MotorcyleSuperstore.com’s revenues have jumped nearly 50 percent.

“I’ve had access to most of the analytics from one source or another, but I had to log in to Overture, extract the numbers and build my own report to compare programs and make decisions,” Barney recalls. “This puts it all in front of you. I go ‘Campaign Drill Down’ and it’s all right there, and it’s really cool.”

On the other side of the coin are the affiliate sales that can be made on a product like this.

“Many of our partners use our technology to not only optimize their marketing efforts, but also complement their service offerings,” says Dan Shapero at NetApplications.com, which integrated Alexa Data Services into its Hitslink analytics tool in late-2003. Hitslink includes pay-per-click conversion tracking, click fraud analysis, referrers, search engine keywords and page navigation paths. It can track an Overture listing, for instance, all the way to orders and revenue, plus it sends out email traffic alerts when your traffic spikes. (There’s a free 30-day trial, good for up to 20,000 hits, at Hitslink.com/trial.)

Already taking statistics for a reported 40,000 publishers, most of Net Application’s customers come through its affiliate and private-label partner programs, Shapero says. “A big part of our vision is if we can enable these partners to use our technologies to market our products, they become our biggest evangelists.” Most of its 3,000 affiliates not only get 40 to 50 percent of every $9.95- to-start monthly hosting fee their users pay, but also get up to 50 percent off the price of using the software for themselves. (Hitslink now has $20 sign-up incentive.)

Meanwhile, Sostre is helping other sites master the analytics tactics he has learned as an in-the-trench affiliate. Using intuitive analytics reports, he helped one site change small things like the color of the button, where the sign-up is and what copy they put next to it. The results, reports a company spokesperson’s blog, were a 60 percent jump in EPC.

“These days,” reminds website strategy consultant Philippa Gamse, “you have to get into the behavior patterns – what you want to do better and what you want to stop doing – to be successful.” These new innovations in Web analytics, at a price range affordable to smaller sites, may be just what ROI ordered.

“The money there is real,” WebTrends’ Hieggelke says. “It’s the kind of thing that shows running your business by the numbers can absolutely have a fast payoff.”

JENNIFER D. MEACHAM‘s stories have been featured in The Wall Street Journal, Kiplinger’s Personal Finance, AARP The Magazine and at CBSMarketWatch.com. She’s a former reporter for The Seattle Times.

Converting Visitors to Buyers

While affiliate Web sites can measure how many visitors and clicks they receive and send on through to merchants, that’s only part of the story when making decisions on maximizing revenue potential. There is still that magical measurement of conversions; how many of the visitors that affiliates send to a merchant actually buy something?

“It’s really all about nuance now. Web sites work and are more or less efficient, but retailers [and affiliates] want to know exactly what their customers respond to online,” says Patti Freeman Evans, retail analyst at JupiterResearch.

And “customers,” plural, is the key. There is no one-size-fits-all strategy that can work to attract the interests and buying decisions of a broad range of customers. Instead, affiliate marketers need a multi-pronged plan of attack. It’s not just trying to appeal to the types of products and services buyers want, but figuring out how they go about deciding to buy.

According to Freeman Evans, 60 percent of online buyers do research online before they buy, while the remaining 40 percent don’t like to do research and just want to buy what they like or need and immediately move on.

So how do you convert this wide range of visitors to your site into buyers? High search engine rankings coupled with a landing page can lead relevant buyers to your site, but companies often forget to do the rest of the work. “Once you get a customer to your site, you want to use all the assets merchants make available, like product photos and marketing material, that will help the buying decision,” notes Gary Stein, senior advertising analyst at Jupiter. “Conversion rates go up when companies develop their content and give visitors a reason to be there.”

Content-rich sites with an edgy passion for their subject matter have an advantage. Sites that reflect passionate, informed views, and articles with real value, win the respect of their visitors and often their purchase orders.

For some affiliates it’s almost a Zen-like strategy. Kathryn Finney, founder and owner of TheBudgetFashionista.com, says she’s never tried to design her site to make sales; it’s always been about serving her readers. Started as a blog, Finney’s site has become a smart and sassy provider of unvarnished information for budget-minded buyers of women’s clothing and accessories. Ads from major women’s clothing retailers adorn the site, courtesy of LinkShare.

“We are getting cash flow and solid partnerships with retailers, and also our leads translate into offline sales for them,” says Finney. “Our focus isn’t on selling, but by providing valuable, relevant information, we end up a great selling platform.” TheBudgetFashionista will accept only those ads that fit with the focus of the Web site Ð clothing-related items for the budget-minded.

Gimmicks That Work

It’s virtually impossible to appeal to the broad needs of all your visitors even if you have a very targeted site. “The amount of attention a browser receives is staggeringly small,” says Matthew Roche, co-founder of Offermatica.com, a hosted service that runs multiple variations of landing pages and measures which aspects of each are most effective at converting browsers to buyers.

Roche believes a little experimentation can get you a much higher conversion rate. “If someone says they have the perfect landing page, they are just guessing,” Roche says. In general, buyers react negatively to tax and shipping charges and having to register. Free shipping has proven to win sales at many sites, while discount pricing is better for others.

One Offermatica client tried free shipping versus 10 percent off. Offermatica was sure free shipping would win, but 10 percent off proved far more popular for this client. There are additional factors to consider, such as how much to charge for shipping if it’s not free and how much the item costs. Ten percent off on a $1,000 purchase will surely be more enticing than free shipping if you can afford to market that way.

While Offermatica has a range of sophisticated tests and measurements, there are some simple, small-scale alternatives. Offer $10 off to the first 50 search engine respondents and free shipping to the next 50. This can be done in an hour or two if you’re getting enough traffic. But be careful going forward. Ten dollars off may work initially, but what if a competitor offers $11 off? You don’t want to get into a war of competing offers if you can’t win.

Here’s another angle on shipping charges Ð don’t hide them. “Consumers don’t want to wait until the shopping cart to find out there are shipping charges; it’s an unpleasant surprise,” says Lauren Freedman, president of the e-tailing group, an e-commerce consultancy. Also, present recommendations to catch your customers’ attention: “Our experts suggest É” or “Others who have purchased have also bought É .”

Freedman, whose company has done extensive research in cross-selling and upselling, recommends gift cards and gift-giving offers at the shopping cart. After all, if you have a shopper ready to buy, he or she probably has a friend or relative who might like the same item. Gift cards are currently a multi-billion-dollar industry.

Roll Up Your Sleeves

Affiliates have to work harder than ever to get customers, notes Bryan Eisenberg, co-founder and chief persuasion officer at Internet marketing consultant Future Now. Eisenberg says the key to sales conversions is to give your customers a comfort and confidence level with the site the way an effective salesclerk connects on a personal basis with shoppers. He sites five central issues to making Web visitors feel comfortable:

  • Relevance The site has to be relevant or you won’t get to the first click in the sales process.
  • Trust The site should be well designed and convey trust with a voice or focus that speaks to the potential customers.
  • Security You don’t need to use valuable, high-profile space to detail what encryption technology you use, but place a brief two- or three-word reminder near the shopping cart or other relevant area that your site is “hacker safe” or “secure shopping guaranteed” (assuming this is true).
  • Value This is completely relative to different shoppers, but know your audience and communicate appropriately. For example, a site for bicycle enthusiasts might be more concerned with safety and warranty issues than rock-bottom prices.
  • Privacy Eisenberg says to put “we value your privacy” or a similar promise right next to the Subscribe or Submit button to emphasize your commitment in this area and to reassure customers.

Also, don’t count on a copycat strategy of blindly following what other sites do. Eisenberg sites the example of Amazon. com. The online retailer had a button that let shoppers later remove items placed in the shopping cart. Amazon replaced the feature and used the space to promote its used books. Eisenberg says “remove it later” is a useful feature that helps with conversions because it helps shoppers feel comfortable that they aren’t committing too soon to a purchase. However, many sites dropped it when Amazon did; yet Amazon had specific reasons for doing so that didn’t apply to the other sites.

Of course, there are also features well worth copying. Staples, for example, makes its shopping cart a component of every page instead of whisking the customer away to a separate shopping cart page every time they add an item. Analysts and Web veterans say building your site’s unique appeal is a key to conversions.

“Affiliate marketing is the ultimate contextual selling,” says Stephen Messer, CEO of LinkShare. He gives the example of high-end retail clothier Nordstrom, known to lavish attention on customers. An effective affiliate is like an online version of Nordstrom in that online visitors are much more ready to buy in an environment simpatico with their interests and needs.

“I believe the main reason for shopping-cart abandonment is that the customer hasn’t been sold,” Messer says. “When you go to a kite-boarding site, the banner ad for kite boards on sale is a call to action that speaks to that audience. The site provides an environment and content relevant to what’s being sold, and the reader is, in a sense, pre-sold.”

By comparison, having a one-paragraph description of a blender at a consumer goods site isn’t much of a call to action. “Affiliates convert better because they add value,” Messer says.

World Choice Travel, a division of Travelocity, runs an aggressive affiliate network through travel-related sites (some 4,000 Web sites in 40 countries). The company pampers its affiliates with site evaluations, search engine templates, free consulting, marketing newsletters and other helpful tools. Rick Schneider, VP of global business development at WCT, says it has the most sophisticated back office in the online travel space to help track conversions.

Schneider says there’s been a leveling off in the number of affiliates WCT supports as the company looks toward quality over quantity. “The affiliates that are and will be successful work to develop their business and work at keeping it unique,” he says.

For merchant Sierra Trading Post, the big attraction is discount pricing. The clothing vendor has thousands of affiliates ranging from specialty mom-and-pop Web sites to large shopping-comparison engines. “Our most effective affiliates get our value proposition across best, which is that we sell the broadest range of famous name brands for less,” says Andy Newlin, affiliate manager at Sierra Trading Post. The average conversion rate for its affiliates is consistently over 14 percent, according to Newlin, far above the rest of the industry, and the average order size is over $100.

A program called Sling Shot has been successful in helping affiliates with online tracking and marketing tools. Sierra hopes to tap the expertise of its affiliates with cash prizes to the affiliates for creativity, bringing in the most new customers and best presentation of Sierra’s value proposition.

From Offline To Online And Back

All in all, the secret to converting customers into buyers in the online world isn’t that different than in offline retailing. In fact, there are some indications that online sellers may someday get more credit for sales help they give their offline counterparts. “Everyone acknowledges advertising on the Internet has an impact beyond online,” says Tom Miller, Internet analyst with the Dieringer Research Group. “But how do you prove the impact or effectiveness?”

Some companies offer online coupons with bar codes that can be printed and redeemed at retailers who can track and credit which sites the coupons came from.

A recent DRG study showed that in the past year, US consumers spent $1 online for every $1.70 they spent offline after conducting online research. Clearly sites can do more to capture the purchases of the shoppers they’re attracting.

The bottom line is that offline or on, customers want a good selection of products, to feel they are getting a good value for their money and that they can trust the seller. Relevant content, and a relationship with your customers (encourage feedback), will help you raise your conversion rates.

DAVID NEEDLE has been covering the high tech industry since the 1980s as both an editor and writer for such publications as Infoworld, InformationWeek and Forbes ASAP. Based in Silicon Valley, he can be reached at davidneedle@yahoo.com.

What Clicks At Performics

To the surprise (and delight) of many, 2004 has put the spotlight back onto e-commerce for the first time since the dot-bomb exploded in the spring of 2000. Web stocks rose over the first three quarters, while mainstream stocks were weighed down by geopolitics.

Google went public with the kind of swagger that conjured up memories of the late ’90s. Online spending continued its rapid rise. And big advertising companies went shopping for smaller Web properties.

ValueClick bought Commission Junction. And Internet ad giant DoubleClick bought Performics.

Few have more insight into the recent past or the long-term future than Performics President and CEO Jamie Crouthamel, who shares his views in this one-on-one chat with Editor in Chief Tom Murphy.

TM: How and when did you get into the affiliate marketing business?

JC: I started Performics, which at the time was called Dynamic Trade, in 1998 and we started as an affiliate marketing service provider addressing the needs of the catalog industry, now really the multichannel marketing industry. The needs they had at the time were affiliate marketing and performance-based technology as well as services and execution help as they were executing these programs.

TM: Why and when did you change the name from Dynamic Trade to Performics? What was the strategy on that?

JC: Early on in affiliate marketing, the term performance marketing wasn’t really being used. As we grew the business and saw other performance marketing opportunities start to evolve out of affiliate marketing, Performics was a better descriptor of what we were trying to accomplish. Today, we view ourselves as a performance-based marketing services and technology company. The fact that we’re leaders both in affiliate marketing and search engine marketing points to our focus in those areas. The two needs that companies have to be able to execute on are technology to facilitate these programs and marketing expertise to execute on them as well.

TM: The acquisition by DoubleClick is complete, and now the real work begins. What changes do you foresee at Performics in the coming months?

JC: DoubleClick acquired Performics because we have a proven track record for success. So many things will remain the same. But we immediately began to work together to build DartSearch, which is a DoubleClick solution, powered by Performics’ technology. Performics also uses DartMail for merchant email campaigns and affiliate communication, and our clients think the product is terrific. Already, we see the benefit of being part of a larger company and ultimately clients and affiliates will enjoy that benefit too. We now have global reach with 19 offices around the world, so as our clients look to expand into new markets, we have the right resources in place. In addition, DoubleClick has great research and a lot of talent. Affiliate marketing is a very good fit within the DoubleClick suite of products. The biggest changes at Performics are always driven by growth. For example, we already have more than 130 employees and will add at least another 30 or more before the end of this year.

TM: The acquisition is another sign the interactive media business is converging. Is the day of the independent affiliate network coming to an end? Do you think a new network could start up independently at this point?

JC: The online marketing industry is consolidating, and affiliate marketing is part of that. Last year, there were four major networks, and now there are three, with two of us owned by larger online advertising companies. So clearly the industry has consolidated. A new network would have many barriers to entry, because established affiliate networks have already built successful companies and achieved some level of efficiency with their businesses. That still does not mean it would be impossible to launch a new network, but a new affiliate network alone wouldn’t be enough today. Marketers want access to multiple performance- based marketing channels, and they expect more from fewer vendors. They want to participate in several performance- based marketing opportunities. Affiliate networks that provide only affiliate marketing services while ignoring other performance-based marketing services lessen the value they can provide clients and hurt their own chances for success in today’s environment.

TM: Are there ways that you would say Performics is different from the other major affiliate networks?

JC: We’re very different in that we look at the performance-based marketing sector as a whole versus components of it being affiliate marketing or search marketing or other forms of it. We started out in affiliate marketing. If you look at affiliate marketing today, and back then, it really set the benchmark for performance- based marketing. Today, everything is really compared to it. It’s interesting to note that affiliate marketing, often the most cost-effective channel in an online marketing mix, provides a platform for pricing. And any media today is really based off of an effective affiliate marketing or rev-share measurement that people use. We started off with that and we started seeing other concentrations of performance-based marketing around affiliate marketing. The first one, which really is pretty obvious, is search marketing. So we broke that out as its own practice per se. We’re the only major affiliate marketing leader who is also a leader in search marketing. We looked at what our clients needed and branched out from there.

TM: A lot of affiliates do search engine marketing as well as affiliate marketing. How does your company avoid competing with your own affiliates on that level?

JC: One way is we know very much about every affiliate in our network. We take great pride in that. Every affiliate who enters our network is screened and it’s understood what their business model is, versus an open network where they come in unfiltered and just start performing their activities. Many clients prefer that Performics run their affiliate marketing program and their search marketing program in parallel because of the inter-workings of the two programs you just described. There are a lot of affiliate programs and a lot of affiliates within those programs who help to complement the marketer’s search program. There are many terms and many categories in which the affiliates are better off participating. That’s advantageous to the affiliate and to the merchant.

TM: There are other areas emerging in the performance marketing field that seem to be fairly lucrative. I wonder if Performics might start competing in such areas as search engine arbitrage or creating blogs to increase revenue flows.

JC: We keep looking at performance-based marketing opportunities as they would be beneficial to advertisers. We always represent the advertiser in ways that would be beneficial to them. We probably wouldn’t get into the blog creation market because that would basically be creating content, which we don’t necessarily do. We just help our advertisers take advantage of it. So as blog advertising may or may not unfold, we would participate in that. With search arbitrage, we tend not to work in that market. But we would convince our clients that it’s better for them to run their own programs so they can reap the benefits of those programs.

TM: You guys are well known for your proprietary tracking technology. How is that system run? Is that a cookie-based system?

JC: There are different elements to it, and there is also a cookie component as well. As with any tracking technology, if you’re trying to track some return-day or some come-back to the site, you have to use cookies. So every tracking technology uses cookies. But there are other elements to it as well.

TM: In our last issue, Steve Messer from LinkShare raised some eyebrows by suggesting cookie systems weren’t accurate enough for this business. Would you care to comment on that?

JC: Well, in our technology, one element of it is a cookie technology. And DoubleClick, which now owns us, also leverages cookie technology. And everybody in the industry uses cookie technology, including LinkShare because they track some type of return-day. So I would think that’s a standard.

TM: Is there something beyond that you use to back up the accuracy of the cookies?

JC: Yes, we have other means that are a little technical to describe in an interview that also do backups to it. But if you’re trying to track any sort of return to a site once you leave, cookies are about the most accurate way to do that. There’s no tracking that is 100 percent. For every pro, there’s a con to it as well.

TM: There’ve been some complaints on the forums that links from Performics don’t go live right away, and that of course makes it harder for affiliates to check their links as they upgrade their sites. Why does that happen and can it be changed?

JC: I don’t know the technical answer to that. But once our links are created, they’re basically live in the system within seconds of being created. So it might be getting approval of those links instead of technically being ready.

TM: Like some other networks, Performics is said to block its affiliates from speaking directly to merchants, which could prevent affiliates from seeking higher commissions.

JC: That’s not true. We encourage meetings between our merchants and our affiliate partners. There’s contact information where a merchant can contact an affiliate. In most cases, an affiliate can contact a merchant. In a lot of cases, a merchant prefers that Performics handle the potential thousands of conversations on their behalf. So it’s really an efficiency request by the merchant, but it’s not a restriction.

TM: People seem to be a lot more aware of predatory advertising now. Do you think that problem is lessening, growing or staying about the same?

JC: I think it has picked up over the last few years. I think it has leveled off. It has become more heightened in the marketplace, and I think that’s why people hear more about it now. At Performics, we’re strong opponents of it. We’ve taken steps with our code of conduct, with our partnering with Commission Junction on that. Again, we screen every affiliate in our network, so it’s difficult for the spyware or the wrong side of the equation, predatory advertising, to take advantage of our merchants.

TM: Blogging, of course, is exploding with affiliates right now because they’ve figured out they can get high search engine rankings. What do you think is going to happen with that trend?

JC: We’re watching blogging very carefully. I don’t have any predictions at the moment. It’s a very efficient form of moving creative content back and forth, but there’s still a kind of non-standards going on right now with blogs being created and with blog writers. So I think there are still a lot of things that will unfold in that area.

TM: As merchant revenue grows in the affiliate marketing arena, do you think some of the smaller affiliates will be forced out by bigger players in their field?

JC: No, I do not. I think the beauty of affiliate marketing is that it’s a way for small publishers or affiliates to participate in the marketing mix of a merchant. I think that’s the beauty of affiliate marketing, that publishers of all shapes or sizes can participate because of the leverage you can get out of an affiliate program.

TM: Do you think, as the industry grows, more merchants will bring their programs in house instead of going through a network?

JC: Again, from the past question, I’d say not, because affiliate marketing allows publishers of all shapes and sizes to participate efficiently in it. It allows for the next evolution. Affiliate marketing seems to create new performance-based marketing vehicles. That’s the catalyst of it. So participating in a network that gives you broader reach in new opportunities allows you to see those emerging trends.

TM: What do you see as the biggest challenges for affiliate marketing in the coming months? It’s an area that changes all the time. Is there anything on the horizon now that seems like a threat to affiliate marketing?

JC: I don’t think there’s a threat per se to it, but I think what you’ve seen over the years is a trend toward more tightly controlled networks. You’ve seen folks who’ve run massive affiliate programs with tens or hundreds of thousands of affiliates starting to scale those back in an effort to get better understanding and control of their affiliate marketing program, as merchants are performing their other performance marketing-based activities.

TM: You said you screen affiliates closely. Do you also remove unproductive affiliates from your ranks? Do you keep them active in hopes they’ll start producing?

JC: Performics reviews each affiliate applicant as a service to all clients. Many Performics clients provide criteria for their program, and the evaluation matches the affiliate against the provided criteria. If a new affiliate applies to our network, we don’t necessarily make a judgment upon application about how productive that applicant will be, but we do make sure they have an active Web site and check for any content or practices that violate Performics’ policies, including our Code of Conduct for Fair Practices. Performics may remove affiliates that do not generate transactions over a period of time, usually one year. Many clients ask that we clean up non-productive affiliates more regularly, but before we remove an affiliate, we attempt to contact them to inquire about the status of their account. We do our best to encourage productive referrals from and commissions for all affiliates.

TOM MURPHY is Editor in Chief of Revenue and the author of Web Rules.

A Nose For Data

As a canny entrepreneur, you’ll want to monitor all aspects of your business. On the Internet, that comes down to tracking data, all kinds of it.

Remember, an affiliate is really an Internet marketer and successful marketers of all persuasions love data. Marketers burn to know who their customers are, where they heard about the company, what makes them come back, what makes them buy. One of the key differences between Internet marketing and the bricks-and-mortar kind is the amount of actionable data the Net can provide.

Keeping track of all that information can seem overwhelming. When she launched bargain shopping site DealHunting.com in 2000, Maggie Boone spent 16 hours a day trying to keep up with stores, products and coupons Ð for a grand total of $2,000 a month. “It’s really hard and very time-consuming,” Boone said. “If anyone thinks it’s easy, well, it’s the opposite.” That careful tracking paid off. Three years later, although she still puts in the hours, Boone has four full-time employees and an income that lets the family live comfortably without her having to work outside the home. She has enough profits salted away that her husband can retire whenever he wants to.

Get ready to become a data hound. If you want to be as successful as Maggie Boone, you’ll need to keep track of four different areas: sales; merchants and their offerings; traffic to, from and within your site; and your advertising and marketing.

How deeply you have to get into tracking data depends on what kind of site you have and how many programs you run. To offer one example, Rotten Tomatoes is a site for film buffs, packed with movie reviews, news and gossip. Visitors can buy DVDs, posters and games. Because the site is so targeted, Rotten Tomatoes works directly with just a handful of merchants. “A lot of these groups have their own ways of tracking,” Rotten Tomatoes CEO Patrick Lee said. “We can either log in to see them, or they send us reports.” Lee trusts the reports, although he might check how many clicks the site is sending over to a merchant, to make sure the numbers make sense.

Compare that simple approach with CouponMountain, a site that strives to help people “live a little above their means” by getting discounts on all sorts of stuff. Founded in 2001 as an after-work hobby by Talmadge O’Neill and Harry Tsao, it now draws 1 million unique visitors every month and reports that it sends more than $100 million in sales each year to approximately 500 merchant partners. CouponMountain, which now has a staff of 11, employs a mix of third-party services and homegrown software applications to keep close track of merchants, referrals, coupon expirations and advertising. The company has one person dedicated to checking merchant reports each day, using AffTrack, an Internet-based service that aggregates reports from networks and individual merchants.

The bottom line

Sales are, of course, top-of-mind for affiliates, because they’re the main influence on the bottom line. Each merchant program may have a different basis for commissions: One might pay for clicks through to its site, another for site registration, and another for sales of products.

Affiliate networks and individual merchants offer other Web-based reports where their partners can check sales and revenue. Reports may be real-time or updated daily or weekly. While many affiliates like to check their reports once a day, most wait at least a month or two to drop under-performing programs. Tracking of sales and commissions happens automatically and reliably, according to Chris Henger, vice president of sales and marketing for affiliate marketing company Performics, because each affiliate’s traffic comes to the merchant via a unique link. “Affiliates don’t have to monitor whether tracking is working,” Henger said. “[There are typically more issues] around, ‘What sales volume am I getting from this merchant, and how do I improve that?'”

Successful affiliates focus not on gross revenues, but on earnings-per-click, or EPC. (See the sidebar “ABCs of EPCs.”) “The most important metric you can get from any network or software is the EPC,” said Shawn Collins, director of affiliate marketing for resource site ClubMom. For example, someone might send a thousand clicks to a bookseller and only 120 clicks to a clothing store, each of which pay the same commission. If you looked only at the commission, you might assume the two programs were equally lucrative. You’d be wrong.

“They don’t pay attention to the fact that it took a lot less traffic to make that same amount of money from one of the merchants,” Collins said. “They don’t take the time to crunch the numbers to see what they actually earn. They’re just stupefied by the [gross] numbers.”

Tracking EPC can help you put your efforts into programs that return the most profit for the least amount of effort. Some network reporting tools and third-party software can automatically calculate and compare EPCs from a variety of programs. Some can also let affiliates create custom reports that compare merchants and programs in different ways so they can identify trends or compare conversion ratios. DealHunting and ClubMom use tracking and analysis tools from AffTrack. There are a lot of reporting options that people don’t take advantage of, according to Collins. Those who don’t, he said, “don’t see the real story.”

Merchant-dizing

When it comes to keeping an eye on all the different merchants, offers and promotions, top-producing affiliates can expect personal service from affiliate managers with the networks and merchants. For a smaller fry, it’s more self-serve. Boone said most of her time is spent on this aspect of her business. “We get a lot of our sales info from the customer channel,” she said. “A handful of merchants keeps us really informed; the rest we deal with as a customer to know what’s going on. We subscribe to the email newsletters that go to their customers, and we literally get hundreds of emails a day from different merchants with sales and bargains.”

Boone turned to a programmer friend to create a database of stores that automatically tracks coupon codes and deletes them as they expire. She can query the database to find out, for example, which stores don’t have any current offers. CouponMountain also built its own tool to track coupon expirations. And it has a content team that spends its days checking to make sure that offers are still good.

Aside from keeping an eye on expiring offers, affiliates have no control over their visitors’ experiences when they arrive on merchant sites. The more you make clear your role as a referrer, the less likely your visitors will blame you if things go wrong with a merchant. Working with trusted partners can ease your mind. Networks protect you by vetting merchants, and they’ll pull the plug on deadbeats. When dealing with established retailers, you can rely on their reputations to some extent. That doesn’t mean you shouldn’t explore less established brands. “There are always different new companies,” said Collins of ClubMom. “I’ll go to different message boards and ask around, ask who’s considered to be the most trustworthy vendor of a product.” Collins warned that you should take such advice with some caution, however. “There’s always a risk that a competitor might try to send you to a bad company. People are helpful and friendly, but they have their competitive interests.”

Still, it’s wise not to take remove yourself too far from consumer-merchant relations. Daniel Washburn, director of merchant development at CouponMountain, says consumer feedback is an important part of his business. “I’m in contact with merchants on a daily basis,” Washburn said. “But in an online business, customers aren’t walking in your front door. So having some sort of communication with them is very important in building a successful site.”

Every time a visitor requests a coupon from CouponMountain, a popup box asks, “Did this coupon work?” There are many places on the site that request feedback, and the company gets as many as 50 customer emails a day. These are not just complaints but also requests for particular coupons or items. But don’t ask for feedback unless you’re willing to respond within two days, the industry standard for good customer service. Wait any longer, and your customers will get impatient and either contact you again with more irritation or go elsewhere to find out what they want.

Positive attributes

Tracking offers and merchants is just the beginning. You can go deeper. Consumers on the Internet are often searching for product information to help them make choices. You need to understand why they make the choices they do on your site, so that you can encourage them to make choices that lead to sales. At the same time, as in the real world, not all shopping choices are based on objective considerations. Merchandising and presentation play a big part in decisions. Therefore, you should carefully track what Lisa Riolo, vice president of client development for affiliate network Commission Junction, calls “attributes.”

Offer attributes may be actual features of the product. To use credit card offers as an example, the product attributes include the introductory APR and annual fee. If you ran a financial information site, analyzing the attributes of your best-performing credit card offers might show you that your audience preferred cards with no annual fee, Riolo said.

How products are described and displayed are also attributes. A retailer might offer several different photos of the same product, in different sizes, with and without backgrounds, from different angles. If you keep track of which photos or descriptions you use, you can understand what works best with your unique site.

Traffic jamming

Another element to come to grips with is internal traffic: how do visitors move through your site? Large corporate Web publishers use complex applications to track visitors’ movements. Many affiliate networks let you put extra information into your links so that you can see which pages do the best job of getting visitors to click. This information lets you move ads and links to the pages visitors like and delete pages of no interest.

Tracking the comings and goings of Web visitors is as important as monitoring revenue. After all, it’s the traffic that makes you money. Check your ads, including banners, link exchanges and paid search results, to see what it is that drew people to your site.

Playing the search keyword game is an art and science unto itself, and many affiliates devote the majority of their time to scrutinizing and massaging their word lists. Search engines Google and Overture have tools that let advertisers observe how their paid search advertising performs. Some networks have management tools that let you incorporate paid search advertisements into your analysis of your overall activity within the network. Some site-building or management applications will let you compare results across search engines and networks.

When you’re ready to become more sophisticated, look for software tools that let you map everything we’ve discussed. “You may want to track all the events that led up to a sale, not just what ads got the most response,” said Commission Junction’s Riolo. Look at where the visitor landed on the merchant’s site, where and when people converted from shoppers to customers. Compare that to which product image you used, the product description and any keywords you bought to advertise on search engines and the text of your ad. “The combination of all this drives the consumer,” Riolo said.

This may sound like a lot of work, but it is worth your time. By tracking all these nitty-gritty details, you’ll get the big picture. Like a well-trained hunting dog, you’ll be able to anticipate the movements of your customers and sniff out the most profitable deals before they get away. n

SUSAN KUCHINSKAS, managing editor of Revenue, has covered online marketing and e-commerce for more than a decade. She is also the co-author of Going Mobile: Building the Real-time Enterprise with Mobile Applications that Work.