It’s rare for me to quote others verbosely but this time I must as there’s so much value in Kevin Lee’s words.  If you find yourself wondering how to invest in performance marketing companies and/or networks or where to assign Web marketing budget dollars in 2006 listen up.

“One thing to remember: even with the VC money flying, industry players (marketing/advertising networks, services, vendors) are in it for the money. When you choose to shift the media success risk onto a publisher or network, that publisher or network works to maximize return on a limited number of search (or contextual) impressions. Even the pay-per-click search networks (e.g. Google), which bill on a cost-per-click basis, determine whether and where to run your ads (i.e. your ad position), based on their profit level from your ad versus that of other marketers participating in the marketplace.

The same organizations that were considered publishers two years ago now offer agency services.  Other publishers have become ad networks; they barely own any of their inventory but instead offer other publishers’ revenue share.  Agencies are spinning off publishing or network divisions, tempted by the high revenues that come with counting media as revenue (not just their fee billings).  Ad-serving and targeting technology providers are building their own publisher networks.  It’s a jungle out there.”

So says Kevin Lee, co-founder and executive chairman of Did-it.com, LLC.  Last week, Lee, who is also the Chairman on SEMPO), made these stunningly honest and insightful comments via his ClickZ column. 

Lee calls the environment a jungle.  Indeed, as it involves companies are positioning themselves for a variety of reasons ranging from courting venture capitalists to positioning in the public market… an increasingly confused one wherein fund managers, private and institutional investors still have a difficult time understanding how Google makes money in cost-per-click (CPC) advertising.

Lee’s advice? 

“I recommend you step back from all the sizzle and think about your business fundamentals. Where do you want your business to be in the next quarter? Six months? Next year? Often, choices require you to trade off growth or market share against short-term profitability. Which are more important to you and your executive team? If profitability is a factor, make sure you know what your most profitable customer’s profile looks like. If you know that, you can have informed, intelligent discussions with the multitude of agencies, publishers, networks, and technology companies to help determine the best way to move your business forward.”

Lee hits nail firmly on head and is clearly in touch with what I view as a serious problem among many retailers and Web marketers - trading long-standing, often branding oriented (consumer facing) long term concerns for short term gains.  The words “search marketing” come to mind as do “affiliate search arbitrage” wherein marketers engage in search marketing via a virtual free-for-all stemming from a “well… I just don’t have time to figure it out so I’ll entrust it to someone else and hope-for-the-best” attitude.

What Lee signals here (and he’s not coy) is that there will likely be big winners and, perhaps, some big losers in a world that is comprised of networked, service-based businesses that are racing forward… yet have very little idea of what they’re going to be when they grow up.  The risks have never been higher for buyers of media and/or performance marketing services. 

Where will Performics end up given that DoubleClick is back private again?  What conflicts-of-interest might arise as companies like ValueClick and aQuantive race forward gobbling up networks, publisher Web sites, shopping comparison properties and marketers themselves?  At what point might customers, as an example, not like to compete head-to-head with their vendors?  If I was CarrotInk I’d be thinking in these terms.

And what about Linkshare’s recent acquisition by Rakuten?  Although you can bet Linkshare and ValueClick will be choosy about what businesses they’ll be getting into this is a concern.  So far they’ve gone straight to the fat margin businesses (i.e. inkjet cartridges) where they can sell very cheaply via networks of publishers that they, of course, own.  Nothing like free media to enhance margins!

Lee concludes with…

“With all the new players, emerging marketers have a difficult market to navigate. The sales pitches all sound great (if astoundingly similar). The booths look snazzy, and the salespeople are willing to entertain at the nicest restaurants where drinks flow freely…

Five years ago, the industry woke up from a period of excessive sizzle with a major hangover.  Let’s hope this time, solid business fundamentals keep the industry humming along on a strong growth patch with no major bumps.”

Indeed but what this industry needs is less hype and spin… not more.  We need more honest dialog about what’s really going on here.  Only then can investors and marketers themselves make educated decisions.  Kudos to Kevin for giving us some.

Meet Greg Shepard.  Greg is CEO of managed affiliate solution provider, NetTraction.com and he’s pitching a new approach called “Cost-Plus-Performance.” Well, it’s not really new of course but when viewed through a more “traditional” marketing lens it’s clearly out-of-the-box. 

Why the new model?
Shepard and his team are, likely, onto the increasing (read: pent up) demand coming from advertisers who engage in old-style affiliate marketing strategies.  Specifically, they want to work in more creative ways with affiliates.  Why?  Affiliates that command unique audiences are demanding it.  The “virtual sales force” is asking for a base salary.

As Shepard says…

“... now there is a way for merchants to now offer a win-win, where both merchants and affiliates have a vested interest. Improving technologies now make it possible for the formerly CPS, CPA, CPL performance programs and the CPM, CPC and flat advertising models to unify creating a new hybrid that I call the Cost-Plus-Performance model.”

What new technologies? 
Well… probably not those of Linkshare, Performics, Commission Junction and the more well-known affiliate marketing networks who seem forever locked into stagnated, in-flexible platforms.  Indeed, such networks have partnered with the likes of Omniture and other Web analytics solutions but this offers little help to advertisers that yearn for flexible payment arrangements with affiliates like FatWallet.com and other powerhouses who have more to offer advertisers… or who are not satisfied with a “pure CPA” relationship.  Currently, if an advertiser works with an affiliate solution provider that only facilitates tracking and reporting on “pure CPA” relationships, a solution must be cobbled together… a situation that the folks at Mercent seem to have their eyes on as well.

So… what does NetTraction have to offer and what about more flexible solution providers like Kowabunga?

If you have ANYTHING to do with affiliate marketing, you need to hurry and register for Affiliate Summit 2006.  I’m actually speaking at this event, but when I look at the roster of top speakers, I’m not sure why!  Brilliant people such as Anne Holland from MarketingSherpa and Declan Dunn from Dunn Direct will be sharing their wisdom from the stage.  Other companies slated to present information include Amazon.com, Carat, Payless Shoesource, Endai Worldwide, and more.  I’ve not yet attended an Affiliate Summit, but I’ve heard the conferences are an amazing opportunity to learn and network.  I’m really excited to be attending, and hope you will check it out.  You can learn more about it by clicking here. 

If you do attend, be sure and let me know so we can meet up!

(The last Affiliate Summit SOLD OUT before the conference even started, so if you want to go, don’t wait to register!)

On the heels of Commission Junction’s CJ University event and last week’s apparent, quiet ousting of notorious “bad actor” affiliate ShopatHomeSelect.com I thought it might be interesting to delve deeper into CJ’s network composition as described by itself.  This is of particular interest considering so much of my consulting business reveals so many advertisers continuing to (knowingly or un-knowingly) work with download-lovin’ ShopatHomeSelect.com.

As seen above, Commission Junction itself reports what it calls “Downloads” as representing a small yet significant portion of its publisher base (translation: to some degree, revenue base).  Also worth noting is that it separates out “Downloads” from “Loyalty” which may actually include players like ShopatHomeDirect given its cash-back (to consumers) business model… although largely distributed via downloads.  It is likely that other loyalty players (such as the Almighty uPromise.com and affiliates like MyPoints.com, eBates.com etc.) are similarly categorized as “Loyalty” although Commission Junction has not been very revealing about its categorization criteria.

It’s also important to note that CJ’s network of affiliates, or “publishers” as they call them, relies primarily on search… a service that they, themselves, and their competitors are rushing into (in effect, competing with their base of affiliates).  CJ competitor, Performics has been at this for years now and managed to take affiliate business away from CJ and Linkshare based on their ability to offer “more than affiliate programs.” I’ve written in the past on risks involved for affiliate networks that are dependent on search-based affiliates/publishers. 

Also, I’m interested to understand more about “Acquisition” affiliates as they would seem to be competing with and/or crossing over with other ValueClick holdings… specifically, CPA networks such as WebClients (acquired earlier this year).

We should be asking when (not if) RSS-powered technologies will be more widely adopted by advertisers considering Return Path’s recent study along with Lyris Technologies’ study... each citing large increases in “false positive filtering” of spam.  In other words, the verdict is out on e-mail delivery: users’ desired communications (i.e. from marketers and other trusted senders) is, increasingly, not getting delivered, rather is being categorized as “spam” or “bulk email.”

“Hotmail’s rate of “false positive filtering” increased from 5.6 percent in 2Q05 to 9.4 percent in the third quarter, and Gmail’s from 4.1 percent to 7.17 percent...”

and

“21 percent of permission-based emails did not reach the inbox during the first half of 2005 because they were either blocked or filtered into the junk folder, according to a new email deliverability study from Return Path.  Senders’ deliverability problems stemmed as much from their own practices (e.g., low list quality and number of complaints against the sender) as zealous blocking of emails by ISPs; blocking rates for individual mailers were as high as 54 percent.”

Jupiter Research received a fairly good dose of egg on its face when it published its widely criticized report on RSS earlier this year.  RSS adoption among marketers has been slow in coming yet RSS is no longer poised to explode… it’s exploding, being integrated into everything from browsers to major portals and is beginning to catch on among marketers in terms of adoption... outside of inserting ads into RSS streams.

Considering all of the email headaches, when will we see marketers move in large numbers to offer RSS-powered communication devices to their valued customers?  I, personally, envision devices wherein consumers willingly place icons on their desktop… doubleclicking to open an RSS-powered window that delivers and organizes order receipts, promotional offers and general communications with customers.  A loyalty device that sits directly on the desktop and is distributed via a viral campaign to tech-loving customers who find it “way cool.”

Googlewashing is a new term used to describe a growing practice by the Almighty search engine (among others).  In practical terms, it describes a cleansing process.  You’re probably thinking. “how did Google get dirty?” In fact, its index has gotten rather filthed up over the years as many… ranging from outsourced SEOs to marketing affiliates… have tried to “game” its search algorithm by making commercial information look like non-commercial information and other technical trickery.  It is critical for all marketers and publishers of original content to pay attention to this trend as early signs indicate that Google, itself, is having a difficult time keeping track of who to index and who to de-list/purge. 

The latest e-plague, in the eyes of search engines, is being dubbed “duplicate content.” Recently, Google has begun to scrub itself clean of this unwanted phenomenon; hence, the term “Googlewashing.”

Duplicate content is largely what it sounds like: information that has an original source but can be found in many other places.  Sound like plagiarism or “syndication gone wild?” For the most part you’re starting to understand the problem for search engines.  In the simplest of terms, “too much of one specific thing in too many places” makes it difficult to distinguish the original, (hence, “good” or “high quality") information from the stolen or regurgitated stuff. 

Who steals and/or regurgitates… and why?  Yes, affiliates of all sorts have been known to.  For simplicity’s sake, here’s the skinny:

1) Some Marketing Affiliates leverage data feeds provided to them by marketers (like you, perhaps).  Do the the contents of said data feeds look similar?  Most often they do… but do they look similar after your affiliates place them onto their Web pages?  This is the key question.  If they do look mostly similar you have, in effect, created your very own duplicate content machine - your affiliate program.

2) Some click-focused Contextual Advertising Affiliates (who make money from programs like Google AdSense or Overture ContentMatch) simply don’t have the time or energy to create their own original content… so they swipe it from somewhere else and slap it up on Web page(s).  Mixing some AdSense advertisements that are contextually-based on the fake/stolen content gives users something to click on and the affiliate a revenue stream.  But how do affiliates get users to the site?  Three letters: SEO and usually not the pretty kind.  As you can see, it’s easy to find.  Here is an example of a headline/article used rather liberally across numerous sites geared to garner ad clicks via “content.” Heck, there’s a whole get-rich-quick-for-doing-nothing industry out there that has sprung up and, so far, Google seems happy to play along.

So what harm is there in this?  That’s another debate entirely but in the eyes of search engines duplicate content is not desirable and is to be eliminated.  Do the good guys (the original sources of the content… i.e. advertisers) ever get mistaken as the bad guys (the “content” purveyors)?  You bet they do and would you believe me if I told you that one of Google’s own has gotten caught up in the mess?  Indeed, the search Goliath recently Googlewashed a blog belonging to one of its own employees.