Rakuten Inc.’s Linkshare division clearly understands that Web-based affiliate marketing is but a mere a cog in a larger, increasingly more important wheel.  This week we learn that the company is moving toward becoming a full fledged, digital ad agency.  Linkshare itself is indicating such a move and industry insiders ranging from publishers to advertisers themselves are buzzing in my ear.

According to trusted sources (one of which will confirm the story here on ThoughtShapers in days ahead), President Steve Denton is wasting no time in setting up a more comprehensive media buying organization—positioning the company to cover more online advertising turf and better serve its clients.  Built exclusively on cost per acquisition (CPA) lead generation programs for retailers and service-based advertisers, Linkshare has historically not provided a wide array of traditional advertising services.  It’s Japan-based parent, Rakuten, is non-plussed with that fact given its entry into the U.S. via the nearly half billion dollar acquisition of Linkshare… a company billing in the $45 million EBITA range.  Simply stated, it’s “go time” for Linkshare and diversification is in order.  Linkshare needs to show serious revenue growth and become a more serious e-commerce platform player, as Rakuten indicated from the get-go.

Would You Like Fries With That Shake? 
Affiliate marketing is a great appetizer when it comes to cozying up to online advertisers of all shapes and colors.  Yet there must be more “beef” when it comes to acquiring new and retaining existing customers using the Web—and there is.  There are a wide variety of paid media opportunities (i.e. paid search, CPM banner media, email) and comprehensive marketing services (i.e. campaign planning, creative development, optimization) to offer advertisers.  So far, Linkshare ain’t tastin’ none of that revenue; hence, it’s time to super-size.  Linkshare needs to grow.

Certainly Valueclick (VCLK) understands this diversification strategy given its array of online advertising options: affiliate marketing (CJ), a click network, a display ad network, shopping comparison and affiliate marketing.  With a pretty sizable customer base in hand, Linkshare needs to grow its online advertising share of wallet (among existing customers) and affiliate programs are, for the most part, maxxed out especially among Linkshare’s target market—the Fortune 500. 

Affiliate Marketing Isn’t Enough
Yet many advertisers (in particular, retailers) have yet to get revved up with a good number of paid media ad opportunities as they’ve long enjoyed the “free branding, pay-only-on-the-desired-action” fruits of affiliate marketing.  Direct response marketing has been their primary turn-on yet within Linkshare’s market segment advertisers have reached a lead generation and transaction plateau.  They no longer see much growth in search-based and rewards shopping portals (the two primary type of seriously productive affiliates).  There simply must be other options… like buddying up with traditional publishers to engage in display ads as an example… and why should clients need to go anywhere other than Linkshare to access them? 

Specifically, look for Linkshare to offer services like:

- Comprehensive research & campaign planning
- Campaign optimization
- Marketing/ad support services

Linkshare’s Mobile Future
If early client projects go well enough, I believe we may even see Linkshare make an acquisition of a boutique (yet highly successful) ad house engaging in mobile media campaigns.  Don’t forget, Rakuten operates one of Asia’s biggest online malls and is a retailer itself.  They’ve already indicated they are highly interested in marketing their own products here in the U.S. and they’re going to need some help.  Mr. Denton himself has been busy preaching the power of mobile—a buying phenomenon that Asians invented and which the U.S. has yet to adopt.  It is not difficult to see a future for Linkshare that involves mobile advertising campaign development (outside of facilitating affiliate use of the technology).  In fact, Linkshare is likely to dominate it given its Asian roots. 

Is it difficult to see Linkshare offering up full service advertising services?  Nope.  How about the company helping retailers get into the mobile commerce game… tapping into consumers’ urge to use their jewelry (that’s what mobile devices are—face it!) to buy digital and real world products?  Considering the transactional nature of such a business, no again… so long as creative services are brought to bear.