Trevor Hughes may be the voice of authority in online privacy and consumer trust for our industry but I’m compelled to set him straight on how we really arrived the quagmire he decribes.  ClickZ’s Zachary Rogers calls him “the privacy expert’s privacy expert” and Hughes has undeniable clout in the online advertising biz but when it comes to placing blame, he’s off target. Earlier this year, Hughes (known for his once moderate now gloomy voice in the e-marketing arena) told ClickZ

“I think there is a growing crisis of consumer trust in many interactive channels, and that is in many cases driven by advertising practices.”

“I think 2005 has been a warning shot across the bow for the marketing industry that third party relationships will come under greater scrutiny.  In 2006, it will become absolutely imperative for marketers to understand how their offers, brands and products are being presented, wherever they’re presented.”

Hughes: Affiliates are to Blame
When asked specifically about affiliate marketing he ended up blaming affiliates for industry woes.

“One of the things that’s striking to me is that tiered marketing structures… are fraught with risk. In the case of Hypertouch media and Gevalia coffee, Gevalia had set up a relationship with some affiliate marketers… who were doing a lot of spamming. What ended up happening was that not the affiliate marketer but Gevalia was sued. Under the CAN-SPAM Act, it is the advertiser who is responsible. Affiliate marketers created real challenges for an otherwise upstanding brand.”

Here’s where I disagree with the head of the Network Advertising Initiative (NAI), the E-mail Service Provider Coalition (ESPC) and the International Association of Privacy Professionals (IAPP). 

Affiliate Networks: A Fool’s e-Marketing Steward
Affiliate marketers don’t create the challenges Hughes cites—affiliate networks do.  Indeed, I created the challenge as a founding father of an affiliate network.  Commission Junction, Linkshare, BeFree… we all created the “challenges” (that’s a nice word for nightmares) for our advertiser clients. 

Designed by Greed
Affiliate networks were not designed with the advertiser’s best interest in mind (and let’s not forget the naive contracts we asked them to strike with us).  We didn’t even see obvious troubles like adware or cookie stuffing coming.  Why?  Affiliate marketing was born in the Gold Rush age of the Web… and today it shows.  Advertisers were massaged into believing they could get “free branding” and “only pay when the desired action is given” to them.  Whoops!

To be fair to myself and my peers, it was not so much a lie then… as much as it was simply ill-thought out.  There are an increasing number of risks and networks have completely failed to explain them to advertisers and protect them from these risks.  Why?  Networks were built from the ground up to have a upward revenue slope and then to sell-off.  Today, their cost and revenue structures prohibit them from looking out for the advertiser’s best interest.

Advertisers Share the Blame
Advertisers, you’re not off the hook either.  You actually bought the “free branding” sales job and, even worse, hired your affiliate network on nothing but performance… all so you could tell your boss “we’re only paying a referral partner when we get our sales/lead.” Paying per click or sharing risk with traffic partners?  Unheard of and, in fact, laughed at!  Advertisers were quick to let the fox in to the henhouse and now it’s time to pay the piper (in 2006).  Is affiliate marketing out of control?  Yes… still.

As Brad Waller recently wrote, “Numbers Don’t Lie, But You Can Lie With Numbers.” I’ve harped on the ”research that is pure propaganda“ issue before so I’ll skip that part.

Recently, Insight Express was commissioned by ValueClick (Nasdaq: VCLK) to pump out a survey that reveals, they tell us, increased reliance on ad networks among online advertisers.  Hmmm.  Why would ValueClick need to declare such news and is this just publicly traded performance puffery?  In my opinion it is and I’ll get to why in a moment.

I was speaking with an analyst recently who suggested that the numbers presented actually sounded troubling, not encouraging for networks.  Here’s the rub using the study’s own numbers: 

If 42% of advertisers have increased there ad network spending in the last 2 years that means the difference between 78% (the percent of those who reportedly work with them) and 42% (or 36%) has stayed the same or decreased. 

I’m told, by analysts themselves, that many are downgrading ad networks’ stock.  I poked around and confirmed the trend.  Surprise, surprise… large advertisers are not using networks as much as they have in the past.  They’ve been there, done that and might continue to a bit but they (and/or their agencies) are exploring other venues such as blogs and podcasts. Yes, I said podcasts. 

Increasingly, publishers are creating direct sales forces and investing heavily in courting advertisers direct.  It’s all over the place.  Although positive on online advertising overall, Buisnessweek recently stated the good news for agencies and in-house ad media buyers:

“Increasing fragmentation of the media landscape should steadily increase the value of and revenue potential in media planning.”

Does this mean networks are doomed?  Certainly not and the largest ad network, Google (GOOG), will continue to roll out and improve on easy-to-use, networked ad solutions… but even those improvements are aimed at facilitating what the market wants: direct-to-publisher relationships.  Google’s own struggle with the “direct versus network” conundrum is clear and provides additional insight into what advertisers and publishers want - more transparency and advertising accountability on the Web. 

Good news for e-commerce and marketing types who have yet to find a clear, practical use for RSS (a.k.a. Real Simple Syndication). 

“RSS is here to stay, but it’s already started to disappear,” says Charlie Wood and Steve Rubel agrees stating emphatically “RSS is plumbing.”

But what about my former co-conspirator, Stuart Watson (now founder of RSS analytics pioneer SyndicateIQ)?  I know he has more to say about RSS’s application in the enterprise and specifically among marketers.  He’s wrapped up at the Syndicate Conference this week but perhaps I can convince him to report in on key happenings.

Settle Down Now: Pheedo’s RSS CTR Rates Explained
In related news out of the Conference, many are picking up on Pheedo’s reports that RSS ads that appear as actual items or “stories” inside feeds get an 8 percent click through rate (CTR).  Excited?  I’m not and here’s why.  Ever use RSS feeds?  I do and guess how many ads I’ve clicked on (or nearly clicked) that I mistook for actual content / news stories?  This sky high RSS CTR that Pheedo reports is artificial... so, settle down now. 

Through a comments post at Revenews.com, Azoogleads’ Joe Speiser is vowing to take on Commission Junction (CJ).  It’s war time and he says CJ is unfairly cutting a competitor (he admits) out of the CJ network based on fear… just as Shawn Collins suspected.  Speiser claims that his affiliates will remain loyal to the Azoogleads network - not CJ’s.  Speiser went as far as saying he’s “just fine” without CJ’s advertisers in his mix and is labeling CJ’s actions “disingenuous.” Speiser himself said…

“I felt you, our industry peers, should know the truth—the decision to terminate AzoogleAds was solely a strategic move by CJ to thwart an ever-strengthening competitor that recently launched a competitive revenue share service called M-Port...”

Round II
Hopefully nobody will get hurt in this boxing match but so far Azoogleads isn’t game on stepping into a padded ring.  They’re suiting up for a knock-down-drag-out with advertisers and affiliates. 

In his open letter to CJ advertisers and publishers (that’s what CJ calls affiliates, of course) Speiser suggests that ValueClick’s (VCLK) CJ is “... hiding behind a ‘quality violation’ issue rather than enacting a simple solution that would allow us to continue supply(ing) large volumes of quality customers to their merchants.”

What’s more, he suggests Azoogleads is “happy to compete and will be just fine without merchants within the CJ platform.”

He claims the company’s removal from the CJ network “has nothing to do with compliance” and CJ is attempting to create a negative image of Azoogleads… which is flattering, yet disappointing.

Round III
Azoogleads claims to have received an email from a “high-level CJ insider” shortly before the account termination notice arrived in customer’s inboxes.  Azoogle, Speiser says, was told that “CJ will be terminating Azoogle’s account because of a competitive threat.”

The un-named person “continued to say that the ‘spin’ CJ is going to tell eBay and other merchants, is that Azoogleads’ affiliates will simply work directly though CJ rather than Azoogleads.”

Vowing to fight Speiser says, “This is not the case.”

It appears that Affiliate Marketing 2.0 is now in full swing and reaching outside the Web.  At the core of the movement is privacy.  When it comes to consumers’ computers, consider adware/spyware and spam but what about their phones?  Those are also under attack.  Today, there’s news of DirectTV being fined $5.3 million (the largest Do-Not-Call list settlement ever) for hiring “dirt world” telemarketing affiliates that ignored (violated) the No-Not-Call list provisions. 

According to Direct Magazine’s interview with the Federal Trade Commission (FTC), “If a federal judge approves the proposed settlement, it will be the largest civil penalty ever for an FTC enforcement of a consumer protection law.”

I point at this and many other happenings (all involving recent federal judgments and FTC actions against marketers) as a serious indicator of changing times.  Are retailers and direct marketers who leverage the Web listening?  Setting aside all the economic implications of owning a loosely managed affiliate program, the FTC has given you serious reason to buckle down. 

Are marketers ready to spend more time with their affiliate program?  Experience tells me many are not as they have found affiliate marketing too difficult to scale… meaning that they reach a point where increased resources on the channel doesn’t move the needle enough to justify the investment.  Can marketers afford to not, at least, take an honest ownership of their affiliate program?  Can they continue shun accountability and, when held accountable by authority, shrug shoulders saying “well, I didn’t know… I couldn’t control it… it was a rogue affiliate.” I suggest to you (as does Harvard Law PhD candidate, Ben Edleman) that cannot.

ValueClick’s Commission Junction has given the boot to affiliate (and rival?) Azoogleads.  In an e-mail being circulated to advertisers working with the company, CJ claims Azoogleads is

“non-compliant" in that CJ “has identified a series of isolated violations with Azoogle and has worked closely with them to rehabilitate and make the necessary corrections, to no avail.”

CJ goes on to say…

“Unfortunately, given the nature of their sub affiliate business model, Azoogle has been ineffective in their ability to perform the requested corrections to meet the high standards as defined in the Code of Conduct (COC). At this time Azoogle is still in violation of the standards.”

CJ account services reports that Azoogleads will be disabled as of December 27, 2005.

Commission Junction, a company that continues to distance itself from advising its customers on who to partner with, is telling its clients “You need to determine if you are going to pay the publisher for those commissions that were earned.  Removing non-compliant publishers is a key part of our priority to maintain an ethical, high-value environment for all clients and it will bring long-lasting benefit to your affiliate program.”

Here we go again - being reminded that affiliate marketing DOES have an ethical, value-driven side to it.  Who’d have thunk… and to be reminded by the world’s largest affiliate network no less!  This, in my opinion, speaks volumes of affiliate marketing’s tarnished image.