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

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

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…

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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!

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

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

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

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