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.

So many people have jumped all over David Jackson’s shorting of (Valueclick) VCLK stock and predicting the doom of its Commission Junction unit… so many that you just have to believe that Jackson is onto something.  In fact, he is; Google (GOOG) will, indeed, be a CPA (cost per acquisition) advertising force to be reckoned with and it could literally happen overnight if Google plays its cards right.  The company recently announced that it is giving consumers a new, remarkably convenient, powerful choice of payment and is tying this to the merchant’s advertising costs / business profitability.  That’s hot… huge… powerful and, in the end, will likely motivate merchants into action. 

It also announced its ”Content Referral Network“—a move generating much speculation about where Google’s ad business is off to next.

Google Checkout: Consumers
Consider Google Checkout—a tool that allows users to give their charge card and “ship to” details to Google once, never needing to fill out another shop cart form again.  They just click Google Checkout—perhaps using a coupon provided to Google (exclusively of course).  Call it a universal wallet or not, Google Checkout has serious appeal that extends beyond one-click checkout processes such as charge card privacy (share with Google and nobody else yet shop everywhere), e-mail controls (turn on and off email coming from stores within your account) and more.  Control, centralization of transaction history, merchant review ratings, zero liability for un-authorized use of your account… aaah.  Heaven on Earth!

Google Checkout: Store Owners & Advertisers
What retailers are playing so far?  Many large, medium and small brands.  Why will more retailers flock to Google Checkout?  Because Google Checkout (who’s $0.20 + 2% of ticket are less than PayPal’s) will pay every advertiser $10 for every $1 spent on Google advertising buys (AdWords, AdSense). Google will literally offer Google Checkout at no cost to many, if not all of, its advertisers (as a reminder, numbering far more than traditional affiliate networks Linkshare, Commission Junction and Performics combined). 

Google charges forward, according to Chris Sherman of SearchEngineWatch and is “also working with shopping cart providers to integrate Checkout into their systems.”

Sherman points out that

“Google Checkout is simply an extension of technology the company has developed internally for its AdWords, Base, Picasa and other services.”

Checkout + AdWords = Free, More Prominent Ads
But wait… there’s more—significant elevation of a participating advertiser/store owner’s advertisements among Google Checkout-lovin’ consumers.

Google has tightly integrated Checkout with AdWords. Any advertiser offering a Google Checkout option will now see their ads displaying with a Google Checkout “badge” icon next to the ad in search results. This visual cue lets searchers know they have the option of using Google Checkout if they click through and buy from that advertiser.

The Trojan Horse
What’s behind Google Checkout if it’s a break-even for Google?  The answer is clear: Google Checkout must be a trojan horse—a means to move Adwords into CPA-based advertising.  CPC is under heavy fire and not by advertisers or their asleep-at-the-wheel agencies who are still trying to grasp elementary operational pay-per-click search concepts (so that they might define—let alone do battle with—click fraud).  Lawyers are moving and 2 class action lawsuits are one too many for Google (even if they settled and got away with murder!).

Google is likely not planning on converting its cost-per-click (CPC) ad network into a cost-per-acquisition (CPA) model but it sure is planning on offering the option to advertisers and publishers in its AdSense network.

Silencing the Skeptics
Jackson’s critics have been quick to point out that he doesn’t understand fundamental intricacies involved in cost per action advertising and suggesting that Google has a big challenge: getting advertisers to let them into the transaction event itself.  Silence critics!  Google Checkout is the transaction event.  Adoption of Google Checkout is racing forward and shows few signs of slowing down given numerous benefits that store owners/advertisers are having a hard time saying no to.

What about fraud?  I say, what about it!?  “How will Google deal with fraud—a ‘relationship based phenomenon?’” ask the skeptics.  I dunno—how do traditional affiliate (or even worse) CPA networks deal with fraud?  That’s right, in reality they don’t deal with it… to the delight of advertisers who fund it... they pay it some lip service when needed otherwise they ignore it and keep ringing the cash register. 

How Much is Too Much?
Too much data in Google’s control you say?  Perhaps… but there are plenty of sellers/advertisers who don’t give Google all the goods or who are willing to trade off some rather important data (transactions, search and Web site analytics) in return for what amounts to free advertising that is tied directly to transactions—pure performance based advertising. 

I find it ironic that affiliate networks like that owned by Valueclick were largely responsible for building Google and Yahoo Search’s entire paid search business (via affiliates who were willing to experiment with “media/traffic arbitrage") before advertisers would even consider paying for a visitor on a per click basis.  Today, Google turns against such networks as it makes a grab for direct relationships with those who sell on the Web.  At least they’re sharing with affiliates!

LATE ENTRY: This just in…

... this is a dangerous and most brilliant assault on the “cost per click” (CPC) plans of Microsoft, Yahoo and everyone else who is coming to the party… late. This move is about cost-per-action advertising. It is about kicking up the online advertising business a notch!

Om Malik

Although… shame on Om for suggesting that with CPA, “As an advertiser, you have no risk.” Not true but let’s face it most advertisers have shown us for years now that they’re willing to stomach the risk so long as they can get enough of the good with the bad.  Burying head in sand never hurts.  So does that make Om’s statement true?  If an advertiser gets screwed by an adware affiliate and nobody knows does it does the advertiser really get screwed?

The Internet is fun and filled with gizmos thanks to Web2.0 and, of course, the advertising industry.  Even if consumers show no sign of adopting new ad technology the ad industry… well, they just don’t seem to care. 

Everyone from Google (as reported by Ken Magill who points out that Gmail is sending many advertisers’ customers to their competitors) to industry blog Revenews is playing around with them.  Today Vibrant Media unveiled an in-text video ad service called Intellitxt Video (delivering video content at the move of a mouse).

Although morphing (certainly to include so-called rich media advertising) the practice has been around for a good number of years now and has, in my estimation, been widely rejected by the surfing public and among most publishers.  Why?  Here’s one that smacks ya right in the kisser: the inter-mingling of editorial and advertising (traditionally, journalism’s biggest no-no).  As for consumers, do they really enjoy publishers who clutter the look of reading material with double-under-scored words that jump out at you with sales pitches when you hover over them?  Is this cool or annoying?

Google, the hands-down online ad industry Goliath, is even messin’ with them inside gMail—opening up a new form of ad inventory (personal email!) perhaps at the expense of user experience/satisfaction.  Nonetheless the tinkering goes on and advertisers appear to be eating it up.

Says Vibrant Media who’s managed to stay alive for a few years now, “Intellitxt Video launched June 12 with about 40 clients, including NBC Universal, Intel and Sony. The current capacity of the ad unit is 200 million commercials.” (via DM News)

Performics (a unit of Doubleclick) announced its OrangeLinks program and, in doing so, schools Valueclick on how to implement and communicate a solution that allows it to make a strategic shift away from manual processes.  Additionally, advertisers are finally able to access e-mail contact information on their affiliates/publishers (should they need them, Performics remains service-centric).

Using OrangeLinks, says the company, it now delivers “pre-generated, live links directly to you (the affiliate) via email or FTP.  We anticipate that this feature will save you time, improve your productivity and make your life just a little bit easier.”

Indeed, affiliates can choose to:
* Receive feeds from a specific set of advertisers
* Receive the most recent links for specific creative sizes
* Receive most recent links for specific promotion types
* Temporarily pause delivery of the links
* Have the latest advertiser links sent via email or FTP every morning

Considering the overall industry climate (eager to find a way to increase scale and take the work out of affiliate programs) and Performics’ recent shift to reporting Earnings Per Click, calling marketers “advertisers” and affiliates “publishers”... well, let’s just say that this should sound VERY familiar to you, the informed reader.

I’ll be less coy: This is the Link Management Initiative all over again but done correctly.  It provides affiliates with a candy-coated and legitimately useful solution allowing them to operate business-as-usual.  Similarly it keeps advertisers calm.  No need to issue propaganda-laden podcasts that only fuel the burning fire of confusion; no need to issue “we’re sorry, we’ll delay this” missives to customers. 

Candidly, I’m shocked that Commission Junction stubbed its toe on this.  If anyone doesn’t have a love affair with affiliates, it’s Performics.  CJ was always the darling among affiliates—errr… publishers.

We’ve been waiting to see what the owners will do with Performics and I suggest we’ll find out soon.  I’ve got all my money riding on Performics being merged with something that scales.  All the indicators are there the rest is just a waiting game.

I’m excited to release a audio program and FULL transcripts (appearing below) as part of the ongoing Best Practices In Affiliate Marketing series. 

I’m very interested in making certain programs available for professional education purposes and will continue to do so on topics that are of critical importance.

What is Commission Junction’s Link Management Initiative all about? What does it mean for advertisers and publishers/affiliates?  Industry veteran advertisers discuss the situation as it unfolds.

“Anybody who thinks this isn’t a response to Google and the technology that Google offers to their advertiser base isn’t looking at this from a far enough perspective… Advertisers are in droves in Adwords spending billions... Adwords is making an assault on rich media, video now… you have to respond; if they don’t respond they’ve got 2 or 3 years left before their entire affiliate base migrates anyway.”
Jeff Nienaber
Allstar Directories

Affiliate manager Nate Griffin suggests affiliates have innovated in past and this is becoming more about who should control innovation—a critical part of affiliate marketing’s strength.

“There’s a lot of questions in my mind of weather or not it (this change) makes it closed to that innovation now and if CJ (itself) wants to control that innovation.”
Nate Griffin

Does CJ want to shake loose the low-value affiliates by frustrating them… thereby improving network quality?

“At the least it’s a fringe benefit… if it’s not the actual goal.”
Patrice Colancecco-Milligan

“They decided that this is what they want to do, and where they want to move, which I can understand them making that decision, I just think they did a lousy job of putting it out. It just seems they’re not affiliate centric, which to me is part of the game. You have to try to keep them halfway happy, or explain to them; they just put it out there like the affiliates have no say in what goes on, and that’s offensive to me.”
Chuck Hamrick
Backcountry.com (and all associated ecommerce sites)

Program Length: 37 minutes

Click PLAY button below to stream.

Download MP3 file here

PROGRAM GUIDE
00:00 Introductions of guests
02:23 Strategic shift for affiliate marketing?
04:00 Backcountry.com reacts to announcement (Hamrick)
06:41 Operational concerns: Affiliate categorization (Molander, Griffin, Colancecco)
10:08 Google vs. CJ (Nienaber)
10:19 CJ losing track of affiliate/publisher needs? (Hamrick)
12:02 CJ “holds all the cards” how will they use them? (Colancecco)
13:32 Advertisers or CJ - who gains from the change?
15:32 Advertiser being given illusion of power (Colancecco)
16:48 What might this mean tactically for advertisers? (Griffin)
18:35 Departure of CJ’s Todd Crawford (Hamrick)
19:57 A Valueclick mandated change driven by Google (Nienaber)
20:54 Is Google going to innovate around Adsense a la Japan’s Ichiba?
22:40 Subtext: Google, Yahoo, MSN competing direct for advertisers
23:10 Could CJ be handling this better? (Colancecco, Nienaber)
23:45 How long will links remain intact? (Hamrick)
24:46 Valueclick’s motivations (Nienaber)
25:23 CJ has opportunity to enhance network quality… will they? (Hamrick)
26:55 CJ’s ace in the hole - advertisers aren’t going anywhere; what about affiliates? (Nienaber)
28:39 Does CJ want low value affiliates to go away? (Nienaber, Colancecco)
31:48 Who’s leaving; are threats valid? (Griffin)
34:52 CJ must do right thing w/ right affiliates (Nienaber)
35:35 Wrap-up: this is all about Google & “media” (Nienaber)

Subscribe via RSS.

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AUDIO TRANSCRIPT
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Jeff Molander:  Thanks to all of you guys for taking the time out of your day and joining me in this interesting discussion with regard to Commission Junction’s recent announcement where they’re going to change their links, and the way that they do linking. On the call, I have Nate Griffin, Chuck Hamrick of Backcountry.com, Jeff Nienaber, formerly of Birthday Express, now involved with Allstar Directories, primarily in the lead generation business; and Patrice Colancecco Milligan. Everybody on the line here are very experienced affiliate managers, to say the least. Patrice goes all the way back to CDNow. Jeff goes way back; when did you start Jeff? Was it 1999ish, something like that?

Jeff Nienaber:  Yes, ‘98.

Jeff Molander:  Okay. ‘98? Geez, I think that’s even earlier than me; I thought I was an old man. Chuck, how long have you been in the business? How long have you been in the business?

Chuck Hamrick:  As a full time affiliate manager, only for the last year. Although I used to just launch programs, back from 2000 on, both in Commission Junction and Linkshare. I’ve had an interesting online marketing experience; I started in 1999, in the days of doorway pages and worked through SEO through 2004, then broke out into consulting, and started with Backcountry last year in October. In that time, we did a lot of mini-sites, and whenever a client would leave, I would back-fill them with affiliate links to news and traffic before I found a new home for them, so I have been playing in the affiliate space since 2000.

Jeff Molander:  Nate, I don’t even know if I know your background. Where were you before where you are at now?

Nate Griffin:  I’ve actually been an Internet marketing manager, not exclusively affiliate, but I actually started with doing email and some project management about two years ago. I’ve been a full time affiliate manager for about a year now, and prior to that I worked on the agency side as a project manager and account manager for a small agency in Florida for two years.

Jeff Molander:  So, we’ve got people who are definitely not new to online marketing, but fairly new to the affiliate game, as well as people who are affiliates marketing veterans. Let’s cut right to the chase. With regard to the link management initiative that Commission Junction just announced, I came out and - I received an email from Commission Junction - started talking to people, putting pieces together… talked to somebody who works at a different affiliate network, who is a CTO type person, and started thinking about this, and ended up with this blog. People have been fairly critical about it in regard to - I don’t know - I just looked at it as reporting the news from fifty thousand feet; I see this as a big strategic shift for affiliate marketing. Would anybody else agree with that? Or am I way out in left field?

Chuck Hamrick:  No, you’re absolutely right. I actually talked to the vice president of advertiser development, who was my old account manager at CJ. We’re legacy; Backcountry has been with them since 1999. I spoke with him yesterday, first I wrote an email kind of complaining and protesting that we were a bit blindsided. We have a weekly meeting with them, just the account manager and his assistant, and it was announced to us first on Tuesday. We have an SEO engineer that’s pretty savvy, and works closely with Matt Cutts from Google, he recommended that we suggest our affiliates use the “no follow” tag because there is a lot of evidence, or buzz, that Google is devaluating affiliate links, or possibly penalizing them. We had a prior discussion about that, then Tuesday we heard from CJ that they were going to do this change to Java script. I didn’t realize it was all or nothing, so we got the email Wednesday morning and it starting a huge buzz on our forum we have a couple forums on ABestWeb. We had posted our “no follow” at the same time, so this thing all merged together.

Chuck Hamrick: My complaint was that it seems like it’s pushing something down the throats of affiliates, as well as the merchant. In that email from CJ, it said that this was a recommendation or suggestion from affiliates, merchants, as well as employees. Well, that’s news to me. My complaint was, thanks for the notice, but this June date, where it rolls over, it really leaves us high and dry.

Jeff Molander:  But, is actually all or nothing? I heard it’s not all or nothing.

Chuck Hamrick:  In time it will be all Java script, although we set our data feeds up and our HTML. We batch that to CJ, so ideally we can keep that going. I don’t have an answer as to when their cutoff date is that it has to be Java script, but I just felt that it was a mandate. There was something similar to this pitched out in August by Linkshare, and it created a huge fervor with affiliates because nobody likes to be told they have to make a change. There was a comment made, that I found interesting, one affiliate said, “I’ve got ten thousand links to change, and it will take me half as much time to just change to a different network, so I think I’ll do that.” Of course, they like to threaten and get a little whiney at times, but it was an interesting comment.

Chuck Hamrick:  So, there’s pros and cons, and I don’t know how anybody else feels, I just don’t like the fact that we had no prior notification to have our PR in place, our communication to our affiliates in place before it came up from CJ. I had one day notice, and I really hadn’t delved into it enough, so I was kind of put upon Wednesday morning. I felt that they had thrown this out at us, and told us that it was going to change, now we have to circle back and figure how it impacts us and how it’s going to effect affiliates when we have to talk to the affiliates about it. I didn’t like to be blindsided, and I told them that. They actually admitted that they are working on some new PR, that their marketing efforts were not done properly and that they are circling back.

Jeff Molander:  It doesn’t seem like they’re controlling the blogosphere very well, because they’ve got me all half cocked out there according to a lot of people. I’m not going to drop names here, but I’ve been receiving heavy criticism for, essentially I think, reporting the news and pointing at I haven’t even had the opportunity, Chuck, to point at experiences like yours, so I’m glad you just shared it but, I’ve been pointing at affiliates freaking out, and looking at what this really means from fifty thousand feet, because I think it’s relevant, just as relevant for you, and for Nate, and possibly for Patrice, to be in a situation where you’re looking at a network and you’re saying, “Okay, now I’ve got to really operationally scramble.” That’s one side of the story, but the other side is what does this mean for affiliate marketing when a network takes the fundamental link structure and they throw it out the door, and say, “We’re not going to do this anymore.” For the most part, they’re saying, apparently Chuck, they’re saying they’re going to grandfather, to a large degree, HTML links, but they’re also saying, as Patrice pointed out to me in an email, they’re also saying, “We’re going to put affiliates in buckets. We’re going to call an email affiliate an email affiliate,” rather, everybody’s going to have to be in a bucket now. Some affiliates get treated differently; they’re all in a different buckets.

Nate Griffin: I think to a certain extent segmenting your affiliates by their marketing tactics is a good idea, and it’s a good practice, I think. It helps you to break down the different economics of each selling method. Being required to do that, I think a lot of affiliates sit in a number of different buckets, if people are being forced to go into one bucket or another, I think that’s probably not going to be the answer, a kind of one size fits all solution.

Patrice Colancecco Milligan:  Not only that, but as we know from CJ letting the affiliates self categorize, almost nobody changes the default anyway, so you have some people are going to try to categorize themselves, and some people who are going to try to put themselves in one bucket, when they need to be in more than one; and some people are not even going to change whatever the default is. I don’t know how effective that necessarily is going to be. It could be more effective based on the fact that somebody who says they are a search affiliate might get a different kind of link than an email affiliate, so that might be the impetus for somebody to actually truly put themselves in the right bucket. We’ll see how that plays out.

Nate Griffin:  It would be nice to get some more validation, I think, of “I’m saying I’m a website affiliate, but now I’m going to go and by a bunch of AdWords,” and I, as an affiliate manager, am going to spend a whole day trying to figure out where your ads are, where your sales are coming from, and documenting all of that. If there’s some validation that gets built in through this system, I think that’s beneficial.

Patrice Colancecco Milligan:  Definitely, because I don’t really know too many people who run straight up websites, who don’t do some sort of search, usually it’s pay per click. You’ve got to get traffic to yours site some how; you can’t just be in some dusty corner of the Internet not driving traffic to your site. That’s almost impossible, to just be a straight up website and be in the website bucket. We’ll see how that plays out.

Jeff Nienaber:  I think if anything, CJ wants to quantify to Google, and to Yahoo, and MSN, how big of a player they are in the space. They have an ad budget aggregated number that they can throw around.

Chuck Hamrick:  I found out recently, I’ve been going through a contract re negotiation and was actually able to move it up to the VP level because I really wasn’t getting anything at the account manager level. I found that they had channel managers that managed the bigger players, and the three that I’ve heard defined, and there maybe more, are search affiliates, deal coupons sites, and loyalty affinity programs. So, I’ve been trying to work in those areas to get some of those bigger players and bigger trafficking.

Chuck Hamrick:  Our affiliates are primarily niche; the ones that seem to be successful are the ones that couple content with data feeds. They use the data feeds for the technology and the ease of getting products positioned, but they write reviews, or they write some type of copy to keep their site fresh and get attention from Google. But then, some of my top players are pure search affiliates. So, you’re right, I don’t know if there is a move on the part of CJ to give us more depth or for them to do more analytics. Some of the comments made were that they wanted to push other technologies, and the Java script allows them to do that, where the straight edge HTML link doesn’t, so this is kind of a future move. They decided that this is what they want to do, and where they want to move, which I can understand them making that decision, I just think they did a lousy job of putting it out. It just seems they’re not affiliate centric, which to me is part of the game. You have to try to keep them halfway happy, or explain to them; they just put it out there like the affiliates have no say in what goes on, and that’s offensive to me.

Patrice Colancecco Milligan:  It seems like they’re not only not affiliate centric, they seem to actually just be CJ centric. Because the way I look at it, they’ve always controlled the information the affiliate managers see, with regards to you can see as much information as you can on some on the other platforms. Now, they’re holding all the cards in terms of what is going to be shown on a publisher’s site. Now they’ve got two ways that they have control over both sides of the coin, and really the people that win out the most with that is CJ. They’re controlling what’s going on in the publisher’s site, their controlling what the affiliate manager sees in their portal; so they’re really holding all the cards at this point.

Patrice Colancecco Milligan:  It will be interesting to see what they do with this. They have the power to do many things, certainly, that can make life difficult for certain types of affiliates. Whether or not they actually wind up doing that is something else. The only thing that we know for sure right now is that they are making it very difficult for affiliates to change their links, and they are going to have to change links in some sort of time frame, whether it’s six months, or a year, or a week, or a month. At some point, people are going to half to change; that’s all we know for sure. We don’t know what they’re going to do with the information when they have it, they could use it to penalize affiliates, they might not. But, really CJ is the win in this because now they hold all the cards.

Jeff Molander:  I think CJ is in the win, but I also think it puts advertisers in a more powerful position, because what they’re able to do is then say to the advertiser, “You hold all the cards.” This is where I’m completely is confused, and perhaps it’s because, Chuck, like you said, they’re not putting out the messaging. I see, and this is what was reported in ClickZ today, by Kate Kay, who, I think, did an excellent job of offering great balance in that, I put forward the theory that this is just a house cleaning. Jeff, that jibes with what you suggested with regard to Google, and it jibes with a lot of what we see going on inside affiliate marketing with regard to low value affiliates, the way that Google looks at them, the way that advertisers look at them. But, I read this ClickZ article, and I see Frank Gerstenderger suggesting that this is not a house cleaning, that this has absolutely nothing to do with anything other than providing advertisers with access to technology that has been available since 1998/1999, which is Java script enabled delivery, which allows advertisers to swap out creative at their whim.

Patrice Colancecco Milligan: That does make sense.

Jeff Molander:  Sure it makes sense.

Patrice Colancecco Milligan:  That’s why we’ve always like the fact that even though banners don’t do a thing for anyone, at least the banners are hosted and you can swap them out at will.

Jeff Molander:  So how is that new though?

Patrice Colancecco Milligan:  As far as putting it into the advertisers’ hands though, I can’t go in there and change CJ’s Java script, so it’s not really in my hands. I still have to ask my CJ representative, or my account manager, to do something on my behalf, and they can still say no. So, it’s not really giving us the power, it’s giving us the illusion of power, that we have some kind of control over the affiliate site, but really, we still have to ask.

Jeff Molander:  You’re saying that’s the way it was, or that’s the way it is now?

Patrice Colancecco Milligan:  That’s the way it is now. You said part of what they’re doing is giving the control back to the merchant. They’re giving the illusion of control back to the merchant, but really, CJ still has the control. They have even more control now, because now they don’t have to worry about reaching in and pulling someone’s HTML, which was impossible before, now they can change anything. Let’s say you don’t pay your bill, you don’t put your money into your escrow account. You could be a conspiracy theorist in all kinds of directions on this, you could say if someone’s not paying their bill they are going to get their largest affiliate turned off. Of course, that’s not going to happen, but I’m just saying that there are a lot of things that CJ can do with this information. If they’re going to spin it as something that is beneficial to the merchant, well yes, it is beneficial to the merchant, but it doesn’t give control to the merchant, more of an illusion of control.

Nate Griffin:  This whole thing goes back to the original comment about I wouldn’t say this has really been communicated well. I’m having a hard time understanding what this means in a very tactical sense. Now, when I put together a text link, am I responsible for making sure the context of that text link works within where ever the affiliate wants to place it? I don’t want to have to put together a link that makes sense no matter where it’s going to be dropped. Or, if I want to change a link because it’s not working, to suddenly worry about breaking or changing copy out there that somebody else has embedded a link within content.

I think that really is a question; who really has control, who benefits from this control, do I really benefit from this control, do I want this control? Or, am I more comfortable letting the affiliates innovate ways of selling the products, or getting people to click through to links? I think there’s a lot of strength in letting affiliates be creative with the link format. I think that’s where you get things like the Product Showcase Creator, GoldenCan, and things like that, it seems that the platform is somewhat open to innovation, and there’s a question in my mind whether or not this makes it closed to that kind of innovation, now that CJ wants to control that innovation.

Chuck Hamrick: I asked that question. I just recently launched GoldenCan; I did more of a PR campaign, but I asked specifically, what is this going to do, because they’re a Java script based sniplet, or whatever you want to call it, and I didn’t get a strict answer back. He actually said he didn’t know. The one comment I want to make is remember that Commission Junction is now owned by ValueClick, and with Todd Crawford leaving, he’s pretty much it for the old guard. He was actually their voice on the forums too. I know he’s blogging now on Revenews, but as no one really represents the old school thought and it affects us.

Chuck Hamrick:  The comments I’ve had from top affiliates are they want some control on whatever they get. They take our data feeds, is that they don’t want it so controlled that they can’t do anything with it; they want to have the ability to massage it the way they want for their website. I’ve looked at their data feed and they’re a little sophisticated. I think the affiliates that are complaining are the ones that see they are losing more control. What I was going to ask is anybody on Linkshare using dynamic rich media? I haven’t, but if it’s the same concept that you could just simply change something internally on the program and push out to where it looks on one case like text blanks; on another case it’s pushing a different banner to other media. I wonder if this thing is being pushed down from ValueClick, which is a database aggregator, it’s CPA networks and all types of other things like that, that they’re trying to maybe push some of their influence down. They may say that there’s a benefit for the affiliate channel, but it certainly doesn’t come across that way.

Jeff Molander:  Jeff that’s begging for you to make a comment on.

Jeff Nienaber:  Well, I think that’s absolutely the tip of the iceberg. I definitely think this is a ValueClick mandated change. You look at the BeFree acquisition, it was inevitable that technology was going to be rolled into the fold, so that’s a big piece of it. The technology infrastructure that we’re seeing, pre this announcement, is six to eight years old; it’s about time for an overhaul. That’s where the industry is going, and anybody thinks this isn’t a response to Google, and the technology that Google offers their advertiser base, isn’t looking at it from a far enough perspective because advertisers are in droves in AdWords, spending billions. AdWords has made an assault on rich media, video now, so you have to respond. If they don’t respond then they’ve got two or three years left before their entire affiliate base migrates anyway.

Chuck Hamrick:  Has anyone heard any comments that Google was actually trying to integrate their AdSense into of more of an affiliate network, like Launch and Gbuy, having ability to pay affiliates? I’ve heard of this concept before that actually Rakuten with Linkshare, this is how they work in Japan. They’re the Yahoo of Japan. They have affiliates on one side that are building small websites and positioning collateral, and they have the merchants on the side; they actually use it as a barter system where they don’t really exchange cash. The affiliates are then able to go into that huge network of merchants and basically use their credits to buy whatever they want, so the only thing really spent, besides labor to ship, is their shipping fees. I have heard that there’s a suspicion that Google maybe heading in that direction, tying AdSense in with the means to pay back affiliates, and monetize that instead of the way the model is now, and maybe tying it back to the merchants and saying, “Okay, here’s your credit, just pick a part from the merchant part of the network, we’re going to handle whatever transaction background.” Then you have Connection Junction with ValueClick looking at the whole online ad industry and how they can get another piece of that. I don’t know. I’d love to see some great migration and shifts in the industry that would make us all better off. It’s still cloak and dagger out there, we don’t really know what’s going on behind closed doors.

Jeff Molander:  What do you think about that theory Jeff?

Jeff Nienaber:  That’s the first I’ve heard of that. That’s pretty interesting. I’ll have to noodle that one. Regardless there’s, I think, a subtext in this change that says, “Hey, we recognize the threat of Google and the Yahoo Partner Network,” which is coming now, essentially, to the base of our business and I think the affiliate networks have to make a response that’s legitimate, that’s quality focused, that’s advertiser focused, yet affiliate base friendly, and let the chips fall where they may. They have to make a move one way or another.

Patrice Colancecco: They certainly could have done a better job of it.

Jeff Nienaber:  That’s standard operating procedure for any affiliate network change. It’s always shoot from the hip and spin the PR later; see what happens, see where the damage is, and then address the damage as it comes on the message boards.

Chuck Hamrick:  Well the comment I heard was CJ made the decision that this is the direction they wanted to go. They didn’t see [unintelligible], a legacy versus the other, they felt that if they were going to make this change, the change had to be made, so they went ahead and put it out there. I’m told that the legacy links will work until March of next year (2007), so I am not overly concerned that I have to get everything resolved now. But, we need to delve into it more and find out what this means. The complaints that come back from affiliates are “So, you’re telling me I have to replace all my links on the site with Java script; I have may have a hundred text links on a page. Java script would make that a huge, fat page and now we’ve got bandwidth problems and all that.” Has it really been thought out or is it some new technology that we don’t understand? We didn’t even get examples or a chance to really play with it. The actual code we don’t know what the deal is, and I agree. I think both the big networks… I don’t really work with Performics so I don’t know how bad they are. They don’t really consider the impact, not just on the affiliates, but the merchants as well, because if our affiliates are upset we have to placate them. We’ll work on our part too, then we’ll all have plenty on our plate.

Jeff Nienaber:  Absolutely. Any time these decisions are made and any time they are executed it’s always been 99/1 rule. They’re absolutely focused on accommodating the top one percent of their client base, and they’re going to build the greatest tools for the top one percent of their affiliate base, and the rest be damned. You either join up and suck it up, or you move to another network, which they know is already extremely frustrating. They have key differentiation points that they think are going to maintain 50 to 60 percent of their affiliate base, and the others, well, maybe we’ll get them back when Linkshare’s performances tick them off.

Chuck Hamrick:  There was an interesting comment made about getting rid of low quality, low value affiliates. Now when we’re proving to affiliates that we look at the numbers and page rank… we’ll look at a site and if it’s in being in niche, then we’ll accept it even if it looks like it has no traction and no traffic. Generally, if it’s got little value, we don’t want to waste our time.
I thought one of the benefits of CJ was that an affiliate would have to make a sale within six months or they are kicked out of the network, so they’re kind of doing diligence there. It speaks to, if there is an opportunity for them to not just push data out through the affiliate channel, but also to take some analytics back and to look at the sites that are not doing much. The other flip of the coin is take the sites that are doing really well and push that. The one thing I love to get from the network is for them to come to me with twenty affiliates a week and say, “These are affiliates that will go really well with your plan. Would you hook up?” They don’t do that, unless you want to pay extra for it. So, it’s always us out there trying to find these allusive affiliates for networking with each other. It’s like, “Hey, trade me a super affiliate for another one. I’ll give you two for one.”
If they came and told me internally, or confidentially, that this will give them the ability to analyze more, and it would be a benefit to us, then I’d support it. Here again, it just comes out as, “We’re making this change and here it is.” We can’t as merchants just flip networks. That’s a big endeavor.

Jeff Nienaber:  I think that’s what they are counting on. That’s their ace in the whole. The average advertiser, the average merchant is not going to get up and walk away because they’re going to have great account management, and they’re going to walk me through the change, and they’re going to offer to manage the message boards, and all the communication nightmares. At the end of the day, that’s their ace in the hole. If the affiliate likes the merchant, they’re going to stay with the network.

Jeff Molander:  Aren’t you going to have, Nate, a bunch of applications, and Chuck, all of the sudden when people are told that they have to now start using the new links, aren’t you going to have a flood of applications to go through with regard new affiliates coming in?

Chuck Hamrick:  According to them, I am. I think that go date is June 25th or 26th, but I don’t have that in front of me. At that point, any new affiliates will only get Java script. Now as I mentioned, we’re covered because our data feeds are handled and we actually deliver those directly to the affiliates outside of the network. As it is, the link comes back, we capture the affiliate ID, then we batch it back to CJ and get credit. We don’t get impression data and we lose click data, but we’re covered on that up until March of next year. For my bigger producers that are data feeders, I am not as worried there, but we’re doing some new initiatives and changing engineering, now we have to put some time into investigating how this changes. It’s the damage control now with affiliates, they’re very emotional. They’re entrepreneurs, they’re independent sales people and now they see it as a threat, whether it’s perceived or real, we have to spend a lot of time taking care of that.

Jeff Molander:  Is it perceived or real? I’m a guy who’s sticking my neck out there saying one of the reasons why some are saying I am saying it’s the only reason why, it’s not the only reason why Jeff’s pointing out a lot of reasons. Chuck, you’re pointing out some reasons. I’ve put out there that they’re out doing this to clean house. They are out there and they’re saying, “This is the way we’re going to do business.” They had to know that a certain group of affiliates are going to freak out and leave. That’s what they are doing, and I am suggesting that, that is part of ValueClick’s plan. I think what you said earlier about Todd Crawford, Chuck, is interesting and probably true if you look at the timing of Todd Crawford’s departure, and you look at the type of guy he was, and the type of things that he did in the trenches.

Jeff Molander:  I’d like to go around to each of you, and I am sure someone will disagree with me.  Convince me (I’m wrong); or do you think that they did this because they knew that a certain group of affiliates were just going to fall off, and that group of affiliates doesn’t mean much to them. Frankly, Chuck, to what you’ve been battling with for the last year or so, or half a year or so, there are problems out there that you have described to me, with regard to OEM manufacturers, and what they’re seeing when they type their name into search in terms of the what the affiliates are doing to their product images, and their product description, and pricing, and the freshness of that information. So, if each of you could let me know… am I crazy to think that Commission Junction just doesn’t care about a certain group, and is kind of trying to appease advertisers with regard to that group of affiliates that causes headaches for them?

Jeff Nienaber:  I’d vote for that, absolutely. I think it’s even more sinister than that. I don’t think it’s just that they expect a fallout, they want them to fall out, and if they don’t, if they stay, they want to know exactly what they are doing. I think it is control. I think you’re absolutely right. It’s a quality play for ValueClick and a control piece for the CJ piece.

Patrice Colancecco Milligan:  I think that, at the least, it’s a fringe benefit. At the very least, it’s something that they wouldn’t say that they didn’t like, if it’s not the actual goal.

Nate Griffin: I haven’t heard that they’re going to be changing their criteria for becoming an affiliate. Again, I am not sure if there’s going to be more validation on the up front of, aside from sending in a W 9, if you’re a US based affiliate. I think that in terms of improving the quality, I think that this will have the effect of hopefully improving the quality of the network. I don’t think it’s going to be JoesBlog.com sites that necessarily that will get kicked out. I think that those folks, as long as they’re interested in being an affiliate, will probably adapt to the changes.

Jeff Molander:  There are a lot of affiliates that fit that mold that are saying, “I am going to leave.” Did Commission Junction not foresee that?

Nate Griffin: Yes, but is that the vocal majority or the vocal minority? Are they valid threats or empty threats?
I think that goes to the fact that the people who are making the most noise are also the affiliates that are producing the most in revenue from the their involvement with CJ advertisers, then they’re going to complain because they’re going to have to make changes and spend more money with their developers, or spend more nights at their PC working, but they’re going to make the change. I just think it’s the lesser evil. For affiliates who are engaging in bad search practices, you got to get rid of them; nobody wants them anyway. That’s something that I would hope would come from better accountability, if that’s what we’re gaining through this new linking, then I think that’s fine. I think that’s kind of a bold move by CJ, because I am sure certain amount of revenue they know is flowing into them from affiliates who are engaging in bad behavior. I think that’s to protect CJ’s brand.

Chuck Hamrick:  I think that it’s a probably a case of they’re already talking with their top producing affiliates and have a sense of what would be a value to them. The other affiliates are the nameless masses that they are really arrogant about and they don’t really care about.

Jeff Molander:  I don’t know if they are talking to their top affiliates because I talked to a couple of them that are really big yesterday, and they weren’t talking to them.

Chuck Hamrick:  I hadn’t had a chance to talk to anybody, and so I am curious if they were. You read between the lines, and they said that they took this from feedback from affiliates, merchants, and employees, but what does that mean? But, I think it’s a matter that, it’s coming from ValueClick, they see that they need more control over what they can push, what they can experiment them with, but also to see how well it’s converting, more depth… They’re on the other side database wall, the data feed wall, or whatever you want to call it and so they’re able to look at analytics that we can’t even touch on. They probably have some insight into what they would like to have to be able to control that mix better. They just don’t really care about the individual affiliate, and they haven’t for a long time. That’s what puts me up in arms. If it affects the affiliates, it affects me, and I don’t like the fact that I am blindsided as well. I don’t know if they can effectively pitch it out to all the merchants too, if they’re going to push something. It’s a mandate. If it benefits them, then boom. It’s the 1 in 99, which I am glad you said that, that’s exactly what I’d use. It’s not 80 in 20 anymore. It’s 1 in 99. If they can control that and make it more profitable, and narrow it down to work with the producers in the means that are effective, then they can care less about the rest of them.

Jeff Molander:  Well according to Frank Gerstenderger they won’t, “They won’t loose anything significant,” in this change

Jeff Nienaber:  That’s because if it’s significant they’ll do whatever it takes to retain them. They’ll build them the right tools, they’ll manually change every single link if need be. If it’s not worth their time, they’re not going to invest in it.

Jeff Molander:  I think Chuck has brought up in this call, I know you guys probably need to get going, and actually I do as well. But Chuck brought up a couple of very interesting points earlier where he’s suggesting that this is really all about where ValueClick is going and less about where Commission Junction is going.

Patrice Colancecco Milligan:  That definitely could be, we’ll never be privy to that. I am sure that in a few months, or in a year, when all this plays out, it’ll be a lot easier for us to look back and say, “Oh this is what they were doing.” Right now everything is sort of pandemonium and we just how everything plays out.

Jeff Nienaber:  My comment earlier is that yes, absolutely ValueClick is a media company. Google is a media company. This is one on one competition; it’s on the front lines. One of their arrows in their quiver was CJ, but this is definitely a response to Google’s position within the media market. Yes, they have to move. They have to do something. Google’s killing them.

Jeff Molander:  I appreciate you guys taking time out of your day to chat about this important issue. I hope might be able to again pull people like you all together, and do it again.

Patrice Colancecco Milligan:  Very good.

Nate Griffin:  Definitely.

Jeff Nienaber:  Thanks guys.

Nate Griffin:  All right. Thanks.

Chuck Hamrick:  You’ve been great, thanks Jeff.

Jeff Molander:  Thank you all.

Jeff Nienaber:  Thanks Jeff.

Chuck Hamrick:  Bye.

Hats off to Kate Kay who presents a balanced, informative and engaging view of Commission Junction’s Link Management Initiative without eliminating the good stuff—the different perspectives on CJ’s announcement.  Kate’s piece is worth a read as Commission Junction denies that it’s caving to pressure from advertisers:

Pacifying advertisers and search engines by eliminating link farms is “not what’s driving [the Link Management Initiative] at all,” countered Frank Gerstenderger.  Instead, he insisted, because the JavaScript links will enable dynamic alterations, the changeover will lessen the number of future changes for affiliates.

An interesting position, indeed, as such technology is a throwback to 2000 and has largely been a low-value function from the advertisers’ perspective.  Historically, few advertisers actually use it or want to use it.  Indeed, this could change and meshes well with meeting advertisers increased desire to have more control over affiliates and a the good old fashioned “house cleaning” (of affiliates) that is well under-way.

As for CJ’s comments on the house cleaning? 

As for the potential loss of affiliates due to the switch, he estimated, “I don’t think we’ll lose anything significant.”

Ouch.

Leading Minds & Advertisers Speak Out
In an effort to get some perspective from advertisers, I’m convening a few leading minds in the online performance advertising business today so as to discuss the implications of what we know about Commission Junction’s recent link structure ("Link Management Initiative") announcement.  The group consists of experienced affiliate managers and a prominent affiliate who promises to, quickly, get at the heart of the situation (get the details from the affiliate side).  The audio program and transcripts will be published here on an ASAP basis.

Commentary
Briefly, a quick bit of commentary on my disappointment in our industry.  Dramatic change seems to be leading to new levels of denial (that this is a significant shift) and venom in a time where it’s nothing but distracting.  Talking about when the links will actually switch is interesting but distracting from what I wish to discuss—a serious power shift that benefits some (advertisers for sure) and punishes others (certain kinds of affiliates). 

Specifically, some peers suggest I’m dangerously presumptuous.  You would think that they might make sure that I don’t actually know something before making such accusations—presuming (ironically) but this is not the case. 

Rather than pointing at people who accuse me of being presumptuous, un-knowing, having a secret agenda and such I will point out something that seems obvious yet is worth stating plainly:  Each of us is an expert in something.  Let’s try to focus on that and play nicey-nice in the sandbox together.