The Future of CPA Networks?

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Today brings the launch of another partnership marketing network, AllAdSpace.com. However, this network is putting a twist on the common notions of what being a network means. As more of these networks launch, what sorts of implications do their hybrid way of doing marketing online have for more traditional affiliate and CPA networks?

AllAdSpace’s hook is that it is free for both webmasters and advertisers. So, webmasters and site owners are able to sell ad space by listing it for free, and advertisers are able to search and browse listings of ad space, also for free. Unlike other online ad marketplaces and auction services, AllAdSpace.com charges no fees to ad buyers or sellers, and doesn’t take a percentage cut of any sales made.

According to the site, the network was conceived as a response to the online marketing industry’s lack of a completely free ad marketplace where site owners can sell ad space without having to pay a fee or give up a percentage of the sale.

The founder, Joseph Messina writes:

“No one should have to settle for only a percentage of their ad revenue. The future of buying and selling ad space online is definitely heading in a new direction, and AllAdSpace.com is proud to be taking the initiative to lead in this revolutionary idea.”

Essentially, these networks eliminate the middle-person in the publisher/network relationship. Just as importantly, this platform also eliminates the tracking, paperwork and bandwidth issues that can plague CPA networks which grow too fast or which are not equipped with adequate resources.

The real question is about the publishers. Will publishers see an opportunity for transparency and full reclamation of their generated commissions, or will they see these platforms as lacking essential protections in terms of reporting, payout dates and insertion orders. The publisher must decide if it is worth the 10-30% margins that most networks take to provide these services.

For all of their problems, networks do bridge the vast expanse which exists between most advertisers and publishers. For that reason, I don’t see these platforms cutting into the margins of CJ or Linkshare who rely on larger merchants and relative anonymity of relationship within the publisher base. The smaller CPA networks, however, should pay attention.

Q & A with Riya / Like.com’s Marketing Director Beth Kirsch

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Affiliate (or partnership-based) online advertising can and must change dramatically in how it is executed. We are truly in the junior leagues with “affiliate marketing” and “shopping comparison” in terms of cost and delivery structure. There are too many limitations. There are tectonic shifts occurring, today, beneath our feet and driven by advertisers.

Specifically, systems flexibility will drive change. Are you a vendor to advertisers who doesn’t provide flexible delivery and payment options for advertisers? You will lose.

Once the inflection point is reached certain vendors will win and others will lose. Innovative shopping solutions — either search-based (Like.com, Jellyfish.com) or relationship based (FatWallet, CouponMountain) — stand to benefit but only those who achieve adoption in critical mass for their market segment.

bethkirsch.gifLike.com has made an interesting move in search-based shopping solutions for advertisers and consumers (I use that word because the individuals using Like.com are, in all likelihood, seeking to consume something). I chatted with Beth Kirsch, the Marketing Director at Riya/Like.com (and ReveNews blogger) about her thoughts on the future of partnership marketing and Like.com’s goals at helping to shape that future…

What parts of your previous experience with affiliate and performance marketing help you the most in your role at Riya/Like.com?

Riya has two teams that are in charge of revenue generation: the biz dev team and the marketing team. My role at Riya is running the marketing team and I’m not managing relationships at all since that is handled by Biz Dev. Riya hired me for two reasons. First, I understand the blogosphere and second, my experience on the advertiser side generating traffic as well as developing and optimizing campaigns and websites. I think a focus on ROI driven advertising helps me everyday at work and is clearly derived from my affiliate and performance marketing background.

Also, as we all know, the affiliate business model is a challenging business model. From my first day on the job, I was thinking about ways to overcome those challenges because I have a performance marketing background. Let me provide two examples: (1) I’m thinking about reasons to give the consumer to buy though us in the first place; and (2) I’m particularly concerned with retention, in other words, a reason for consumers to come back and buy though us again and again. Watching affiliates and other marketers develop solutions to these issues over the years clearly has helped.

What is interesting is in my interview with Riya, I did not mention affiliate marketing once. I just interviewed as a marketer than happened to blog. My affiliate marketing background is just an added perk for them, but it clearly helps.

In your latest series of posts on ReveNews, you write: “I thought transitioning to a smaller company than Audible and LowerMyBills.com would be fun, smooth and simple. I figured I know how to open up channels and grow them, how hard can this be?” How does the new aspect of Like.com further complicate or simplify that paradigm?

We have been working on Like.com for a while and kept it in stealth mode for PR purposes. When I wrote that statement, I knew about the release, so nothing changed that much in that perspective. What does feel different about the launch are the expectations from everyone. My colleagues in research and engineering are looking at me and my partner in biz dev waiting for us to monetize their product. I also feel the eyes of affiliate marketing community looking at me too wondering if I can pull this off. This is my first time leading the marketing strategy and a department, so the pressure is on. I tend to like working under pressure, so I welcome the challenge. But I expect it to be hard and that I will stumble a little along the way.

In that same post on ReveNews, you write that: “When I got to Riya I realized that search was important and we needed to win at the search game which to me means the need for a serious bid management tool.” You thought this was an important insight but later your CEO, Munjal Shah, helped you to realize some new insights into the growth of your company. In retrospect, what advice would you give merchants or affiliates in regards to the importance of search in growing a site, program or company?

I still think search is an important channel for the company, we just staffed it differently that I thought we would. As for advice, that is a hard one, search is different for companies at different points in their growth cycle. I do believe that search will become even more important over time though and we all need to understand it as well as we can as marketers. I think it’s important to career success if you are interested in online advertising.

How do you answer critics about the celebrity/bling nature of Like.com (given Riya’s original mission of a facial recognition search platform)?

I’ve heard one person doing this and I’d call it link baiting. 😉 More seriously, we took money from investors and it’s our job to give them a return on their investment. Companies change business models all the time. Here is a blog entry by Peter Rip, one of our board members about the change in biz model called “the Riya Pivot.” I think this talks about the change in biz model very well and the reason why.

As an experienced affiliate marketer, what implications do you see for the future of the industry in terms of what is going on with Like.com?

Riya has been very fortunate to be embraced by the Web 2.0 community. I think there is a lot of synergy between Web 2.0 and affiliate marketing. First there are affiliates that are using Web 2.0 tactics. Scott Jangro has Costumzee and Vinny Lingham has Synthasite. Both have been featured in TechCrunch, the bible of Web 2.0. To me affiliates will embrace Web 2.0 because affiliate marketers are the first to adapt to new technology.

Second, As Web 2.0 companies learn how to monetize their product, I think they might turn to affiliate and performance marketing. Riya did, ThisNext has and so have others. This in combined with the release of CJ’s long awaited web services might lead to interesting affiliate business models. It will be fun to watch. I can’t wait to see what people come up with.

Mobile Marketing Making an Impact on Affiliates?

phone_thumb.gifI’ve spent a small amount of time working with marketers devoted solely to the mobile side of things, and to be sure the space has taken off in the past 18 months.  The United States does seem to behind Europe and Asia both in terms of mobile technologies and mobile ad serving (large use of mobile internet, or WAP, in Europe is just one example).

As these technologies continue to drop in price here in the States and users continue to demand more features pertaining to quick internet access, expect this sphere of marketing to explode.

The implications of mobile marketing for affiliate (or partnership) marketers are particularly enticing (delivery of relevant content, ads or messages to interested individuals on a cheap but effective platform).  Will Google get involved in this area as well?

This is from the mobile technology blog MobHappy…

Without being too trite, I think we can say that the future for mobile advertising is already here, despite not being on many marketers’ radars yet. Hundreds of millions of ads are already being run, click-through rates are much higher than online (8% is still not unusual, though 5% is more common) and millions of dollars of revenue are being generated through the channel.

CostPerNews Widget Now Available

Links are dead (more on that soon).

I’ve been promoting widgets as a promising platform for the future of affiliate marketing. So, I decided to construct a widget for Cost Per News that you can place on web pages or your desktop. Updates and podcasts that are added here will automatically be updated on your widget, so it will save you a little time if you’re a regular visitor.

Here is the file:
costpernews_widget.htm

Let me know if you have any suggestions or usage questions.

Weekly Insight – November 10, 2006

weekinsight.GIFAgain this week we overstepped the thirty minute barrier that Jeff was aiming for. We even went a small amount over the hour mark, but the conversation was interesting for the most part. The asides and random tangents were there, but we’re ringing them in much more effectively and the conversation is really becoming more developed (and valuable) every week. The addition of David Lewis to the regular cast of Amanda, Jeff, Wayne, Lee and myself added more depth to the insights on topics such as Jellyfish and coupon sites.

This show was particularly broad in scope, but there were some very good in depth discussions. We covered everything from the new Like.com to widgets to Marchex and Zanox with some more discussions about the nature and future of affiliate marketing thrown in. If you’re in the affiliate marketing industry and interested in cost per action, SEO or coupon sites, this is a must listen in my opinion. At the end of the show I got to throw in some comments about MyAffiliateProgram’s v9, which I will be covering early next week and we’ll hopefully be discussing on the podcast next week.

Weekly Insight

Friday November 10, 2006

  • David Lewis Shows Up!
  • Love, Hate for Like.com
  • Widgets, Search: Affiliate Marketing’s Future
  • Marchex/Domainers Marchex/Domainers Launching Ad Networks
  • Google v. Zanox

Download the Show in mp3

Here’s the link to the Weekly Insight Feed

Google Checkout Is Going International

google-checkout.jpgA few weeks back I made big news and landed on TechMeme for pointing out that ZeFrank’s Gimme Some Candy promotion had been dropped by Google Checkout for not selling an actual product. In the end, this worked out for Frank’s benefit as many of his Canadian users pointed out that Google Checkout was not open to residents of Canada anyway. He moved his promotion to PayPal and it has (by all accounts) been a large success both for Frank and his viewers who are more than happy to pay for duckies (even me).

Now, it looks as if Google Checkout is going international (heading off Zanox at the pass, perhaps?). Why is this important? Think of the vertical channels, content creation/aggregation (YouTube and Wiki’s) and the limited scope Adense to adequately encompass the growing canon of user content. The international factor is a logical extension of where Google is heading with its Advertising Operation System.

Garret Rogers writes:

Since I live in Canada, purchasing or selling items on Google Checkout is not an option. I really wanted to check out the new “email invoice” feature they just announced today, but I’m unable to sign up as a seller.

Bitter, I decided to poke around in the source code to see what I could find. It turns out they are getting ready to open up the service to Canada, and probably other countries soon. When you are in the signup form for Google Checkout, you can type this javascript into your address bar to reveal a Canadian signup page — unfortunately I’m still unable to register.

This is potentially a very important issue as Google seems to be amping up Checkout for the Holiday and early 2007 season with major discounts available to consumers in partnership with participating merchants.

Google is heading into CPA next year and it’s going to be a much larger scheme than we’ve imagined in all of our pontificating!

Affiliate Networks – Changing of the Guards?

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In his wrap-up coverage of this year’s ad:tech NYC, Scott Rewick of NextInternet writes that one of the things unique about this year’s conference was:

Rise of the “new networks” XY7, ClickBooth, CPA Empire, HydraMedia. I grew up in the early days of the Internet when the companies attracting all of the attention were Adteractive, MetaReward, and Azoogle. I sense a “changing of the guard” as the older companies mature, while the younger ones are aggressively pursuing growth.

I agree with Scott on the transformation that has been happening in the network side of the industry over the past four years. I was with SubscriberBASE at the time when the affiliate network phenomenon was just beginning to take off, and Jeff French had the foresight to see the need to expand our business to include this emerging space with the AdDrive network. Working with AdDrive in the early stages of growth and brand expansion was an incredible experience, and as Scott points out, the main competitors early on were the likes of Azoogle.

However, the market of affiliate networks soon experienced a Big Bang explosion which created an entire universe of networks along with a seemingly inexhaustible supply of material for the creation of new networks.
What’s the reason for this “changing of the guard” as Scott calls it? It has less to do with the ability of the “older” networks to keep up with shifting marketing forces, and more to do with these networks (Azoogle, Adteractive) maturing and expanding their scope in relationship to the largest of networks such as CJ or Linkshare.

As Jeff Molander pointed out last year,

I wonder… is it possible that Azoogle hopes to net a good number of the more cost-sensitive, smaller advertisers from the CJ network (during the most expensive time of the year)? Those, perhaps, who feel under-served (by CJ) and who have declined to purchase service packages for themselves? Might Azoogle be inclined to believe that they can make a better “value offer” to such advertisers… including a more affordable service offering that keys on the existing Azoogle “sweet spot” of hooking advertisers with their existing network of productive affiliates?

Spot on questions, Jeff. These questions are still not answered by Azoogle or any of the networks making the move from a publisher-network to industry competitor and are still relevant for discussions about the CPA space. With Google potentially considering a CPA move, next year could be quite interesting for everyone involved.
The stars seem to be aligning for major acquisitions in this space in 2007, so maybe the haze around the future of these networks will begin to clear then.

Changes at Yahoo’s Upper Levels?

question.jpgValleywag is reporting a tip that some of the top people at Yahoo! are going to be receiving the pink slip in the immediate future.

Guaranteed

  • Bill Demas, Senior Vice President & General Manager, Yahoo Publishing Network
  • Will Johnson, VP & general manager of the Yahoo Publishing Network

Any connection to the coming class action lawsuit first elaborated on by Jeff Molander?

vSocial and Adify Team Up for In-Video Vertical Advertising

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Adify is an interesting new player in the video space. Underneath the heading of “Community Driven Ad Networks,” their blog states that:

At Adify, we are developing a business model that “wraps around” this emerging form of content creation with a unique set of services for supporting monetization. Our community networks are designed to enable any participant – publisher, advertiser or user / enthusiast – to benefit directly from helping in the advertising sales or support process. We think that this is a breakthrough model with the same potential to democratize the business side of online media.

Of course there are alternatives for anyone seeking to spread the use of their video in either a specific vertical or across many channels. Today, however, Adify entered into a partnership with vSocial to allow publishers the option of publishing, branding and spreading their user generated content.

vSocial is a social networking for video platform that enables content owners, site operators and online marketing organizations to custom brand, target, virally distribute and monetize their message via video, so this partnership makes for an interesting platform for publishers looking outside the Revver or YouTube models.

According to the press release, this partnership shows some differentiation from competitors by enabling the publisher to include advertising through ease of use:

“Enabling in-video advertising is the next logical step in the evolution of the online video space,” said Mark Sigal, CEO and co-founder of vSocial. “By integrating our vConnect video platform with Adify’s advertising platform, we are giving video publishers a simple way to create value around their content and their brand in a manner that harnesses the power of social networking to create greater reach than has been available in the past.”

The biggest problem I see with this new platform is the reluctance many publishers may have for turning over their content to serve ads which they have limited or no control over. Revver has done a decent job at confronting this worry by allowing some control of ad content, and by building up its own brand since well-known “vlogs” are using the service.

While attempting to bring some democracy to video generation, this partnership still has a few questions of ad-relevancy and long term vision to make clear before publishers begin signing up.

Widgets and the Future of Affiliate Marketing

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Within a year we’re going to see blogs transforming themselves into customized start pages. This won’t happen with all blogs. It will start with high-traffic sites that zero in on popular verticals like tech and politics. As these tools become more sophisticated and easy to use, the trend will migrate down the Long Tail into other niches.

As I have mentioned before, you can easily transform your default home page into a one-stop-shop that covers most of your basic needs. So why can’t a blogger provide the same service to people who share a common passion on a topic?

Similarly, affiliate marketing in general (from the mom-and-pop sites up to the large loyalty sites) could see such a transformation if a 3rd party platform was made available to the industry. What would spur this metamorphosis? Limitations of scaling.

Rubel points out that one of th reasons this transformation has not occurred en masse in the blogosphere (particularly high traffic niche blogs) is because of the lack of infrastructure. Widgets require registrations (how about co-registrations??) and the ability to cope with large amounts of demand for personalized data. Simply put, most affiliates (and affiliate networks) don’t have the tech infrastructure for such an undertaking. Rubel suggests that in the next year, 3rd Parties will see this deficit and

“will handle the back end processing in exchange for a piece of the generated advertising revenue. This is a great next step for AdSense.”

Take this one step further into the realm of affiliate marketing. Providing a platform for delivering personalized data based on registrations in exchange for a piece of generated advertising revenue sounds very much like the model which most affiliate and CPA networks already operate under. That is no accident, because serving widgets and serving ads (particularly customized ads based on user choices and user registrations) have more in common than anyone in the affiliate marketing world has taken time to notice.

With the introduction of attention and more venture capital into the CPA network space, companies with familiarity of API’s and widget technology are also bringing new tools into the industry. Could the utilization of widgets enter with these newcomers?

The idea of building or morphing a high traffic affiliate site (especially think of loyalty sites such as uPromise, eBates, FatWallet or BizRate) into a widgetized one stop shop beyond the context of just hyperlinks into the realm of customized and portable content is not hard to imagine. Would this be profitable? Yes. Would this encourage user interaction? I definitely think so.

Transforming an affiliate site into a widget building blocks site requires one central thing besides the technology: relationship. Relationship is something (in theory) affiliate marketing is capable of producing across a wide variety of diaspora channels. And this producing of relationship engenders a community receptive to certain forms of communication. Of course, email marketing was effective before we killed it, and RSS has been called by many the next great hope.

However, let’s move beyond those models which still enforce that top-down dictation model and focus on models (like widgets) that produce a back and forth between user and affiliate site. That’s where affiliate marketing shines, and that’s the promise that widgets specifically have for pushing certain parts of the industry in the right direction.

For example, the new email company Gigya shows how utilizing widgets to communicate ideas, data and micro-entertainment might work in practice. Using Gigya’s interface, users can embed widgets containing music, videos, games and even their MySpace layout into an email. The person who receives the email will be able to play back the video, song or whatever has been embedded if they can view HTML email. Imagine an affiliate site or loyalty site pushing company or user generated content in such a format.

Jeff Molander makes the following lucid and well thought out insights about affiliate marketing’s scalability in the context of the relationship paradigm…

Why the freak-out by traditional affiliate managers and executives as Google enters the space? One word: Scale. It’s a word that, to many, is not comfortable in a realm that is dominated by relationships (those nasty little things that don’t scale!). The concepts of transparent (you know who, what, how, when you’re dealing with) advertising and opaque (you have less of an idea) are central as the former offers less scale, the latter more. As time goes on (competition for advertisers heats up) making performance-based ad buying frictionless is becoming more important. Hence, “traditional” (relationship-oriented, transparent, high maintenance) affiliate programs become more focused (coupon and loyalty shopping sites) and receive less attention (as they require more people power to scale).

The link is dead. Content customization based on a relationship (even as simple as user registration or co-registration) and micro-systems of delivery of that content is the new black. Affiliate marketing, with its ability to make relationships, has a great opportunity to make use of widgets and widget delivery to set the larger industry standard.

In this mode of widget usage, scalability is not a detriment to affiliate marketing. Rather than adhering to that long held belief that the non-scalability of affiliate marketing is what’s holding the industry back from the major leagues, realizing that new platforms (such as widgets) provide a way for affiliates and networks to utilize the relationship factor as a positive… an incredibly profitable and long-term solution positive.