Just when you thought it was impossible to balance healthy doses of affiliate-generated sales while maximizing incremental revenue and avoiding cannibalization of search campaigns along comes an Angel… Angel Djambazov, 2006’s Affiliate Manager of the Year and marketing chief over at PopShops.com.

Listen as AffiliateFairPlay.com’s Kellie Stevens chats candidly with Angel about a best practice he pioneered. This interview will give you everything you need to know about launching, setting expectations for and then managing successful Web affiliate marketing programs that meet cost and brand objectives.
[96 minutes]

Download the program’s MP3 file HERE.

A full transcript of the program appears below.

[theme music]

Kellie: Hello and welcome to AffiliateFairPlay Affiliate Salon Podcast Series. This is the first of a series that we’ll be doing, where we bring in experts in the industry to just sit back and talk about different aspects and issues and ways that folks can improve their programs and improve their revenues as both merchants and affiliates. It’s going to be pretty laid-back but totally spin-free zone and no BS, all that’s left at the door and we’re just going to talk about the facts of how to make more money and be more productive in the affiliate marketing industry.

Our first show is going to be talking about “Keeping It Clean – Achieving High ROAS Through Affiliate Channel Integrity.” Our guest today with us is Angel… and Angel I’m going to let you say your last name so I don’t completely slaughter it.

Angel Djombozov: That’s OK Kellie, my last name is Djombozov.

Kellie: And Angel is the affiliate manager for Onlineshoes program. He took over their program in October of 2005, and in a very short time has turned that program around into a pretty good success story for an affiliate program, where we’re going to get into more details to that in a minute. He had even taken the program over towards the end of 2005, we’re going into Q4 for 2005. He was voted as the Most Improved Affiliate Program by the ABestWeb Community in 2005, and just last month he was voted Best Affiliate Manager at the Affiliate Summit in Vegas.

So, we’re very glad to have Angel with us and he has a lot of experience in achieving a very productive affiliate program with high integrity and productive or what we call value add affiliate within that program.

So, thank you for being with us today, Angel.

Angel: Well, thanks for having me on boat, Kellie.

Kellie: Just so people will have a little idea, can you tell us a little bit of what the Onlineshoes Program was like when you first took it over.

Angel: When I first came on board with Onlineshoes, the program was run through B3 and it had been around for several years and had been mostly on autopilot during that time period. Without a dedicated affiliate manager, with only rudimentary banners in the program, without a steady point of contact as far as newsletters out to affiliates. The program itself was open to anybody who wanted to join, which basically meant that year over year the program had been relatively flat for Onlineshoes in terms of both activity and in what the program itself was doing as compared to the rest of the marketing department.

Kellie: And basically, the program which is on auto-approve, would be free and…

Angel: Right. Complete auto-approves that meant…

Kellie: And that was pretty much just whoever signed…

Angel: Everybody and their mother was in that program. [laughs]

Kellie: So, it’s so active. Recruitment going on, looking for specific type of affiliates for the program, definitely no type of development or creative, or tools, or things like that.

Angel: No, and also none of the even rudimentary basics as far as… just no one was even looking at the affiliates coming and seeing if just even the content was appropriate. Forget anything more…

Kellie: Or…

Angel: …Advanced than that.

Kellie: A suitable match for the online shoes program for yourself.

Angel: Right, for our audience.

Kellie: Exactly.

Angel: And so…

Kellie: Basically you came in and it was pretty much relaunching a program from scratch. Actually in a sense sometimes that’s more difficult for a manager to walk in, then to starting a program that’s completely nonexistent and starting one literally from scratch. At least, I think that sometimes it’s more difficult for a manager, when they’re coming in and dealing with what’s already in place even though it hasn’t really been managed for a good while.

Angel: Well, I think the one aspect of that, that was slightly more difficult than just launching a program, was the fact that you did have a baseline worth of revenue coming in. So, suddenly there were requests going out to our graphics department and to our IT department. And not just a few new requests, but a lot of requests because of a lot of building that still needed to happen to the program. So there are definitely those conversations of, “Well, are these things necessary?” “Do we really need landing pages to track all our different brands, and do we need banners for all those really?” And those simple kinds of questions because again the program is what was raking in cash…

Kellie: Because we’ve been having revenue coming in. Right, we’ve been having some revenue come in for a good while now and we haven’t been having to do any of this work.

Angel: Right and definitely…

Kellie: We’re knocking for, to get that revenue.

Angel: Right, and definitely the work – we weren’t expecting the work to quadruple rather as far as the amount of resources that the channel was requesting from other departments and online shoes.

Kellie: So, at this point now in February of 2007, what kind of growth have you seen with the program since you took it over?

Angel: Well, I guess it’s important to note that we did move in May of last year, of 2006, to LinkShare. We did do a lot of due diligence as far as, even while we were with BeFree, as far as building out communication channels with affiliates. Bringing them into the process of; how we would approach any enterprise level marketing partner, as far as talking about where the creative needs to be, what kinds of campaigns are appropriate for their audiences.

Having those kinds of conversations that you would with enterprise level partners. And then we spent a lot of time cleaning the channel, making sure and actually with some help from you yourself, as you remember, just cleaning the channel and making sure the partners that we were working with were good partners. So, now in December of 2006, we achieved 110% growth year over year compared to December of 2005, which was great growth in the channel.

Corporate was very, very happy with that. And, I think some of the accolades that we’ve received from folks from ABestWeb and from affiliates that have also kind of testified to the kind of growth the channel has seen both in terms of success and in terms of interaction with the community.

Kellie: Yeah, and that growth as you said, is coming from basically relaunching a program and getting all the ducks in a row and changing networks all during that same time period.

Angel: Right.

Kellie: So, that makes the 110% a little bit more meaningful than someone who’s walked into a program that already active and running and had good communication with the affiliates than…You know, tools and creatives were in place and you were just building upon something that was already there and rocking and rolling along fairly well. I think it’s much more significant with that percentage growth.

Angel: Well, I think I was also lucky in a lot of ways, because often times affiliate managers don’t deal with merchants who are at least committed to the affiliate channel in such a way of giving the affiliate manager enough freedom to grow the channel and the resources, at least access to the resources needed to help with some of that growth. So, Onlineshoes is at least committed to that process.

Then I was also pretty lucky in the fact, that I think that the community responded with suggestions. When we queried, “Hey, what do we need to do to grow this channel?” we were smart enough to listen.

Kellie: Yeah, I think that’s the key. The community will always give you an opinion, if they’re asked to voucher about anything…

[laughter]

Kellie: But it is a matter of listening and, again, having management and the merchants themselves who are willing to commit to the channel itself.

Angel: Right. And I think also key there, too, along with listening, is kind of engaging them in the conversations. I think oftentimes, especially ABestWeb itself gets a reputation for having a lot of noise and a lot of chatter and some relatively negative threads. But, on the other hand, if you as a merchant, talk to the people and actually engage them in a conversation, instead of like, “Oh, they’re yelling at me!” and then just running away. “Oh, I can’t talk to these people. It’s too aggressive.”

Kellie: There’s usually a grain of truth in the noise…

Angel: Oh, absolutely.

Kellie: It’s a matter of being able to filter that out, and sometimes being perceptive enough as a manager or merchant to say, “What’s really behind this noise that these affiliates are generating?” Because there’s usually a legitimate point behind that noise that you’re hearing…

Angel: No, totally. Not only a legitimate point, but I think that once you engage them in conversation, they really do give a lot of good points to improve your program, because, ultimately, if they are interesting in working with you, it’s in their best interest to help you improve your program.

Kellie: I mean, affiliates are out there to make money themselves.

Angel: Right, right. If you’ll listen, they’ll give you that advice, and especially if you engage them in conversations. So you’ll find, if you go to our Onlineshoes forum on ABestWeb and look, you’ll find some interesting threads on turning a negative thread around to a positive thread, just by simply engaging in conversation and not running away from the dialog that’s there. Because, really, you need that dialog in order to help grow a channel.

Kellie: When you were walking into a program that definitely needs to be improved upon… which I would imagine that’s one reason that Onlineshoes hired you to begin with… then of course there’s going to be negative comments. I mean, you walked into that program knowing there was a lot of work to be done.

Angel: Oh yeah. [laughs]

Kellie: If you go to affiliates and say, “Hey, what do we need to improve?” you are going to get comments that could be perceived as being negative, because if everything was hunky-dory, then you wouldn’t have had a program that needed improving upon to begin with.

Angel: Sure. There were a lot of very simple things, like, “Hey, you big dork, if you update your creative [laughs] to actually make it meaningful to what’s going on in the channel,” to “Hey, guess what: we’ll post it.” [laughs] There were a lot of very simple things that, once you open it for comment, you may be thinking about doing those things, but then you realize how impactful neglecting the channel is on how the channel does.

I think oftentimes people think of the affiliate channel as equivalent to running a search campaign, where you can just log in, turn it on, push out your coupons, push out your offers, push out your creative, and everybody is just going to snatch it up, and, “Boom!”, it’s going to be up on their sites the next day, and that’s it. You just run it on autopilot like that and check on it once a week, and it should be fine. It’s really not.

It’s more similar to running a media program, where you’re talking to people and you’re planning, on a regular basis, successful segments. Because in order for them to be successful, you have to plan out when you’re going to set them loose and whether they’re appropriate for that channel or not.

Kellie: One of the things you mentioned was that when you took it over, you came in and you cleaned house. For some merchants who, maybe, are new to the industry, or managers who are new to this industry, what do you mean by “cleaning house”?

Angel: Well, there was a lot of affiliates in, again, the program we had: I believe 8,000, at the time. So literally, lots and lots of affiliates. Most of those were not active. Of the ones that were, you start to look at them, and right off the bat, there was the first call-outs, which were, just the look and feel of the site is not appropriate for our audience. There were some sites that normally, their tone, as far as being an adult tone for example, was just not appropriate for our retail audience, so those were removed.

And then we started just getting some feedback about the cleanliness of channel, in terms of some of the partners that were in the program. One of the big call-outs right away was, at the time, Shop at Home Select… I’m going to go ahead and name them… was in the channel and was one of our big affiliates. It was in our top 10. Suddenly, CJ kicks them out. This was before we had really fully started the process.

Kellie: When CJ kicked them out, they weren’t kicked out of the BeFree program also, were they?

Angel: No. No, they were not.

Kellie: I didn’t think they were, because usually that didn’t go hand in hand.

Angel: Right. They were not. Although, eventually, they were actually phased out of it, but it didn’t happen simultaneously. So we were just like, “Wait a second…”

Kellie: “What’s going on?”

Angel: “Maybe we should be concerned that one of our top 10 affiliates…”

Kellie: “You just kicked these guys out…”

Angel: Right. So we started kind of a dialog on ABestWeb with a forum, and people started pointing out, “You should really take a look at these tactics and practices.”

Kellie: I’m sure that got some responses. [laughs] I’m sorry. Go ahead.

Angel: “You should really look at some of these tactics and practices, because they’re against your affiliate agreements, against the network’s agreements, and probably are impacting the channel in different ways.” So we start to look, and realized that, “Hey, not only are these affiliates not clean, as far as their impacting the commissions of other affiliates, but they’re also impacting our return on ad spend because they’re affecting other channels in our marketing department.”

That was really problematic, especially from, again, that aspect of, “Hey, we’re trying to grow out this program. We’re already asking for new resources.” There’s affiliates that are negatively impacting our return on ad spend elsewhere, and suddenly that became a focus for us.

Kellie: So you started looking at identifying those types of affiliates who were bringing traffic and sales into your program along the lines that some of the tactics or practices that “Shop at Home Select” were using.

Angel: Right. In hindsight, after a year, I think one of the things I realized was that cleanliness of channel is very important, in terms of knowing where your true customers are coming from. A lot of these affiliates were what I would term as “double dipping, ” where basically, our click, on Google, for example, in Google AdWords, would generate, based on a downloadable they had, a window on our customers’ computer that would launch, basically, our site up again, even though we had the initial launch inside Google AdWords.

Basically, they were using our Google AdWords, for example, to facilitate their own commission in our affiliate channel. So they were getting paid on the front end and getting paid on the back end. When you start to look at it in that kind of manner, one, in terms, again, of not knowing where your true customers was coming from, because obviously, in that case, they came from Google and not from that affiliate. Number two, how that would count after as being effective both in your search campaigns and your affiliate channel; you start to become concerned. The more we dug into it, the more we realized that there were some tactics that we couldn’t deal with growth.

Kellie: For some folks out there, who may not have really heard of these tactics before, basically there are affiliates out there who have software applications, generally called Adware or you’ll hear affiliates call them parasiteware, and it’s software that’s installed under different conditions on end users’ computers. In a majority of cases, that software is triggered by the actual merchant’s website itself.

So, they’re not bringing new customers to the merchant; it’s being triggered by customers that are already on the merchant’s website and then, in different ways that software will then invoke that affiliate’s affiliate link and set the tracking so any subsequent sale gets tagged and tracked as an affiliate sale. So, basically it’s one end user, but that end user is being tracked two times, once from however they originally got to the merchants site, either directly typed in, through the merchant’s pay-to-click spins, another affiliate sent them to the merchant, and then again as the merchant Adware affiliate.

So that definitely can impact you poorly as like you said, double dipping, you’re paying twice in certain situations. But it also can definitely show statistics. If you look at some of those Adware affiliates, they show very good statistics to a merchant, because they’re targeting end users that were already on the merchant’s website, so often times there’s a higher chance of conversion with that end user; they’re there already at least.

Some of these applications will actually target end users when they’re at the merchant’s shopping cart, so there’s an even higher chance of conversion. So they can show some really good numbers and like you said that “Shop At Home Select” was in your top 10. Now “Shop At Home Select” also has a website, and I’m sure some traffic comes legitimately from the “Shop At Home” website.

For a merchant, could you really…is there a way for you statistically to look at that data and say I know that X percentage of their traffic from this affiliate is coming from the Adware who’re already our own customer on our website, and X percentage is coming from their website, legitimate traffic?

Angel: I think there is now, for us. Back then, there really wasn’t a way to legitimately define that especially because due to upgrades that we had in our backend in 2006 and 2007, we were kind of waiting for those upgrades in 2005, so we couldn’t segment that out that way. But what we then briefly reporting, I mean if anybody that was using it, was not great. So no, there was no way to segment it out. You are right that they know that there probably was some legitimate traffic in there.

But ultimately again what you are doing as a merchant is you’re paying… The affiliate channel is ultimately an acquisition channel; you’re paying for new customer acquisition. When somebody is already on your site and then it’s being “taken away from that experience to having a secondary experience”, and then also almost like déjà vu, showing up on your site again.

That to me, isn’t a new customer, that customer is already there. That’s different, if they are going out and… there are legitimate reasons why they may leave the site and might not come back, in those cases at “Shope Home Select” and some of the other players, definitely not legitimate reasons for them to suddenly have this deja vu experience of seeing the site twice.

Kellie: Right. In your experience… Again, like I said, some of these affiliates, they’re top performers in all the major networks. They’re top performers. I know when you initially contacted me and gave me the list of your top affiliates, to go through and help identify for you guys, there was quite a few that I flagged for you all that were top performers within “top 50 active affiliates.” I forget exactly how many you gave me to look at that, that I flagged for you. You had already removed some of them that you had identified yourself.

Angel: Right.

Kellie: So definitely, they were… That can be a tough sale to management.

Angel: Well, I think it is a tough sell to management, often times.

Kellie: You know, when you come in and you say, “Hey look, there’s twenty or whatever percent, and there’s six of our top ten, or four of our top ten that you’re showing revenue-wise in your affiliate channel…” Of saying, these are partners that…those aren’t real numbers that we’re seeing.

Affiliate marketing is pay for performance. It is bringing in an actual new customer to the merchant, and these guys really aren’t doing that. But when you’re looking at, “that’s your number five affiliate, or your number three, affiliate revenue-wise, ” that can be a hard decision to click the terminate button on, and say I’m going to drop this. Even though I’m being told that, I’m going to drop this number three performing…

And it’s not just one affiliate that I’m doing it with. How is that going to impact the revenue overall for our affiliate channel?

Angel: Totally. The last thing any management wants to hear is you coming into a new program and taking one over and saying, “Hey, I know I’m supposed to grow this program, but I’m going to whack four of our top ten, or five of our top ten affiliates right now. We’re going to end our relationships with them, and I’m still going to grow the channel anyways.” That’s a hard sell for sure.

I think that the main thing is getting the merchant to realize that, the affiliate channel does not run as some kind of isolated segment out there. Things that you do in the affiliate channel will impact your email channel, will impact your search channel… So, when you’re looking at those impacts, if you look at the whole marketing initiative as that return on ad spend, and seeing how the affiliate channel affects certain segment, it became an easier argument when you said, “Well hey, look…”

I’m going to throw out another example. eBates, in particular, was a huge partner for us, prior to the cleaning, and not… to me they’re in the grey level of parasites. I mean, there’s definitely far, far worse ad situations out there.

Kellie: I know affiliates won’t like to hear this, but there are definitely worse players out there than eBates.

Angel: Right, right. Way worse. But that being said, it was very easy to kind of look at how much traffic they were sending us… what their overall clicks were, what their overall sales were… and then start doing some analysis on, “OK, well, how many times does MoMoneymaker, which is their downloadable from TopMoxie, how many times does that affect our other channels? Whether it be our payed placement channels, or whether it be our search channel…

Kellie: Or our free traffic.

Angel: Yeah, our normal traffic, our free traffic from Froogle or from wherever.

Kellie: The organic traffic.

Angel: Right. You know, from the shopping preston portals from BizRate and so on. When you start to look and kind of make comparisons of, “OK, well if this is popping up so many times…” We can get a baseline percentage here, and how is it affecting our rest of return on ad spend? The return on ad spend in the affiliate channels start to look bad because, well, it’s affecting these other channels. I think that was really the argument. “Hey, look. You should be one, worried about your, how it’s affecting those other channels.

Number two, there’s negative associations especially if you’re a merchant that has vendor relationships that you care about. Often in our vertical, our vendors – you know, by vendors I mean the brands – Merrill, Puma, Timberland – they really care about the customer’s experience. If they feel that you as a merchant appreciate their products via Adware, and that Adware has a negative association, negative impact on the consumer, they’re going to terminate their contract with you.

So, it’s not only just a matter of how it’s impacting other channels. Certainly, you’re also worried about vendor relationships because last thing you want to do as a shoe merchant is lose a big brand like Merrill because they’re mad, because…

Kellie: Otherwise, it’s a misrepresentation of their brand.

Angel: Right, it’s misrepresentation of their brand with your Adware, you’re inadvertently or purposely using. I think that the other lesser argument affected at this point, once these arguments are weighed out was that, “Hey, not only is it affecting our return on ad spend these other channels. But if the customer came from BizRate or from Google, or Miva, or wherever, and eBates is discredited bringing it to customer, then somehow we’d lost the track of where that customer’s coming from. Especially, you know, at that point when we didn’t have the more advanced tracking that we do now, that was of huge concern because certainly we don’t know which is the right acquisition channel.

So, I think when you combine those three things and you lay out that kind of argument, it becomes easier to say, “Hey, you know, I know these are tough, so many performers. But we should either remove them from the affiliate channel or understand that they are impacting our return on ad spend elsewhere and take that into account when we look at overall marketing spend.” Maybe some merchants do that. Maybe some merchants incorporate that to overall marketing spend. But I don’t think so. I think a lot of merchants, again, it’s kind of look at those affiliate channels as its own little entity that is separate from what is happening to the rest of marketing.

Kellie: Yeah, I think that at least from what feedback I’ve gotten from other managers is, a lot of times, that statistically looking at the program and gaging the performance or how successful the affiliate channel has been, is so much focus is just placed on the sales revenue or the volume of the program and not looking deeper into the statistics of what’s really going on.

Angel: Well, sure. I think it’s partially because…

Kellie: …Looking at possible customer acquisition cost there are the ROS, the ROI of the channel itself which to me is a more valid statistics for gauging what’s really going on in the affiliate channel.

Angel: Well, sure, but I think that some merchants are just only worried about share of market. If they are only worried about share of market, they’re going to be less worried about the strength of their dollar where how much cost to acquire a customer. But, our shoes, a lot of other healthy merchants are worried about where the return of ad spend is coming from.

I think it is important to understand that the affiliate channel is going to impact other campaigns. One, it’s good to understand that because then, if you really understand that, you can use that knowledge to help them improve those other campaigns. Because then, you really know where your customers are coming from, what’s affiliate brought them, what type of affiliate it was. See, know a little bit of information about your customer and then you can speak to them better.

But in this kind of case where the channel’s muddy and not clean because of the different players that you’re allowing in there using tactics that are not the best for channel. Once that’s happening is that your ad return on ad spend lessens. So, instead of getting, you know, $10 back for every dollar you spend, now you’re only getting $3 or $4 back, and that’s a huge hit if you look at it in those terms rather than, “Well, this is my overall revenue, and this is my overall market share in the affiliate channel, and that’s all I should care about.”

Kellie: And that really was a turning point, I think, for you, with Onlineshoes management really understanding what you were wanting and trying to achieve with the changes that you were making in the channel, wasn’t it?

Angel: Well, sure. It was a turning point…

Kellie: When they saw the hard proof of the impact that it was having on your other channels and what it was actually costing them to have certain players within the affiliate channel.

Angel: Yeah. I mean, it was an absolute turning point, especially not only in the cost factor, but again, in our situation, because of the relationships with the different vendors or brands. Again, we wanted to keep those relationships, and you don’t want to lose one of those relationships. Losing one of those relationships is more impactful than almost anything else. When you combine those two, it was a definite turning point.

But I think that it would’ve been a less valid turning point that, if the next December, we didn’t have that growth. But I think it was really validated in December of 2006, when suddenly we have the growth, even with keeping the channel clean. I think that that gave more validity to all the changes and work we did.

Kellie: Yeah. You said that you had the growth, even keeping the channel clean. Again, a lot of these affiliates can generate some really good numbers, as far as, again, sales revenue and volume within the channel and again, can show some very nice superficial statistics that you can show somebody in management, that a manager can show somebody in management.

I know that there are managers out there, or there are OPM’s out there, who actually actively seek these types of affiliates to generate those types of statistics for them, right? To show what I consider an inflated growth or value of the channel, by bringing these guys in.

I know a couple of OPMs that actively market… They have special relationships with these guys. These are their top affiliates, their super affiliates, that they can immediately bring in for a merchant. They showed them the dollar revenue that they can bring in, and it’s pretty heady stuff for a merchant to see some of those figures.

But why shouldn’t a manager, when they can show those types of numbers that make a merchant very happy… or I would say a not fully educated merchant, maybe… very happy with those numbers, why should a manager bother to take all this extra effort to have a program that’s clean?

Angel: Go ahead. Sorry.

Kellie: To have affiliate partners that don’t engage in these types of activities that can bring high volume and high numbers actually very quickly into a program, perhaps.

Angel: Well, I always keep in my head that, to some extent, Kellie, we’re in marketing and marketing can be a lot about blind faith and imaginary numbers. [laughs] And depending on how you’re spinning numbers, you can put together stuff, or somebody in a corporation puts together some numbers, and then other people buy off on it, and suddenly, you’ve got this imaginary streak based on numbers that were not accurate in the first place. Then the numbers kind of kept around because people were worried about it. That’s how you get Enron.

Kellie: Oh…

Angel: Not to compare this to Enron, but that’s how you get those kind of things.

Kellie: It’s the one thing that I took away from back in my other life, when I had to suffer through two college courses of statistics when I was in medical school, was that you can make numbers look or mean almost anything that you want to. That’s why they have the field of statistics out there is to be able to draw accurate and valid conclusions from the numbers that you’re seeing and from the data that you’re seeing. Because you really can make numbers look any way that you want them to and mean anything that you want them to.

Angel: Well, I think that your motivation as an affiliate manager, I think comes from the fact that if you’re wanting year over year growth that’s meaningful, that if you just play with… let’s say you just play with those affiliates that are using those kind of practices and throwing up big numbers… well, two things happen; One, the channels are getting very expensive because over time… because other affiliates will not work with you.

Over time your diversity in channel starts to shrink, and you start paying out more and more to the segment, and this affiliate that’s really not bringing you 100% new customers and are bringing you only 30% new customers and 70% customers that you already have, but you’re crediting them for a double.

And so, suddenly the channel long-term… short-term may look great, long-term is going to start getting expensive for you, especially if you’re trying to bring about a certain amount of growth because what’s going to end up happening is that, because you’re diluting your knowledge of where your true customers are coming from, you’re not going to be able to then go and say, “Well, I need to go and find myself more affiliates that are similar to these ones or bring in successful real numbers.”

Because what’s happening is like in Ebates situation, you’re going to go to other people like Ebates that have downloadables like TopRebates, for example. Well, suddenly TopRebates and Ebates are competing for that same duplicate customer. So, if TopRebates and and Ebates are competing for that same duplicate customer for that 70% of duplicates, that were only there on your site and only sending you 30% of new traffic, there’s really a new customer.

Again, you start to limit your amount of real growth, whereas in, if you’re dealing with. For example, we have a very successful relationship with an affiliate by the name SheFinds, and they were an affiliate that previously are doing the B3 at times and they hadn’t registered with us, there was no activity with you know, a couple of things have been tried but there’s not much response. I systematically start to work with them, partially because I noticed that their conversion was right where I wanted to be in terms of… and they’re sending not very much traffic but the conversion was very good.

So, I started to work with them and started to get a bit of branding and voice with their customers and suddenly from nowhere, they started to impact the channel in a very, very positive way. Well, I’ll guarantee you that if I had been working with those other players, their impact would have been muddied and instead looking for a new SheFinds who’s bringing me real new customers, I’d be looking for a new Ebates who’s bringing me, again, 70% duplicate customers that I would have already had through another channel.

I think that the key is, if you want that growth, you need to spend time on making sure that the channel is clean so that way, when you start to look for new media relationships, you know where you want to acquire those customers. I think that’s a key to a long-term program.

Kellie: And again, I think you’re right there, that the mind set of long-term versus short-term. Sometimes with long-term corporations, they tend to think especially public corporations, they tend to think short-term because I think quarterly reports to their stockholders and along those lines. But as they’re establishing they’re long-term relationships with affiliates, that are going to be all bringing you true value to your program, and having those and because those affiliates, statistics aren’t muddied down by these other guys that you know where there’s true value of those affiliates or to you.

Angel: Right and not only the true value but to have a better understanding of how to speak to those customers and I think that the other factor is.

Kellie: When I say true value, is that, you have a better statistical analysis of those affiliates, like you said, you went to Shoefinds, and started working with them directly, but when you have muddy statistics, it’s hard for you to be able to accurately say if an affiliate isn’t performing as well as they could for you, why aren’t they?

Angel: Right.

Kellie: When somebody, other players, are diverting that affiliates traffic into their own, then you can’t make those judgments, because it’s difficult enough as it is sometimes to figure out why somebody isn’t converting, or they’re not performing as well, and they expect to win the pictures clear, that’s just the nature of online, ’cause we can’t fit behind every end user to see exactly what they’re doing, right?

But we have limited amount of data that we can try to draw conclusions from, and when you don’t have accurate data to make those conclusions, it’s even harder. To be able to establish those long term relationships with affiliates that are going to be working with you, potentially, for years down the road.

Angel: Right, and I think sometimes people, in that rush as affiliate manager to show that growth, I think sometimes you kind of forget what attracts then to marketing, which is that diversity in the channel is really, you want in a marketing program, because the less diverse it is, the more expensive those segments become.

Not only more expensive those segments become, but the larger segment of customers that you’re missing out on because you don’t know where they are or who they are and how to contact them. I think that once one of the really great things about the affiliate channel is that if you reach out to your affiliates, that often, they themselves are one, in the business to make money, so they’re very entrepreneurial about how they contact those customers and segments.

It can react in ways that you, as a big corporation, as a merchant, as somebody who is worried about your distribution channels, cannot react to finding those customers, and so you really need to keep that channel clean in order to facilitate the conversations, again, with affiliates like SheFinds, for example.

Kellie: Well, I know, just from a few conversations that I had last month in Vegas with some merchants, these were managers I should say, these were experienced managers that have taken over programs recently in the last couple of months, who moved into new positions, and they are working with programs that have a reputation in the affiliate community with affiliates of wanting quote “dirty programs, ” in other words, they have a lot, a high percentage of these Adware type affiliates, or cookie stuffers, or affiliates that use questionable tactics to generate profit and sales to the merchant in their program.

These programs have a long history of that over years time, and these managers have stepped into the positions now and more merchants are now beginning to truly understand what is really going on with some of these tactics, and they’re kind of over a barrel now, because, when you came and the way you approached cleaning your program, and maybe Onlineshoes wasn’t as known out there, or their brand wasn’t as known or as visible as some other programs and other merchants in general, and you said, “Hey, what can we do?”

You would show a concerted effort and you were able to, as you cleaned up and proved yourself to affiliates, you were able to bring in some true value ad affiliates into your program, which you definitely need. Now these merchants are, because of the way the program was run in the past, they’re kind of over a barrel now because a large percentage of their affiliates, or these “questionable players”, and true value affiliates either promote them in a link, or don’t want to work with them at all.

So now, they came to me and said, “What can we do? We terminated all these guys, we pretty much just lost all of our revenue for our program, but nobody wants to work with us. The affiliates that we really want now, nobody will even want to touch our program or really want to put much effort into promoting us. So, what can we do?” They’ve kind of boxed themselves into a corner now. Their program has become very reliant on these other affiliates.

Angel: Right, and I think that’s unfortunate, because I think that has to do with lack of, I guess will, whether on the part of the networks or the merchants to a lot for other means of tracking or other technology to work with those affiliates. I think a big part is the “clean affiliates” are not going to want to work with you because you are not interested in preserving your agreement with them. If they feel that you are not interested in preserving your agreement with them and they feel that you are not interested in crediting them for the correct sales….

I saw a recent thread where a merchant said to an affiliate “Hey, I saw this other affiliate stealing from you and they got credit for that theft. I went ahead and terminated working with them and maybe now next time you’ll get better credit for the customer you sent me.” My first thought was, “Well, if you as the merchant knew that this was the affiliate that sent you the right customer, why even go through that process and tell them ‘Well, maybe next time you’ll have better conversion with me and I’ll give you more commission?’ You knew who the right affiliate was that sent you the customer. That should be the person that is credited with the sale.”

I think it’s kind of that lack of, not lazie-faire, spacing on the term, it’s that lack of “Oh well we don’t have to honor this agreement until next time” attitude that I think really hampers things. Because ultimately this is a relationship, you’re not going to…

Kellie: Well, there is a business relationship.

Angel: Right.

Kellie: Affiliates, they’re getting paid by performance only. If the customer that they sent to you makes a purchase, that’s the only time they are going to get paid. It’s not like publishers who just have to have the banner load and they get compensated for it, right? So it is more critical to them that the agreement, the actual legal contract that they have established with the merchant is honored.

Affiliates take that very seriously, especially as affiliate marketing becomes more competitive in general. There’s more programs out there, there’s more affiliates out there. It’s even more critical to a lot of affiliates that they actually get paid for what the merchant told them they were going to be paid for. I don’t think that’s an unrealistic expectation that your legal agreement with your merchant is honored, from the affiliates perspective.

Angel: Right, and I think that, again, there’s lots of reasons for you as a merchant to want to do that. I think that, again, that one of the problems is that…

Kellie: Outside of, it is a true legally binding agreement, but…

Angel: Right, just outside of that.

Kellie: Outside that tiny little fact. [laughs]

Angel: Right, [laughs] well as long as you know… I think again, merchants also look and then say well CJ or Linkshare, or Performics or whichever the network is, has allowed these super-affiliates in and I know all the small folks complain about them stealing, but obviously they can’t be stealing because these networks have let them in. I think that from my experience with Linkshare…

Linkshare has done really well by us and has helped us through a lot of things, but it’s my due diligence as Affiliate Manager to look and to make sure that my affiliates are playing by the rules of my terms and conditions with that affiliate. As Affiliate Manager I shouldn’t expect the network to do all my work for me. I think that often times, merchants do that, then affiliates blame the networks. Really, LinkShare overall has treated us very, very well.

Kellie: Ultimately, ultimately, it is the merchant’s responsibility.

Angel: Right.

Kellie: As a merchant or as a business person, in general I’m not going to let somebody else’s internal policies dictate to me how my business is run, or how I want to conduct my businesses, or who I want to have partnerships with or do business with. So although a network may allow certain affiliates into their network, still it’s ultimately the merchant’s responsibility to say is this particular affiliate’s business model what we want for our own business and our own business model.

Is it a match or is it not? I think it’s, I hate to say it, but, to me in a sense it’s a merchant or a manager who’s being somewhat lazy when they fall back on, “Yeah, well, you know the network said.” Because they’re still within the network, the network has said that they’re OK.

Angel: Right, right. I mean at least be…

Kellie: Merchants don’t accept affiliates for a lot of different reasons, outside that they use Adware, because they don’t meet certain criteria for that particular merchant.

Angel: Right.

Kellie: So, to fall back on that I think it’s somewhat of a cop out on the merchant. You know?

Angel: Right and at least and really if you’re going to as a merchant, if you sat down with your marketing department and said, “OK, despite XY and Z, I’m still going to work with these affiliates that are doing some of the more shady practices.” At least be honest with yourself and say, “I’m going to do this and I know they’re going to double dip. I know my actual return on ad spend is actually going to go down, but I’m OK with it because I’m just out for market share.”

Then beyond that, be honest with your other affiliates and say, “Hey, yeah, we are working with these people.” You have two fold choices there. You can say, “We are working with these people and if you don’t want to work with us, ‘Too bad’.” Or you could do the other step of due diligence, which I think a lot of merchants are even more lazy on, “Hey, you know there are other methodologies that I can choose to work with these affiliates on.

I know that they’re going to ultimately impact negatively my return on ad spend, but I’m going to work with them and still not cheat my clean affiliates of their commission, by choosing other methods of tracking.” And they don’t.

I know it causes technical problems and I know there’s legitimate business costs there, but I think it’s just lazy to say “You know, well we’re going to work with these affiliates that are double dipping and are stealing your commissions and it’s either work with us or not, ‘Too bad’.”

Kellie: Yah, there’s technical costs involved, but there are technical costs in doing that type of alternate tracking. It has definitely gone down over the years. I know merchants who do it on the QT anyway. They have their own internal tracking set up, affiliate tracking set up, very quietly on the side that they use for their special, very special super affiliates. They run them on that instead of through the network.

Angel: Well, sure, I mean right…

Kellie: That happens all the time. I mean, that happens and I don’t care what networks may have exclusivity clauses and the networks know what happens.

Angel: Well, I mean after…

Kellie: That to me that’s somewhat of a cop out too, because it’s easy enough. I mean how much is a direct track license now?

Angel: Right.

Kellie: I think it’s like $5000.

Angel: And after we moved “Shop at Home Select” out of the program, we got contacted several times by them saying, “Hey, I know you moved us out of the program. You know and I know you’re with either BeFree or LinkShare. Why don’t you come and work with us directly? And that way we want to pass through your affiliate channel and we can show you this value ad then.” If we had chosen to do so, we could’ve done it offline through the network, you know I mean outside the network. Except for the fact that, again, 70% or 60%… I’m just making up that number…

Kellie: Whatever.

Angel: A large percentage of their traffic is going to be duplicate traffic. Is going to actually impact negatively the return on the ads on my other channels. I’m just going to accept that. Because I want the market share and the market share is more important to me.

Kellie: That’s what “Shop at Home Select” is. Shop at Home Select has bought themselves a license for direct track. They have their own network… tracking network. They can pull in merchants from outside of the networks and they actually track them themselves. Right?

Angel: Right.

Kellie: If an affiliate can do that then a merchant can definitely do that. That’s what they had when they were terminated from CJ. They lost such a huge portion of their merchant base that they provide to their end users, in one swift move, that they really started focusing on that.

When I look at their offerings now, their relationships with “Shop at Home Select”. They still have link share and performance merchants on there. Now CJ has let them back in. But even since CJ has let them back in, the bulk of their relationships now, or through CPA Networks, may only have four or five per CPA merchants that they are promoting per CPA Network.

A lot of internal tracking, independent programs in their own tracking. A lot of that has to do with merchants going outside their normal networks. Even on the CPA Networks, the merchants whose primary program is on one of the other three major networks out there.

Angel: Right. I haven’t followed that money trail… super Adware affiliate to CPA Network. My guess is if you are a merchant and you are in a long term relationship there with that negative affiliate. What’s going to end up happening again is that child is going to become really, really expensive because there has to be an incentive if you are…

Kellie: I understand why they are certain of these Adware players. Use “Shop at Home Select” for example. I understand why there are certain merchants that want that relationship even though they know what it is costing them through the affiliate channels.

Angel: Sure.

Kellie: That is because “Shop at Home Select” is a cataloger. That’s how they started and they are huge in that. So your catalog type merchant, when they get their foot in the door with “Shop at Home Select” through the affiliate program, they are also being promoted on the catalog side of things. That is where they are seeing their true value. As their marketing and advertising value with “Shop at Home Select” isn’t necessarily through the affiliate channel but it’s on the catalog end of Shop at Home’s business.

Angel: One of the things that makes me frustrated, because the way you just pointed out, there is actual value there. It would just take a certain amount of due diligence from the merchant and a certain amount of due diligence from the affiliate, “Shop at Home Select, ” in this case. A certain amount of due diligence from the network, or you can take it off site, just to make the child clean.

Stop the double dipping. Stop taking away from other affiliates. It is a matter of people not doing that because… again, they are seeing this, as the way to quick growth without having to implement that extra due diligence. Which again…

Kellie: I don’t know…it is actually is now, with the way technology has advanced, to do that due diligence. So, they are sacrificing the value of their “clean affiliates”, that they could also be deriving, if they took that of and made sure in real life, “Hey, we are just going to pay on both of it.” They’re paying them on the double dip anyway.

Angel: Right.

Kellie: So if the overall value for “Shop at Home Select” when they factor in the catalog end of the business, still makes it worth… still gives them an “oral eye”, that they are happy with, overall. Why sacrifice your true value ad affiliates?

Angel: Well it’s funny I…

Kellie: For that overall “oral eye” that you are looking at for “Shop at Home Select” you promised something like that.

Angel: In San Francisco, right before our affiliate summit, I was at LinkShare Symposium and I got approached by an affiliate. They were a super affiliate and they were the ones that are in the Gray Area and they said, “You know, look we’re no longer on your program. We’d like to be back in your program, what can we can we do to get back in your program?” And my sentiment was, “Well, make it to that what you’re downloadable doesn’t overwrite the affiliate cookies of the affiliate that you sent me the clean traffic.”

They stopped and looked at me, and they said they know all about talking to their engineer. I have not had a phone call from them.

Kellie: Right.

Angel: And it’s a simple matter of, again, when people first created the technology, let’s grab as much cash as possible and rake it in, and not worry about what contract we’re breaking, what agreement we’re breaking, who we’re stepping on, because the easiest route for me to be instead of, again, doing the diligence of building it out in an ethical profitable manner. It still doesn’t make any sense to me.

Kellie: Well, you know again, I learned from way back when some of these guys first came on to the scene. Comments that were being made behind the scenes by the owners of these companies and it was basically is like, “We’re just going to make as much money as we can, as quickly as we can and when all falls apart, we’re just going to take out all the money we made and move on to something else.” Things really didn’t pan out that way.

When you go to some of these guys and you say, “Look, I’ll let you in our program but just opt us out in your Adware. We just want traffic coming in for your website, and see what kind of response most merchants were going to get from those affiliates.” They’re going to be told, “No, we can’t do it.” They can do it but they won’t do it. To me that indicates how reliant they have become on that Adware segment of their revenues within their own business model, and things are much more competitive now overall for affiliates and between Adware affiliates.

Angel: Sure, which is sad because if they’re both competing for that imaginary 70% of duplicate…

Kellie: Oh, I’ve watched applications go to war on end-user’s computer. I’ve installed more than one and watched the battle that they do with each other, on the end-users for control of the browser. But, some of these companies wound up getting VC money and things like that and they couldn’t just walk away from it then. So, now they’re forced to try to maintain and compete within the market place, and I think that they’re going to have to find a balance.

Angel: Which also means to me that the amount of legitimate new customers that they’re bringing in, if they’re that dependent on their applications that the amount of new customers… legitimate new customers they’re bringing in to their side because of whatever value ad, that they’re offering to their customers is shrinking because of the amount of competition.

Kellie: Well, I think they’re going to…

Angel: And so…

Kellie: They’re going to have to be true value ads like everybody else. The days of just getting an application on a computer, no matter by hook or crook or however you can do it, that’s dwindling. There’s lawsuits happening over, there’s government intervention coming into those tactics and I think these companies are going to have to really look at how their applications are behaving and look at their overall business model of what value they’re actually bringing to their own end-users.

But they clearly do have a base of consumers themselves and it’s not just that they got their application installed by bundling or through different technology exploits to get their software on the computer. They have a legitimate base. Merchants are becoming more educated.

Before, there really was almost complete lack of education on merchant support, of what was really going on and how the traffic themselves were being generated. More and more merchants are becoming educated to becoming concerned about it, and as you said, the channel has become more expensive for them and now they’re looking at as to why. These companies are having to justify themselves to merchants or they are being terminated.

Angel: Sure.

Kellie: So I think they are going to have to look at their own business models and continue to make adjustments along more long term… solid foundations of what their own business models are themselves.

Angel: Sure, and I think that is not also not just being… Truly, I think a merchant is looking at it and the affiliate keeps coming back to, and these affiliates are coming back to “Well, we are going to need more money to keep you on our tool bar, or you need to be this more competitive, or you need to put out these coupons and offers because they are not in”, and merchants, even after that initial short term boost the merchant going to start to look at it and go, “Well forget about the return that’s been. What’s my gross profit after working with all these?”

That is going to start to minimize and they are going to start to say, “Well I just can’t keep increasing throwing money after money to participate in something where I’m not 100 percent sure that it’s providing me new customers.” I can just see that being… just increasing as the competition increases.

Kellie: Well one of the things that I have affiliates often ask me is they will say that “Contact your merchant and let them know what we have provided improved documentation. We showed them how their own traffic is being cannibalized by these guys, ” and the merchants continue to partner with them. The affiliates just don’t get that, and they say, they ask me “Why would a merchant continue to partner with these guys, when they see and they have been shown what is happening.” Do you have any thoughts on why some merchants or managers take that approach?

Angel: Well, I think that sometimes that approach is taken because… sometimes a company is not always driven by return that spend, again, sometimes they are driven by simply a market share factor. So you find yourself as an affiliate manager making buys through their affiliate channel, and starting relationships with affiliates that you normally would never ever do. Only because you are not necessarily interested about that qualified traffic, you are interested in getting as much placement out there on the net as possible and…..

Kellie: I have to say, and maybe you can share in your own experience talking with other merchants and managers, but I know that from companies that take that approach, especially when the manager is, well probably for OPN.’s too, but for in house manager, they have a lot of pressure on them by there supervisors and their bosses to generate certain numbers along those lines, and they can be some hard numbers to hit.

Angel: Well, I always call it the Google addiction. Where your corporate CO comes up to you and says, “Why spend this amount of money in the affiliate channel, when I know I can get an absolute return on my investment in Google?” I think, there is that kind of pressure, because in other channels like Google, like shopping comparison portals, like the email channel, you have a far more direct control of the creative, of the customer relationship, and that customer relationship is based solely upon your brand. In the affiliate channel you are kind of handing off the, it’s like passing the baton, where the affiliate really is in control of the customer relationship portion.

If they’re doing their business right, they’re sending you a qualified customer that’s going to convert for you, but that process is not as clean and instantaneous as email or Google or BizRate, and so, suddenly, you have a lot more pressure on you as an affiliate manager to perform the way those other channels are performing. In one of my interviews with that at an affiliate summit, WebMasterE asked me about what growth, on, and she’s expecting in 2007, and really they expect 300%, where 300% in any channel is difficult and the affiliate channels is really difficult because, again, you don’t have direct control about where that affiliate is going to put your links.

You often don’t know, you hope the affiliate is again, under due diligence and sending you qualified traffic, traffic that makes sense for you, you hope that the offers you put out in the channel really do convert and they don’t negatively affect your gross profit, and there’s a lot of stuff that you want that removed from, so that pressure to have those instantaneously results is there, and “Oh, eBates can be my savior because I’m going to throw them on there, and they’re going to generate 70,000 in one month for me, 170,000 even,” and…

Kellie: Even when, an affiliate channel is being put up there compared with, you have again, email channel and search channel, but I can tell you, from my own work and what I do, those channels are also bringing in some of those really good numbers through Adware partners.

Angel: Sure.

Kellie: And I think that’s a misconception about a lot of affiliates that these are playing primarily in probably by merchants, too, in the affiliate channel and they’re not anymore, they haven’t been for a good while. When you start looking at contextual applications and some of the really rogue type pop-up Adware applications, they’re all over email, and pay-per-click like you wouldn’t believe, probably not, sometimes more so than actually operating within the affiliate marketing channel themselves.

So those channels are having really inflated numbers driven into their channels also, that the affiliate channels are being compared to, and some of those guys, really rogue applications, I mean, they pop off… I have tested applications that I’m not even doing anything at the computer, I just boot it up and I leave it, and I’ll come back 30 minutes later, and I’ll literally have 30 pop-up windows on the computer. A lot of times those will be, they will be links that are tagged, I can tell they are tagged is designing, and they’ll be click fraud, they’ll be pay-per-click click fraud…

Angel: Yeah, I think that click fraud, there’s definitely other issues in other channels, but I think that, as a merchant, I can make more meaningful adjustments to what’s going on in my campaigns immediately in other channels where you cannot in an affiliate channel. Because you’re handing off the creative, and so merchants, whether or not they’re concerned about click frauds, which they should be, or whether or not they’re concerned about those other…

Kellie: What my point was just being that some of that really large growth that you see sometimes in other channels oftentimes inflated too, though.

Angel: Absolutely.

Kellie: Then the affiliate channel is being said “Hey, you need to compete with the numbers that we’re seeing over here in these other channels, ” which have some, which can have some really inflated statistics going on, some numbers being shown.

Angel: Right.

Kellie: And there seems to be even less awareness of the degree to which that is happening… those numbers being inflated… than there is in the affiliate marketing channel, which was really just my only point on that one.

Overall, how much impact do you think that affiliates who are using Adware are having on ROAS for a merchant… and I know that’s going to vary from merchant to merchant, definitely.

Angel: Sure. I think that for us, specifically during the cleaning process in 2005, it seemed to… Whereas our multiplier was $11 back on every dollar we spent out, prior to us kind of doing that cleaning, we saw a several dollar drop. If I remember right, it was a $3 drop on what the multiplier really would have been, had we factored in that impact on return on ad spending.

That’s going to vary heavily, and I think that some of those numbers for us are based on estimates based on the fact that… some of the actual tracking we didn’t have on a one-to-one basis, but that is significant. Especially if you’re in a budget-tight situation. You’re trying to budget where… to which channel are you going to give money as a merchant?

Luckily we choose… we really have a strong internal dollar, and we can be very creative with our campaigns, and very aggressive with our campaigns, but I think that for small merchants especially, if you’re in a tight budget situation, you’re trying to decide where you’re going to put that dollar. If suddenly what you thought was a home run turns out to only be a second base hit, as far as what the channel is doing, you start to question whether or not you want to throw more money in there because of that impact. So, I think that’s a pretty significant impact, when you look at it… knocking things down by that many points on your multiplier.

Kellie: I think merchants who do their shares of their traffic that come through their different channels… That’s going to vary from merchant to merchant also, but you have a merchant that’s deriving a lot of their traffic, or a high percentage of their traffic, from their own pay-per-click campaigns… I think they’re going to be impacted a whole lot more, especially if they’re dropping a whole lot of money on first tier search engines, where the clicks are more expensive to begin with. I’ve consulted with merchants where that was their situation, and that was their concern.

Angel: Right. I think that if we had, at the time that I came onboard, if the search channel had been actually more active, and we had extensively used those players because of how large and robust our search segmentation is, that that impact would’ve been much bigger. I think it wasn’t a catastrophic hit, because, again at that time, the affiliate channel itself was very… again, auto-pilot. But… I mean, it could’ve been very impactful.

So to me, in a company that’s, on all issues, it’s very return-on-ad-spend driven… a $3 drop in your multipliers is huge. So even just in that channel, it’s impactful, and then again, if you look at the potential of how much more impactful it could’ve been, and again, beyond return on ad spending, the effect it could’ve had on our vendor relationships. It can be very impactful on your channel.

Kellie: I think that because that’s how you approach looking it is the impact on your return on ad spend overall. I have a lot of merchants that come to me and they say, “We terminated X parasite from our program, because we were getting all this feedback and flack from our other affiliates, so we terminated them. We looked in the affiliate channel for those numbers to be made up… and it didn’t happen. So we let them back in.”

Angel: Right.

Kellie: And I said, “You didn’t look the right way. Right?” But what they hear so much on the forums and from other affiliates… because it’s from the affiliate perspective, and it’s what they’re concerned about of course… is their own links being overwritten and being re-directed to the Adware affiliate. The merchants never looked outside of their affiliate channel. I’m like, “I’m looking at the guys that you were partnered with.

Those players are somewhat compliant, so there’s a portion of other affiliate traffic that they won’t re-direct on, depending on how the other affiliates are coding their links and things like that. So “No, you didn’t look in the right place. You didn’t look in your other channels, you looked just within your affiliate channel. So if that affiliate was generating $X in sales for you, and you expected to see all $X sales re-surface within your affiliate channel… I could’ve told you beforehand that wasn’t going to happen!”

Angel: Right, and I think that’s also back to the mentality that the search channel should be kind of an automated thing, where if I take out the bad affiliates, boom, the next month my good affiliate volume should go up. It’s not that way.

Kellie: But some of the sense I think is still a lack of education out there for merchants, because they weren’t seeing that it wasn’t only other affiliates’ traffic that was being re-directed. The Adware affiliate they terminated wasn’t just re-directing or overwriting other affiliates… because that’s what they hear from affiliates, and that was all they were hearing from affiliates, is that my links were being overwritten right?

So they weren’t looking at their other traffic sources were being re-directed on to that Adware affiliate. It’s a very myopic view. I think sometimes it is truly just a lack of understanding on their part, or the managers taking the time to really understand the behaviors and what’s really going on with some of the Adware affiliates out there.

Angel: Yeah. Your affiliate channel is not your only little entity, and if you have an Adware affiliate in your affiliate channel, it’s going to impact other channels. If you’re not looking at that, like “OK, I removed them, ” and I’m looking back again at the affiliate channel, you’re going to miss not only the true impact of that Adware affiliate. But what you are also not going to do is take the time in your affiliate channel to reconnect with the affiliates that were sending you the good traffic.

They’ve probably stopped sending you good traffic, or a limited the amount of traffic they’re sending you, because you’re not crediting them with the right sales. So, that relationship does take time to rebuild, and again… obviously, 110% growth at the end of December of 2006 to 2005, those relationships can be rebuilt…

Kellie: It’s become a trust issue, with your other affiliates. Trust is… the Internet is instantaneous, and I think a lot of times, we want to see everything instantaneous related to the Internet…and it’s not. Those relationships do take time to rebuild, and for other affiliates to have their confidence and their trust restored in a merchant.

I know that you spent a lot of time out there, connecting and communicating with your affiliates to let them know…. “Hey, this isn’t just some marketing spin that I’m throwing your way. This is something that we’re truly doing.” You had to prove yourself to affiliates, and there’s probably some affiliates you’re still proving yourself to.

Angel: Sure, but I think ultimately it wasn’t simply because we were trying to be ethical.

Kellie: You were doing a lot of other things apart from it…

Angel: Sure, but to me it also makes absolute business sense. I mean, an affiliate is not going to promote you… especially a clean affiliate… if you are not converting for them. So, if you don’t look like you’re converting to them because you’re really giving the credit to the not clean affiliate, then of course they’re going to stop promoting.

Kellie: And not just in conversion, it’s not just from legit to parasite, if you’re not converting for…I mean, you can be a clean merchant, if you’re not converting.

Angel: Sure.

Kellie: There’s where the other issues that you are addressing. You know, with developing tools and developing your landing pages and your creatives and things to improve your overall conversions. Once the consumer landed on your own Onlineshoes but definitely it’s not going to help your conversion for your other affiliate if you have these other parasitic type affiliate within your program.

Angel: Right.

Kellie: No way is it going to improve your conversions for your other affiliates.

Angel: No.

Kellie: I’ve had more than one manager call me or contact in a state of panic, because they had one affiliate get into in their program and they’re on a network that reports EPC, and this one affiliate sent them just junk traffic to Adware and tanked, completely tanked their EPC in a day’s time.

Angel: Right.

Kellie: And affiliates were like running from them like crazy just based off of that tanked EPC. They went from showing great numbers to just really, really poor because they got tens of thousands of clicks from one affiliate that was just garbage through Adware.

Angel: You know, ultimately to me, aside from my own ethical beliefs, when it comes to Adware, to me, not playing with it is a business decision. The business decision to me is about having the true strength on the dollar and having the ability to grow a clean channel where you understand where your customers are coming from. To me, that’s a business decision that’s even beyond, again, this is not on personal ethical feeling is about, I just don’t want to work with these scumbags but…

Kellie: Well, I think that I always try to make the discussions on the business aspects because out here, the business aspects speak for themselves. I think it is a business decision. Ethics are very near and dear to me, but I think this issue stand on the business and the business side of things by themselves, outside of ethics in a lot of cases. When you start really looking at the true numbers and the true value, I just don’t comprehend as a merchant, I want something for my advertising dollars.

Angel: OK.

Kellie: Something is not paying the advertising dollars for visitor that I already have on my website. To me, that just makes no business sense whatsoever to do that. Why pay for something that I already have?

Angel: Well, not only that but why… the last thing you really want on a big website is to confuse or get your customers off track. To me, you want that bread crumbs to start from the moment that they hit your website to be the surest possible to get to what they need from you as a merchant. To me, an interstitial page that has no value ad and suddenly pops up and just shows them the same merit that they would have see in the first place is completely useless to you as a merchant and is a horrible customer strength.

Kellie: Well, I know that some of the applications that I test and some of the applications that I’m more concerned about, actually from the end-user’s experience, there’s no indication that, that application is even on there. They don’t do any pop up, they refresh the browser in the same browser window, that can be the same exact place to end user were that, already on the merchant site. They just refreshed with their affiliate link.

There’s some very crafty guys out there developing technology, and they’re getting it styled in very stealth, crafty methods on end users’ computers, and it really goes undetected. They’re using very fraudulent methods to hide the traffic patterns from the networks and merchants.

Those are the types of affiliates that are really a concern, to me, more so than something that you see that’s very obvious, that you or the end user get a pop-up window saying, “You’re earning X number of rebates right now.” So I think there’s just a lot of considerations for merchants.

Angel: One, I think you said something very key there, which is that they are very crafty and they are evolving. As a merchant and as an AM, you need to do your due diligence, in order to understand what’s happening in the space, because if you don’t, those players are going to come back in.

That’s why, one of the things that always kind of gets to me is when people are like, “Our program’s 100 percent clean, ” I’m always worry, when somebody says that, that they’ve stopped checking their program and adapting their program to the newest tactics that are out there. I think that that is, again, another level of dangerous complacency out there.

Kellie: Yeah, I definitely agree with that. I tell everybody that 100 clean or parasite-free or whatever you want to call it is a myth. What you can have, are networks to merchants who do due diligence and work really hard to try to achieve that state. But having that, it’s impossible. That just doesn’t happen.

And that type of complacency, or that type of false sense of security, sometimes, on a merchant’s part, they say, “Because I’m partnered with this particular network, or I have an in-house program.” I never understood that, the merchants who say they’re running their own in-house program, so they’re parasite-free. I never understood why they would assume that, based just off of that fact.

But that always concerned me, because, to me, I wonder if they’re monitoring their program as closely as they should be. I think that there are a lot of those guys who really do want to have that state in their program, and they’re very opposed to questionable tactics in their program, but I get concerned that there’s probably things going on in their program that they’re totally unaware of.

Angel: Right. I think, any day, I’d rather be actively anti-parasite than throw up “100% free” and then forget about it.

Kellie: Yeah, because that’s probably going to come back and bite you in the butt.

Angel: Right. You want to be… You do need to…

Kellie: Because somebody’s going to find what’s in your program eventually. It’s going to come out eventually, one way or another, most likely.

Angel: Absolutely.

Kellie: Well, I really do appreciate you coming on with us today…

Angel: My pleasure, Kellie.

Kellie: Sharing your perspectives with us…

Angel: I have to say that I’m drinking as we’ve been talking. I’ve been drinking your coffee that you sent me, from New Orleans. I’m going to send you some coffee back, because we need to give you some Seattle coffee, just to give you a taste of the real coffee. [laughs]

Kellie: Oh, so our coffee isn’t real, huh?

Angel: I’m just saying that, again, you want to diversify your overall coffee availability and flavors. [laughs]

Kellie: Yes, I actually have about five different kinds of coffee in my cupboard right now. [laughs]

Angel: [laughs] That’s why we get along so well.

Kellie: Not all of them are New Orleans, not all I have. There’s a variety in coffee up there, I have, yes. [laughs] We’re from different…

Angel: Well, I appreciate you having me on your show.

Kellie: Thank you very much. I hope that we can have you back discussing some other issues, because I think you really have done quite a bit with the online shoe program.

Angel: I’d be my pleasure.

Kellie: All right. Thanks a lot.

Angel: Thank you.

Kellie: And I’d like to thank everybody for tuning in and listening. We’ll be having more shows in the near future.