MarketingExperiments Blog: Research-driven optimization, testing, and marketing ideas

My colleague, Robert Reynard, and I just returned from Affiliate Summit. Special thanks to Shawn Collins and Missy Ward for having us. This is not the first time I have been, but nonetheless it impresses me to see the number of people who have an interest in this space.

Affiliate Marketing Regulation

One of the most interesting topics this year was around government actions which are threatening many who have profited from this space for many years. The Federal Trade Commission (FTC) is cracking down on Internet sites that profit from promoting other’s products or services without disclosing within that promotion that they received some sort of compensation from the company.

Compensation in this instance is not limited to cash. Let me give you an example that I heard at the show:

Let’s say a stay-at-home mom begins a blog to help other stay-at-home moms. A diaper manufacturer sees that blog and decides to send her a box of diapers with the hope that she would try them on her children and then blog about how well they performed.

That mom must disclose that this was a gift from the manufacturer and she must disclose that this blog post is partial to them for that reason, even if she would have blogged about “the diapers making it through the night without leaking” anyway and was in no way influenced by the fact that the diapers were a gift. In other words, even mommy bloggers could be held liable for product reviews.

This may be an extreme example, but thanks to some who may have been taking advantage of consumers through use of exaggerated claims and fake reviews and testimonials, it has become a necessary part of affiliate marketing.

Google Adwords frustration

Another hot topic surrounding this event was affiliate frustration with the Google Adwords program. Over the last year, many affiliates who used Google Adwords to advertise their site(s) were notified that they were no longer welcome to use the Google advertising platform.

OK, so “notified” may be a bit of a stretch, typically the way they found this out was without any sort of notification at all but rather by noticing that sales are lower or perhaps non-existent and logging into their Adwords account to troubleshoot.

After looking around for a bit, they probably found that everything seemed to be in order. On the surface at least. They then may have scrolled over a status column which, when hovered over, opens a small box showing a users Quality Score. To the affiliate’s surprise, the Quality Score ranking that once read 7/10, 8/10 or even 10/10 now says 1/10.

A 1/10 Quality Score ranking in Google Adwords is about as effective at removing advertisements as deleting the campaign altogether. Worse yet, starting over with a new campaign will not help. An advertiser’s Quality Score remains with their domain.

I have heard, but this has not been confirmed by Google, that the only way to receive a 1/10 Quality Score across an entire account is for a Google Policy Team Member to manually place this on the account…meaning that this does not naturally occur. Perhaps this is why affiliates have affectionately labeled this occurrence a “Google Slap.”

Can you imagine being in business one day and out the next? That is what is happening to some of these affiliates. So why would Google do this? After all, affiliates are paying them, right? Well, Google, like the FTC, is probably reacting to the bad apples. Google is fanatical about protecting its customers (i.e. search users) and if it takes hurting some legitimate affiliate’s business to protect customers from the bad apples, it looks like Google is okay with this concession.

What this may mean for 2010

It will be interesting to see how both of these situations play out over this year. I counted 46 businesses from the advertising and marketing industry that made last year’s Inc 500 list of the fastest-growing companies, private companies.

Many of these businesses have deep roots in the affiliate marketing business. Their growth rates have skyrocketed on the backs of affiliates using Google Adwords to advertise, and in some instances have grown off of sites that now must alter their pages to abide by the new FTC guidelines.

Will these companies be able to adjust their business models and continue these impressive growth rates in the face of these new obstacles? Share your thoughts in the comments section of this post or start a conversation with your peers in the MarketingExperiments Optimization group.

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For those of you who are unaware, our next certification course covers the topic search engine marketing (SEM). In response to that, I have received several emails as to how the curriculum will pertain to Yahoo, in the midst of the Panama Update.

First, Yahoo’s Panama Update:

Later this year or early next Yahoo is scheduled to lunch a major change to its Search Marketing platform. This change is labeled “Panama Update” and will replace the old Overture platform with a platform similar to Google Adwords and MSN Adcenter.

The Panama Update will eliminate the transparent bid platform which allows users to bid on the position they want based on the CPC they are willing to pay for that position. They will be replacing it with a platform which uses a ranking formula.

Rather than the straight forward formula which is Position = CPC (Cost Per Click), Yahoo will use an algorithm which is similar to Google’s which is Position = CPC x CTR (Click-Through-Rate) x Quality Score.

What is “quality score”? Quality score is something Google recently added to adwords to help determine a sites ranking. It is the terminology applied to Google’s attempt at artificially ranking sites based on content. Strong related content receives a high quality score, little or non-related content receives a low score.

So how will the Panama Update impact advertisers? Essentially, it will place more responsibility on advertisers to build strong adcopy and send traffic to high content pages. It will also eliminate bid slamming (jumping up to one penny under your competitors bid) and Yahoo is no longer expected to have a waiting period for ad approval.

The Panama Update will help to promote those merchants who spend time to test and build strong ads.

Now, as to how it might affect the SEM Certification Course:

Since, Yahoo has not announced when the Panama Update will take place, we are proceeding with the curriculum based on the current platform. However, if the Panama Update goes live prior to the class on Yahoo Search Marketing we will cover the new platform.

We are committed to making this course as practical as possible and want to make sure the training covers the most current optimization techniques.

Thank you to everyone who participated in the small ppc search engine clinic last Wednesday.

Following this clinic I received several questions regarding the ways that these search engines are driving their traffic. Specifically, how the small search engines are using domain traffic and why the quality of this traffic would be poor.

First, let me elaborate on what domain traffic is, domain traffic is using a domain to drive traffic. This traffic can come from domains that once had sites but no longer do, misspelled domains receiving accidental traffic or generic domains receiving direct navigation traffic (this refers to finding a site through the use of your browser bar rather than a search engine).

So, if the small search engines do indeed drive less qualified traffic and some of the small search engines are using domain traffic, is domain traffic less qualified?

Certainly not ALL domain traffic is less qualified. Direct navigation, where people looking for cellphones type cellphones.com into their address bar and end up on a page filled with cellphone advertisements, can be extremely qualified and people are now making very large investments for these types of domains. Rather it is the other methods which domains are driving traffic that concerns us.

This can be difficult to visualize so let’s take an example I found with a quick search MySSpace.com (SS). If you visit this misspelled domain you will notice that one of the first links on this page is to something called “friend search”, and if you click this link a page is displayed filled top to bottom with advertisements to personal/dating sites and people finders. Undoubtedly, some of these advertisements are clicked by individuals looking for MySpace.com.

Now, if this visitor looking for MySpace.com finds them self on a dating site rather than MySpace.com, they may stay and subscribe, though the likelihood of them being interested is far less than if they arrived at the site intentionally.

This is an example of how domain traffic can be less qualified. Seeing as how the traffic from the small search engines was of such low quality, we can only assume this is the type of domain traffic these engines are utilizing.