The masterminds at Google have successfully dropped another red herring feature into the advertising ocean. They’re calling this one Position Preference but I like to call it IDIAT - Injecting Demand Into Auction-based Traffic.

This latest attempt to inject demand into the already frenzied PPC search auction is more chum in the water intended to attract branding budgets from the big fish. Not only is Google brilliant at extracting money from clients they’re also brilliant at spinning it as advertiser demand. 

Interestingly enough Yahoo is rumored to be releasing their version of Yield Rank Ad Serving this very month. As the two leaders in the space start to amalgamate their Ad Serving algorithms it leaves me wondering what do these two know that we don’t? (CPC X CTR x Branding) = more money for them.

Ironically these announcements come dangerously close to April Fools - but don’t be fooled by Google’s Trojan fish it’s going to change everything.

I’ve said it for years now and it seems that some are in agreement… one very large segment of “affiliate creativity” is capitalizing on advertisers’ other BIG media spends by leveraging their ignorance of (and non-participation in) paid search.  It can be summed up as:

Advertisers spend millions on media buys (TV ads).  Consumers navigate to the advertiser brand using Google (not their browser address bar).  Affiliates pay pennies for Google ads so as to shuttle consumers onward to advertisers’ site, pocketing a commission with HUGE margins (considering the low cost of ads targeting your brand and high shopper conversion).  I’ve been watching this since 1999, y’all and today we see an outstanding article in Electronic Retailer Magazine focusing on direct TV (DRTV) advertisers.

I’m giving a shout out to Paul Soltoff today, CEO of SendTec who tries playing nicey-nice in the onset of his piece, ”Should You Be Employing an Affiliate Program“ but in the end tells it like it really is without much sugar coating.  Soltoff goes as far as giving examples of typical affiliate behavior.

Just what is that behavior?  His very pointed piece is broken into two bits “Branding and Marketing Communications Risks.” Sounds familiar to me.  The second chunk is entitled “Paying a Premium for Your Brand.”

Says Soltoff, “While manipulative marketing communications are a significant risk an even bigger risk can show up in your P&L statements should you let your affiliates go unchecked.” I’ve also discussed this here at Thoughtshapers in that our affiliate program audit clients are, increasingly, the CFO. 

To be blunt, Soltoff is relentless in his clear illustration of what’s going on and how it’s BAD for DRTV advertisers. 

An example from Soltoff’s article, “Should You Be Employing An Affiliate Program.”

Could some retailers and service marketers, through participation in common affiliate programs, be aiding so-called “bot nets” that glean bank account & credit card numbers, passwords and other personal information from consumers’ computers?  Perhaps so says Wayne Porter of Facetime Communications which has identified a “large scale and sophisticated attack” on consumers using instant messaging technology. 

According to Porter, marketers need to pay attention to who their affiliates really are and not just because the FTC is interested.  Why? 

Porter says, “Large scale and sophisticated attacks like this have the potential to have a ‘chilling effect’ on shopping, buying and banking online and in general eroding the very e-commerce infrastructure that merchants, affiliates, networks and customers take for granted.”

How It Works
According to Facetime, consumers get passed the privacy-invading software from a link in what appears to be a friend’s instant message (but is in reality an automated program posing as their friend).  Once on the computer the process is repeated until, Facetime says in one instance, up to 150,000 computers are infected. 

What It Does to Consumers
Once infected the software really gets to work—scouring “desktop and back-end systems to obtain credit card numbers, bank accounts, and personal information including log-ins and passwords” says Facetime.  According to the company, the operators could launch these scans from any computer on the network of infected computers so as to mask their actual location… making catching them difficult.

How Your Affiliates Might Be Involved
Some affiliates will do anything to earn a commission and extend their “creativity” far beyond that of bidding on your brand in search engines.  Indeed, they’ll go further than paying an adware company to pop an advertisement at your checkout page and, thus, set themselves up for an un-due commission. 

In order to achieve the same result, some affiliates will actually create their own software applications (like browser bar plugins… similar to Google or Yahoo’s Toolbar) that install when a consumer downloads games or other software.  This “bundling” of software feeds on consumers who assume they’re only getting what they clicked on and can be a “I’ll scratch your back if you scratch mine” business.  When an already dubious affiliate gets even more greedy and bundles serious spyware with its own software, the financial payoff goes up (they earn cash on every installation of the thieves’ spyware). 

Wait… bundles of bundles that are distributed with bundles?  Confused?  Darn right you are… that’s the point. 

The Bottom Line
Some affiliates will try to place their software on consumer’s computers, netting themselves un-due commissions.  Some of those affiliates will, when presented with a lucrative financial opportunity, bundle their software with that of others (operated by serious criminals) when distributing their dubious software.  In all fairness to dubious affiliates they may not even understand who their doing business with (phishing criminals).

You read it here first—DirectRevenue is agreeing to ground-breaking settlement terms in bringing the class action brought against it (March 2005) to closure.  The embattled spyware/adware company is agreeing to, among other things, the below terms in a settlement with class representative/plaintiff Stephen Sotelo in Cook County, Illinois Circuit Court:

1) Destruction of personally identifiable information “to the extent that DirectRevenue possesses any such data, said data will be destroyed.”

2) Giving equal prominence to 2 choices when displaying the End User License Agreement to consumers considering installing the software:

“I have read and accept the agreement” or “I do not accept the terms of the agreement” (EULA)

The “accept” option will NOT be the default option.

3) In addition to providing computer operators with its EULA, it will “disclose, separate and apart from the EULA” that users will receive ads while online along with a description of the ads; its collection of information about Web sites visited by users; its intent to provide adult ad content ads if users visit adult sites; any bundling—the fact that its software will also be included with any ad supported software being downloaded.

4) Not installing its software using Microsoft ActiveX or any other security exploits or in any way that does not require users’ consent.

5) Un-installation information to be displayed in the EULA and supported with an array of consumer resources such as a link at DirectRevenue.com as well as telephone and e-mail assistance offered to consumers (including special help for the visually impaired) wishing to rid their machine of the software.  All messaging will be detailed in how consumers can remove DirectRevenue’s software.

6) Not using sites aimed at children as distribution partners.

7) Not using the word “free” in banner ads describing the program being promoted (by the distribution partner such as a screen saver or video game) unless the ad also discloses that the program is ad-supported.

8) DirectRevenue ads will display a “?” button on the title bar or text link indicating further information is available to consumers. “This information will include an explanation of why the user is receiving the ad; the identity of the consumer application the user downloaded with the software; an instruction that the user can uninstall the software using Windows ‘Add/Remove Programs’” (to be found “under the exact same name used in branding the ads").  The company will limit its “name changes” used on ads (i.e. Best Offers) to once per every two years.

9) No re-installation unless the user performs a re-install.

10) No deletion of other software tools or modification of the consumer’s security settings will be performed.

11) Limitation of advertisements served to 10 or less (per computer per 24 hour period).

12) Purchasing sponsored links, if Google is willing to sell such links, that provide links to help consumers remove DirectRevenue software. 

Unfortunately, the settlement’s chief weak point is a critical one: affiliate control and enforcement of rules.  The company agrees to hold its affiliates responsible for terms agreed to as part of this settlement but makes no warranties beyond its commitment to “closely police its distributors.” It promises to “take appropriate action based on the circumstances of the violation, potentially including termination of the distributor.” The use of sub-affiliates is also not prohibited.

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EDITOR’S NOTE
3:25 PM CT
3-13-06

In a note to me this afternoon, David Fish (of The Collins Law Firm, P.C.) wished to make something very clear regarding DirectRevenue’s control over distributors.  That being…

“One of the main reasons that we agreed to the settlement relates to the ability of our law firm, the Class of Illinois residents, and a Federal court to hold DirectRevenue accountable for any misconduct that may have been aided by one of its distributors.”

In the same email Mr. Fish said, “The bottom line is that if there is a violation the terms of the settlement, we don’t care whether DirectRevenue is going to try to ‘pass the buck.’ We will seek to have DirectRevenue held accountable… If DirectRevenue (or its distributors) violate the settlement agreement, we have the right to ask a Federal judge to hold DirectRevenue in contempt of court for violating a court order.  This is why we insisted on DirectRevenue agreeing to ‘injunctive relief.’”

How far off are we from Google auctioning off behavioral “meta data” gleaned from Web surfers within a specific geography typing “The North Face Denali Ski Jacket” into Google.com and then helping the winning advertiser place geo-targeted radio or magazine advertising buys in the region of strongest demand?

On the heels of last week’s Search Engine Strategies conference in New York, I’m left with better perspective on Google’s (NASDAQ: GOOG) advertising market growth plan—to transfer the success of its auction-based AdWords and AdSense platform to other forms of media.  Yet Google may have a fall-back plan if advertisers reject the transfer of its highly successful ad selling innovation. 

The “Attention” Model
Simply stated, second to transferring its successful ad platform to radio and print media, Google looks to become the King of all Attention Meta-data. 

What exactly is this new “attention" world all about and why is it being talked up by the movers-and-shakers out in Silicon Valley lately?  From Newscorp’s acquisition of social networking site, MySpace to Google’s acquisition of Web analytics solution provider, Urchin we can see a clear grab for what is, in fact, piles and piles of data that measure the “attention” (and behavior) of Web users—sometimes on an individual basis (raising serious privacy concerns) and sometimes in aggregate.  How to make money using the “Attention Model” is still being hashed out by thought-leaders like Steve Gillmor and, of course, is hotly debated based on its fundamental use of what consumers/users consider private—one’s gestures and actions while using the Web.

Evidence
Urchin (a pile of data describing precisely how users interact with eCommerce sites) is merely one example of Google’s plan B.  Indeed, as John Battelle points out Google is looking to take the success of its AdWords “advertising auctions” model and transfer them.  This has little to do with the “Attention” concept but if it fails what is Google left with?  Again, piles and piles of data that, at least, measure behavior and attention of users. 

As an example, Google can match searching activity of users in a particular zip code (demand for products/services) with radio ad buys covering that same zip code.  Powerful… but if advertisers reject the notion of buying radio and print ads through an auction Google would be left with the information it already has—describing geographic demand.  Nielsen/NetRatings and Arbitron data suddenly looks weak.

From Google’s Mouth
Today, Google is able to help advertisers take virtually every product to market based on its SKU identifier, model number and a variety of other product-specific information that users type into its search engine.  That’s huge and highly unlike selling on the radio or in print… BUT consider the residual data Google is left with.

As stated last week by Google’s Tim Armstrong, VP of Advertising Sales…

“The information that comes out of digital media such as search and contextual targeting is transferable to other media… Advertisers wanted to see if we could apply some of the measurably and accountability of search to contextual targeting, and we launched that several years ago.” (AdSense)

The information, says Armstrong. 

Google is clearly gearing up to transfer its already successful innovations and leverage current advertiser relationships… yet I wonder how serious they’re looking at competing with those who measure “attention” and behavior.  I also wonder if Google will be at the center of the “attention measurement” game (assuming there is one) in years to come.

Increasingly, bean counters (CFO’s) at retail and catalog companies are taking aim at their Web affiliate programs by assigning audit task forces to uncover waste and fraud within the channel.  At the heart of such actions is a serious desire to root out “hidden costs” that are associated with affiliate programs.  These costs are often viewed as an additional “tax” on orders that would otherwise be delivered.  These include affiliate orders involving:

1) Adware and spyware (involving illegitimate commissions)
2) Search affiliates who used trademark/brand terms to “intercept” traffic already bound for the marketer’s site (assigning a cookie, earning a commission)

“Don’t we already own these customers?”

In addition to the above affiliate tactics being troublesome a larger question has popped into the minds of marketers as they rush forward.  At the heart of the matter lies loyalty and motivation—who rightly deserves credit for creating the sale.

“Aren’t we already investing in other media to earn these orders?”

Indeed, marketers are slowly realizing that they spend in many other ways in order to earn a sale from existing customers—through paid Web media (pay-per-click) arrangements with comparison shopping sites, radio and television ads, catalog and direct mailings, etc.  Affiliate programs were built on a false pretense: affiliates always deliver new customers and are always, solely, responsible for creating the sale.

In fact, other media costs are usually involved and audits are revealing the truth about affiliate programs.

The Last Marketing Channel Wins
Some savvy marketers are growing increasingly uncomfortable paying more than one party for a sales transaction.  In fact, some are going as far as only providing an affiliate with credit (commission) upon an immediate or 24 hour conversion to sale.  Others are creating tracking mechanisms—outside of affiliate networks—that allow them to pay affiliates only if they were the last MARKETING CHANNEL to refer the customer. 

As an example, an affiliate sends a user from its site to the marketer’s site.  A 30 day cookie (commission earnings period) is set.  The user clicks off and doesn’t purchase but returns 10 days later as a result of the marketer’s email campaign.  A transaction results and the affiliate cookie automatically negated by the marketer prior to passing on any data to the affiliate solution provider.

Affiliates & Affiliate Networks: Lose Lose
Who loses?  The affiliate network and the affiliate.

In fact, many affiliates themselves don’t realize this is occurring.  Close examination of marketers terms & conditions reveals an increasing number of marketers use this technique for a variety of reasons… some mentioned above.  They simply don’t shout it from the mountain tops and bury it in the legalese.  Don’t ask, don’t tell.

Are you concerned about affiliates adding a “tax” to your orders and/or leads?  Click on Comments below and share your thoughts.