I have written in the past about how the difficult economic climate could reap rewards for affiliate marketing and other paid on performance models, but I have to disagree with the statement that the advertising industry will need to move towards a CPL/CPS based pricing model in order to maintain its growth in popularity.  Whilst pure performance based advertising models are very attractive on the face of it, they are not as straight forward, and simplistic, as they might sound.  In fact, the downfalls of PPC advertising identified in the article could quite as easily be applied to CPL and performance channels as well:

“Increasing costs of keywords”: could quite easily be applied to increasing costs of leads.  The increased cost comes from competition, the more advertisers wishing to “buy” the lead or click, the more expensive it becomes, simple supply and demand.  This is potentially even more magnified in affiliate and cost per lead advertising as the market is more finite and less developed.  A CPC advertiser in a search market may be priced out of the more generic, high volume keywords, but can still gain traction in the lower volume specific keywords.  In affiliate marketing all the leads go to the highest bidder, and there is less of a long tail for those with a smaller CPL target.

“Increasing click fraud”: The author doesn’t state how he is judging it to be an increase just states Google’s Q3 stats.  I have worked in search marketing for 5+ years and I think that there is less click fraud around now than in the days of straight bid auction systems.  What has increased is awareness of the problem and the ability to report the stats.  I have also worked in affiliate marketing and from my experiences I would say there is far more fraud in affiliate marketing than you ever see in search.  Affiliates and partners try everything in their power to claim the leads which come through your website.  From filling in bogus details themselves, to cookie dropping to claim leads which weren’t directly theirs.  I have seen fraud as high as 70% through affiliate marketing!

“Lack of Transparency”: Ditto with CPL advertising!  multiple affiliates claiming each lead, lack of number tallying between affiliate tracking systems and in house technology, lack of clarity on the affiliates driving the leads, the list could go on.

“Difficult to tie in with business metrics”: Whilst you can build a CPL model which “should” fit your business goals, the points made above make this very difficult.  More difficult I would say than with paid search.

Whilst I am not trying to discredit CPL/CPS advertising I think there is a long way to go before it becomes a replacement for CPC advertising.  Paid search and other CPC forms still represent the most measurable and trackable form of advertising and they are still much more measurable than other channels, both on and offline.  I believe paid search is set to grow as it gains budgets originally allocated for display advertising online, and similar offline channels such as TV, radio, billboard and magazine, all of which have much less accountability.

A quick view of the authors profile produces the reason for his apparent bias, he is the Co-founder and CEO of a lead generation market, that explains a few things! Performance based advertising may be the future, but it has a long way to go before it replaces CPC, the main reasons for which will follow in part 2…

The affiliates will have to agree to Google’s terms and conditions which will mean that the affiliate is responsible for ensuring the gambling sites they advertise are legitimate, therefore removing all liability from Google themselves!  Another requirement is that the affiliate is “adding to the user experience” and not simply showing details of a single gambling site or regurgitating website copy available elsewhere.  The word “comparison” came up on more than one occasion int he call and so affiliates comparing gambling programmes is clearly an area Google is thinking for the new sites they allow on board.

All campaigns will be manually approved by Google by a specialist gambling tema they have set up.

Who will qualify?

• affiliates comparing programmes or “adding value” to the user journey

Who wont qualify?

• Affiliates direct linking to gambling providers
• Affiliates copying or mirroring gambling sites or copy from gambling sites

So its open season for affiliates who meet the criteria and a potentially expensive time for gambling companies who’s own CPCs will rise and they will begin to see their affiliate commission payouts on the increase at the same time, double whammy!

Google: Obviously this going to have a slight impact the company which made the change!  This is a massive market for online and is bound to generate a large amount of revenue for Google with some stories quoted figures as high as £300 million.

Gambling Companies: Google has opened up a huge new revenue stream for gambling advertisers which had been frustratingly out of their grasp in the past.  Having to make do with traffic and registrations from Yahoo and MSN had meant that these companies, who were willing to spend large amounts on new sign ups, were unable to reach all the available users.  This has all changed now and gambling companies are rubbing their hands together at the prospect of all the new sign ups they are set to receive from this new channel.

Affiliates: Affiliates willing to push the rules had for a long time been making the most of Google’s ban by employing out of hours bidding and trademark bidding to cash in through the gambling affiliate programmes.  With the new changes, and the requirement of a gambling license, affiliates will find it harder to bypass the system, but will also be priced out by the gambling companies as their returns are lower and so they wont be able to compete on CPCs.

Search Engine Optimisers: I’m not sure how big an impact this will have but I just wondered how the introduction of PPC listings is going to reduce the SEO volume in gambling on Google.  In theory it should remove about 20-30% of the available traffic which could impact the time and money invested in SEO by the big gambling companies.

Agencies: If you have gambling clients, rejoice!  Their value has just increased 10 fold.  So long as you are quick off the mark and get them live you could be looking at a good Q4.

Yahoo and MSN: Gambling has been a large part of Yahoo’s revenues for a while as they have made the most of the Google ban.  Now this is lifted they could see a large dent in their revenues from this channel as gambling marketers allocate more of their spend to Google.  The affect will be two fold, with advertisers looking to free up budget for Googled so reducing overall spend, and a natural reduction of competition on Yahoo and MSN which will  bring the market CPC levels down, so its a double edged sword for them.

The market is yet to settle down, and we wont know the full extent until it does but it is certainly one of the biggest announcements google have made in a while and should help their share price a little!

A recent poll by toprankasked 400 business marketers “What 3 Internet marketing tactics will you emphasize most in the next 6 months?”.  The results showing SEO top of the digital agenda with 149 votes, Blogging second with 134 and Pay per click third with 107.  These are pretty high statistics for a group of people who were not necessarily Internet focused and would undoubtedly be considering these channels against other offline possibilities.  It shows a growing confidence in these channels from mainstream marketeers and a growth in understanding of the benefits to the business.

Similarly Jonathan Mendez is Spitting in the Face of Pessimism regarding the recession and saying that Internet firms with a solid model should be relishing the prospect of economic downturn as long as their business model is built on the right foundations.  Suggesting that Internet advertising models which are based on return and performance are set to benefit, and even prosper in a period where marketers will be prudent with their spending.

I have to agree with these pieces, when the purse strings are tightened, the only channels which will be considered are those which can bring the least risk.  and with their measurability and accountability online channels are bound to come out on top.  What they maybe dont account for is that the advertisers businesses also have to survive in order for them to be spending money.  Many finance companies for example are cutting online budgets at the moment, not becasue the channel isnt performing, but because their OWN market is in disaray, similarly with property advertisers.  But on the whole, digital marketing should come out on top which bodes well for those involved int he industry.  Bring on the recession I say!

May 20, 2008

Microsoft to Launch “Live Search Cash Back” Tomorrow

The major Microsoft Live Search announcement scheduled for tomorrow will be the official launch of a new product: Microsoft Live Search Cash Back.

The program in partnership with eBay and its PayPal unit will offer cash back to consumers who search on Microsoft Live and make a purchase. The announcement will be made in conjunction with a taped message from eBay CEO John Donahoe. The technology is based on the acquisition of Jellyfish by Microsoft in September, 2007.

The announcement is expected to be made by Satya Nadella, SVP Search, portal & Advertising Platform Group, Microsoft, prior to Bill Gates’ presentation on “Connecting the Future.” The goal is to differentiate Microsoft’s vertical search experience for users while leveraging improvements in the core search algorithm.

Microsoft believes the Live Search Cash Back program will align the interests of consumers and the search engine, putting Microsoft “on the same side as the consumer.”

The job of Live Search will be to match the most relevant products with the most relevant consumers.

Microsoft will likely offer advertisers a CPA (Cost-Per-Acquisition) model rather than a traditional search engine Cost-Per-Click (CPC) auction.

Tony Hsieh, CEO of Zappos, said in a taped interview that the program would help overcome the barriers of first-time buyers of shoes online.

A Barnes & Noble executive stated that clickthrough rates and purchases had increased through the use of the Jellyfish pilot program.

The following message is posted on the Jellyfish.com Web site:

“As part of our pledge to save you money on the products you buy, our Cash Back rewards service is currently offline to perform necessary service upgrades and enhancements. Jellyfish Account holders will receive an e-mail notification when our Cash Back service is up and running again. Thanks for your patience.Using Jellyfish, consumers could compare prices of products from a number of online stores. Retailers paid Jellyfish fees to feature products. A portion of that fee was refunded to consumers who bought through the Jellyfish site.

Jellyfish also offered “Smack Auctions.” During each Smack show, Jellyfish would auction off new products in a unique price dropping format. Every second that ticks off the clock, Jellyfish would drop the price of the product, until the deal sold out.

Jellyfish founder Brian Wiegand is agroup manager at Microsoft. Last year, ye stated, Microsoft is “investing heavily in shopping and e-commerce.”

Microsoft closed the deal on Sept. 27, 2007 but didn’t announce it until Oct. 2, 2007.

This isn’t the first foray of Microsoft into the world of search engine incentives.

Microsoft Live Club is an ongoing experiment with incentivizing searchers but never on the Live Search Cash Back scale. For example, Microsoft Live Search Club lets users play games. A completed gives earns tickets toward prizes, such as Zune accessories, song downloads and ringtones.

Microsoft’s official statement on the announcement:

On Wednesday, we will be announcing a major new initiative that our search teams have been driving. We are getting better and better with our core algorithmic search, and at the same time, we are investing to differentiate in vertical experiences and to disrupt the current model. You’ll hear more about our plans Wednesday.