Google Weighs into Affiliate Sector
By Blyth, Alex
Google’s entrance into the affiliate marketing space is set to shake up the sector. Alex Blyth examines the potential impact of the search giant’s latest move. When Google acquired Performics in March this year, the realisation dawned that with one acquisition, the search engine giant could change the entire affiliate marketing sector. After all, Performics is a big player in the US affiliate marketing world, and Google had paid $3.1 billion (Pounds 1.6 billion) for its parent company, DoubleClick.The notoriously secretive search giant was up to something, but was giving nothing away.
Google then announced that on 5 May 2008 it was going to stop protecting trademarked terms, allowing rivals to bid on each other’s key words, and blowing the market wide open for affiliates specialising in search. Weeks later, it sold the search division of Performics to Publicis Groupe and rebranded the remainder as Google Affiliate Network. It was becoming clearer that Google had decided that there was money to be made in affiliate marketing, and it was moving in to take its share.
Even though Google Affiliate Network only operates in the US, almost everyone expects it to launch in the UK before long. Meanwhile, the change to Google’s trademarkprotection policy has opened the floodgates for affiliates to bid on keywords that were previously out of bounds. While some advertisers have been slow to react, others have instructed their affiliates to build branded landing pages and bid on key words to oust rivals from prized sponsored link spots. Some brandowners have already changed their affiliate strategies.
Hannah Kimuyu, director at Greenlight, reports that one advertiser has already increased its budget for branded search terms by 202 per cent as a result of the changes Google has made.
To some extent the industry is still guessing what will happen. Some people are predicting that Google’s increasing influence in affiliate marketing will transform the sector, while others believe that the company will struggle to make any impact on a market that relies so heavily on relationship building. One thing is certain – marketers, agencies, affiliate networks, lawyers and Google itself all have strong opinions.
Goog’s view
The way that Google’s trademark policy changed in the UK and Ireland means it no longer monitors or restricts the use of keywords. A company advertising on Google.co.uk and Google.ie can now bid on keywords trademarked by its rivals. Pay-per-click affiliates can do the same on behalf of their merchants.
Google is explaining all of these changes as an attempt to give consumers more of what they want. Tim Evans, product manager at Google Europe, says: “Google has built a business by putting users first. Google is popular because it is fast and gives users relevant results. To be clear, even in the sponsored links, advertisers cannot buy their way to the top – they have to earn their position by being relevant to the user.”
He adds: “The situation we have created is no different to shopping in a supermarket. Shoppers may walk towards the washing powder aisle with a brand in mind, but when they see the array of different options on the shelves they may make an alternative decision.”
Beyond that, Evans is cagey about Google’s future plans. Asked whether Google’s Affiliate Network is to be launched in the UK, he says: “We are not ready to make any announcements regarding a specific UK launch at this point.”
And asked whether Google has further plans for moving into affiliate marketing, he answers: “We’re looking forward to making further announcements regarding the Google Affiliate Network soon.”
The lawyers’ views
Many of those who have suffered a shark attack, and have lived to tell the tale, report that one of the most terrifying aspects of the ordeal is the silence with which the shark moves in to devour its prey. Many in the affiliate marketing industry are viewing this silence from Google in a similar way.
After all, these are significant developments. As Andreas Bernstrom, TradeDoubler’s chief operating officer, puts it: “When Google announced the change to its trademark bidding policy there was understandable uproar from the industry. In one short statement it had managed to dramatically alter the search landscape.”
The first thing many players did on hearing of the change to trademark protection was to consult their lawyers. Dominic Farnsworth is a partner in the media, brands and technology team at law firm Lewis Silkin.
He reports that many of his clients are concerned that the change will force them to commit a significant budget to outbid their competitors, to appear at the top of the list of sponsored links when someone searches for their trademarks. He believes that Google may yet face a legal challenge to its new policy: “While Google may take some comfort from the fact that no court action has been taken against it in the UK since the policy change took effect some months ago, the dust has not yet settled. Advertisers are still assessing the actual costs of the policy change to their business and are still talking to their lawyers.”
The affiliate networks’ views
For their part, affiliate networks are working hard to appear unconcerned by these developments. Robert Glasgow, managing director at Webgains believes that Google will bring further credibility to the affiliate networking sector. And Alison Guise, European general manager at Commission Junction, goes further, sayingthe change Ito the trademark policy gives her and her fellow network owners an enhanced role: “This I change in Google’s policy will broaden our responsibility, and make any network’s role pivotal in ensuring that the parties act appropriately.”
Most, though, are taking the line that, while Google has undeniable breadth of customer contact, it will struggle to develop the depth of relationship that is so important to successful affiliate marketing.
Tom Morgan, managing director at Affiliate Future, says: “Google has never been much good at customer relationships. It’s very much a technology company. We’ve spent many years working with advertisers and publishers helping them to develop affiliate marketing strategies that work. Will Google be able to do this?”
The maritetlng agencies’views
On the other side of the fence, digital marketing agencies are not so sure that the existing networks are as safe as they would have us believe. Keir McConomy, head of search at WAA, believes that Google will present a significant challenge to the pricing structure that those networks have come to enjoy.
“The big question on the other affiliate networks’ lips is how competitive Google’s payment structure will be,” he says. “Most currently rely on their override – usually around 30 per cent – coupled with a monthly management fee. If the Google Affiliate Network takes off, it could force the whole industry to rethink its business model.”
Matt Bailey, head of affiliates at i-level, is excited to see what technological innovations Google will bring to the market. He says: “Google is famed for its technological innovation, and if it implements technical changes to the Performics network with the same vigour that it has invested in other markets, then traditional affiliate networks may have to start playing catch-up pretty quickly.”
Most agree with their counterparts on the network side that Google will need to have better customer relations if it is to make a serious dent in this space. As Pauline Pasquier, performance channel manager at Web Liquid, says: “Google remains a large corporation that is difficult to get hold of, and the existing networks have spent years developing relationships with hundreds of affiliates. I will advise my clients to choose the right network for their needs, but I can’t see Google swallowing up the entire market.”
Tito marketers’views
Finally, what of those who hold the budgets? So far, most marketers remain unmoved. Chris Bishop, online acquisition manager at House of Fraser, states: “These Google changes to trademark policy shouldn’t have any effect whatsoever to a programme. By setting the rules in the initial stages and communicating effectively, the issue should be eradicated.”
It is a view that most now share. But earlier this year the announcement caused jitters. Online gadgets and toys retailer Firebox has used affiliate marketing for eight years, and generates around 15 per cent of its Pounds 11.4 million annual turnover through the channel. So, when Google made its trademark policy changes, online marketing manager Naomi Brown was initially worried. “We’ve got a strong online brand,” she explains. “Last year more people searched for ‘Firebox’ than for ‘gadget’.” So she sent an email to her affiliates, instructing them not to bid on any competitors’ terms. “We think it’s unethical to do this,” she says. “But also, as the market leader we don’t need to.”
She got a good response to her email, and reports that, apart from a couple of rapidly resolved mistakes, there have been no transgressions. Furthermore, almost all of her competitors have adopted similar policies. “I think everyone’s realised that bidding on competitors’ trademarks is a bad idea,” she says. “It’s very expensive and you get poor leads, because the consumer was searching for a competitor, not for you.”
Brown is also not excited by Google Affiliate Network: “If Google doesn’t offer something different, it’ll really struggle in the UK market,” she concludes.
BruceTownsend, marketing manager for Actinic, an e-commerce supplier for SMEs, is equally sceptical. He says: “The launch of its Affiliate Network takes Google outside its core competency and into foreign territory. All in all it looks a bit of a minefield, and it’s hard to see it succeeding.” These are early days for Google in the affiliate network market, and the firm has yet to unveil its full offering to the UK. While its track record suggests that it has a strong offering to smaller advertisers who are poorly served by affiliate networks, and Google may well have spotted a lucrative niche there, it would be surprising if this innovative company failed to come up with something that will shake up the entire affiliate market.
Even in the sponsored links, advertisers cannot buy their way to the top-they have to earn their position by being relevant to the user
Tim Evans, Google
When Google announced the change to its trademark bidding policy there was understandable uproar from the industry
Andreas Bernstron, TradeDoubier
Dealing with Google’s new policy
Colin Telford, affiliate director at online marketing agency R.O.EYE offers this advice for marketers on how to adjust their affiliate marketing in the light of Google’s changes to its trademark policy:
* Do monitor your brand terms closely for any signs of competitors bidding on your terms.
* Do monitor your competitors’ affiliates bidding on your brand terms.
* Do assess the viability and profitability of bidding on your competitors’ brand.
* Do ensure that your affiliates are up to speed with your search marketing objectives. They can work in tandem with your campaign to help deliver your overall online objectives.
* Do ensure that you have strong relationships with your affiliate base. They can help with this issue, and advise you on future changes in search marketing.
* Do seek to form ‘gentlemen’s agreements’ with competitors where possible so you can minimise unnecessary inflation of pay-per click (PPC) costs.
* Do ensure that trademarks aren’t used in PPC ad copy if bidding on your competitors’ brands.
* Do monitor your brand terms closely for any signs of competitors bidding on your terms.
* Don’t bid on a competitor’s brand if there is a chance that retaliation will affect your campaign and drive up PPC costs.
* Dont rule out other affiliate types. For example, look and see where incentive and content sites are appearing on search engine optimisation terms because they can help list.
* Dont believe the hype that the policy change will cost companies substantial chunks of their marketing budget.
Advertisers are still assessing the actual costs of the policy change to their business and are still talking to their lawyers
Dominic Farnsworth, Lewis Silkin
I will advise my clients to choose the right network for their needs, but I can’t see Google swallowing up I the entire market
Pauline Pasquier, Web Liquid
The launch of its Affiliate Network takes Google outside its core competency and into foreign territory. All in all it looks a bit of a minefield, and if s hard to see it succeeding
Bruce Townend, Actinic
Copyright Haymarket Business Publications Ltd. Sep 2008
(c) 2008 Revolution. Provided by ProQuest LLC. All rights Reserved.