Comments:
I know I’ve arrived now that something I’ve written has been linked with anchor text “freak out.” :)
I think you missed my points, though. Affiliate marketing is about relationships, of course, but even CJ has put up barriers there and obviously they’ve been fine so far. As a technology provider (which Google is in this scenario), offering CPA is much more complicated than CPC or CPM. You have to manage fraud, cookie stuffers, spyware, and more, and when there is no transparency in the channel (the relationship), the advertiser has no idea if the “affiliate” really deserves credit for the sale.
And that’s just the relationship/fraud angle. Will publishers be willing to accept CPA risk without CPA control over ad content and use? Why would they when they can make CPC instead, which is the real goal of most affiliates (with CPM being the ultimate goal). Will Google payout 75% of the commission to affiliates as CJ does? And Google cannot trust just any merchant to track these sales, they will have to limit participation to limited partners, and those partners are going to have to figure out a way to validate leads and sales coming through these links. I’m not saying it won’t work for some advertisers and some publishers, I just don’t think it will make a noticeable dent in the current affiliate networks, because it can’t scale easily.
Sorry about that. I should be more polite about the anchor text :)
Great points but I don’t see how CPA is more complicated when Google doesn’t give a hoot about fraud that occurs under its watch in CPC and CPM. Moreover, advertisers have all but accepted (by continuing to pay… not flocking en mass to CPC fraud solutions… and agreeing to settle with Google on terms that all but endorse Google’s dismissal of the problem—with regard to the class action suit) click fraud.
You suggest there’s no transparency in affiliate marketing and I fundamentally disagree as does Jay Weintraub based on what I read over at DM Confidential. I think there’s been an effort (by your competitors, Jeff) to create lack of transparency but there is still more with affiliate marketing (i.e. Linkshare allows marketers access to referral data).
To your point, the advertiser has no idea if the “affiliate” really deserves credit for the sale nor do they have any idea if the CPC affiliate deserves credit for a valid click. It’s all the same so long as advertisers don’t care to monitor and police… which they don’t in both realms.
Yes, publishers will accept CPA risk without control when they don’t want control. Has control stopped Google AdSense from being adopted? To a limited degree—so Google added control. Done.
Indeed, at the end of the day an effective CPM is the goal but there are many ways to get there—Google will offer each one.
I am highly interested in your argument that Google needs to trust merchants to track sales. I’m surely missing something here… but do we know exactly how Google will track these CPA arrangements? If they control the platform they do not need to trust beyond your company would need to trust… or any affiliate network would need to trust.
Yes, participation is limited for now but what is preventing a mass roll out? The fact that leads will need to be validated? Okay but don’t affiliate networks face the same challenge and haven’t they all failed (beyond Advaliant / Empiremedia) to provide a lead scrubbing solution? Although they’ve failed lead gen is the hottest market in online advertising now.
I honestly don’t see how this won’t scale for Google based on your points. I’m dying to know though if you’re willing to share!
OK, let me take these one at a time.
I think there is a big difference between click fraud and commission fraud. Click fraud is a bit ephemeral, it’s hard to pin down, and at the end of the day the advertiser is only looking at how much the traffic cost, and when compared to CPM it’s pretty good. As soon as you tie the payout to a unique act—to a specific lead or a specific sale—and when you are cutting a percentage of that sale right off the top, the fraud is much more real and identifiable, which is why it’s a central issue for affiliate providers.
I didn’t mean to suggest there was no transparency in affiliate marketing—just the opposite in fact. When affiliate marketing is done correctly, there is a lot of transparency. When you eliminate the transparency you get spyware and brand abuse and all sorts of things that I know you’ve been talking about for years now. LinkShare’s Athena was a move toward and transparency and I think CJ’s LMI is as well, and I know our company has its own solution coming out. Google would have to change things pretty drastically to allow this kind of transparency.
To your point that advertisers currently don’t seem to care about who deserves the credit for a sale, I’d just say that you’re right in some respects, but that is simply lazy marketing carried over from old ideas about CPM and brand marketing. The current up and coming crowd of marketers will be less and less willing to accept that sort of sloppiness. I don’t think this is one of the bigger concerns of Google, however.
Control has not stopped AdSense from being adopted because its CPC. You can’t give a lot of control in that situation, and on the flip side, you don’t need it. It is what it is. CPA marketing on the publishing end is not about the click, it’s about pushing traffic that is ready to convert. If I’m going to be paid CPA, I want to be able to help make that happen, not just let advertisers get free branding on my site and even free traffic. I want to be able to write a blog post endorsing a product and have the links embedded in the post. I want to be able to write up a full page endorsement. I want to construct my own banner that works on my site, etc.
We don’t know how Google will be tracking these ads, but I suspect they will be using their analytics product. We also don’t know if they will allow return day cookies, something all affiliates usually require. In either case, it is always possible for a merchant to “accidentally” remove the tracking code from their site or to claim that a sale was chargedback, etc. The only way around this is if Google actually handled the cart/payment/lead form themselves. That may be exactly what they are doing, but that also adds another layer of privacy issues and complexity as a barrier to entry for merchants. In either case, it’s very messy and hard to track when compared to a click. And it’s not like Google isn’t making a ton of money with clicks. It seems like a big leap to take a risk when they have that sort of cash flow from a simple technology with almost no overhead.
Validating leads and sales is not complicated once you have the infrastructure and experience in place. I just don’t think Google does. All of the tricks that used to work in the networks could now be tried again with Google, and unless they have built a back end to allow validation and feedback, they won’t be able to handle it—actually, I don’t think they’ll see the benefit in building technology to handle it.
All in all, I think it’s certainly a very sexy proposition to advertisers; who wouldn’t want to pay only when a sale occurs? It’s why I’m in the business to begin with. But the devil is in the details, and in this case its more true than ever, I think.
I do think Google can do this on a limited scale with trusted advertisers when Google controls the transaction; I just don’t think they will pull away any affiliates who are worth anything—it will just be the same AdSense crowd who wants to add a line of code to their site and collect a check. In that sense, there may be a long tail there that the affiliate networks have neglected that Google can own, but I don’t see it being much more than that.
Spot on re: Google’s Analytics and gPay playing into this all. I’ve not heard this discussed anywhere so thanks for sharing! Agreed, GOOG doesn’t have infrastructure in place but they are the dominant infrastructure online advertising company out there right now. They can easily tap existing infrastructure—which you pointed out (via a CPA mash-up of sorts).
Hmmm.... I think CPC and CPA fraud are equally identifiable, Jeff. I think the core issue remains: do marketers want to A) look for it and B) find it? Yes and yes requires having a game plan to take action afterward (more work).
This boils down to “what do marketers spend their time doing” traditionally. They don’t go looking for fraud—they’re not trained to do it nor do they receive *enough* benefit from it IMO.
With such a dis-interest (and I don’t think this will change much) in quality (i.e. weeding out fraud) on the marketer’s side, I don’t think CJ nor any other company cares a doodly about quality so much as they care about scale at this stage. I agree, some up-and-comers will care but they are firmly in the minority now and, again, it’s not in their job description to care (currently). CEO’s and CMO’s have such low expectation of those who work in marketing that they don’t need to. I say this not proudly but sadly.
Absolutely affiliates/publishers need control when buying clicks on a CPA basis! I think we disagree here… Google as well (since they’ve done nothing but allow publishers and advertisers more control over time).
I understand your argument for tying the need to control media with CPA advertising but I remain un-convinced that control is required. Control, after all, requires sharing and marketers have never shared well with affiliates—sadly. They’ve always looked to affiliates as a means to achieve “something for nothing” and that’s not fair to affiliate partners; hence, so much stress and tension. Control also requires relationships—which do not scale.
Again, I keep coming back to scale because I believe this to be the driving force here—marketers and networks require/are demanding more scale from affiliate relationships. They don’t, in my research/consulting, get *enough* benefit out of increased time invested in building relationships with affiliates.
I very much appreciate all of your thoughts shared here but I honestly believe that you might want to step back a bit and consider that Google is doing quite well with its AdSense network, as an example, in terms of offering more control and more scale in the realm of CPC. It’s a natural fit to offer CPA along side of it and trailblaze.
I don’t think VCLK or CJ are sure to die off tomorrow but they do stand to be seriously hurt by Google who has a LOT more money in the bank, a LOT more advertisers (happily giving them money) and a LOT more publishers—all taking advantage of more scale and more control as time goes on. You suggest this is risky for GOOG but I don’t see it as such a risk providing it’s rolled out slowly.
You say they won’t pull affiliates away. I agree but they don’t have to. They have all the affiliates/publishers they need—loads more than any “affiliate network” does.
OK, I’ll just concentrate on one point that I am absolutely sure about: the great majority of CJ’s current affiliate base, and in particular the super affiliates, do not need or want JavaScript/Contextual CPA ads (just look at the hubbub over the LMI). The affiliates who do want that sort of thing are already using AdSense; all of the other types of affiliates—datafeed, loyalty, etc.—have determined that they can make more revenue by controlling the content and the data. Unless Google can figure out a way to scale that sort of relationship without a service element (which I don’t think is possible), they are left to the long tail of content sites. They’ll just be converting their existing publishers from CPC to CPA, and CJ’s business will be mostly unaffected. If anything, the attention that Google is drawing to CPA may just expand the available client base.
To be clear, I think your bringing gPay and Google Analytics into the convo are brilliant.
“The affiliates who do want that sort of thing are already using AdSense” indeed but my point is that there are more of these types of affiliates out there (vs. CJ’s network).
Also, I see a few hundred (at best) affiliates in an uproar and doing things like signing petitions. Contrast this with Google’s network and mix in VCLK’s desire to wean itself off of revenue derived purely from publishers who spend more of their money with Google (not them!). VCLK literally owns the relationship with the advertiser and receives the smallest financial benefit.
IMO this is further proof of where things are going.