Google (NasdaqGS:GOOG) is serious about its new Checkout service.  How serious?  Serious enough to invest in it via participating merchants.  This time it’s not just advertising credit or low shopcart fees for merchants (a standard they’ve already set), Google is helping retailers pass along deep discounts to consumers (on products and services they offer). 

Example below.

Considering the predicted focus consumers will have on discounting this holiday season, merchants should enjoy the added promotion.  Google’s bet is that it will help merchants adopt the Checkout shopcart even faster.

Momentum: Distributors
Surprisingly, Google is also securing serious traction with its advertising distributors.  A closer look at how Web merchants and their distributors (affiliates) are using Checkout provides more insight.

Established affiliates and distributors (i.e. comparison shopping engines) show strong signs of embracing (not fearing) Google Checkout as a serious conversion (turning browsers into buyers) enhancer through use of that same exclusive, deep discount.  Distribution partners of Web merchants, like Shopping.com/Dealtime (see below), are wasting little time in pointing consumers at the cash incentives offered by Checkout.

Why is this a surprise?  Not all affiliates provide “native visitors”… many, rather, provide arbitraged visitors (via paid search media) which retailers are, themselves, increasingly getting better at netting.  Established affiliates, however, rely less on use of paid search advertising to attract shoppers.  These affiliates are not threatened by Google’s interest in offering merchants a very attractive, self-funding direct-to-consumer advertising solution like Checkout. They’re embracing it!

Does Google risk driving away its once cherished affiliate advertisers?  Perhaps but Google has managed to reduce inventory, improve ad quality overall and raise prices quite well in 2006.  In fact it’s taken a fairly anti-affiliate stance in many cases… weathering the storm very well as it weans itself off of affiliate dollars and moves to “go direct” to advertisers.  Affiliates and distributors who in the past relied on search to garner visitors are increasingly turning to other forms of Web selling such as drop shipping.

Momentum: Retailers
Will advertisers continue to tolerate the higher click prices?  Time will tell. 

Consider Google’s heavy courtship of National Retail Federation (via Shop.org) members this week in NYC.  Consider the quantity of large, medium and small advertisers jumping on board and the rate at which Google is signing them up since rolling out the service just a few months ago. 

Finally, consider Shopping.com’s bold move into Google’s turf (using both a shop cart and cost-per-acquisition approach).  It would appear that the company (one troubled by its merchant partners’ disdain for their bidding on brand names/performing arbitrage in search engines) smells blood as does eBay who bans the use of Checkout among its merchants.

Momentum: Partnerships
Google hasn’t waited long to strike up some interesting partnerships such as a promotion with Citibank credit & debit cards that rewards shoppers who sign up for both services.  They’ve even got a merchant referral (affiliate!) program.

What other partnerships has Google stricken to enhance the growth of Checkout and what are advertisers themselves saying about Checkout so far?  Will Shopping.com be the first shopping comparison engine (SCE) to go “back to the future” by returning to (don’t forget this is how all SCE’s were born) a cost-per-acquisition fee model?

Web retailers have always been frustrated with pay-per-click comparison shopping engines (CSE’s) but Seattle-based Mercent may have part of the answer.  The power of of SKU level performance information and bidding capabilities is not to be understated in a world where retailers must hunt-and-gather performance data in order to approach the CSE marketing channel with a modest level of ROI sophistication.  In short, CSE’s have been reluctant to provide performance tracking data (as other performance advertising companies like Google and Yahoo Search do).

According to Mercent (who already provides centralized Web marketing/advertising performance tracking) their new solution allows Web retailers to submit customized product data across multiple CSE and affiliate channels in an automated fashion.

“Utilizing Mercent Retail for online content management, we can optimize the descriptions of individual product SKUs across online marketing channels, without having to pick up the phone to call IT or an outside vendor,” said David R. Williams, who manages VWR Education’s Science Education Affiliate Network (SEAN).

“Now, we have the ability to test offers across multiple channels and see which offers convert at the highest level, ensuring that we’re getting the best placements for our product promotions.”

This positions companies like Doubleclick’s Performics search and affiliate division in an interesting light—moving forward offering retailers a centralized product data feed service without the means to automate and streamline IT processes.

"When a stranger promises ‘you can trust me,’ most people know to be extra vigilant.  What conclusion should users draw when a Web site touts a seal proclaiming its trustworthiness?  Some sites that are widely regarded as extremely trustworthy present such seals.  But those same seals feature prominently on sites that seek to scam users—whether through spyware infections, spam, or other unsavory practices,” says Harvard Ph.D. candidate and leading spyware/adware expert.

Sure to send ripples throughout the blogosphere, media and perhaps corporate boardrooms, Edelman has released a new paper (summary here) entitled Adverse Selection in Online “Trust” Authorities.  The paper demonstrates how TRUSTe (the hands-down authority in trustworthiness) has sold out to the most un-trustworthy of companies—those operating various “Internet pollution” type of operations; largely adware and spyware firms that pummel consumers and corporate user computers into oblivion. 

TRUSTe calls itself “an independent, nonprofit enabling trust based on privacy for personal information on the Internet.” They “certify and monitor Web site privacy and email policies, monitor practices, and resolve thousands of consumer privacy problems every year.”

I call it yet another failed attempt for industry to self-police itself.

Featured guests include Direct-Revenue.com, Funwebproducts.com, Maxmoolah.com, Webhancer.com. 

In a bold move, AOL’s Advertising.com unit re-structured its publisher terms and conditions.  Publishers must now gain written permission from the company if they want to engage in:

- Incentive-oriented campaigns
- ANY form of search engine arbitrage

Stiff e-mail provisions are also enacted with ‘per occurrence’ penalties set at $10,000.  Search marketing offenses start at $1,000 per “occurence” (notably, not defined in the T&C’s themselves).  If you’re a publisher and do business with Advertising.com you, thereby, agree that these liquidated damage amounts are not only in force but “reasonable.” In other words get caught and you’re not going to weasel out.  Not only can the network withhold all monies due you’re going to pay dearly for offenses (offenses are 100% definable by the network and broadly defined in many cases).

Example:

Without the prior written approval of Advertising.com, Publisher may not purchase keywords from search engine service providers in order to drive traffic to Creatives or Landing pages, including, but not limited to purchasing keywords that include the trademark, service mark, or brand name of the advertising client to which the applicable Creative relates, or any derivative of any such trademark, service mark, or brand name ("Advertiser Marks"), or purchasing online advertising inventory for purposes of running advertisements that include Advertiser Marks on Web Sites or within emails.

Affiliate marketing Goliath eBay recently pulled the plug on its existing affiliate program tracking—centralized at ValueClick’s (VCLK) Commission Junction (CJ) network—and is unveiling what it calls Project Rover (via Jangro.com).  Notably, reporting will remain centralized at CJ.  According to eBay:

Project Rover has been designed to work seamlessly with the Commission Junction interface, increase the effectiveness of our affiliate’s marketing campaigns, and will be rolled out to all countries.

The benefits for affiliates/publishers?  Says eBay:

- Reduced ad / cookie blocking (reference)
- Fewer URL / server redirects
- Global tracking

In short, eBay is taking its tracking out of a network and into its own control.  Why?

Asks long-time CJ affiliate and former employee Scott Jangro, “Is CJ being disintermediated? This move at least puts CJ in a very weak position as they can be switched out in a flash once the program is humming along on the new links.”

Sounds familiar.

I spoke with David Lewis (winner of this year’s CJ Horizon award for innovation) this morning about the situation and he speculates that the allure of (my words) “CJ as a source of great publishers” remains a strong one; hence, eBay is not willing to walk away.  After all eBay is more than capable of providing a reporting interface considering its technology prowess.  Why keep the CJ reporting tool in place?

My perspective remains a confused one as search-based affiliates have become an endangered species in recent months… and CJ seems to be best at providing eBay with a means to meet such affiliates.  Point being eBay is likely meeting fewer and fewer search affiliates through CJ as time goes on.

A new report on “Which Anti-Spyware Programs Delete Which Cookies?” has been released.  Underwritten in part by Incubeta and executed by leading spyware/adware expert Ben Edelman, the research attempts to zero in on which advertising (pay-per-click, cost-per-acquisition/"affiliate") networks are being targeted by which anti-virus (AV) and anti-spyware/adware application providers. 

Why Another Cookie Study? 
In the case of cost-per-acquisition (CPA) networks like Commission Junction, Performics and Linkshare (the full list of networks studied appears at right) affiliates and publishers want to know if privacy-concerned users (shoppers) are using AV or anti-spyware/adware software to zap cookies that control their commissions.  No cookies, no dinero amigo!

Obviously networks (who’s compensation is tied to the affiliates’/publishers’) want to know too.  They appear to get a freebie on this one given how Incubeta and Edelman are making the study public. 

What’s New?
I asked Edelman to give Thoughtshapers readers the skinny. 

“Affiliate networks’ tracking systems—and hence their abilities to add value and to get paid—rely directly on cooperation by users and their PCs,” Edelman says. 

“With a factory-fresh computer and a cooperative user, tracking will work as affiliate networks intended.  But if a user becomes suspicious of tracking that’s perceived as privacy-invasive, the user can delete the cookies by which tracking occurs. And if a user installs security software cookies can be blocked or removed.  Either way, the affiliate and affiliate network don’t get paid.  This research indicates that such blocking remains widespread—that such blocking is performed by mainstream, widely-used anti-spyware programs. 

Consumers In Control
All of these cookie-zappers indicate that their customers are in firm control of who gets targeted for deletion and who does not.  Relating to Edelman’s above statement… in my viewpoint the affiliate networks are targeted by widely-used anti-spyware/adware programs; however, these applications are used among a relatively smaller, more “privacy-concerned” user group that differ from a wider set of consumers using AV software.  How?  Those who uncrate their shiny new PC and Macs (having pre-installed AV software loaded on them) are using a more blunt instrument against affiliate network cookies (they’re more concerned with virus protection).  How blunt?  According to this research AV software (the big players) doesn’t much damage affiliate network cookies at all.

The AV and security software vendors are absolutely rushing into the market to protect users against spyware and adware but it’s not an overnight process and today they offer less sophisticated detection and deletion capabilities on the spyware/adware front (as compared to more specialized tools like AdAware, Webroot, Xblock and Zonealarm).

In short, McAfee and Symantec’s Norton have larger user bases that are less sophisticated and less hyper-focused on Web privacy tools.  The affiliate networks have, with them, been let off the hook.

As I mentioned to ClickZ’s Kate Kay recently, I do think that if privacy concerns continue to escalate, and users respond by choosing (currently lesser-used) applications over the larger anti-virus players, the affiliate networks will need to figure out a way to get ‘un-targeted’ by the smaller, niche anti-spyware and adware firms.”

Edelman’s research also yielded an interesting and related fact. 

“It seems big ad networks and affiliate networks are disproportionately targeted by anti-spyware programs, while smaller networks are allowed to operate unimpeded,” said Edelman.

His research also indicated that Google’s cookie distribution methodology may have earned them a pass (among anti-spyware/adware applications) as well.  Edelman noted that Yahoo! Search is not as lucky and is being targeted.