R.O.EYE Blog

By Kate Perry, Programme Exec, R.O.EYE

From shopping and research to banking and social networking, we are increasingly going online, for everything we need. Obviously, Marketers want to be where their audience is, but as online becomes more and more complex and the consumer increasingly more savvy, it appears that using established tactics and static sites to get brands in front of consumers, no longer works. Indeed - in the light of Affiliate Window’s recent announcement of its new Facebook Application - it has become apparent that Merchants need to engage in a personal relationship with users; providing them with interactive tools, which encourage them to become part of the advertising process.

Affiliate Windows’ very own Facebook application – ‘The Wishlist’ – ‘encourages users to share, recommend, review and – crucially - covet items via an interactive list on their profile.’ Products are fed through to each Wishlist using the ShopWindow API. Though advertising through Facebook applications has, historically, provoked many a cautious response, there is no doubt that engaging users, to the extent that they customise their own online space and become a crucial part of a brands online advertising, is a very powerful tool.

The key to the success of this application, is to create a tool that adds value to the end-user experience, encouraging them, not only to download the application themselves, but also to distribute it through their network of friends. Users must feel empowered by the tool, rather than like a small part of the broader advertising process. To do this, it appears that Merchants will have to release a small element of brand control to their consumers, allowing them to review products and comment on brand messages in the public forum of Social Networking. Merchants who appear to have done this – such as Sky and STA Travel - are set to benefit, not only from the demographic profiling Facebook has to offer, but also from having a network of online brand ambassadors,

Creative, subtle, engaging and – crucially – interactive: it appears that these are the rules Merchants who wish to utlise Social Networking, as a direct-response marketing platform, must abide by. It is too early to forecast the success of Affiliate Window’s ‘Wishlist’ at this stage, but what is clear, is that this move signifies a new direction in traditional affiliate marketing.

Google’s recent acquisition of Doubleclick has set off alarm bells at R.O.EYE and others in affiliate marketing. The $3.1bn acquisition strongly suggests Google’s desire to break into the affiliate space.

And who can blame them. Affiliates, in the UK alone, helped to generate an estimated £2bn in e-commerce sales in 2006. This figure will only increase in 2007.

The acquisition, if this is indeed Google’s plan, is a cunning move as Google often reflects, through penalisations, that affiliates detract from the “optimal” user experience.

As Google currently tests its CPA based product however, this desire becomes even more evident. The one drawback for this model being that it is dependent on advertisers implementing Google Analytics tags on their sites – a major stumbling block for Google I imagine. But buying the market leading adserving solution should fix that. And by migrating to Dart for its conversion tracking, Google could in theory place a significant dent in the affiliate industry overnight.

Let’s look at a better alternative. There has been a lot of talk online about a Microsoft / Yahoo! acquisition, which would finally give Google some competition. An acquisition here would bring valuable technology such as Yahoo! Talk to Microsoft and would relieve some of the dominance Google has in online advertising revenue and web-based services. Unfortunately, to-date, this is only speculation.

In the coming months, Google’s next steps should be closely monitored. This acquisition does not only impact the affiliate industry - technology could also be at risk. If Google offers tracking solutions as a value added service to its “adwords”, there will be no charge for clients to use the software.

Such developments make me question how much of a business model remains for the adserving sector. If Google offers Dart, for free, to its existing clients - an estimated 60% market share – we might as well all close down and head to the pub.

We should be prepared for an imposing behavioural targeting model if Google starts serving inventory into its Adsense placements. And if BFP is withdrawn, as I’m sure many agencies suspect, we will be left with a monopoly media owner with a major share of the search market, a significant share of the display market, determined to operate a model totally geared towards a client direct trading relationship. Google could revolutionise advertising relationships, in a way that even Rupert Murdoch has not contemplated offline.

The potential implications of the DoubleClick acquisition should not be underestimated. Google is going to have to pull off a masterstroke in its execution to achieve full potential.

We can only hope the competition commissions, to who this case has been referred, will do us justice. Otherwise, for the first time, the future of affiliate marketing could be in the hands of Microsoft.

The affiliate marketing industry is showing its teeth, bringing in an estimated £2 billion worth of e-commerce sales in 2006. With an estimated 80% of this coming from only 20% of affiliates, there is a lot of power being held by only a handful of players. Affiliate marketing is now, more than ever, in need of good communication skills to ensure that clients are getting the cut through needed with ‘super affiliates’ - the big hitters having a huge impact on your online returns.

One thing affiliate marketers don’t often take into account when running affiliate programmes is media agency and public relations skills. And why would they? Affiliate marketing is about securing sales for merchants in exchange for commissions, while media agencies and PR are about wooing journalists and ad networks to get publicity for their clients. Right? Not anymore.

The shape of the affiliate industry is quickly changing, with the success of many affiliate programmes relying on their ‘super affiliate’ relationships for maximum visibility and sales across affiliate networks. But the future of affiliate programmes is not based on sales alone.

Previous experience in media agency environments has taught me that there are better ways of running affiliate programmes. Ensuring merchants have maximum visibility and branding across affiliate sites, and making sure activity is tied to the wider marketing mix, will produce far higher returns.

Below are six key learnings that affiliate marketers should consider when running and securing affiliate programmes – to ensure maximum returns:

• An understanding of how marketing functions operate and how merchants work is essential. Affiliates are sales people, not always marketers, and more often than not, don’t understand marketing constraints, for example why budgets get pulled. Media agencies know how to deal with marketers and this knowledge and skill will enable affiliates to integrate programmes within the wider marketing mix.
• Affiliate marketers need to act as a filter between merchants and affiliates. Both merchant and affiliate time is limited, meaning affiliates need to be able to filter out important aspects of their merchant products and services. Draw out the important information, filtering out what affiliates don’t need, and package the necessary info to make life easier for affiliates.
• Tailored reporting for ‘super affiliates’ is a good way to build rapport and keep your merchants on the top affiliate sites. We run an in house reporting system called DMS, which means we can create tailored reports for super affiliates, giving them the information they need from clients. This makes reporting more accountable and helps affiliates with their month end reporting.
• Think outside the box by assisting affiliates with more innovative ways of driving traffic to their sites - go beyond banners and buttons. Examples could include setting up a blog; product of the week; integrated application forms; use of databases for email lists and specific offers. Offer affiliate programmes as part of the wider marketing mix. Get involved in the marketing process. Secure your budget allocation and give affiliate programmes a voice during the planning stage. Knowing when marketing events are taking place and linking affiliate programmes to events such as product launches or a new TV ad can have great returns.
• Online branding is a huge task. If affiliates can ensure branding across their sites is consistent and compliant, this is a heavy weight off the shoulders of merchants, making the value of using affiliate marketers just that little bit more apparent.

Working with dedicated affiliate managers, as opposed to in house marketing executives, is highly advisable, as they (should) go above and beyond the sales side of affiliate marketing. It is their job to ensure relationships with ‘super affiliates’ are maintained; that branding is consistent across their sites; that brands get maximum exposure online, and that all affiliate activity links back to marketing campaigns. If you are already achieving this from your affiliate programmes, keep up the good work. If not, it’s time to see how you can better maximise affiliates for your marketing gain.

With the web being the dynamic entity that it is, it is not surprising to hear about the many mergers and acquisitions that take place each month in the online marketing space. However, certain recent deals have taken aback even the most experienced marketers. These market moves cannot be put down to the usual flurry of activity which has led to online businesses being traded at very healthy profit multiples. They are potentially Herculean transactions which could change the shape of the space in which we operate.

The Google Doubleclick acquisition continues to make waves in the online marketing industry. Although it has now been referred to the US regulators, industry rumours suggest that the deal is expected to go through. It is likely that Performics, the PPC and Affiliate arm of Doubleclick, is to be jettisoned from the new marriage due to competition fears. But even the substantial Google deal has become old news in light of activity which has taken place in its wake.

Smarting from losing Doubleclick to Google, Microsoft stunned many industry observers with the $6bn purchase of Aquantive. This figure is three times the amount Microsoft has paid for any other company and is the industry’s biggest deal, doubling the price paid for Doubleclick. Borne out of the market-leading direct agency AvenueA at the turn of the century, Aquantive went on to build a robust adserving platform in Atlas. It added GoToast (at the time the market-leading bid management software) to its product portfolio, alongside agency businesses including the remnants of Razorfish and, in the UK, DNA.

Interestingly (and predictably), it looks like the ‘big guns’ are focussing on two primary assets – search and technology. Rumours abound that these deals could see the birth of ‘super-agencies’, in which search engines effectively have the technical abilities and skill sets to interface directly with merchants and run their search campaigns on a bilateral basis. Should this be true, the death knell to the major SEM’s will be the final removal of their agency commissions. Whilst smaller SEM’s and full service off-shoots may be able to survive due to their agility and fee structures, anyone running a major SEM relying on agency commissions should be very concerned indeed.

As is often the case however, while these plans are outstanding on paper, the benefits will only be fully realised upon their execution. It will be a huge hurdle for these technology companies to integrate their relevant functions and combine them with the human element. It is the human side which has enabled agencies to carve out such an important niche in the market – adding value. We all know that the strongest marketing initiatives are the products of well laid plans and individual talent. It will be interesting to see how the latter is added into the mix to give the SEM sector a run for its money.

Not all the deals, however, are about technology businesses moving into the agency sector: the reverse is also happening. Sir Martin Sorrell has joined the party in his WPP juggernaut by buying 24/7 Realmedia. As well as opening up a significant remnant inventory arm to the WPP network, 24/7 also owns the Openadstream adserving platform. This acquisition could be a very shrewd move indeed, as it offers the benefits of an in-house tracking tool and the economies that come with it.

With rumours of a possible liaison between Microsoft and Yahoo! still rife and the current hotbed of activity within the internet TV sector, it looks like the rate of consolidation is set to continue. If it is accepted that three months in the online world equates to a year (or more!) within traditional industries, is there anyone willing to gamble where the balance of power will lie by Christmas?