Setting Quality Standard in Affiliate Marketing

Setting Quality Standards in Affiliate Marketing William Martin-Gill, Director, eBay US Affiliate Marketing Chris Howard, Senior Manager, eBay EU Affiliate Marketing

Quick eBay Partner Network background
eBay has had an affiliate programme since 2001, eBay Partner Network was launched in April 2008
In-house platform has improved availability of data and ability to innovate
We’re the merchant (12 eBay sites + Half.com) and the network
Our programmes combine cost-per-sale and cost-per-lead
Over 100K affiliates in 27 countries
Many business models are supported, including portals, niche content sites, blogs, deals/loyalty sites and more

Why quality standards are important
Affiliate fraud negatively affects everyone – advertisers, publishers and networks
Conversely, a focus on quality is a win-win-win
Quality is a lever that we can all influence
Now more than ever, marketing dollars will be allocated to the most effective channels

Quality is becoming a focus for advertisers, networks and publishers “ during the 3 months ended Mar 31, 2008, we terminated relationships with certain Google Network members who did not comply with our AdSense policies … these steps include[d] … terminating Google network members whose web sites do not meet our quality requirements” Source: Google 1Q 08 10-Q “ We believe Yahoo!’s affiliate business is likely to deliver relatively flat Y/Y top-line growth over the near term as Yahoo continues cleansing its affiliates by focusing on quality…” Source: Lehman Brothers, Anmuth’s Internet Inside, early 2008

Quality is becoming a focus for advertisers, networks and publishers Advertisers cited inventory quality as the top ad network differentiator in 2008 Source: ThinkEquity Partners, Collective Media 2008 Ad Network Study 52% of pay per lead merchants cited quality-related issues as their biggest affiliate marketing challenges. Source: Shawn Collins, AffStat 2008 Report

Quality is core to eBay Partner Network Network Quality High value traffic to advertisers Rich commissions to publishers

What is quality? Legitimate traffic Incrementality of sales Lifetime value of customers Was the sale or the new user lead legitimate and within our T&Cs or was it fraudulently generated? Would this sale have happened anyway without the efforts of the affiliate? Are the new users as or more valuable than what the merchant is paying to acquire them?

We fight multiple NQ battles
Cookie stuffing Causing affiliate click events to occur without user intent or awareness
ACRU Manufacturing Creating eBay accounts for the sole purpose of earning an affiliate bounty
Malware Malicious software designed to place cookies on unsuspecting users’ machines
and more…

As a merchant: Think about more aggressively attacking NQ
Build capabilities to detect fraud
Data and analytics
Crawlers and automated tools
Third parties
Systematically eliminate malicious behavior
Address it on an affiliate by affiliate level
Don’t just focus on the big guys
Focus on the front door
Evaluate business models carefully
Be clear with your affiliates
Managing NQ effectively requires dedicated resources

As an affiliate: Know the merchant T&Cs and protect yourself
If you’re not sure, check the T&Cs
If it’s not clear, talk to your merchant!
Use discussion boards, others can probably lend some insight
Abide by the advertiser’s terms and conditions Protect yourself
Be transparent – provide referring URLs, good communication
Be proactive – monitor your metrics and if you’re changing course dramatically, talk to your merchant
If you’re a sub- or super-affiliate, take extra care and know your responsibilities

What is quality? Legitimate traffic Incrementality of sales Lifetime value of customers Was the sale or the new user lead legitimate and within our T&C’s or was it fraudulently generated? Would this sale have happened anyway without the efforts of the affiliate? Are the new users as or more valuable than what the merchant is paying to acquire them?

Not all sales are created equal Most programmes measure sales… … When they should be measuring incremental sales “ Would the sale have happened without the effort of the affiliate?” Why?
Cookies get dropped, a big issue for sites with lots of organic traffic + long cookie durations
High incrementality tends to mean:
Ads are reaching the right audience
It is probably a higher-quality affiliate

How do we think about quality of sales?
Buying activity over the lifetime of a customer
Engagement with eBay
Bid-to-click ratios
Time on site
Page Views
Fraud metrics
Unpaid items
Credit card fraud

Small affiliates can be your best affiliates Yet how many programmes reward small affiliates with higher-than-average payouts? Revenue per click for different sizes of affiliates in eBay Partner Network (Data for October 2008)

As an advertiser: help your affiliates drive incremental traffic
Help affiliates better align with your goals and objectives, e.g. via promotions
Adapt pricing to reward for incrementality
Pay more to your best affiliates, regardless of their size
Come up with more simple, more innovative compensation structures to reward affiliates
Invest in better technology for your affiliates
More transparency and better metrics
Customer targeting based on customer and conversion data
Landing page optimization + geotargeting
Better tools and APIs to help affiliates integrate with your programmes + help them “pre”-sell
Opportunities for advertisers

As an affiliate: Build high-quality sites and optimize them
Maximize the amount of unique content to your site
Use more targeted creatives and tools
Integrate merchant links within your content
Optimize your landing pages + use geotargeting when available
Avoid simply incentivizing visits to the advertiser
Most of all: test, test, test Opportunities for affiliates

What is quality? Legitimate traffic Incrementality of sales Lifetime value of customers Was the sale or the new user lead legitimate and within our T&C’s or was it fraudulently generated? Would this sale have happened anyway without the efforts of the affiliate? Are the new users as or more valuable than what the merchant is paying to acquire them?

Not all leads are created equal Most programmes pay flat rate for leads… … When they should be rewarding lifetime value of those leads Why?
Lifetime value varies by customer
Average value of customers can also vary significantly by affiliate
Affiliates that send more leads not necessarily sending highest quality leads

Average value of leads can vary significantly by affiliate Value Index Value of Active Confirmed Registered Users Class of Mar 2008 Not compensating the best affiliates for traffic they bring Rank-ordered affiliates Programme Average Large numbers of affiliates driving below-average ACRUs

Quantity and quality not always correlated Value of Active Confirmed Registered Users Recent class of users Size (Number of ACRUs per affiliate) Value Index Need to supplement volume-based tiers with factors to reward for quality

How value-based pricing might work Case Study: eBay Partner Network, US
New ACRU tiers based on quality and volume
Lower at bottom range
Higher at top range
Ultimate objectives:
Reduce fraud
Pay more to encourage top affiliates to bring us more traffic
$25 $35 $50 $1 Oct Nov Dec Jan
ACRU tiers adjusted on an on-going basis
Adjusted each month based on performance
But based on historical value to control variability

How this works, in practice
US Affiliates programme implemented ACRU Value Based Pricing
Predictive model estimates value of users using key variables
What they bought
Revenue
Unpaid items and fraudulent users
Model ties payout to value driven and reduces incentive for lead-gen fraud

As an advertiser : invest in better technology
Invest in technology to help determine lifetime value of customers
Reward affiliates for lifetime value of customers
Longer cookie latencies
Wait to pay
Predictive models
You must also invest in technology and process to reduce variability for your affiliates
Opportunities for advertisers

As an affiliate : learn to target effectively
Pay attention to the profile of your customer base
Choose niche sites that will yield higher quality customers for your merchants
Don’t use gimmicks to get people to sign up
Incentive models generally don’t work
Pre-sell a service and convince your users that it is good, don’t leave it all to the merchant
If you focus on sales, new users will typically come by themselves
Opportunities for affiliates Most of all: test, test, test

Metrics and pricing are no silver bullet
Personal relationships key to attracting and retaining top affiliates
Need to help best affiliates reach full potential
Pricing won’t catch all fraud: need strong network quality team
Affiliates is a relationship-oriented channel Need to continue to invest more than money in your affiliates
Premium creatives, tools, APIs
Creative optimization – contextual, behavioural
Landing page optimization – search results, geo-targeting

Why are we sharing all the insights we’ve learned in the past year?
We all win from raising the quality standards in Affiliate Marketing
Advertisers get better leads and sales truly incremental to their other efforts
The best affiliates should get compensated more
The more we as affiliate marketers can prove incrementality in our organizations, the more budget and resources we’ll receive
Affiliates can (should) be bigger than display or paid search
Together we can help the affiliate channel reach its full potential!

If you’re interested in learning more… White paper on quality in SEMJ.org…
We’ll be up here for 10-15min after the presentation
Stop by booth #1
For questions about eBay Partner Network
To trade thoughts and tips
To get more information
… or, come and talk to us

Questions and Answers William Martin-Gill, Director, eBay US Affiliate Marketing Chris Howard, Senior Manager, eBay EU Affiliate Marketing

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Setting Quality Standard in Affiliate Marketing

by a4uexpo Conference on May 01, 2009

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