There is an immoral minority in affiliate marketing who wreck havoc and cause headaches to affiliate managers. They stuff cookies, spam blogs, redirect affiliate links, and commit a whole assortment of dirty deeds. We could go the Travis Bickle route and hope that someday a real rain will come and wash all this scum off the streets. But a more reasoned, and effective approach is to take some proactive measures, monitor affiliate activity closely and enforce your terms and conditions.
Terms of Endearment
There are certain truisms in affiliate marketing, like affiliate agreements for most programs are outdated boilerplates. And affiliates don’t read affiliate agreements.
It has long been common that new affiliate programs, especially those without in-house legal counsel, borrow extensively from affiliate agreements used by other companies. In the late ‘90s and early part of this century, it was laughable how many affiliate programs did a find and replace on the Amazon affiliate agreement, and then called it their own. There were hundreds of agreements out there with the same typos as Amazon.
There are a few problems with this approach. The assumption that one size fits all is flawed. If your target market is middle aged men in the Pacific Northwest, the particulars for your program will be a lot different than those of a bookseller.
Also, there’s always a new bogeyman in the industry that needs to be addressed, and you cannot count on other companies to do your homework. Finally, it’s not cool to steal from others.
So here are some issues you should be covering in your affiliate agreement:
- Adware/Spyware: They’re two different gremlins, but you can cover them in one paragraph. Most programs either forbid them both, or mention neither.
- Cookie stuffing: Using IFRAMES and other methods, affiliates place their affiliate cookies on anybody that hits their site. So they’re getting credit for the referrals of anybody that visited their site and later bought from yours, regardless of whether the consumer clicked their link.
- Spam: There are two areas to consider here. Of course, you’ve got your old fashioned email spam, and you’ll want to clamp down on it (want the FTC breathing down your neck?). But a more contemporary strain of spam is when affiliates post nonsense messages to blogs with their affiliate links.
- Trademarks: Can affiliates use yours in their SEO and PPC efforts? There are two distinct camps here, so figure out what works for you. On that note, there’s also a movement to restrict affiliates from bidding on competitors’ trademarks in order to promote a given company.
- Residency of affiliates: You could take all comers in the hopes that those sales from China, Nigeria and Tajikistan are not fraud. Or you can play it safe by working with select countries. I generally consider applications from affiliates in Australia, Canada, the UK or the US. Others are reviewed (and usually rejected) on a case by case basis.
- Banner hosting: Some affiliates are inclined to save your banners and host them on their servers. Don’t let them. When you want to refresh creative, it’s a real bear to try and get all of the outdated legacy creative up to date.
Just the FAQs
You’ve got the updated affiliate agreement, but you’re not finished. Even after you lay out your terms in explicit detail, that doesn’t mean affiliates will bother to read the document when applying.
In fact, affiliates are most assuredly not reading the affiliate agreements, and that can lead to legal liabilities and brand risks for the merchant. According to data I gathered for the AffStat 2004 Report, only 45 percent of affiliates stated that they always read the affiliate agreement.
And really, can you blame them? After all, affiliates join dozens, if not hundreds of affiliate programs. Nearly half of the affiliates I polled have joined 50 or more affiliate programs. And they don’t want to give away ten minutes of their life trying to navigate pages of legalese every time they apply to a program.
I was reading a thread in a marketing forum recently, and somebody asked which affiliate programs permit pay per click search engine advertising.
I replied that whenever you are in doubt, you should read the affiliate agreement, since some programs forbid PPC bidding for their trademarked name(s) and/or certain terms, and if the affiliate is caught, the agreement might stipulate that the merchant has the right to charge back, and/or disallow any and all commissions.
A number of affiliates didn't seem to like the approach of reading the rules first. One replied, "It's always easier to get forgiveness than permission in anything ... just do it."
Since affiliates are not reading the agreements on such a grand scale, I would encourage the creation of a sort of affiliate agreement for dummies. Basically, just utilize your affiliate FAQ as a baked down interpretation of the agreement. Write it in common, simple English and you’ll have a better chance of spreading the word on your terms.
You may also want to consider including questions that affiliates ask frequently in your FAQ. Despite the name of the document, most affiliate programs have a stale boilerplate for this, too.
Doing the Big Brother thing
I like to run my affiliate programs by the rule of whoever profits by the crime, is guilty of it. So I consider it to be a priority to keep tabs on affiliates, and to enforce the terms when they are violated.
One step that helps the gate-keeping efforts is to manually approve all affiliates. During this process, you can check for evidence of adware and cookie stuffing. And if you don’t wish to work with affiliates from certain countries, you can reject them at the onset.
Once they are in the door, it’s a good idea to keep an eye on your referrer logs. This will enable you to see the exact URLs where affiliates are promoting your program. The logs are a useful tool that can reveal whether affiliates are promoting your program from sites other than those they used to apply to your program.
It’s also helpful to see how the affiliates are using your creative, and whether they’re trying their hand at writing some really bad, and factually incorrect copy.
Another detective tool is to simply search for the name(s) of your company and your competitors in the search engines, and determine whether any of your affiliates are bidding on these terms, or any others that you may have forbidden. One third of affiliates are using the PPC search engines to promote affiliate programs, according to the AffStat 2004 Report data.
Lastly, in order to monitor spam, it’s a good idea to opt-in to the newsletters of your affiliates. Yeah, that’s a monster of a task when you’ve got thousands of affiliates. But think about that -- if you cannot effectively monitor the activity of your affiliates, maybe your program is bloated, and it’s time to trim it down to the active affiliates only.
The FTC is looking for examples to trot around as the perp du jour that has violated CAN-SPAM, and they don’t care that it’s a hassle for you to have to spend a lot of time monitoring the compliance of your affiliates.
So you can seed the clouds and hope to flood out the vermin, or you can go on the offensive and take steps to stop the liars, cheaters, forgers and stealers before they get started. And if they beat you on the front end, sic your legal eagles after their back end.
Shawn Collins is CEO of Shawn Collins Consulting, an affiliate program management agency; Webmaster of the AffiliateTip.com affiliate program directory; and a founder of the Affiliate Summit conference. He authored the book Successful Affiliate Marketing for Merchants and the AffStat affiliate marketing benchmark reports cited in this story.
The economics of SEO
Most agencies charge between $100,000 to $250,000 per website/site section per year for a project or retainer-based SEO program. To put this per-site fee in some context, imagine a consumer packaged goods company that may have 50 to 500 brands, and 20 or more international incarnations of each brand site. Paying $100,000 per site is what is known in corporate America as a "non-starter."
At a high level, this investment in SEO is allocated as follows:
- Keyword discovery. The process of determining which keyword on which to focus consumes approximately 10 percent of the fees paid to the agency. This process includes trying to figure out the total potential for each keyword related to a brand, and whether the brand can actually "win" on that keyword or not.
- Site audits. The second step in the process is an initial audit of the website(s) to identify issues that are preventing a site from being optimally ranked for a given set of keywords determined during the keyword discovery phase. The delivery of this step is a large PowerPoint or "desk-breaking" Word document with actions the advertiser should take in order to drive results. This is usually 30 percent of an agency's efforts, and 30 percent of the billings.
- Site changes. The third step is making the changes from the audit to the site (to the extent that changes can be made in conjunction with IT). This is the work that actually results in changes on the search engines themselves and is where the majority of the investment should go. Site changes usually comprise 45 percent of the investment or the fees paid to agencies. This includes technical changes, content changes, and link-building efforts.
- Ongoing monitoring and reporting. The last step is the ongoing monitoring of the site (to ensure that optimizations are not unwound) and ongoing identification of SEO health (rank changes, conversion analysis). Included in this step is the reporting necessary for the advertiser to track SEO performance and results. This usually consumes 15 percent of the investment or fees paid to agencies.
For a large advertiser, any model that does not dedicate more than 75 percent of the resources (ideally 80 percent or more) to the site change process simply will not scale. That means that 30 to 40 percent of what agencies are currently charging has to be streamlined or brought in-house by the advertiser themselves. That is a tall order.
Recrafting the agency model
So what does this mean for the advertiser and the agencies that provide SEO services? SEO agencies, in the U.S. alone, will make $2.4 billion on SEO services in 2009, and this number is projected to grow at 16 percent per year, according to Forrester Research. However, the advertisers are requiring two things:
- Automation. Marketers want the keyword analysis, site auditing, and reporting processes -- the administration processes that currently consume 55 percent of the fees and are very headcount intensive -- to become automated. The scalable SEO model requires no more than 25 percent of fees go toward SEO administration, meaning that 30 percent of the fees will be transferred to independent software firms or investments in technology by the agencies that will automate this work.
- Refocusing of service delivery. The "change process" will move from 45 percent of the fees to 75 percent of the fees, where the deliverables will be a) link building, b) content development and deployment, and c) technical issues around the website development work.
Most agencies, particularly holding company agencies with SEO practices, will fail at this automation strategy. They simply lack the business model and talent to build software of any sort. And with the issues around refocusing of service delivery, agencies will find themselves more and more in competition with a new class of competitors: content management system vendors like Autonomy (through Interwoven), Microsoft, Vignette, and others. Managing the placement of SEO-friendly content on the site will become a more and more natural part of the content development and management process, with the agency being relegated toward pure content creation (which only accounts for about 10 percent of the current fees being charged).
As for the advertisers, it had long been predicted that the drive to in-source this work will become more and more powerful. It's clear that technologies are becoming available to allow them to automate much of what they are paying their agencies to do now with people, but at a fraction of the cost. In addition, the ability to take custody of their own data regarding SEO performance, and in fact performance of all digital advertising channels, is another factor driving in-sourcing.
SEO is irresistible to advertisers. A high rank on Google for a high-traffic keyword is the gift that keeps on giving. It is worth gold. It is leveraged and lucrative. And the process by which large advertisers craft a plan to take advantage of SEO is becoming far more efficient amid a far more diverse ecosystem.
Automating the administrative aspects of SEO strategies, namely keyword research, site auditing, and reporting, provides an opportunity to drive down costs by 30 to 35 percent. Advertisers can take advantage of a host of new software vendors focusing on building systems to automate these processes.
This is a challenge to the traditional agency model, which is being refocused on managing the actual on- and off-site content development and link building. This work is done at lower margin than those aspects of the processes that are being automated. There is also increasing competition from content management systems, which are starting to incorporate SEO content creation concepts into their workflow.
With the economic downturn spurring a slew of innovation in this space, advertisers are seeking to take advantage of SEO in a far more economic and scalable way via automation technologies.
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Agencies vs. publishers
Publishers want advertisers to spend money on their platforms. Advertisers want unique native advertising opportunities that are closer to publishers' content than a typical banner ad. It's expensive for agencies to develop creative for one-off executions for individual publications, however, so often these publishers might get left off the plan.
Of course, publishers don't want to get left off the plan so they hire junior designers, look at brands' existing campaigns, mock up ad units, and tell the advertisers they can have the creative for free.
On the surface, a brand might ask, "Free banners from a publisher or thousands of dollars from my agency? Hmm."
This same scenario plays out with everything from mobile ads to sponsored content to Simon Cowell's plastic cup of Coca-Cola.
Is this really a turf battle? Or is it an opportunity?
The challenge publishers face is that while they might come up with the occasional clever idea and can follow brand guidelines as well as the next guy, they are never going to be strategic marketing partners for brands. First off, they are self-interested, so they'll never be objective or useful beyond their own properties. Second, developing brand strategy and translating that to creative is a core competency that they don't have. Third, do brands really want to manage a bunch of individual publishers? That's not a core competency brands have either.
The smartest agencies aren't looking at this as war. Instead, they are getting ahead of it. They are sending RFPs to publishers and asking how they can help. They are vetting ideas and bringing them to their clients. They are getting publishers to contribute additional value and passing that along to their clients.
Yes, it means agencies will get to build a few less banner ads. (Sniff.) On the other hand, they'll get to deliver more value and better results to their clients. And if agencies do that, they don't have to worry about clients taking meetings "behind their back" with publishers. It's a win-win.
Agencies vs. DSPs
I recently overheard the media director at another agency say she wanted to send MediaMath a non-disclosure agreement because she heard rumors that it was going around agencies' backs and selling managed services to their clients.
So now brands are supposed to use proprietary technology companies as their new agencies? Good luck with that.
The truth is that tools like demand-side platforms (DSPs) make some degree of media buying a commodity. They are pretty damned easy to use.
But if you talk to the people actually using these platforms, you'll find that:
1. They are actually labor intensive to use.
2. While the basics are easy, strategy and the ultimate degree of success you'll have come in when you set them up and customize them.
3. Different DSPs work better in different situations.
Brands hire agencies to solve problems that lie outside their areas of expertise. Unless a brand wants to start bringing media in-house, working directly with ad tech vendors seems like a foolish path.
Of course, that brings us to our next turf war...
Agencies vs. in-house client teams
Some brands have been taking parts of their community management and online direct response in-house. My agency brethren might not like me saying this, but sometimes this makes absolute sense. Sometimes.
Community management is one area. In an ideal world, that is something that is better done by somebody who actually works at the company. You wouldn't call an agency to run your call center. So why outsource customer service to one just because it's on Twitter?
Direct response is also being handled in-house by a handful of brands that have e-commerce as their primary source of revenue.
In fact, our client Shutterfly brought online direct response in-house because driving e-commerce revenue is the core of its business. Shutterfly engaged us for a year to help it develop that expertise in-house. The combination of programmatic buying tools and commoditized display creative is making customer acquisition a business process in organizations. But should it be? It takes hubris and talent to think you can do something that isn't core to your business as well as a partner whose entire business is centered on it. But for some, it makes sense. That's up to the clients to decide.
Agencies vs. video production houses
High-speed web access is ubiquitous. More than half of Americans have smartphones, and more than half of those are completely addicted to them. Brands have learned that they need content to engage customers. All this adds up to an insatiable demand for video from brands.
It is trite to say that the era of high-production values is over. Tell that to a brand about to spend a few million bucks on a TV campaign -- or even a video that will live on its website, the cornerstone of most every brand today. Quality still matters. Being strategic matters. Making people laugh or cry or think matters. Building trust matters.
No, the need for high-quality production hasn't gone away. But it's been joined by the need for sometimes not-so-high-quality production. In either scenario, the agency will typically leverage the production company -- if they're smart and secure.
Just yesterday I was approached by a major bank brand. It wanted to produce some customer videos. It knew the style it wanted. It knew which customers it wanted to interview. It just needed some help designing a "video template" and cost-effective production. So I referred it to a production studio.
Ad agencies vs. digital agencies vs. PR agencies
For starters, the distinction between ad agencies and digital agencies is essentially meaningless at this point. There isn't really any noteworthy difference between what Goodby offers versus an AKQA. So we can put that one to bed.
Where the real battle lines are being drawn, however, is between consumer-centric agencies versus PR shops. This has been fueled by the rise of social media. To me, this is a false equivalence because other than social, PR shops don't stand a chance of horning in on ad agencies because they are media-focused, not consumer-focused. Even when it comes to social, the community management part might actually be better handled in-house, as noted earlier.
"Businessman in boxing gloves isolated on white" image via Shutterstock.