The Link Economy: Exploring the Economic Power of Links

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This presentation is from Affiliate Summit West 2014 (January 12-14, 2014 in Las Vegas, NV). Session description: The link economy, the market of buying & selling links, is young & woefully inefficient, but due to new optimization tech that harness the economic power of links the future of affiliation is changing.

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  • Hello and thanks. My name is Oliver Roup and I’m the Founder and CEO of VigLink. Just quick poll – who here has heard of VigLink? Oh that’s great, more than half of you. Well, quickly for those in the room who aren’t familiar, VigLink sits at the intersection of online content and online commerce. For sites like blogs and forums, we automatically monetize their content via links to retailers. Our tools remove the hassles of affiliate marketing and we make ordinary links more valuable.
  • So it should be no surprise that today I’m going to talk about links. Yet, where most people see a simple hyperlink, I see the potential for innovation and massive disruption. Of course I believe that, I’m building my company on this premise, but I think the implications are much broader than any one company. I see a future for links that impacts everyone in this room, this city, and the entire Internet.I see a future that is both exciting and controversial.
  • As I see it, links have the power to be the foundation of an entire economy. That is, links, or more specifically, site-to-site clicks, ought to be priced, bought, and sold in an open and transparent marketplace.But we have a way’s to go before we see that reality. In fact, it’s worth taking a step back and looking at how far the link has come today.
  • Not very far at all. Truth be told, we’re still living in a link 1.0 world.We can measure progress against that other site-to-site click, the ad. When you look side by side, links have been left in the dust. Where ads are tailored, in real time, to the audience, the publisher, and the advertiser, links have remained static regardless of who sees it, when, or where. Where ads are priced, bought and sold in real-time auctions using real data science, links are posted with essentially no insight into the financial upside or downside.Retargeting, behavioral models, contextual targeting, ad exchanges, RTB, automated creative optimization...these remain squarely in the domain of ad tech.It seems like a tragic failure of technology that such awesome power of personalization has been relegated to the least personal part of the web – display ads.
  • While banner ads have come a long way, they were starting with a huge handicap. Let’s face it, nobody loves ads. In fact, I’d argue the modern web has all but written off the banner ad.Banner blindness, clutter, and focus on what matters – content - have led the modern web to say “no thanks” to display ads.
  • In-content links, on the other hand, are the underdog – under appreciated and out-gunned. But I believe in the inherent superiority of the link. Given the same technology, in a performance battle with ads, links should always win. They are inherently more relevant. Better links can make the whole web better.
  • Content is authentic; it’s the reason you show up on a site; it’s credible authority. A link to eBay in content drives higher conversion rates and more qualified buyers than interruptive display ads. This is because content will always be closer to a user’s intent than an ad.This is why we’ve been hearing a lot about native ads. Native ads try to closer to what would pass as native content. Well, you can’t get more native than a link.
  • And this is what makes links the perfect means of monetization for mobile. They take up no space and weave seamlessly into the content.
  • If links are so inherently awesome, they must be pretty valuable, right? Well, sometimes they are and sometimes they aren’t. But knowing which is when is harder than you’d think. It turns out that for most of us we might as well use a magic 8 ball to figure out what advertisers are willing to pay for a click on a link.What if you’re a hot tech blogger and you want to let your readers know where to buy the Apple TV you’ve just reviewed? It’s sold by at least a dozen different retailers, but which one should you link to?
  • Maybe the tech blogger will log into their affiliate network and look at the commission rate they’re getting from the various retailers. And maybe they’ll choose the retailer with the highest rate. But that’s not the whole picture.
  • Actual earnings are impacted by other factors, including the average order values and conversion rates, factors that can often more than make up for a few percentage point differences in commissions.To truly know her effective earnings per click, the tech blogger would need to know these values before posting that link.I think we all know how unlikely that is.But at VigLink, we sit on top of millions monthly of transactions. When we looked at links to the Apple TV, we found huge discrepancies in what merchants ultimately paid per click.
  • Payments ranged from an average of 7 cents to way, way below a penny. The difference between the highest and lowest paying merchant was a factor of 700! I feel sorry for the tech bloggers that linked to merchant six, but if we’re honest, they had no easy way of knowing they were giving away the farm.But we do know, and we’re using that information to power the next generation link economy.
  • At VigLink we’ve built the world’s only real-time link exchange where merchants can bid for links and publishers can auction them off, all moderated for relevancy. To participate, publishers need to do nothing more than what they’re already doing today – linking to relevant product. If they want those links to go to the highest bidder, they just opt into what we call link optimization.
  • Let’s look at how this works in the real world.http://technutz.com/diy-nas-freenas-2013/The tech advice site TechNutz is a customer of ours. This article is for the geekiest of the geeks – step-by-step instructions for how to build your own Network Attached Storage Device – a sort of hard drive in the cloud, except it’s your very own cloud and your very own hard drive.
  • The memory link now goes to Walmart.comA click to get the case takes readers to Mwave.comAnd the flash drive now directs readers to Other World Computers. In each of these situations the winning link pays TechNutz more while taking readers to the exact product they’re looking for. Indeed, the reader sees no difference at all. Their browser never told them they were going to Amazon. They’d have to dig into the source doe to ever know that original links was an Amazon link. The optimization is all automatic, directed by our software.
  • Naturally, the author links to each of these products on Amazon. It makes sense – Amazon sells everything at a decent price, so why bother linking anywhere else? I know there are many merchants here today and I could feel you cringe when I as I just said that. Amazon has become the default link for many. But from our experience, they are not always the highest paying merchant.Indeed, as when I last checked this article, which is actually using our link optimization technology to auction these links, we found the most lucrative destinations turned out not to be Amazon at all.
  • The memory link now goes to Walmart.comA click to get the case takes readers to Mwave.comAnd the flash drive now directs readers to Other World Computers. In each of these situations the winning link pays TechNutz more while taking readers to the exact product they’re looking for. Indeed, the reader sees no difference at all. Their browser never told them they were going to Amazon. They’d have to dig into the source doe to ever know that original links was an Amazon link. The optimization is all automatic, directed by our software.
  • Overall, we find that clicks on these optimized links, as we call them, increase in value from between 2 and 3x. A click that was once worth a little over a nickel is now worth over twenty cents. This is the power of competition. After all, if you’re a merchant, would you let your competition get away with stealing all those clicks for a nickel?
  • In fact, we asked that very question of an advertiser and showed them the yield curve. It’s up to them what they want to pay, but here we make it clear that the more they are willing to bid for a click they greater their share of clicks.
  • Creating a true link economy has profound implications. But it wont work if all links become spam, sold to the highest bidder regardless of relevance. As the operator of the exchange, our job is to mediate the buying and selling of links. Our goal is to make the web better, to build on what makes links the foundation of the web, not undermine that foundation.When done right, benefits accrue to all stakeholders. Advertisers find new customers, publishers are compensated fairly, and consumers are finding new and relevant destinations.But do you think? What questions or concerns do you have? We’re all players in the link economy so let’s open it up for Q&A.
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