Case Study : eBay Partner Network's Quality Click Pricing Exposed

… or, why eBay Partner Network introduced Quality Click Pricing ‘ How Incremental is Affiliate Marketing?’, and other difficult questions... Chris Howard and Julia Nisted 14 th October 2009

Quick eBay Partner Network background

eBay Partner Network launched April 2008, replacing eBay affiliate programmes on 3 rd party networks

Affiliates promote eBay in 13 countries worldwide

Recently announced Quality Click Pricing, a new CPC payment model rewarding publishers for quality traffic

>100k affiliates in 27 countries

Business models include portals, content sites, blogs, shopping comparison, deals and loyalty sites

Why we love affiliate marketing Measurable, Performance-based Spend Revenue ROI Positive Rewards entrepreneurs Rapid growth, huge opportunities

Affiliate industry has been too complacent over concerns Networks and affiliate managers often have incentives misaligned with asking these questions “ I let my network deal with who’s on the programme” “ I know there’s some fraud in there, so I just pay 20% less per lead than I would for the same lead from SEM” “ I don’t care where the traffic comes from, as long as the numbers look good”

Why building trust in affiliate marketing matters Affiliates as ‘dark secret’ of Marketing “ We can’t go on together with Suspicious Minds” Suspicion from Marketing Directors Budgets for Affiliate Marketing Shrink Uncompetitive monetisation option

What are the difficult questions we should all be asking? “ Did the affiliate’s efforts generate the lead/ sale?” “ Does the size of an affiliate matter?” “ Are my good affiliate numbers driving business performance?” “ How do you keep compensation structures simple but reward for all benefits affiliates bring?” “ Are the affiliate’s leads worth what you pay for them?”

How have we dealt with these issues in the past? Improved front-door security Better defined Ts and Cs Investment in fraud detection Removed lowest quality affiliates Since launching eBay Partner Network: Now adapting pricing to reward good affiliates and reduce incentive for fraud

What is Quality Click Pricing?

New CPC pricing model for eBay Partner Network globally

Two main components to determine CPC for each affiliate:

CPCs updated daily for easier optimisation

Designed to better reward good quality affiliates

Short-term Value Long-term Value

Incremental sales revenue

Incremental PayPal revenue

Incremental ad revenue

# of incremental new users

Lifetime value of new users

User engagement with eBay

How does Quality Click Pricing address difficult questions? Click on affiliate website

Strong link between affiliate integration and item bought

Weak link between affiliate integration and item bought

Item bought on eBay Time from click to purchase “ Did the affiliate’s efforts generate the lead/ sale?” More incremental sales driven by affiliates weighted more heavily 15 mins 7 days

How does Quality Click Pricing address difficult questions? “ Are the affiliate’s leads worth what you pay for them?” Quality Click Pricing pays affiliates for value of their leads Value Index Average value per lead by publisher - illustrative Not compensating the best affiliates for traffic they bring Rank-ordered affiliates Average Payout under old model Large numbers of affiliates driving below-average leads

How does Quality Click Pricing address difficult questions? “ Does the size of an affiliate matter?” CPC based on quality, not quantity, of traffic Revenue per click for different sizes of affiliates in eBay Partner Network (Data for October 2008)

How does Quality Click Pricing approach difficult questions? “ Are my good affiliate numbers driving business performance?”

Rewards for incremental sales and leads – not just cookies dropped on users’ machines!

Fraud indicators built into algorithm

“ How do you keep compensation structures simple but reward for all benefits affiliates bring?”

Publishers get a single variable (EPC) to optimise for

Earnings calculation incorporates revenue from variety of sources

What does this mean for affiliates? Concentrate on adding value for the user and the merchant Ensure your site is relevant for the merchant Develop a great end to end user experience NOT Take care of inbound traffic sources Optimise, Optimise, Optimise!

Examples of good affiliates

Our hopes for the affiliate industry Engage with the difficult questions “ Did the affiliate’s efforts generate the lead/ sale?” “ Does the size of an affiliate matter?” “ Are my good affiliate numbers driving business performance?” “ How do you keep compensation structures simple but reward for all benefits affiliates bring?” “ Are the affiliate’s leads worth what you pay for them?”

Our hopes for the affiliate industry Engage with the difficult questions Demand more from your network Where is my traffic coming from? How are applications vetted? Is this in my company’s best interests? How do you guard against fraud?

Our hopes for the affiliate industry Engage with the difficult questions Demand more from your network Support the good affiliates! Tools Data Education

Thank you for listening! Questions?