What’s one thing that advertisers and customers can agree on? Advertising Spend?

Some control shifts that are happening in this age of customer empowerment are being classified as Vendor Relationship Management (VRM), which is basically a movement to enable customers to have more control in managing their relationships with companies who are attempting to sell them products or services. The idea is very much tied to the data portability/ownership movement and is increasingly being tied to pay-for-performance marketing.  Harvard Law School is organizing initiatives to move VRM forward for a host of reasons including privacy, control and economics.  These are obvious benefits for customers.  Conversely, advertisers are reluctant to give up their control.  But there is one thing that both Customers and Advertisers can agree on – a better way to spend $1 billion of wasted money.  Here are some interesting views of the costs associated with ineffective advertising and the increasing role that pay-for-performance online marketing will play in the new world.

At least $1B of what’s spent on online advertising is completely wasted and is unsustainable. Advertisers are going to eventually wake up and recognize that unless it’s a highly visible placement, banners get you largely nowhere.

Some claim this number is actually as high as $100 billion throughout all channels.
 
The Cost-Per-Action/Pay-for-Performance business model of Affiliate Marketing is likely to continue to transform the ad industry, significantly reducing billions in unnecessary expenses, including the $1B wasted on unseen display ads in Rubel’s analysis.

Perhaps this money could be spent on adding value to a customer’s lives and on truly building win-win relationships. Well, customers and advertisers have long accepted advertiser money for funding enhancements to customer’s lives – so this isn’t a stretch.  The question is, how do we track it to a specific customer reward level in this fragmented media environment?  Just to think a bit out of the box — would there ever be a complete flip, where systems track what advertisers are doing for customers – all from a customer-centric POV?  What would that performance model look like – advertising and loyalty per enhancement?  How could customer-owned data models enable more effective advertising/loyalty programs and an exchange of what customers and companies both want in a relationship? Tracking is a unique feature of online media – but customers hold control over advertisers by limiting how and where they are tracked.  Customers owning their own tracking/data and embracing performance exchanges is potentially much more efficient for both companies and customers.

Just food for thought.  

Check out more on VRM on Harvard’s website.

Google announced today that they are launching the “Google Affiliate Network”. This further integrates and consolidates Performics after Google acquired DoubleClick Performics. Most importantly this is a significant validation of the effectiveness and viability of the affiliate marketing channel.

The integration marks the beginning of the next evolution in affiliate marketing through consolidation and innovation. The industry needs to evolve as performance marketing becomes a very important channel for advertisers and publishers. Additionally, current economic conditions have mandated the need for more effective spending. I think this will create a new round of industry consolidation as it moves from ad networks and exchanges into the affiliate marketing community. Accountability is king right now, and performance marketing offers the best ROI across multiple distribution channels such as email, search, display, mobile and social media.

The most important aspect of this announcement is that it moves the industry away from the “network” and closer to being platform-centric. We firmly believe the next evolution of performance marketing is about open, modular and multi dimensional platforms as we move away from one dimensional networks.

Here is the announcement from Chris Henger, group product manager for the Google Affiliate Network.

We are pleased to introduce Google Affiliate Network . Effective Monday, June 30, 2008, DoubleClick Performics Affiliate will operate as Google Affiliate Network. The integration with Google’s brand is a reflection of efforts to quickly assimilate our business and teams, as well as reinforce Google’s commitment to the Affiliate channel. Together with our new colleagues at Google we are creating new opportunities for monetization, expansion and innovation in Affiliate Marketing.

Within the next couple of weeks you will see some exciting changes to the user interface reflecting the new brand. The platform will continue to be hosted at www.ConnectCommerce.com, but will eventually migrate to a google.com product url.

As noted in earlier communications, DoubleClick Performics’ Search operations are being spun off and sold to a third party. While many advertisers have relationships with both DoubleClick Performics’ Affiliate and Search, there have always been separate account teams and product-specific specialists servicing clients’ search and affiliate programs. These teams remain intact. While the formal separation will occur when the Search business is sold, the businesses are functionally separate today.

We are proud of what we achieved as Performics and this name change signals a new milestone. Google provides world-class resources and enables us to continue to attract the best talent to support our advertisers and publishers. Now as part of Google we have an exciting and unprecedented opportunity to advance our industry. We remain committed to ensuring you receive the quality service you have come to expect from us.

We appreciate your business and look forward to doing great things together.

Sincerely,

Chris Henger

Group Product Manager
Google Affiliate Network

So last night I dusted off one of my favorite movies, the 1973 classic martial arts film Enter The Dragon. While watching it I began to see some great marketing wisdom in the dialog and found it be extremely timely and quite relevant concerning a current project I am engage in. I thought I would share with you the highlights of Enter The Dragon: Competitive Marketing.

“Do not concentrate on the finger or you will miss all that heavenly glory”

Too often we have tight timelines, many moving parts, multiple contributors, and general the general chaos and distraction of life surrounding us while we are getting our go to market plans ready.It is very easy to focus solely on the tasks at hand with out stepping back and looking at the big picture. Often that picture is pretty fantastic, even while the current project you are working on may be a pain in the ass. Don’t forget that you are part of a team, and a business unit, and company all striving for the same thing - success in business and a great quality of life, however that is defined by both your industry, your company, and your family. Look up from your desk, take a walk, talk with a colleague and acknowledge the goodness in your efforts.

“Boards don’t hit back”

Practice. Practice. Practice. and then practice some more. Run your presentation by a group of peers before the keynote. Double check that persona one more time before running the scenario. Go back through notes, your email, your gut checks. Because there comes a time when you will be faced with real competition and must respond in real-time, to real threats, and must fight real battles in your market space, or at a closing meeting with a new client, or with the CMO of your company about how you think that a solution based positioning isn’t really an advantage for the market pentetration of the product and wont differentiate it in an already over crowded…. anyway. I digress.

Han: “Your style is unorthodox”
WIlliams: “But effective”

Many times we have to look deeper than our established bag of tricks, especially in a market that is fast moving, constantly changing, and that requires creativity, confidence and stamina to win. And not just win once, but to win repeatedly. I have always considered myself to be a bright guy, and the smartest thing that I do is to surround myself with people smarter than me. (or is it I. Smarter than I.. have to call my wife on that.)

Anyway, the point that Williams was making is that one should strive to be effective no matter what the method of action may require. I call on those around me to shake up my snow globe of ideas and see if they find patterns or data or insights that I may have missed. The way we finally get to a result may be a little odd, but those results are not.

“Never take your eyes off your opponent, even when you bow”

You never know the exact moment of opportunity and must be ready to either strike or defend in real-time. Defensibility in the market space is a one of the primary reasons certain startups don’t get handed their lunch by the fourth week of school. Great companies are constantly looking to defend and strengthen their position at every opportunity. And its not so much the “best offense is a good defense” mentality. It’s more to the point of be aware of your surroundings. If you are looking to gain a position in the market, you are damn certain your competition is looking to do the same. Just be sure not to get caught looking. Be prepared to act.

“Provide your customers with products they need and, uh, charge a little bit to stimulate your market and before you know it customers come to depend on you, I mean really need you. “

Ok, so in the flick they were talking about drug smuggling and corruption, but its the classic case of creating a need in the market, fanning it with desire, and capturing the trust of your clients. During my storied career as a tech sales guy I never really sold the product (which might be why I eventually was fired.) What I did sell though was need - need for the product or service that we could provide. And I would compare that to my competition, noble warriors all, but just not quite as good as what we had to offer. And then I would show them how they could trust me, and that I had our mutual best interest in hand. Oh, and if they bought now I would take off an additional 12% on signing. Need + desire + dependency. Its not just for romance novels anymore.

“You must attend the morning ritual in uniform.”

Come prepared. Most reasons we miss that window of opportunity is that we don’t recognize it as it is coming toward us, see it only as its passing by, or see it early but just cant get ready to anything about it. Come to work ready to work. Go to a house party ready to party. Be present and appropriate and provide both context and content for whatever you are doing. And that goes for your marketing plan as well. A key word here is ritual. Practice, reverence, and habit can be key to developing a winning marketing strategy.

Enter The Dragon is only one of many examples of films that provide nuggets of introspection and learning within the dialog. Now its up to you. I would love to hear about your movie insights and how they align with your industry. Post them in the comments. If they are especially good, I’ll send you the movie of your choice as a “thank you”.

Bonus points if you can define Market Readiness from The Big Lebowski. Have fun.

Robert Scoble is talking about how YouTube is going long-form and why it will be more profitable for them and more attractive to advertisers. His argument is that if someone is willing to sit through a 30-minute video online, then they are more engaged and will more likely be customers for advertisers:

Someone who’ll watch a 30-minute video is HIGHLY ENGAGED. They are far more likely to become a customer than someone who just watches a two-minute entertaining video.

Here’s why: long videos are a filter. Only the most passionate and most interested people online will watch such a video. Those who aren’t interested wouldn’t even consider watching a long video.

It’s a nice theory, but I don’t buy it. First, I believe that a large chunk of people that consume online video do so at work. That environment allows you to watch a 2-5 minute video and then get back to what you are doing. It also allows for more interruptions, while still being able to finish the video. How many times are you going to tolerate being interrupted at work by co-workers, phone calls, or email before you throw in the towel on a 30-minute video?

People just don’t watch long-form video on their computer. My own video work has fallen victim to this as well. I’ve done many videos that were 15 minutes long and after watching them with colleagues or with an objective eye, it was clear that people get antsy after 7 or 8 minutes. It made me cut deeper during the editing process and really get to the meat of the content. My productions are better for it.

Don’t get me wrong, I’m not saying that it is impossible for a long-form video to find an audience online. After all, Scoble does just fine with viewership of his pieces - although it doesn’t hurt to have his brand name and the weight of Fast Company behind him. Additionally, sites like Hulu that archive complete TV shows and movies will find an audience because they are serving up content that already has a traditional media audience of millions. It’s hard enough for unknown prosumer / UGC / pro content to find an audience with short, well-paced pieces. I believe that becomes an even bigger challenge when the content starts getting into the 30-minute range.

The other side effect I see of YouTube allowing video longer than 10 minutes is increased piracy. They can barely police their network efficiently now with a 10-minute limit. This opens up their network to people adding complete TV shows or movies. That means their copyright department is going to be working lots of overtime.

Advertisers want engagement. We know that. To me, that is better measured by how many people comment on a video or link to it, rather than making the assumption that committing to watching a longer video makes them a better potential customer.

An affiliate marketing panel at the 2008 Internet Retailer Conference led by panel moderator George Michie from RKG allegedly turned into an unethical and irresponsible affiliate marketing bashing session. Linda Buquet at 5 Star Affiliate Programs reported in a post that about 400 merchants attended a panel session that turned into a 90 minute rant about what scum-bags affiliates are.

The session led to this video interview with Larry Joseloff, VP of content at Shop.org talking about the state of affiliate marketing, where it’s going, and how it needs to reinvent itself. He makes some valid points but for the most part seems a bit out of touch with the inner workings of the affiliate marketing channel. He also didn’t really offer any thoughts on ways to improve the channel.

This issue is nothing new to the industry and is actually one that is being addressed with the formation of the PMA “Performance Marketing Alliance”which will be working with affiliates, merchants, networks and service providers to set standards and govern this very large and valuable marketing channel.

The disturbing part of this recent event is how the panel was poorly led by its moderator George Michie -  who not only led this unethical and irresponsible style of panel moderation, but then continues to speak out of both sides of his mouth with a backhanded apology that instead re-bashed affiliate marketing without one shred of data to substantiate his rant. This not only demonstrates how a panel should not be moderated, it also demonstrates poor leadership that creates a negative image of the entire online marketing industry’s integrity. Here’s an excerpt:

Finally, I implied in my talk that most affiliates were “bad guys”. That was wrong. I apologize to those I offended. However, I do believe that the vast majority of the $3 Billion in affiliate commissions that will be paid out this year will go to cheaters, and other programs that add no value for retailers.

Does this not put him in the same ethics category as the few affiliates (out of the many) who he rants about? Is it not a moderators job to be a leader and provide an objective platform on all sides of the panel discussion? Why was there no representation from the affiliate marketing side of the business to speak about the channel? It seems that he was instead more interested in taking the opportunity to self promote his PPC channel and services.

Shawn Collins has posted a sound response on his blog “Consultants Can Fix Affiliate Marketing” that challenges and counters George Michie’s childish BS! There is also a good affiliate discussion in ABestWeb regarding the panels lack of affiliate representation. 

You can read my response in the comments HERE.

Who has business partners that they can’t contact and build relationships with? How many people get financial statements with the understanding that they are only 90% accurate? How many marketers want to build campaigns in one channel and not be able to leverage them in another? How many companies want to be forced into paying fees for services that ineffectively bridge gaps that are actually created by the service provider? How many companies want to be forced into silos and high switching costs as the result of a vendor’s strategy? Who wants redundancy and inefficiency due to a lack of standards?

Well, at this point – thousands of advertisers and publishers in the current affiliate marketing models. Or, at least, they are made to accept these compromises.

Why? – I think there are basically two reasons:

1. Affiliate marketing is relatively narrow and under served. It has not gotten the attention that other online channels have had in terms of standardization, technology advancement and channel integration.

2. Vendors and networks that control the market have not needed to evolve because of their clout. They’ve used this clout to create closed networks, proprietary standards and high switching costs. Some changes toward what clients are asking for now, could result in loss of control and revenue.

Are there better ways? – of course! Many networks, vendors and clients are talking about the changes that need to be made, but the industry has still not truly moved toward more accurate tracking, open communication, universal standards, more sophisticated ‘action’ metrics or integrated channel/partner models.

I think that in any industry, customer compromises flag areas from which the next generation of innovators emerge. And that’s where we need to focus as an industry ready for that next evolutionary stage.

This week we did something different, and somewhat indulgent - we turned spotlight on ourselves and shared the how’s and why’s that go into creating the Relevantly Speaking podcast. How was it conceived? What type of equipment do we we use to shoot the segments? What is the distribution philosophy? What are we working on next?

Christopher and I talked about all of that during a sunny afternoon in my backyard in Santa Barbara. If you’re really paying attention, you can catch a glimpse of my dog, Mia, hanging around the “set.” You may also hear lawnmowers, birds, and other sounds of the day. We felt these added to the unique flavor of the behind the scenes chat.

If you’d like to share your thoughts on how you produce your podcast, we’d love to have you join the conversation in the comments section.

Check out Relevantly Speaking in Hi-Definition Video

Today, our pay for performance division, Advaliant, jumps into the arena of social networking. This move is long overdue, but we wanted to make sure we did our homework and positioned ourself in a way that made sense to our affiliates and our advertisers.

Our rollout centers around the idea of micro-blogging; short updates about new offers, news in the affiliate marketing space, and our perspective on the state of the industry. In addition to our presence on larger platforms like Twitter, MySpace, and facebook, we’ll also be participating in communities like Hi5, Bebo, Tumblr, Plurk, Xanga, Mashable, and Pownce. We believe that Advaliant’s journey into social media is more comprehensive than any other pay for performance network’s is to date.

Over the next few months you’ll see lots of great content coming from the Advaliant camp. In addition to our social networking activities across the web, we’ll also be doing some great stuff on our internal web properties including affiliate marketing podcast episodes (see our recent interview with David Taber) and the launch of the Advaliant blog.

We have some of the top minds in the pay for performance space working at Advaliant. Over the next few months I think you’ll come to see that in a big way. The first person I’d like to introduce you to is Larry Markovitz who works in Business Development. He’ll be the voice of Advaliant through our micro-blogging activities and will help steer you towards interesting content in our space. We know you’ll get to appreciate his intelligence, charm, passion, and wit - just like we have here at MediaTrust. If you’d like to start by following him at Twitter, you can do so HERE.

This is the second part of our conversation with David Taber. In this segment David talks about how affiliate networks can make themselves more attractive to advertisers and what you should look for when researching a network to do business with.

Check out Relevantly Speaking in Hi-Definition Video

Great news from the front line of the New York State Affiliate Tax (also known as the Amazon Tax) front. After dropping their New York affiliates Overstock has turned around and joined Amazon in fighting the affiliate tax. The news was fist broken this weekend by Linda at 5 Star Affiliate Programs who along with Heather Paulson and Shawn Collins has been following the events closely and getting key information out into the affiliate community. I have to say I am impressed at how our community has collaborated through the use of social media to create a voice and ground swell against the tax issue.

I was fortunate to be speaking to our business partner Adrian from Meet Innovators who had been reading our posts and he told me he was going to interview Patric Byrne the CEO of Overstock. Adrian asked what questions would I like to have asked about the current issues. The interview just came out today and not only shows Overstock’s position that this tax is ridiculous, but also talks about how valuable (and large) Overstock’s affiliate marketing program is and that it is a very important part of their marketing initiatives. Here are a few segments from the interview:

Patrick: About 15 years ago, the Supreme Court found that you cannot hold a catalog company responsible for collecting out-of-state sales tax. There are 7,200 taxing jurisdictions in the United States. In some jurisdictions, cotton candy is candy. In some, cotton candy is food, and food and candy have different tax rates. A company in Utah, for example, cannot sit here and know the right way to tax every possible product in Paducah, Kentucky. It is impossible.

The Supreme Court wisely said that the burden cannot be put on the out-of-state retailer. Therefore, I think New York’s law is directly unconstitutional. We’re not suing the state for any money. We’re suing to enjoin them from ever acting upon this law, and we’re trying to get the Court to throw out the law.

We had to drop the affiliates because of the risk of not collecting the affiliate tax and then someday having New York win. We would get dinged for that. So we had to drop the affiliates immediately.

The decision to seek an injunction is the right long-term thing to do. We have a law firm in New York, and we’re putting hundreds of thousands of dollars into this.…….

Adrian: Do you have a large affiliate program or is most of your revenue from Super Bowl ads and type-in traffic?

Patrick: Affiliates are very nice double-digit percentage of our business. The outside sees our growth of $200 to $800 million, and it may look like it was all smooth. It really was four to five different things we found that worked. One of the big ones is the affiliate business.

We were doing less than $1 million a year in affiliate business when we discovered this was a great opportunity for us. The affiliate business is still a very healthy chunk of our business, larger than $100 million.

Last year, Amazon dealt a real blow to their affiliate program by basically saying they were going to stop paying affiliates or only pay a drastically reduced fee on a wide range of products. Our affiliates bring us value, and we have supported them. We’ve regularly won prizes such as “Merchant of the Year” and “Program of the Year” from Link Share. That is a testament that we, as a company, take our affiliate team very seriously….

The tail end of the interview speaks about how the affiliate community can get involved and help Overstock and Amazon fight the Tax. Please take the time to do something regardless of whether you are directly involved with this tax. This looks like it could spread to other states if this is not stopped dead in it’s tracks. Make your voice heard! Thank you Patrick Byrne for stepping up to the plate. Special Thanks to Adrian for getting this interview and information for us. We hope to have more news from the IAB public policy front lines.