The following is a transcript taken from the May 25, 2007 edition of Weekly Insight that discussed a recent “state of affiliate marketing” panel convened at the DMA’s Multi-Channel Marketing Conference.  You may listen to the program via download or live streaming audio here.

Featuring:
Amanda Watlington, Searching for Profit
Lee Gientke, Leadpoint.com
Sam Harrelson, CostPerNews.com
Jeff Doak, Converseon

[music]

Jeff Molander: Hello everyone. This is Jeff Molander. We have the return of Jeff Doak. Jeff Doak of what? Are you of Converseon yet?

Jeff Doak: No. [laughs] Not officially.

Jeff M: That’s where you’re of, though, we can say that now right?

Jeff D: Sure, go ahead.

OK. We just said it. And Amanda Watlington of “Searching for profit.” We have Sam Harrelson of CostPerNews.com, and affiliatefortunecookies.com as well. We have Mr. Lee “Lead” Gientke of LeadPoint. Let’s see, who did I miss? I think that’s it.

We’ve had probably one of the busier weeks in quite some time in terms of announcements, things happening. People traveling. Amanda and I are fresh back from the old catalog conference, now the multi channel marketer conference, lot’s going on there. So much that we could probably do a half hour call just on that.

I suppose for you, Lee, if you have to drop off after 30 minutes, that’s certainly understandable. But I might just turn us loose for an hour here because there’s so much to talk about. The return of Jeff Doak here. I’m sure he’s got stuff to talk about. I’ll just toss something out there and we can run with it. What do you think about that?

Jeff M: I’ll start with Amanda. Let’s do a little tag team on this conference in Boston that went down, which is basically a bunch of catalogers that come together and now they’ve changed the name of the conference because of this thing called the Internet. Everybody is pretty much hooked up to it now and selling over it. Although I would like to see that conference turn into something where there’s stores, truly multi channel stores, direct mail catalog and Internet. That would be nice. Anyway, to take away from that for me, from 50,000 feet was, everywhere I stuck my nose, every session I stuck my nose into, somehow people managed to talk about affiliate marketing.

And in particular in the discussions and seminars that were revolving around the path to purchase that consumers take. And trying to give credit to certain channels for scoring the hit, or help contributing for the sale. And doing order match backs and trying to determine that so that you can figure out which marketing channel works the best on the Internet.

Also all the offline channels of course, but in particular with the Internet. And this is where affiliate marketing kept rearing it’s head. And people seem to be very frustrated with it to the point where the founder of Flax Art says people are dumping it. This is actually confirmed to a small degree on the Vintage Tub and Bath call this week where a lot of people showed up.

A lot of people decided to contribute for some reason. And they indicated, no one would really name names, but there are people apparently out there shutting down their affiliate programs based on the many frustrations. One of them being the fact that affiliate marketing many times it gets associated with other marketing spend and therefore is kind of in a knee jerk.

You heard from me correctly. Kind of a knee jerk reaction by executives. They say well, we’re not going to do that anymore. They reach some sort of threshold, whether it’s 40% or 60%, they view it as kind of a tax on their Internet orders that are coming in. Rather than figuring out ways, kind of David Lewis style, to work a little bit more strategically with affiliates.

Amanda: You see, I put that from somewhere else. I put that as a pressure point as coming from somewhere else. In part the pressure point has been the rising role. Again I see everything through a search lens. And the thing that I was seeing at the show, the very same show, in many instances many of the very same session.

What I was hearing was distress at how much they were spending on all of their channels where they thought they used to get it for free. Or close to. And that frustration shows in terms of their disquietude at anywhere in the channel. And they see affiliates just like they see some areas of search.

They think they would of gotten it some other way. And I keep hearing that a lot because I work almost exclusively in natural search. And I keep hearing it from people who’d tell me, “I don’t want to pay for something that I really would be getting if I did a little more work on my side.”

And I think we’re starting to see more sophisticated marketers saying, “What can I do to, if you will, bring some of the cost out of my marketing? Where I can get better performance or get more orders or be able to get a higher margin. It simply is a cost pressure.

Jeff M: I totally agree with you on that. And I don’t mean to hyper focus on affiliate marketing. This completely sets up Jeff Doak to come in and talk about his solution.

[laughter]

Jeff M: Well, what was his solution that Kowabunga offers. I don’t know, Jeff, you don’t need to speak in terms of that context. What’s your reaction to what you’re hearing here?

Jeff D: Well I think you’re right. The reason I designed the software was to be multi-channeled and to look at all the channels that were being touched by a visitor when they came to a site. Well it’s because of this very reason we affiliate networks were built on a technology platform about ten years ago when the only way you drove traffic to your site was with natural search or direct marketing.

Or if you did plug a CPM ad or something. But it didn’t really matter if those things crossed over. In fact, you kind of expected them to at some point. You put a buy in somewhere. People are going to see that banner. And then maybe an affiliate would actually pre‑qualify them a little more and drive it to your site.

But that world doesn’t exist anymore. We exist in a world now where there are dozens of different places where you can spend money to drive traffic. And for an affiliate network to assume that just because an affiliate touches that visitor within the last 30 days, at some point, before they purchase it, suddenly that affiliate deserves full credit for that commission. It’s just ridiculous.

Now obviously affiliates still want to live in that world but they also don’t want to live in a world where spyware and all these other things are taking credit for their sales. And so there’s a middle ground there where if your an affiliate who’s really driving traffic and that traffic wouldn’t of gotten there from any other means or that traffic wasn’t going to convert unless you were involved.

Then you deserve a full commission. In fact you may deserve more than you’re getting now but if your just a middleman in that path. That someone saw a TV ad or a magazine ad, click through to the site and then a couple of days later happen to click through some sort of niche key that you purchased and then convert.

Who’s to say whether or not you actually deserve that full commission. And I think that’s where the stress point is right now and so anyone who’s doing any kind of multi channel marketing needs to understand exactly what path a visitor is taking before they purchase. And then if you start considering offline purchases and catalogers and all this it gets far more confusing to where this money goes.

Jeff M: Yeah, but here’s the thing. I have a feeling I’m going back and forth and back and forth. And I think the industry is going back and forth too because everybody wants to do a CPA direct response type of payment thing because it’s nice to say you pay only when you get something.

But the bottom line is in a multi channel marketing world where a large, maybe even a majority percentage of your sales are being touched by various parties, various media spends. Various third parties who you are going to pay in some way to compensate for that touch, that nudge towards the sale, right?

Jeff D: Right.

Jeff M: Why wouldn’t the multi channel marketing world suddenly go, “OK I’ve got affiliates. I’ve got search marketing. There’s my brand terms involved in some of these things.” Ultimately I should probably be factoring all of that in and it doesn’t necessarily need to translate to a cost per action type of thing where one channel’s getting the credit.

Jeff D: Right, exactly.

Jeff M: But for one channel to be issued the credit in a way that is under a CPA model, I think is a little backward, is that what you’re saying? It sounds like maybe that’s what you’re saying.

Jeff D: Yeah, I think that it doesn’t make sense anymore, along those terms. I think it needs to actually be a fairly complicated algorithm, at some point, based on your own business model as to determine, let’s say you’ve got five…

Jeff M: Well if you keep it in a direct‑response type of scenario, yeah, it has to be a complicated algorithm, but if you just cave and you say well, you know what? I’m going to have these four or five touch‑points I’m going to do.

I’m going to do comparison shopping, I’m going to do affiliate, I’m going to do AdSense and AdWords, and I’m going to do banner buys, and you look across that and you go OK, well, I’m going to budget accordingly, it just takes a lot of the science out and it makes it more of an art.

Is anybody tracking what I’m saying here? Am I making any sense?

Amanda: You are making sense, Jeff. I think that you’re looking at it, I want to say, from a slightly different view, which is, I think there are some other factors at play. I think some of them are some of the things we’ve hit on a number of times in this podcast, not this one particularly, but along the way.

There’s also, when you’ve got stress points in a marketing system you step away and ask, “Which area of this am I least comfortable with? Where do I think I have the least zone of comfort?” And I think in a lot of ways affiliate has been one of the places where the marketer has the least comfort.

I think it’s one of the reasons we hear so much noise around the click‑fraud issue. It’s because, let the marketer lose confidence and comfort with their ability to earn with an ad and a paid‑search model and you start to watch a lot of the system come under stress.

And I think that’s when you hear all of the noise on the ups and downs on click‑fraud part of it is that it stresses the model. It stresses the whole presumption under which people are doing business, and they are least comfortable with how they are doing business with affiliates.

Jeff D: I think that’s because of the way the model is structured; affiliate marketing is based on this idea that “winner takes all” and even the fact that a basic affiliate network system won’t even tell you if more than one affiliate was involved in the click‑path is ridiculous, because obviously that happens a lot and yet it’s always the last affiliate clicked that gets credit.

That model is a problem because not only is it ignorant, but it gives such a huge cut of final revenue to one source of traffic, even if there’s other things that were touched along the way. So what needs to happen is that whole model needs to collapse. It’s broken. For anyone to think that it’s not, that’s going to doom affiliate marketing if they don’t fix that.

Everyone needs to fix that model because it doesn’t make sense anymore. So it does need to be kind of an art, as Molander said. It needs to be more along the lines of, you look at your business model, you look at where your spends are.

You have to make some basic assumptions about, if someone saw, or clicked on one of my brand terms, and then two days later clicked through an affiliate link and then a month later purchased, what does that mean? Did the affiliate have any stake in that at all, since it happened a month ago? Did it mean nothing?

It’s going to get very, very complicated. What happens then, obviously, there is going to be stress between affiliates and merchants saying, well the affiliate is always going to err on the side of “well, if I touched it at all, I deserve something, and I probably deserve more than you think I deserve,” and then the whole thing gets messy.

So where does that push everything? That pushes things to all of these big so‑called affiliates that aren’t really affiliates like loyalty programs and things like. They need to earn a slotting fee or CPM or something outside or comes out of that channel.

Jeff M: Jeff, that’s the other thing, and I want to hear from Sam and Lee on this, but that’s the other thing I want to make sure I briefly get across here is that the loyalty sites and coupon sites essentially, Amanda, correct me if I’m wrong here, if you heard something differently, but everyone who I spoke to, all these advertisers who I spoke to said that they were reducing or planning on reducing their affiliate program down to, it wasn’t the quantity, I mean certainly quantity was a factor, but it was really a quality issue.

They were going to reduce their affiliate programs or they had already reduced their affiliate programs down to loyalty sites and coupon sites. In doing so, they’re going to look at the number of new‑to‑file customers versus existing file customers. Their actually going to look at search affiliates, those who remain active and will allow their affiliates to do search.

Many are prohibiting search, like eBay, are prohibiting search altogether. But those who are, are doing the David Lewis thing. They’re saying, I’m going to have four or five strategic partners, but they are going to earn a lower commission. And they’re reporting that they’re having success with that, which David Lewis has reported as well. They’re not going to pay them as much, but it’s going to be more of a strategic game for them to allow David to be a partner.

Amanda: Or they’re going to pay them more, and tie them deeper to them. It was either cut or increase, depending on the metrics that are being used. I think, Jeff, one of the things you’re saying there is that what we’re seeing is an increase in sophistication in understanding the role of the affiliate.

It isn’t just, “Hey, I’ll sign all these guys up, and they’ll act as extra feet on the street,” in the digital street. We’re not seeing that anymore, and I think that’s a function of the growth and use of analytics, and the growth in the understanding of the role that each element plays in driving that final purchase.

Jeff D: I also think that it’s a result of the networks really failing in their mission to convey to the merchants, in this case the catalogers and that kind of thing, what the affiliate channel provides, or how we’re going to monetize this, and not have it overlap into other channels, et cetera.

Amanda: How to keep the channel conflict to a minimum.

Jeff D: Yeah, and I think the networks have done a horrible job at that.

Sam: I think they strive to stay away from even thinking that’s an issue, because it breaks their whole model if they start talking about…

Jeff D: Exactly, but like you said, if you don’t confront this, it’s going to lead to some very bad things for the whole industry; the fact that the networks are still acting like it’s 1999.

Jeff M: And the way that they’re confronting it, I don’t know if you guys have seen this “A Few Words in Praise of Affiliate Marketing” article in Direct Magazine, has anyone seen that? The way they’re coming back is kind of like, I hate to pick on Performics but it’s kind of like the same thing.

They get ComScore to create this ridiculous “research” ‑‑ this propaganda posing as research ‑‑ and that’s the way they choose to, you know, these really poor propaganda campaigns that kind of prop up affiliate marketing rather than actually address the issue.

Sam: That’s kind of been an ongoing problem with affiliate marketing, is everybody is looking for, as Jeff likes to put it, credibility and for validation; that we’re actually here, that we’ve arrived, and we’re more than a bunch of two‑year‑olds sitting in a room playing with this thing called Google.

Amanda: You sit at the big table now.

Sam: Exactly, exactly.

Amanda: That’s Search, we sit at the big table now.

[laughter]

Sam: Right, right. And I think that a lot of the hand‑wringing in the retail channel, in regards to affiliates, comes from the lack of control as to what affiliates can and can’t do. And many affiliates just go ahead and choose to flaunt the rules and raise a finger or two when they’re told to stop.

Which is a challenge, whereas if you’re doing your search in‑house, you have control over everything. If you’re going to have a solid affiliate program, there are a lot of people who believe you’ve just got to close your eyes and let go, which I know a lot of very smart retailers don’t want to do.

Jeff M: In particular the multi‑channel, the catalog guys, the direct marketing guys.

Jeff D: The one thing I’ll kind of toss into that is that there are a lot of catalogers who don’t even understand their own analytics…

Amanda: Right.

Jeff D: … where a sale came from anyway. Did it come from the catalog we sent out six months ago? Or was it because we sent them three subsequent catalogs after that that actually created the sale? Generally, multi‑channel marketers have had a hell of time doing match-backs and what not. I don’t think there’s ever been a solution for it and then adding Internet on top of it.

Jeff M: Absolutely. Absolutely true.

Jeff D: Yeah, yeah.

Amanda: I think it’s systematic. I think also one of the things that we see, and this is in any discussion, because we can measure the Internet so thoroughly and we can get such a rich amount of data that we’re always confronted. This is something I hear all the time from my clients is, “What should I be measuring?” And a lot of people assume that the data is the answer, not setting the metric.

And so they don’t set a set of metrics. It’s a blunt instrument. It’s a big heavy blunt instrument. They shouldn’t collect so much data. And I think we said this sort of earlier, but we sort of just popped pop on the edge, that it absolutely depended on what you or the business needs. A lot of you aren’t prepared to make that decision, because they honest‑to‑goodness do not understand. As you said, they don’t understand even their own business although I haven’t said that I set a set of metrics for it.

Jeff D: Why don’t they understand their own business? I think that’s an interesting question. I think it’s because there’s parts of that they don’t understand Internet marketing still. They still don’t understand what it’s all about. They live within this framework of traditional brand marketing that doesn’t make any sense online anymore, whether they have a marketing budget and a PR budget. PR budget’s tiny. The marketing budget’s huge.

Then they look at it online and say, “Well, where does this bucket go? Maybe, it’s a different bucket. If it’s the same bucket, then what is branding? Why am I spending millions of dollars on a TV commercial when I can spend 100,000 and cover half the web with ads?” The whole thing is confusing because it’s a completely different paradigm and no one gets it yet.

Amanda: There’s also another thing with a lot of merchants and I discovered this working with merchants is merchants have what I call a “cigar box” approach to business. Is there more in the till today when I’m done with my business day than there was yesterday?

Jeff D: Right.

Amanda: It’s fundamentally sound. How can you argue with it because if the goal of business is to make a profit? But what it leads to ‑‑ and this is the piece that I’ve seen ‑‑ a reluctance to use the data. It says, “Hey! I never need to know that in the past. Why are you telling me I need to be pay attention to it?”

Jeff D: Also they have to admit, if they’re going to do this at some point that because you’re talking about at the end of the day having more money, but that’s where a marketing budget gets kind of weird because in traditional marketing before there was online ‑‑ if you’re just throwing money at branding or TV ads or radio ‑‑ measuring ROI was almost impossible…

Amanda: Right.

Jeff D: …to the point where it wasn’t even done. And so you just saw that as that’s part of our budget. We spend it on marketing. We don’t really know exactly what it does or brings in but we do know when we ran this campaign we got an extra one percent of whatever.

To live in that world and then suddenly say, “You know what, maybe we were wrong for the last 20 years, this marketing budget thing. We didn’t really make any sense because we either have to measure it or we just have to assume it does something good and hope we’re spending enough money in the right places.” Then that comes along and says, “Actually, you don’t need to. It’s not one or the other. You can actually measure every single thing you do all the way down to the customer level and then what you do with that.”

Do you have to scrap your whole paradigm and start all over? Do you still continue spending millions of dollars on television commercials? Again, it all comes back to this. We always talk about this ignorance economy and it’s more than that. It’s more of the whole platform. Everything that everyone is doing today is shit.

So what do you do with all of that information? You either close your eyes, and I think what’s been going on mostly, is they hand all of this to an agency. Or they hand it to a so‑called expert or hopefully someone who actually knows what they’re doing and says, “Please help me because I don’t know how much I’m supposed to be spending or how I’m supposed to be doing this?” And when they go to LinkShare or Commission Junction and say, “Oh, it’s an affiliate program. I spend $10,000 to get set‑up. I spend x amount a month and I get all these sales and boy, just look at all these sales I’m getting because of all these commissions I’m paying out.”

And they realize two years later, “Well, I was actually getting a big chunk of those sales anyway and a lot of those sales were from keywords that I could be spending on myself and we’re still in the middle of this big mess where nothing’s really working.”

Jeff M: I think the mess is sorting out, though, because what they’re doing is they’re doing some simple math. Right?

Jeff D: I agree. Yeah.

Jeff M: They’re doing some simple math and they’re coming up with some simple answers to that math. They’re taking action. Now, some of them are freaking out and complete saying, “I’m not going to do affiliate marketing.” But I have to tell you that some of those people who have said, “I’m not doing this anymore,” like Lisa Papageras over at Universal Screen Arts. And then there have been some other folks that I have spoken to at this conference who have said, “Look, I’ve completely gotten rid of my affiliate channel and I’ve seen nothing but upside.”

Sam: Well that’s just the thing. And what is interesting is that, the answers are not coming from the affiliate side.

Amanda: Marketing.

Sam: It’s coming from the marketing side, the catalogue side of it, the marketing department side, right. We all were thinking that it was going to come from our side or the affiliate side and that’s not happening. We’re happy to play in our fix out here and not really push things forward.

Jeff M: Well, I never thought it actually was going to come from the affiliates. I think that’s why people have always criticized me to a large degree is because I am kind of this naysayer and I’ve always from the beginning whether you could understand this is where I am coming from or not, many times I was admittedly kind of smartass or smarmy.

Affiliates either have something that the marketer can’t get at like loyalty site. These people will not, whether it’s a woman who used to run QVC, Carol Steinberg who is part of our panel, she came out very plainly as many people at this conference came out very plainly and said, “Look, we have to be there.” And to your point Jeff or to Brian Littleton’s point… to his endless points. These are not necessary affiliate relationships. These are places where you have to go to tap into someone else’s loyalty, mainly Upromise or iGive. Yeah, and you have to be there or you’re not up for consideration.

So you can do that on a fixed fee basis or perhaps on an image, per impression, basis. There’s all kinds of ways you can work. But I knew that this was eventually going to catch up. Because either it’s an arbitrage opportunity, which is really what it has been for the last few years, or affiliates have something that marketers truly do not have access to or would have a difficult time accessing on their own.”

Amanda: What you’re saying, Jeff, and this is what I was hearing too, were these closed points in the system of getting at the consumer. It’s just like the airlines. If the airlines know that you are a loyalty point buyer, they’ve got to have a loyalty point program.

Jeff M: Sure. Sure.

Amanda: Because they’re not going to get access to the purchaser in any other way. And I heard the loyalty sites, the merchants, recognizing that the individual is going to go to that loyalty site or to that coupon site. That’s the pinpoint where they will begin their hunt, if you will, and that if you’re not there, you’re square. You’re not even going to be in the consideration set.

Jeff M: Right. Right. And they’re not going to do that. They’re not willing to walk away from affiliates. They’re not.

Amanda: And I think that that points to the fact that today the web is anybody’s market. It’s not a closed system as it was when there were fewer web purchasers. You could assume, “Well, I can use affiliate marketing on the web and get after those consumers that are in this closed system.” They’re not today. Everybody’s in the system.

So you get to where you step back and you go, “Hah! This isn’t a closed system anymore. I can play too. I’m not getting anything special out of it. It’s simply part of a market that I would already have. Oh my! What am I doing? I don’t know about this.”

And then they start rethinking what they’re doing, because they see that this is not a closed system. There’s no magic to getting in. They don’t have to worry about how to play.

Jeff M: Sam, you had some thoughts.

Sam: Yeah, it goes back to: affiliate marketing doesn’t have personality or an image, or somebody up front who works for a group that’s really able to speak for affiliate marketing. It’s such an organic, moving thing. And the groups that are on the personality side‑‑CJ, Linkshare, that kind of thing‑‑aren’t putting forth what affiliate marketing can do in these situations, if it can do anything at all. These groups aren’t living up to their responsibility to really speak for the industry, I think.

Amanda: Do they have to?

Sam: If they want to stick around, I think they should. As Jeff said, if they’re going to bring in new clients and promise all these leads from a different channel, and charge 10 grand to start off and five grand a month and whatever, then yeah, I think there’s a responsibility there to say, “This is what we provide that’s different, ” or “This is why you should have…”

Jeff M: Let me read you an advertisement, a three‑quarter page advertisement, that DoubleClick Performics took out in “Multichannel Merchant” for this month, in an article that surrounds it, that discusses affiliate marketing. It’s a very interesting article. I think it starts on page 39. I’ll try to send you guys a link.

The copy goes like this: “Innovation. How do you catch the browsing consumer’s eye? DoubleClick Performics has a track record of creating farsighted digital marketing strategies that break out of the pack. Our industry‑lead proprietary research and intelligent technologies are delivered in a personalized service package. These inventive solutions work because we begin with the novel idea that customers are first and foremost human.”

Sam: Jesus, that’s horrible.

Jeff M: What are they talking about? [laughs]

Sam: They’re innovative, they’re responsive and communicative, but these networks don’t even blog. Kowabunga does a great job of that, and Performics has a half‑assed blog that they have up to post on…

Jeff M: Do people read this and go, “Oh, I’ve got to give those guys a call?” Because if you do, you’ll call anybody up. [laughs]

Sam: Exactly, exactly. It sounds like it was written by a freshman in college, honestly.

Jeff M: This is un-compelling and filled with gobbledygook, and vague.

Amanda: Standard business ad.

Jeff M: It is.

Amanda: Standard B2B ad. They usually say nothing, in very many words, because the poor copywriter who’s writing is usually totally ignorant on the field they’re writing about.

Sam: But that’s the thing. If DoubleClick’s Performics is spending how much money that they paid for that ad‑‑thousands and thousands of dollars to do that, which probably brought in no new leads, no new sales. They’ve done pretty good with their value lately. I’m just saying, they spend all this money on that, yet they don’t invest money and time into really saying, “This is who we are. This is what we do. Here’s our CEO talking about this or that.”

Jeff M: They’re going to get run over. Like you said, Sam, they’re going to get run over.

Sam: It’s sad.

Jeff M: I think they are getting run over. Amanda, I walked away from this conference, and I’m just thinking to myself, “These companies had better get their act together.”

Amanda: The times, they are a‑changing. The thing which I love about technology is what just has kept me in this industry for as long as it has is that the times, they are a‑changing. It’s a continuous who’s up and who’s down on the wheel of fortune. It’s amazing to me. It changes so fast that today’s star is tomorrow’s goat.

Sam: And the thing about being on the web is that if you don’t tell people who you are and what you do, people are going to come up with that for you.

Jeff M: Right, right. Exactly.

Sam: There is no advocate out there for affiliate marketing over these networks.

Jeff M: People like us, [laughs] we should not be allowed to define DoubleClick Performics. Slash Google. [laughs]

Sam: Yeah, exactly.

Jeff M: We are half‑cocked.

Sam: This project is up on their evangelist blog and say “Just going to do this, but no. But no this actually what we do, blah blah blah.” They’ve got something to scribble, basically. You know. That’s the bottom line.

Jeff M: That’s absolutely true. On the positive side, I was at the end of our panel discussion, I was really encouraged when Amanda started talking about Universal Search, which you can easily be discouraged by thinking about Universal Search.

But yet Amanda made it very clear that, you know, that this is offering marketers and affiliates serious challenges in that the old search results are now being pushed off the page and there’s new things being included on those page one search results that were never included before that Google has under its umbrella ‑‑ things like video and audio and images.

Does this now open up an opportunity for affiliates? I think the answer is yes.

The more and more we talk about it on this panel, I actually got excited by it. I thought to myself, maybe I should become an affiliate because I just don’t see that much going out there with affiliates doing this until of course I had this Vintage Tub and Bath call this week where I heard about webvideozone.com.

If you’ll go there ‑‑ I sent you guys a link on that ‑‑ where there’s a tool. As well as freeiq.com where Collette from WorldWide Brands is very actively engaging in video‑based affiliate marketing.

So there is video based affiliate marketing going on out there. I don’t know why the industry isn’t talking about it although we are talking about it yesterday on this conference call. So anyways I’ll let you guys react to all this.

Sam: I really like Brad and admire what he’s doing with his career but freeIQ is just really not that good. I’m sorry. I’ll go out on a limb and say that. I’ve played with it since it was in beta. I don’t see it as sort of the shining stars of what you’re saying.

Jeff M: Well, it’s a little bit closed.

Jeff D: Well, yeah, it’s, I don’t know, it just seems like a bunch of want tobe gurus pushing their products and that’s it.

Jeff Molander: But, there’s a huge market for that.

Jeff D: Unfortunately. Really, is that what we want to hold up as an exemplar of the future in affiliate universal search.

Jeff M: Well that’s aside from universal search but universal search is a much wider opportunity.

Jeff D: Well the interesting topic you brought up in that email thread too is the way that Google is pushing YouTube results in their…

Jeff M: That’s what I’m getting at.

Jeff D: Intermediate the big media companies that have their own videos and that are ad supported. So all of a sudden, Google acquiring YouTube, which I always thought was interesting, makes a heck of a lot more sense, because if what people are searching for is content and they can get the content directly from that Google result screen rather than have to click through anywhere, that changes everything. Then Google becomes a television channel that is enabled in everything. They own the whole thing.

Jeff M: Well as long as search remains dominant it supersedes all the other video content out there.

Jeff D: Yeah and I think it actually makes search stronger because I was starting to get to the point where I wasn’t using Google nearly as much as I used to simply because I could usually find better information at Wikipedia or some other source and could avoid dealing with all the ad supported stuff that was on Google’s front page. But now, I’m starting to try again because I’m seeing more interesting results and what does this mean for media companies? If you’re talking about affiliate marketers, how are affiliate marketers going to get on the first couple of pages with video results unless, you know, very clever, or somehow, you know what I’m saying? How do you monetize that if you’re an affiliate if you’re video is already on the page and you don’t have to click through to anything. Does Google start to own all of it?

If everything is going to video, if everything is going to broader bands, and people are going to go back to stopping to read things instead of watching things more often. I don’t know. This changes a lot. I think it’s a very big deal and it’s much more than just affecting SEO and all these other things.

It affects the whole way that people interact with the content. That’s what has me so spooked about it. It completely… I’ve seen all of the gnashing of teeth about it, but I think that with the pushing… the other announcement within the last week of… where they’re starting to send out the “Get out of our life” letters, to people whose business model they don’t like. It’s really cleaning up the neighborhood, dusting it up so it’s a better place to live.

It’s very, very powerful, and a lot of stuff… I look at it, and I’m just really taken aback at it. I think it’s one of the biggest changes that we’ve seen, because the tags have long been invisible to everybody, I think Danny Sullivan is absolutely right when he refers to them as invisible. I think that the shift to visibility… How will they get their content seen otherwise, given that the user doesn’t click on it?

As a matter of fact, I was working with someone today who I was… She would go, “I never used that thing. I never knew how to find it that way.”

Jeff M: What thing… what are you referring to that?

Amanda: It was… frankly, it was somebody who had never used Froogle, or Google Base, because they didn’t know how to find it. Now, it’s all right there in front of you, and I think what’s going to happen is that more users, but also you’ve got this thing that we were just talking about. Harder to push down on the page with the video right there, and then the plus box letting you open it up and view it right there. You don’t have to click anywhere. You just live on that page happily.

I think we’re going to see a lot of… I want to say low sophistication users are not going to leave that search page. They’re going to do everything from it. It’s going to be like a catch‑all for their attention.

Jeff D: So, what does this mean for people who produce content everywhere? If Google is allowed to pull anything it can find, off of any web page that’s publicly accessible, pull it out of it’s context where it’s surrounded by ads, or it was put there because Home Depot or Lowe’s decided to upload a how‑to video to drive more people to their site, because they’re actually producing content, rather than just things to buy, doesn’t this mess up everything for people?

Amanda: I’d be interested to see. That’s the question I’m begging is where else will the individual need to go. I’m not sure, at this point.

Sam: We’re going to get searches that get more personalized, as well.

Amanda: That’s right.

Sam: We’re moving from this generic Home Depot puts up a video kind of thing, like… I might see that, but Jeff may not, based on…

Amanda: His preferences…

Sam: Yeah, and my preferences, and that kind of thing. My Gmail account, and my Google Reader.

Amanda: Boy, I’ve got some weird stuff.

Sam: Yeah, I mean… combine that with FeedBurner, and the incorporation of feeds into the serves, and a whole new wild, wild west to sort through.

Amanda: Very much so. Very, very, much so.

Jeff D: I mean, what probably has to happen is that Home Depot, or any other company, is going to produce videos, and put them on their web site… they’re going to have to put links and/or something in the video itself, so you know when you’re watching it that it wasn’t some anonymous video, that it actually was produced by Lowe’s, and it’s clickable to their site, or something, and encourages people to click.

Maybe that’s all it is. Maybe it’s just a matter of everyone who produces content has to make sure that their brand and clickability and everything is wrapped up in that content. But, you could also go the other route, and say, well, if I’m producing this content, the only reason I spend money to produce this content was to get people to my site, either to subscribe or to see the ads I’ve got. Google pulled it off and put it on their search results. Google owes me money for putting that content there, and that’s an old story. They’ve been sued over and over again for different things like this, but this makes it much more in your face now, because…

Sam: Right, like with the Google News last week…

Jeff D: Right, exactly.

Amanda: It’s compelling, but you know what’s the most… what I thought was one of the most interesting… actually talking about news, is whether there’s been a search, an absolute search, in local, in video news coming off of actual news sites.

Everybody, for instance here in Boston, “The Boston Channel” has video constantly. You really have a hard time getting away from video clips of what’s going on in the news. All of that gets sucked into Google too, as video news.

They are getting a tremendous surge in the volume. All of the local stations are playing this “let’s put our streaming video out there on the web because there is so much broadband that they can get at it,” which I think is kind of cool.

Jeff D: Yes, definitely.

Amanda: I like that I can watch a piece of video news coming from pretty much anywhere. I don’t have to worry about seeing it on a television station that I don’t get.

[silence]

Jeff D: Now the only question is if Google is going to be the new TV kind of thing or if it’s going to be some other platform. What’s going to be the platform of choice for that kind of information? Is Google going to continue to be the preeminent place to go to find that information on the web?

Amanda: For now.

Jeff M: Another thing. I remember reading an article I think two or three months ago ‑‑ and you may have blogged about it, Sam ‑‑ someone was talking about the end of the web page all together. This idea that people go to a web page to read content is getting more and more archaic, when all it is is a piece of information that can be fed somewhere.

If that is really what’s going on, then this is another step in that direction, right? Because that’s what is happening now. Google is making it even easier with Speed Burner and putting all of these search results and video results on their front page. It’s making it even more the truth about the reality of being online.

This idea that you actually have to navigate someplace to find the information you’re looking for doesn’t really make sense anymore. Again, what are the effects on media companies and content providers when it comes to that kind of stuff too?

Jeff D: Right. That’s what Mozilla with Firefox 3, Adobe with the Apollo platform, and Microsoft with Silverlight were all competing over. This offline/online convergent space where things like web pages are going to start to seem archaic in their setup because people and Google are pulling up information and we are matching it up and putting it where we want.

That’s what Facebook was trying to do by opening up their API and allowing third‑party platform accessibilities to their 22 million users, which is tremendous.

It’s just another step in that general progression of blurring the lines between the web browser and the desktop, which I think will kind of be a silly concept 15 to 20 years from now. It’s a blending back into one space. Where you once had to open up a Firefox or IE7, those are slowly going away with widgets, Silverlight and Apollo. Thank goodness.

That’s what ultimately is really going to screw things up for us marketers and advertisers is that we have no idea how to deal with the web as it is now. Once this happens we are going to be S.O.L.

Amanda: I think it’s going to be interesting.

Jeff D: You know that the cream is going to rise to the top. The smart people are going to make it. It’s going to kill off the people who say, “Oh, you should do arbitrage because it’s great and you can make a lot of money.” This is going to skim the fat, which is always a good thing.

Sam: It’s fun to see the web, as it was, being removed from the desktop and away from the normal experience of having a computer, etc., and sort of putting that into the computer. Now the TV and entertainment center are coming together as well. I don’t know.

It’s going to be a fun 10 years to watch. It’s going to be fun to see how our next generation looks at us watching black and white TV.

Amanda: Yes, I think they will. Particularly when they’re wandering around staring at a hand‑held device, or not even hand‑held, thank you! It’s up on a screen in front of their eyes.

Jeff D: [laughs] Yeah.

Amanda: I’m amazed. You know what I see as the first move in that direction? I like to drive. Frankly, put me on the road and I love to drive. I’ll just drive and fish. Not at the same time of course! But I’m always amazed at how many family vehicles have a DVD screen and a DVD going full‑time. I’m thinking the road’s interesting enough!

Jeff D: Right, or even in the console now. Every new car has a console with a GPS and your entertainment system in there. You can plug in your iPod and you can put a DVD in the console and that kind of thing.

Amanda: But I think that that’s‑‑‑

Jeff M: Why not drive and fish, though?

[laughter]

Amanda: You do that the [inaudible], man, and you’ll run into rocks!

Jeff M: It’s called trolling.

Amanda: Yeah, yeah, yeah.

Jeff D: Or an even better one: Drive and shop, because…

Amanda: Drive, shop, and fish! How cool!

Jeff D: This is the question we always come back to. All of this stuff going on, all of it is driven at one level or another, by people buying things. Because that’s what we’re talking about. So how is this going to change the way people buy things tomorrow, and how people are going to be buying things in five years?

All of this, I think, still comes back to people freaking out because they don’t know the answer to that question. The answer to that question has never been more unsure than it’s ever been in history, right now. So for anyone who is used to doing anything a normal way, whether it’s marketing, PR, branding, or anything, every single day they wake up, they have to rethink everything.

Because just this small change that Google’s made affects so many things in so many places. And then you start to think well, if I’m about to buy a chainsaw, and I search for chainsaws, and I see a video pop up that shows three different chainsaws and I’m going to pick from one of those three and I can actually click on the video and I never actually make it to any other website other than to‑‑‑a little box pops up through Google store, and I can buy the chainsaw right from their site and I never even went to the vendor.

Again, you start to think about all these things. If that’s how people want to buy things. They want to buy things, they want to make it easy, they want to know that they’re getting the best recommendation, the best price, the best incentives. If one place, if Google can do it, if they can wrap all that stuff up into one experience, then they win. So it’s just a matter of, is that how people want to buy things? Are they going to be comfortable with Google owning that experience or do they want to go to a merchant website and look around a little bit first? Or is that idea going to become archaic?

Amanda: Like the big mall. It’s interesting to me that we’ve seen a‑‑‑I was reading an article, I can’t remember where it was: “Is the Big Mall Dead?” Yeah, hello! They said, increasingly, the valley girl at the big mall and that whole “mall experience” is less and less attractive. Yeah, there’s lots of fashion‑‑‑I want to say changes‑‑‑in terms of how we shop, what we shop for, and how we go about doing it.

I used to have friends who recreationally shopped. I know almost no one today who recreationaly shops. They shop with a purpose and I think it ties to some of the changes in our life. Maybe it’s just the sort of headlong individuals that I know, but I do not know recreational shoppers anymore.

Jeff D: Just real quick. My college students, we got into the topic of something that had to do with malls of the ancient world. We sort of brought it back to the malls today and I asked them how many of them actually go to the mall now. Out of 35 kids in the class, I might have had three or four that were like, “Yeah, we go once a week or once a month kind of thing.”

Sam: It’s really changing.

Jeff M: And you’re in a pretty‑‑‑are those city kids, city youths, or is they a mixture?

Sam: Outside of Charlotte. They have access to the nicest malls in Charlotte; it’s 15 to 20 minutes away. And that’s amazing because when I was in college, when I was a teenager, that was the place you went to hang out.

Jeff M: That’s where you hung out, yeah. Totally.

Sam: Yeah, or buying things or whatever. Facebook and everything else, that’s really changing, and people are buying things. I just look at like what Amazon did with the recommendation system; I think that’s so genius. I don’t buy things now, even if it’s like a stick of RAM, without going on to Amazon and seeing what other people have said about it. And I know some of that’s gamed or whatever, but still, that’s a really powerful system. And I think there’s a lot to be said for that.

Amanda: That’s fine.

Jeff M: So eBay is banning all search affiliates. Is this a strike back at Google? Amanda Watlington.

Amanda: I’m not sure. I’ve thought about it a little bit, and I’m not sure it’s not a cleanup of the channel.

Jeff M: Yeah, I completely agree with that; it’s eBay saying, “Thank you very much, affiliates. We don’t need you anymore. We have built the brand on your back. We’re like General Motors and apple pie, Coca‑Cola and all that; we’re pretty much eBay.” But also, I started thinking recently, maybe this is some kind of a strike at Google.

Amanda: Who’s to say? Are we sitting in there, behind those closed doors, listening to the scheme and the plot? I don’t think so. All we can do is see how it plays out.

Jeff D: Well, yeah. It really just depends on whether eBay drops that whole system altogether and stops buying every‑‑obviously, their affiliates used to buy every single keyword in the world and say, “You can buy this at eBay.” Is eBay going to continue to do that, but on their own terms? Or do they just get out of that altogether?

Jeff M: And this has led to‑‑on the call yesterday, with the Vintage Tub and Bath call‑‑people are saying, “Well, what the hell is going to happen now to the affiliate program for eBay?” And I have been thinking that, really, the only thing that’s‑‑there’s a relationship between Commission Junction/ValueClick and eBay.

And that is a very strategic relationship, because the perception is‑‑I think perception and reality are totally different. Perception is: the eBay account is Commission Junction’s largest and most strategically important, when in fact, it’s not; the pencil has been sharpened over the years so well that they could lose eBay, and they’re not going to be losing that big of an account.

Jeff D: Really?

Jeff M: It’ll be big, but it’s not going to… Yeah.

What I’m thinking here is that there is a relationship between those two companies. I mean, they switched tracking technology but kept Commission Junction’s reporting. It’s just way too bizarre for any other explanation, other than this is a public relations type thing, to protect ValueClick from seeing their stock take a hit.

But what is going to happen now, when essentially, they don’t have an affiliate program? Someone’s going to do some math here. No one really knows what the financial relationship is, how Commission Junction gets paid by eBay nowadays, whether it’s a fixed fee or a variable fee.

What’s going to happen to the eBay affiliate program? And isn’t eBay one of the leading..? They’re a big company. They helped pioneer affiliate marketing; they built their brand on it, kind of like Overstock has built their brand on it. What’s going to happen now?

Sam: Not to mention programs like ShoeMoney’s Auction Ads thing, which is sort of built on top of the API for eBay. Major affiliates are making a lot of money in this; it’s not just‑‑I wouldn’t call them an affiliate‑‑but major search people or whatever are making a lot of money on this. So I don’t know.

Jeff M: Search people? Yeah. I’d issue to call him a search person. I have even some other words for…

Jeff D: [laughs]

Sam: Much agreed. Much agreed.

Amanda: [sarcastically] I’m hurt!

Sam: But neither here nor there. I don’t know. I think it’s… I don’t know. [laughs] That’s one of my big questions: what’s going to happen when eBay does that? I don’t know.

[silence]

Jeff M: There’s that awkward silence.

[laughter]

Jeff D: Yeah, I don’t think there’s any way to tell right now. Frankly, I’m surprised that you think that eBay is still not a big chunk of CJ’s bottom line.

Jeff M: Well, ValueClick has, in their earnings calls, suggested that at every contract renegotiation, they have been fairly forthright with the fact that eBay is asking them to sharpen the pencil on the relationship.

Jeff D: If you remember, three or four years ago, I think Beth, or somebody, posted a revenues and sort of mentioned that the top 50 affiliates for eBay all made a million dollars a month, or drilled a million dollars, or whatever it was. It was some obnoxious amount of money that, if you worked out the numbers, probably was 20 or 25 percent of CJ’s revenue came from that one client, from eBay alone. If that’s changed, then that’s changed, but I can’t believe it’s changed that much. I know eBay told us at some event that the biggest check they wrote every month was to CJ.

Jeff M: Well, a lot of that, though, I have it from someone who worked back in the days of three or four years ago, where eBay was much larger. There were a handful of affiliates that did well into the seven figures, and this person told me that there were all type of trademark‑related scenarios going on, and eBay was none the wiser to that kind of stuff.

I think eBay has evolved, much as any online retailer would evolve, into understanding the power of its brand and those kinds of things. I think what you’re suggesting, Jeff, is absolutely true. It was true years ago, but it hasn’t been true for the last few years.

This is what I’ve been told by someone who I think would know. This person was with BeFree and then came over to Commission Junction when they got bought out.

Jeff D: So if you’re a big eBay affiliate and suddenly at some point can’t do business with them anymore, then what do you do? Do you become an Amazon affiliate and change your whole system over?

Jeff M: No, you’ve got a helluva lot of money at that point. Maybe you just go into early retirement.

[laughs]

Jeff M: Well into the seven figures! Like you said, they were getting big checks.

Jeff D: I think that also comes back to some of the loyalty and coupon stuff we were talking about before. I think a lot of this has to do with these big publishers: “If you don’t play with us, I’m driving that traffic somewhere else.” I think that’s where a lot of the loyalty programs end up holding big brands hostage.

Jeff M: Absolutely.

Jeff D: Cutting things off. They must assume that they can get rid of all of that traffic and still survive and still earn, still be…

Those affiliates have to do something, though. They’re not going to just stop and close up shop. Maybe that’s the answer; they pick Amazon. Because Amazon, if anything, has just as many tools, and even better tools in some cases, to let people make money. I don’t know if that’s going to have an effect. eBay is smart, so they must have thought a lot about this and decided that they could live without it.

Amanda: [sarcastically] Isn’t that special?

Jeff M: [laughs] We are at the one hour mark. We’ve managed to cover all the important stuff, I think. Really quickly I’ll just mention that‑‑‑‑what?

Sam: Google/Feedburner. Zanox, that’s huge.

Jeff M: Right, Google got acquired by FeedBurner, or FeedBurner’s getting acquired by Google! Wouldn’t it be funny if it were the other way around? Zanox getting acquired by Publigroup. What else? Interesting, Marchex is buying some Latin American based properties.

Sam: I swear you own stock in Marchex, don’t you?

Jeff M: Who? Me? I don’t own stock in any of these companies.

[laughter]

Jeff M: What are you laughing about? I don’t! I would not.

Technorati relaunched recently. We didn’t get to touch on any of that stuff, but perhaps next week, OK? So let’s go around for closing thoughts on this week’s discussion. Let’s go to Jeff Doak first.

Jeff D: I think the interesting question has become, going back to the beginning part of our hour: If you had to answer the question, “What’s the best way to run an affiliate program?” Assuming you’re going to have one. I still think everyone needs to have an affiliate program; I think it’s just a matter of how you run it.

Do you run a very small program with a few select partners, and maybe you’re running hybrid deals, or you’re keeping them in a different channel or separating the channels? And/or do you look into doing much more long tail stuff, where you have a bunch of small affiliates, where there’s maybe low overhead somehow, and they drive small amounts of traffic, but in aggregate, it’s a lot, and you sort of own these little niche communities?

And I still think that’s where things are going, but in general, if we can answer that question: how should you run an affiliate program? The way things work right now, what kind of technologies should you have? What considerations do you have? And even though that’s a question that probably has been answered a thousand times, I think the answer’s different today than it was a couple weeks ago, even. I don’t know. I think that’s interesting to explore.

Jeff M: Is Lee still on the call? [laughs] Lee, are you there?

He probably had to drop off and do that whole work thing again. Amanda Watlington, your final thoughts.

Amanda: My final thoughts are really that this has been a big week. And it’s part of what we’ve seen a lot of happening this week; we’ve seen a lot more acquisitions. I’m kind of fascinated at when the pace will slow down on the acquisitions because it’s like any time. A lot of the big companies have been swinging a lot of food into their face; now they’re going to have to chew it, and bring it all to pass because I look at the integration of any acquisition as being the single biggest next task.

And that’s where we will really see whether or not they get out of it what they really expect. It’s whether or not they can absorb, assimilate, and maximize all of this stuff they’ve bought.

Jeff M: Why not let it run, as it is, on the side?

Amanda: Then you achieve no advantage, other than perhaps having your eye a little closer on your competitor. You buy your competitor.

Jeff M: Mm‑hmm. Mr. Sam Harrison. Harrelson. [laughs] I called you Harrison, sorry.

Sam: Jesus, thanks.

Jeff M: Who’s that guy? [laughs]

Sam: Malander.

Jeff M: [laughs]

Sam: Again, I blame the networks for not having a presence online and having a personality online. Affiliate marketing isn’t going to rise to the next step, past 1999, if the networks don’t get their stuff in order, and really get out there and be advocates for the industry, beyond just lip service and showing up at Affiliate Summit and AdTech, and that kind of thing.

They’ve got to get out there and blog and interact, if you will. That doesn’t mean going on ABestWeb; that does mean having someone, or something, that sort of says, “This is who we are, this is what we do, and this is why you need to work with us.” Otherwise, we’re dead. [laughs]

Jeff M: Ken Magill wrote an article called “Affiliating with Success” in this month’s “Multichannel Merchant” magazine‑‑probably will be available online soon.

In my closing thought, I will read to you a short quote from a gentleman named Quinn Jalli ‑‑ Quinn, if I’m mispronouncing your name, I apologize ‑‑ chief privacy officer for DaTran Media. Jalli recommends questioning affiliates on how they intend to market the offer. For example, can the offer appear in a pop‑up ad? Can the ad appear in a newsletter? If so, what kinds of newsletters? And what is and is not acceptable?

“If the affiliate distributes your creative through a multichannel approach, you’d better understand each channel. If people won’t answer questions about how they’re getting the word out, you should walk away, especially in this era of liability.”

That’s my final thought.

Sam: Cool.

Jeff M: And I guess Lee is not here. He had to go do that whole work thing. So thank you all. I hope you had as much fun as I did.

Amanda: Absolutely. Absolutely.

Sam: Yep.

Jeff M: And we’ll talk again next week.

Amanda: I won’t be here.

Jeff M: Oh, you will not be here?

Amanda: No. I will be on the water in Camden, New Jersey, at the men’s collegiate rowing championships.

Jeff M: Oh! Very nice, very nice.

Amanda: Yeah.

Jeff M: Well, I will see you in the blogosphere, for sure.

Amanda: You absolutely will.

Jeff M: And email and all that kind of stuff.

Amanda: All the other good stuff. Thanks a bunch. Good night.

Jeff M: See you guys. Goodbye.

Sam: Bye.

[music]