If any of those things ring a bell, then you might look back fondly on October 27, 1994. That’s when the first banner ad was created. Adman Frank D’Angelo was in on that historic moment, and he shares his perspective in a fascinating piece in Ad Age.

As with many advances in marketing, the birth of the banner ad really started because of an industry leader’s vision – in this case, Ed Atzt, then chairman of mega-brander Procter & Gamble. At a May 1994 industry speech, Atzt implored his colleagues to jump on the new media bandwagon. Frank D’Angelo’s boss, an ad agency head, was in the audience. He brought Ed Atzt’s challenge back to his agency, which happened to have MCI, then a rising telecommunications company, as a client. (MCI would later become WorldCom – but we won’t go there.)

MCI, says D’Angelo, was a perfect fit for this “new” online advertising. After all, one of the company’s employees was Vinton Cerf, the acknowledged “father of the Internet.” But D’Angelo makes it clear what a bold move it was for an advertiser to agree to a banner ad on Hotwired.com, a spin-off of WIRED and the first commercial digital magazine.

“Keep in mind,” says D’Angelo, “this was 1994; the first graphical web browser, Mosaic, was less than a year old (soon to be replaced by Netscape Explorer), and Web access? Purely dial-up, 24.4kps if you were lucky, meaning these ads took a while to load. The online U.S. population? Two million, if that.”

Still, MCI and five other advertisers took a crack at admittedly clunky banner ads. Read the rest of D’Angelo’s story to discover what happened.

Fifteen years later, banner ads may be under siege, but they are still very much a part of the web advertising landscape. D’Angelo says “no other development since has advanced advertising measurement, effectiveness and accountability than the display banner.”

The larger issue today, however, is the continuing quest for optimal measurement. In that context, D’Angelo references a recent report from eMarketer, “Online Brand Management: Connecting the Dots,” that is worthy of consideration.

The report discusses a huge challenge: Are advertisers getting their money’s worth from display ads and other branding-oriented ads? The report asks: “Do [advertisers] have the right metrics, and are they able to connect the dots, both within online platforms and between online and offline media?”

Needless to say, there are no easy answers, but the report offers valuable insight into where we are and where we need to go in terms of measuring advertising effectiveness. One of the quotes from Carrie Frolich, managing director, digital, for Mediaedge:cia, sets the tone for the report’s findings:

Remember why you’re advertising. You are not advertising for clicks or [gross rating points]. What you’re advertising for is to sell me stuff or change perception, and that’s what we need to be measuring against.

As we look back on the past fifteen years, and look forward to the next fifteen, we should always keep that in mind. No matter what technological advances come along, no matter how wonderful the creative might be, no matter where the ads are placed – the objective of advertising, both online and offline, should always be to have a measurable impact. Let’s not forget it.

High search volume + high offer payouts = A perfect niche?
Is the financial niche a strong one? You betcha.

Comparing “head traffic” via a broad keyword like “credit report”, it’s not surprising that it has 7 times the search volume as another high traffic keyword phrase “internet marketing”. The phrase “credit repair” is no laggard either, posting about half the search demand as “internet marketing”.

Couple that with CPA street payouts ranging from $20 to $50 per lead and you can see why consumer credit repair is a great niche to be in.

So where has it gone wrong in the eyes of the FTC?

The key issue the FTC seems to have with the way “free credit reports” are being marketed is how rebill offers and upsells are placed ahead of giving consumers their federally mandated free credit report which is available through a centralized website, AnnualCreditReport.com.

Navigating through an advertisers site embedded with upsells, uninformed consumers may feel they are required to sign up for the CPA advertiser’s premium and/or rebilling services in order to receive their credit reports. The FTC reports in paragraph 4 of the release that they’ve received “consumer complaints about promotions for products and services that confuse and frustrate consumers as they attempt to obtain their free annual credit reports.”

The fact is few people go to these sites to “just check” their credit report.  Most people seek their credit report when they are faced with a big decision: because they want/need / or where denied a home loan, personal loan, auto loan, student loan. When a consumer pulls their report they are probably anxious about an upcoming decision or perhaps they’ve been denied a loan and are now confused about why their scores are low. In this state they arrive on a site to get an onslaught of upsells and rebill offers only to feel mislead by the site afterwards which leads to complaints.

With the FTC stepping in to address these complaints, existing credit report affiliates might feel that the FTC’s proposed disclosures are draconian in nature. An example:

“for any Internet site offering free credit reports, the Commission proposes a requirement that, before the consumer may obtain a credit report from that Web site, such site must first display a separate landing page with the required disclosure: “This is not the free credit report provided for by Federal law.”

Giving consumers the message “you don’t have to enroll for any upsells and by the way, here’s a link to your free credit report” will obviously hurt conversions in a significant way. If these measures come into effect, advertisers who provide these credit-related services will have to step up their game and offer compelling information/content that will add to the free credit report, or risk their offer going up in flames.

Think the FTC’s proposed measures lack bite?

A day later (8th October 2009), the FTC issued a media release stating that two credit repair companies and their principals settled FTC charges that they falsely claimed they could repair consumer’s credits and collected upfront fees, in violation of federal law.

Although offering a free credit report is a far step from claiming to being able to repair a consumer’s credit score, the FTC is showing its online mettle when it turns a keen eye on what’s happening in the online space.

The FTC isn’t choosing to deal with internet marketers by slapping them gently on the wrist either. Imposing fines of $8.3 million and $2.5 million against the defendants, the credit repair businesses were suspended due to an inability to pay the fines.

Impact for affiliates and marketers?

Although an affiliate or merchant with a vested interest might think the government is actively seeking and destroying the lucrative livelihoods of online marketers, it’s a stretch to come to that conclusion.

In the scenarios highlighted above, consumer complaints were the catalyst that got the ball rolling, with the resulting legal consequences. This past July, the FTC solicited public feedback on proposed amendments to the Free Annual File Disclosures Rule, also known as the “Free Credit Report Rule.”

Furthermore, the Credit Card Act of 2009 requires the commission to issue a rule by Feb 22, 2010 to prevent deceptive marketing of “free” credit reports. If advertisers are under the impression that the legislative “perfect storm” has passed, there’s going to be more bad news for them, but good news for consumers down the road.

Some advertisers within the credit report/report space have chosen to build their business model around rebills and/or offering premium upsells to uninformed consumers. It might even sound like a great business proposition. The reality as has been shown in the FTC’s recent actions, will likely result in more shady operator’s “businesses” collapsing like a house of cards.

FTC Resources:
Credit and debt related issues

While a rebirth of print magazines is unlikely, these publications are still fighting for their collective lives. But now the battle is being waged largely on the Internet. Magazine publishing companies that compete with one another “are discussing the creation of an ad network that would sell targeted space across many of the industry’s websites,” says an October 6 Ad Age article. One magazine executive told Ad Age: “We’re getting killed by ad networks. …if we could just create some scale on our own and sell across it, we can get a lot better ad rates.”

Clearly, desperate times require desperate measures. While the industry has discussed such a possibility before, it seems to be a more compelling need today. “Now there are maybe 500 ad networks,” another magazine executive told Ad Age. “Last time the conversation started, there were maybe only 200 ad networks.”

Variations of a magazine ad network already exist. Time, for example, has a network for its own print and online properties. Other magazine publishers have created topic-specific networks, such as Martha Stewart Living Omnimedia’s “Martha’s Circle,” according to Ad Age.

A home-grown magazine-controlled ad network is just one strategy for survival. Another may be publishing electronic versions of newspapers and magazines. True, some already exist, but not in any formalized paid form. So it’s interesting to hear the latest rumor, previously reported by Ad Age, that a group of magazine executives supposedly held talks with Apple about digital editions of magazines to be sold via iTunes. Apple is also said to be in talks with The New York Times about producing a digital edition, says Wired.The discussions center around Apple’s new “tablet,” a product yet to be officially announced, that could provide a platform for reading digital magazines.

The Apple tablet in itself is significant new – it could very well catapult Apple into a brand new arena, competing directly with Amazon’s e-book device, Kindle.

But the real message behind Apple’s tablet, Amazon’s Kindle, Sony’s eReader, and similar devices is their ultimate purpose: to replace traditional print versions of newspapers, magazines, and books with electronic versions. And the message behind a potential online ad network created by magazines is pretty clear: We’re raising the white flag on print and surrendering to the digital world.

On October 5, the FTC issued its final revised Guides Concerning the Use of Endorsements and Testimonials in Advertising, the first rewrite of the Guides since 1980.  Under the revised rules, which go into effect on December 1, companies that make payments or give free products to bloggers and other online commentators in order to generate positive buzz or favorable reviews for their products will now have to monitor closely the statements and claims made about the products and ensure that these relationships, if material, are clearly and conspicuously disclosed.  Otherwise, they will face liability for unfair or deceptive advertising practices under Section 5 of the FTC Act, even if they do not control what the bloggers say (or, indeed, whether they say anything).  The bloggers themselves will face similar liability for false or misleading statements and non-disclosure of material connections.  Marketers are also responsible for advising bloggers of their responsibilities.

While not actually binding law, the Guides serve as administrative interpretations of the law, issued to provide guidance on what the FTC considers to be deceptive behavior.  However, this does not mean compliance is optional.  Violations are punishable by civil penalties of up to $11,000 per violation. In addition to the regulation of Web 2.0 marketing which is the focus of this article, the Guides also include other significant changes, such as a new requirement that testimonials which do not describe typical consumer experiences must include clear and conspicuous disclosures of the results consumers can generally expect to achieve by using an advertised product.

By its very nature Web 2.0 marketing encompasses a variety of informal and fuzzy relationships which fall within the purview of the FTC’s new rules even though they are qualitatively different from traditional uses of endorsements in advertising.  For example, a marketer may provide unsolicited samples of its products to members of a blogger network who sign up for the network so that they can review the products on their sites.  Or a marketer may supply a product, such as a video game, to one particularly well-read blogger known as an expert or authority in his area in the hope of gaining a positive review.  Or the marketer may institute a word-of-mouth or viral marketing scheme where participants receive something of value (such as a payment or an entry in a sweepstakes) to e-mail their friends or send out tweets about the marketer’s product.  All of these relationships may now be characterized by the FTC as endorser-advertiser relationships, wherein both the “endorser” (i.e., the person generating the content about the product) and the “advertiser” (the marketer) must ensure the absence of false or misleading statements and the “clear and conspicuous” disclosure of connections that are not reasonably expected by the target audience and are likely to influence purchasers’ assessment of the credibility of the statements.

When is a Favorable Post an “Endorsement”?

The Guides define an “endorsement” as an advertising message that consumers will likely believe reflects the opinions, beliefs, findings or experience of a party other than the sponsoring advertiser, whether the endorser’s statements are the same as or different from the sponsoring advertiser’s.  Knowing the level of incentive that turns blogger commentary into a compensated “endorsement,” thereby rendering both the blogger and the advertiser potentially liable for failure to disclose material connections and for deceptive statements, is critical.  The FTC notes on page 10:

“[A] blogger could receive merchandise from a marketer with a request to review it, but with no compensation paid other than the value of the product itself. In this situation, whether or not any positive statement the blogger posts would be deemed an “endorsement” within the meaning of the Guides would depend on, among other things, the value of that product, and on whether the blogger routinely receives such requests. If that blogger frequently receives products from manufacturers because he or she is known to have wide readership within a particular demographic group that is the manufacturers’ target market, the blogger’s statements are likely to be deemed to be “endorsements,” as are postings by participants in network marketing programs. Similarly, consumers who join word of mouth marketing programs that periodically provide them products to review publicly (as opposed to simply giving feedback to the advertiser) will also likely be viewed as giving sponsored messages.”

The Guides cite as an example a consumer who purchases a new brand of dog food and reviews its favorably on her personal blog.  If she purchases the dog food with her own money or gets it for free because the store routinely tracks her purchases and generates a coupon for a free trial bag of the new dog food, there is no endorsement.  However, if the consumer gets the dog food as a result of joining a network marketing program under which she periodically receives various products about which she can write reviews if she wants to, her positive review will be considered an endorsement.  As another example, a college student who has earned a reputation as a video game expert receives (as he has in the past) a copy of a newly released video gaming system along with a request from the manufacturer to write about it on his blog.   He tests it out and gives it a favorable review.  This is also an endorsement, and the FTC comments that because the review is disseminated via a form of consumer-generated media in which his relationship to the advertiser is not inherently obvious, and given the value of the gaming system, the blogger should clearly and conspicuously disclose that he received it free of charge.  Furthermore, “[t]he manufacturer should advise him at the time it provides the gaming system that this connection should be disclosed, and it should have procedures in place to try to monitor his postings for compliance.”  (Here the blogger would also have to comply with the FTC’s rules on the use of expert statements in advertising.)

In one of the Guides’ most controversial examples, a skin care product manufacturer participates in a blog advertising service that matches up advertisers with reviewers.  The marketer requests that the blogger try out its new body lotion and write a review.  The blogger, totally on her own initiative and without any direction from the manufacturer, makes an unsubstantiated recommendation that the product cures eczema.  Both the manufacturer and the blogger will be liable for the unsubstantiated claim and any failure to disclose that the blogger is being paid.

The FTC has explained that the purpose of the new rules is to treat new media in the same manner as traditional journalistic and advertising outlets.  However, as a practical matter, many businesses treat these channels differently and will have to scramble to implement the necessary monitoring and enforcement mechanisms.  When a business buys a conference sponsorship, for example, in the hope of generating some positive online buzz, is anyone at the sponsor giving the conference organizer’s blog and Twitter emissions at compliance review?  Indeed, the whole point of marketing to bloggers and through social media is to support a spontaneous and unforced style of commentary that has greater authenticity for cynical, tech-savvy consumers.   Of course, in response to such comments the FTC has countered that its rules are designed precisely to protect consumers’ ability to rely on this quality of the blogosphere in making purchasing decisions.   Controlling what bloggers say is not relevant; what matters for liability purposes is whether “the advertiser initiated the process that led to [the] endorsements being made – e.g., by providing products to well-known bloggers or to endorsers enrolled in word of mouth marketing programs ….”

Playing the Compliance Game

Unfortunately, corporate legal departments will now have to extend the long arm of compliance over a whole host of Web 2.0 marketing activities that until now may have been loosely policed, if at all.   “In employing this means of marketing,” the FTC dryly observes, “the advertiser has assumed the risk that an endorser may fail to disclose a material connection or misrepresent a product, and the potential liability that accompanies that risk.”  However, it also states that in the exercise of prosecutorial discretion it will consider “the advertiser’s efforts to advise these endorsers of their responsibilities and to monitor their online behavior ….”

What this means for companies is that they will have to design a compliance and monitoring program.  What it means for online advertising agencies is that they can expect new restrictions and levels of review from clients over their Web 2.0 marketing activities and should also expect to assume a role in their clients’ compliance and monitoring programs.  Companies will want to get a handle on what their marketing departments are doing to curry favor with bloggers and create buzz through viral online marketing and will be especially anxious to herd advertising and PR agencies into the corral, since the companies are legally responsible for the actions of these third-party agents.

If compensation, free products or other valuable incentives (such as sponsorships) are being offered in the hope of stimulating positive reviews, then the company will need to institute and document a process of advising bloggers and other new media commenters about their duty to disclose material connections and the limits on the factual claims they can make about a products and its beneficial effects.   There should also be periodic monitoring of the resulting posts, with documented follow-up action if necessary, to make sure they comply with the FTC’s endorsement guidelines.
If blogger relationships are managed through an advertising or PR agency, then the agency will likely have to provide detailed information for each campaign about its contacts with bloggers and will have to share in the responsibility of conveying the advertiser’s guidelines to them and monitoring their compliance.   Companies should include a specific allocation of responsibilities with respect to these issues in written contracts with their agencies.  At the very least, a company should reserve the right to audit and pre-approve an agency’s solicitation of bloggers so that the company knows which bloggers the agency is dealing with and whether the relationships are of a type that could lead to advertiser-endorser liability and can monitor the bloggers’ posts about the company’s products.

If this compliance burden is too onerous for companies and their online advertising agencies, the alternative is to implement policies that prohibit the payment of compensation or giving away of valuable products in the hope of generating positive online buzz.   Favorable reviews are not “endorsements” within the meaning of the Guides unless they have been incentivized in some way.

Tips for Bloggers

As for bloggers and other online commenters, they should be sure to disclose any compensation or benefits they receive to comment on products and, if they do have such a connection to an advertiser, should be very careful to follow the guidelines furnished by the advertiser or its advertising agency (which the advertiser is required to provide) and not make general or sweeping factual claims about the product or any claim that can’t be easily substantiated.  If a blogger chafes at submitting to this degree of oversight and control, he always has the option of buying the product himself, for example, rather than receiving it as a freebie.  The FTC has indicated that advertisers and not bloggers will be its main enforcement target.  However, a blogger who runs a “substantial operation” that violates the rules and who receives a warning will still be at risk.  Moreover, the FTC can adopt a more aggressive enforcement stance at any time.

The FTC’s rulemaking will heavily influence the way marketers generate buzz on the Internet and warrants close scrutiny of participation in blogger and viral incentive programs by all parties involved.

Does this sound familiar?

You discover a new social media outlet, (insert your favorite choice of Facebook, Twitter, FriendFeed, StumbleUpon, or a high authority forum in your industry), and enthusiastically create a profile on the site.

Within the first day, you’ve made 10 postings/updates and check the site every couple of hours for updates. You might even have one or two highly energetic “chat conversions” with other enthusiastic members or the community. You might even find yourself in a “meeting of the minds” type conversation over instant messenger with community members.

If there was a definition of the social media “honeymoon” effect, this is probably it.

Unfortunately, things are not meant to last, and within a period of 10-14 days, you’re going through stages of social media burnout, exhibiting symptoms like restlessness, fatigue, and maybe even an inability to fully focus on your regular work. That is, until you plug yourself cold turkey from the site.

What happened?

Plugging in and going “deep” into a social network can be addictive and all-encompassing.

Given the volume of data and conversations that a well-tuned community can pump out, it might be tempting to spend way too much time:
* Trawling your friends networks to see who else you know (and can invite to be your friend)
* Following links, recommendations, viewing recommended videos and spending a big chunk of time on news sites, YouTube and content aggregators
* Sending out friend invites, getting invited/pulled into group chats

…to the detriment of hours of otherwise productive time.

While we all could potentially fall prey to the Hare syndrome and probably more than a few of us will admit to having been there and done that, you might also consider the “Tortoise” approach.

Here are some tips to ensure a longer term approach to using social media effectively:

Look before you leap.
Just like in Aesop’s fable, the tortoise isn’t always the first to rush into a new social media outlet.
There’s no hurry to rush into the “new thing”. Instead, calmer heads prevail and one might even hold back for a couple of months until there are signs that the community might be around for a while, rather than being another flash in the pan.

Can you find what you’re looking for?
Can the community help you achieve your long term goals? Given that internet marketing is frequently a solo endeavor, the prospect of connecting, communicating and exchanging ideas with someone in a different town, state or continent has a degree of newness that breaks the routine of running a business.

Taking part in community conversations can do more than just provide a “connection to the outer world” fix. Going into it with goal-oriented clarity with objectives you want to achieve will give you a concrete return on your socialising efforts.

Confidant to a few or social butterfly to all?
While there are some benefits to being a friend to many and being known to most users in a community, the greatest dividends come from a few intimate relationships within the community. By “intimate” I am refering to peeling away the social shields to share information and establishing joint ventures with potential partners. You’re more likely to do business with people you know and trust.

Plan and stagger the time you spend in a community.
Managing your time effectively and limiting yourself to a daily allocated block of 15 or 30 minutes can help increase your effectiveness. Some will see a time limit as restricting what you’re able to do. I see it as motivating yourself to prioritize the most important activities and getting those done.

While following the tips listed here will not make you a social media superstar, it can however gain you traction in the community and ultimately, like the tortoise, help you win the race.

Some excerpts from MediaBistro:

·    Will the New York Times’ “Paper Cuts” or the Los Angeles Times’ “Jacket Copy” or “Shelf Life” at Entertainment Weekly, to pick three examples, be bound by the same FTC guidelines as “The Elegant Variation” or “Smart Bitches, Trashy Books” ? If not, why not?

·    Just out of curiosity, will the FTC be requiring authors who blurb other authors’ books to disclose the “material connections” they have to those authors and the publishers of those books? If so, will those requirements apply to blurbs printed on book jackets as well as print advertising? (And if such disclosures are not made, against whom should a complaint be made? the publisher or the author who wrote the blurb?) If not, why not?

On the other hand, Associated Press writers Deborah Yao and Emily Fredrix respond to at least the first bullet by stating the following:

“Bloggers have long praised or panned products and services online. But what some consumers might not know is that many companies pay reviewers for their write-ups or give them free products such as toys or computers or trips to Disneyland. In contrast, at traditional journalism outlets, products borrowed for reviews generally have to be returned.”

Reading these reactions, I detect a fair amount of exaggeration and “slippery slope” fear-mongering. I do think that it’s interesting that both the print media and blogger factions choose to bring up books as the innocuous side of the endorsement coin. And I think discussing it in these terms sorely misses the point.

For one, I don’t know any bloggers who have been lavishly showered with all expense paid trips to Disneyland for giving Mickey the thumbs up in their weekly link round up and I don’t know of any journalists who are just in the biz for the free books (why waste time grinding through journalism school and covering town hall meetings for your local newspaper when you could just get a library card?). I also doubt that publishers are hounding journalists to return their $20 hardback after getting all that free publicity.  I know times are tough in the publishing industry, but that’s a bit much.

Whenever new legislation or regulations hit, it’s easy to assume that yours truly will be victimized and that this is the first step down the road to authoritarianism. But I don’t think the FTC has granted itself sweeping power to take down bloggers for no reason. Yes, the FTC regulations are a bit vague – stating that it will only seek to penalize bloggers running “substantial” operations with “material connections” to advertisers. But this vagueness is in the favor of legitimate bloggers.

The important thing to keep in mind that the FTC does not have the resources or the motivation to crack down on two-bit bloggers (or even big shot social media mavens) who forgot to mention that someone sent them a free book in the mail. What the FTC is likely after are those who are undermining the very collaborative, community driven Web 2.0 that we all value and love and make our livings from.

I’m talking about the companies paying for favorable reviews on Amazon.  Or how about the fake blog to which the ubiquitous “One Flat Stomach Rule (Obey!)” ads bring you, replete with fake comments from fake users.  Or how about the cosmetic surgery firm that had employees give fake customer testimonials on forums?

These are the people that the FTC are after. And these are the people that we, as bloggers, social media consultants and Internet marketers, should want to see wiped from the Web. They clutter our ad space, undermine our credibility and rip off web users. There is already a simmering mistrust of all things on the Internet (how many sitcom characters have you heard make the sarcastic crack, “It’s gotta be true, I read it on the Internet” or “Where’d you read that, Wikipedia?”) and those of us who have our trustworthiness debased from collateral damage will actually benefit from the unscrupulous getting taken down a peg.

In fact, the urge to remain transparent and open is already palpable in the blogosphere and has led to an admirable amount of self-regulation. Etiquette dictates that influential bloggers disclose when a product link is an affiliate link. When Deb Ng of the Freelance Writing Jobs Network cut a deal with the oft-slighted content aggregator Demand Studios, it sparked a controversy that shook the community to the core.  Deb handled the situation with enough class that FWJ continues to be on good terms with most of its readers, but the episode goes to prove that transparency isn’t just ethical, it’s what the readers demand. And if the readers demand it, then it’s just good business. You shouldn’t need the FTC to tell you to be straight with your readers. There’s far more at stake than a fine or a warning from regulators.

Plus, the FTC has said that it plans to mainly go after advertisers who violate regulations, and not the bloggers – unless, of course, the blogger willfully and repeatedly practiced unethical business practices.

Which raises the next point – there have always been laws on the books against deceptive business practices. They’re called Truth-in-Advertising laws, and they apply to every business, big or small, online or off. The recent measure merely seeks to update the FTC’s guidelines in order to provide some structure for how regulators will investigate, pursue and penalize patently unethical bloggers. Blogs, after all, didn’t appear on the radar as viable avenues for making money until recent decades.  And as the opportunities for making money grow and more consumers turn to the Internet for product reviews and more advertisers turn to bloggers to reach audiences, an FTC crackdown is perhaps what we need most.

As someone who does not get paid to write testimonials, does not write fake reviews and does not willfully engage in unethical business practices, I am not worried about possibly of incurring FTC fines up to $11,000. As someone who is thankful for the efforts the FTC has made to regulate spam, telemarketers, credit reporting bureaus, debt collection agencies, price fixing and other blights to consumers, I’m looking forward to seeing what the government can do about the Acai juice hawkers and the rest of the scammers. And you should be, too.

In the final analysis, all online advertisers should be adopting, at the very least, a CPL (Cost Per Lead) model. After all, what every advertiser really wants from an online ad is a qualified lead – a prospect who has a demonstrated proclivity to buy. That’s the type of lead worthy of an advertising investment.

The problem is that lately, the price of ad impressions on websites has fallen. It’s largely because ad networks have lowered the barrier to advertising by spreading costs across many sites. So advertisers can get tantalizingly more impressions, and maybe even more clicks, for less money.

But is that a good thing? The metrics of more impressions can be deceiving – the pricing may look attractive, but ads with minimal targeting produce unqualified responses. What’s the value of lots of responses if they do not turn into the right leads?

The answer to the dilemma is for website publishers to sell, and advertisers to demand, ad space that works harder. In short, ads need to help qualify the respondent.

An article in Forbes references a recent report that suggests “marketers will pay publishers an average price of $2.27 for each reader they can convince to fill out a form with their real name and e-mail address, along with a few bits of personal data such as their Twitter handle, phone number or answers to questions about their shopping habits.”

While over $2 CPL may seem like a lot of money, the advertiser is, in effect, paying for valuable data about an individual prospect. This data can then be used to do a better job of communicating product benefits and, hopefully, convincing the prospect to buy. Forbes says the “hefty price [of CPL] suggests publishers should consider abandoning cheap ads sold for guaranteed prices and should instead try to use space on their Web pages to convince readers to turn over their personal information.”

The implications of this are significant, however. Ads need to engage prospects, and prospects must want to ante up details about themselves. In an age of privacy concerns, this could be a tall order.

Still, if online advertisers want to make the smartest advertising investment, they’ll soon recognize that it makes sense to pay a higher CPL to get higher quality leads. In the long run, they’re likely to see a higher conversion rate, and therefore a higher rate of return. That’s why CPM and CPC are being questioned more and more – and why the online world could be in for a big change in perspective.

A Brief History of a Bad Tax

Passed in April of 2008 the Amazon Tax sets a dangerous precedent, as written it is tortuous in structure and in essence violates the Commerce Clause of the U.S. Constitution.

The first round in the legal battle went to the State of New York when Judge Eileen Bransten handed down separate dismissals against separate suits brought by Amazon and Overstock in January of 2009. Amazon appealed (pdf) the ruling on July 13, 2009.

The case is being watched closely since legislative battles in eight other states were fought this year. No less than 12 states are expected to consider ratifying such a tax (including some like California who are expected to revisit the matter) in 2010.

Interestingly even states that ratified similar legislation appear to be having second thoughts. Rhode Island General Treasurer Frank Caprio stated the following after his state passed an affiliate nexus tax:

“I looked at this issue and I do not think it’s the right idea at this time… it hurts our local business…”

A Friend of Amazon’s

Today the PMA filed a motion seeking leave to submit an amicus brief (pdf) in support of Amazon. An amicus brief, literally translated as “friend of the court”, is a motion by party who is not directly engaged in the litigation, but who believes that the court’s decision may impact its interest. The motion was filed in the New York State Supreme Court Appellate division.

The brief filed by the PMA attempts to help educate the justices on the role affiliate marketing plays as a form of advertising in order to make clear distinctions in the court’s mind between affiliates and advertisers. It also outlines how rather than generating revenue for the state of New York the statute harms thousands of local affiliates who’s business has been severely impacted due to advertisers terminating relationships with them.

According to Rebecca Madigan, Founder and Executive Director of the PMA, the goal in providing such support is to

“Spearheaded efforts to persuade state legislatures not to adopt statutes like this discriminatory New York law, which threatens the livelihood of thousands of individuals and small business owners and has the potential to strangle e-commerce with invalid regulation.”

Fight Preparation

The State of New York is expected to file a response to Amazon’s appeal and the PMA’s brief by September 16. Amazon has already promised to take this battle to the Federal courts should it prove necessary.

In the meantime the PMA is gearing to lend support in other battleground states. One of the PMA’s initiatives, according to Rebecca, is to put a “human face” on those affiliates whose businesses have been impacted by such legislation. The PMA is encouraging affiliates in New York as well as North Carolina and Rhode Island who would like to tell their stories to submit them to: rebeccaATperformancemarketingallianceDOTcom

After all it is always easier to pass a law, no matter how misguided, when legislators cannot put a face to the constituents it will hurt.

Of course, if you’re going to bring an affiliate program in-house, you better make sure that the software you choose to power it is up to par. Otherwise, your base of affiliates is unlikely to switch over from promoting your network-based program to your in-house one.

When evaluating a potential affiliate marketing platform (as well as any 3rd party network program), there are four sets of features to consider:

1. Commission Management Tools
2. CRM Tools
3. Tracking Reports
4. Marketing Tools

By either allowing you optimize your program performance and campaigns, or supporting your affiliates and making your program more appealing to them, each of these sets of tools are essential to the success of an affiliate program.

Commission Management Tools

Supporting flexible commissions helps you maximize the return on various promotions by tailoring incentives according to the needs of a product, promotion, and/or target affiliate demographic. There are three essential features that an affiliate platform should provide if it’s going to help you effectively manage custom commission structures: (1) support for different ad-models, (2) commission groups, and (3) automated commission management.

Implementing Custom Commissions: your software should support CPM, CPC, tiered CPA, and hybrid commission tracking; this will help optimize your program for the long-term by attracting a blend of affiliates that can quickly generate results, as well as affiliates who prefer to build a steady revenue stream over time. Working with a wider-base of affiliates gives you more control over your program, and insulates you from sudden changes in the market.

Commission Groups: your software should make it possible to pre-approve affiliates for certain commission structures by assigning them to groups; affiliates only see the different commissions available to the groups their assigned to.

Automated Commissions Management: such a feature ensures that when a custom commission structures is set up for special promotions, (1) it expires alongside the promotion, (2) the relevant affiliates are automatically notified of the expiration, and (3) a new, replacement commission is automatically applied to all affiliates on that promotion.

Affiliate CRM Tools

Affiliate software should also include sufficient CRM tools to help you retain affiliates, keep them active, and better publicize promotions and other program developments. So your affiliate software should possess CRM features that facilitate both internal and external communication.

Internal Message Bank: an internal inbox, it should be featured on the affiliate dashboard, communicating with affiliates the moment they log in.

Email Lists Generation: makes it possible to segment affiliates according to performance (inactive, super-affiliate, etc.), generate a targeted list of those affiliates, and then reach out to that targeted demographic with specialized communications.

HTML Mailer: makes it possible to build, preview, and deploy marketing emails through your affiliate software interface so that you don’t have to also use email marketing software if you don’t want to.

Email Alerts: notifies affiliates via email whenever transactions occur, internal message are received, or a new promotion is available; this is essential to keeping affiliate engaged and active.

Affiliate Tracking Reports

There are four kinds of affiliate reporting that are necessary to optimize an affiliate program: traffic, earnings, creatives, and period comparisons. These reports provide invaluable metrics on the ROI of the program and other marketing efforts, and should be available in a variety of formats.

Traffic Report: helps you identify your strengths in the acquisition process by providing insight into the full acquisition cycle; it compares conversion success at the click, registration, and conversion level based on both creatives and landing pages.

Earning Report: provides intelligence on your top earning affiliates and which promotions and commission structures deliver the greatest return; this helps you determine how individual and groups of affiliates are performing, what’s working for them, and what can be done to maximize their performance.

Marketing Creative Reports: offers insight into which creatives deliver the best return; this intelligence can be used to both maximize the program performance and, because of the performance-based model of affiliate marketing, helps you test creatives before deploying them across other acquisition channels (such as CPM networks).

Period Comparison: helps you identify what caused a change in program performance by providing an overview of changes in your affiliate program performance over time; this report is particularly useful for conducting quarterly or seasonal analysis of program performance.

Exporting Reports: your reports should also be adaptable to your pre-existing business needs; your affiliate software should make all reports available to be exported in Excel, CSV, and TXT formats, as well as through an API so that they can be integrated directly into other CRM platforms that you might be using.

Affiliate Marketing Tools

Your affiliate software should also support the needs of affiliates. Essentially, it should help you help them focus more on doing what they do best: driving sales. Have your software feature a variety of tools to help affiliates save time on administrative and technical tasks, and allow them to focus on generating referrals.

Geo-Targeting: uses a user’s IP addresses to allow affiliates to target users with offers and banners that are relevant to their location and language; the affiliate simply drops some banner code on their page, and your software determines the user’s location, then shows them a banner that’s pertinent to them.

Affiliate Custom Tracking: helps affiliates segment and track different campaigns by letting them add additional variables to their affiliate tracking URLs; particularly useful for PPC affiliates, it lets them determine how well each keywords/campaigns converts in a referral.

Banner Rotator: your software should also support javascript that automatically rotates banners so affiliates can always show their users fresh content.

Banner Groups: your affiliates should be able to create banner groups to be rotated on different campaigns; this same functionality also allows program managers to create banner groups for different segments of affiliates.

Banner Uploader: program managers can upload new banners directly through the admin interface, and then assign them to specific groups or campaigns.

Third Party Banner Support: your software should also support banners codes and javascript from third party platforms so that both affiliates and program managers can consolidate all their tracking and conversion reports under a single interface.

Deep Linking Tool: allows your affiliates to choose the landing URL/pages of their affiliate links; this supports them in their own marketing methods and helps them provide calls-to-action that resonate and convert with their own user-base.

Widget Support: lets you offer affiliates widgets that show users fresh, dynamic advertising that they can interact with; increases both user-engagement and conversions.

Bringing it Home

Migrating an affiliate program in-house offers you efficiencies and profitability. But if you’re going to be able to bring your affiliates in-house as well, you need to ensure that the technology powering the in-house program features the right commission, tracking, CRM, and marketing tools.

That being said, just because your software alone can break your in-house program, it takes a lot more than your just software to make it. At the end of the day, affiliates like networks because they allow them to manage multiple programs through one account and interface.

So if you’re going to lure them into setting up another account and login, you’re going to have to give them a damn good reason. You can do that partly by passing on some of your increased efficiencies to them in the form of better commissions – offer them a few extra percentage points if they come in-house.

The other half of the equation, of course, is relationships. You’re going to need a strong relationship with your base of affiliates if they’re going to listen when you bring your program in-house. So while you’re building your internal program, focus on getting to know your affiliate-base and building strong relationships with them. That way, when your internal program does go live, you’ll be in a much better position to get their attention and explain to them what’s in it for them if they make the switch.

Here is the list:

Affiliates in the 2009 Inc 5,000 List of Fastest Growing Private Companies

Affiliate OPMs in the 2009 Inc 5,000 List of Fastest Growing Private Companies

Affiliate Networks in the 2009 Inc 5,000 List of Fastest Growing Private Companies