Performics 2008 Preview

Written By: Angel Djambazov
Published: December 27, 2007 9:47:50 AM

As part of the Revenews 2008 Network Preview Series, I interviewed representatives from the four major networks to get a sense of their plans and goals for 2008. Today's interview is with Chris Henger, Vice President Affiliate Marketing, DoubleClick Performics.

What challenges are currently facing the affiliate industry?

"Today's publishers need to constantly think about how they are going to drive traffic," said Chris. "Where are they getting their consumers? How can they drive repeat traffic? If publishers constantly play some type of arbitrage game where they have to buy advertising in order to get consumers and then have to turn around and sell advertising on their site to advertisers in order to make that arbitrage work; that tactic might be compromised over time."

Chris feels that publishers need to create a business model around their website that attracts consumers, particularly repeat consumers. Ideally, those consumers will build up an affinity to the publisher's website and thus overall traffic will grow organically without the publisher having to continuously buy advertising to drive traffic.

"Here is the leading indicator for the long term success of a publisher," Chris disclosed. "Are the traffic patterns around unique visitors, or page views, constantly growing on a month-over-month basis? If so, then they should be sleeping pretty well. If they are not growing, or if they have no means of growing organically and they are reliant on the mentality of 'I have to buy my traffic to then monetize it' then their business model runs the risk of being compromised." Many factors could lead to such a compromise. These include: changes in the price of buying advertising to generate traffic causing costs to go up, and; the advertisers the publisher is trying to attract may not find as much value in the consumer being provided. As advertisers get more sophisticated they may bypass the publisher and run their own buys, whether they be paid search, ad exchanges, media buys or social media campaigns. "That is the fundamental challenge for a publisher and it's the same challenge affiliate advertisers face," stated Chris. "How to grow their consumer base in an inexpensive retention orientated manner."

Publishers also have the opportunity to be an integral part of an advertiser's marketing arm. One such role for a publisher is as a search specialist affiliate. In the past, search affiliates often clashed with the advertiser's internal search team because of the tactics employed by some search affiliates. Part of the change is that advertisers are becoming smarter to the various types of tactics that go on online, especially in search.

"Times are changing for the publisher specializing in search who is trying to be sneaky and trying to disguise their tactics hoping the advertiser doesn't realize they are bidding on the advertiser's trademark terms," Chris used as an example. "Well, I would be really having a rough New Year's Eve if I were that publisher and looking to my prospects next year.

"If a search affiliate is doing things like hijacking display urls, or simply using overly aggressive tactics in paid search and counting on the advertiser not being able figure it out until three months later then they are in for a surprise," said Chris. "Because advertisers have overcome the mystique of how affiliates do things in search, the knowledge disparity is far less today."

Chris feels there needs to be more transparency for publishers focused on search to keep it thriving. "We have some very successful search specialists," Chris explained. "They work in partnership with the advertiser to dominate the search page in a beneficial way. They remain within established boundaries on the keywords and trademarks they bid on. Due to their transparency these search specialists essentially act as an outsourced marketing partner. That type of publisher can prosper and do quite well."

Times are also changing from the advertiser's perspective as well. "Advertisers, even ones from traditional companies, are embracing online marketing at greater levels," stated Chris. "They are organizing their business and marketing staff around the various tactics necessary to be successful in the online market space, whether it be display, search, rich media or affiliate advertising."

The biggest challenge for today's advertiser is measuring the lifetime value of a customer acquired through any of its online initiatives. "How does the advertiser, over time, look at the balance between direct traffic and paid marketing initiatives?" asked Chris. "I think advertisers are going to start to want to make sure that the quality of the customer in their paid marketing channels is not only high but competitive on a relative sense to the kind of customer their peers are acquiring."

What about the annual proclamation of the affiliate industry's demise?

What usually drives people to make such proclamations is a large publisher leaving the industry. Chris feels that such change is part of the industry's evolution. "Who the big publishers are, and/or the types of publishers that are driving a lot of sales for advertisers does change and evolve over a 1-2 or 2-3 year cycle," said Chris. "Five years ago Real Names was a huge affiliate publisher and certainly 2-3 years ago LookSmart was a huge affiliate publisher and neither is a relevant affiliate publisher today. The makeup of distribution and affiliate sites will change and evolve over time. But the business model of websites that provide consumer benefits in the digital space, have ads to merchants on them and are driven on this really scalable performance-based marketing model will survive and prosper."

How do you feel about the affiliate industry's health overall?

"Our affiliate business is growing. We see it not as a mature channel but an emerging channel entering the mainstream. One analogy that really resonates is when you think about the Sunday circular and the free standing inserts, coupons and fliers that are in the paper," Chris gave as an example. "Affiliate marketing and affiliate websites are the digital incarnation of those. On Sundays 75% of the population who gets the newspaper can't wait to throw that section out so it doesn't clutter up the house. But 25% can't wait to get that section of the paper. It is the reason they subscribe to the paper. They pour through it, they organize it, and they spend their time gathering all that information. Affiliate websites and the promotional aspects of the affiliate value chain mirror exactly that type of very entrenched offline consumer behavior.

"So the health of affiliate marketing is extremely strong and it will continue to grow. It has a lot of sustainability in its core business model," continued Chris. "There will be subtleties and change like in any business: who are the players; what happens to the affiliate distribution; how the affiliates drive traffic. But the principle of a network needing to exist to help advertisers and publishers and to allow those two parties to market, expand their distribution and equally win has a lot of sustainability."

In what ways is DoubleClick Performics addressing industry challenges and needs?

According to Chris, continued outreach and transparency with the publishers is a top priority for DoubleClick Performics. Part of this focus will be on engaging publishers in discussion online.

"I think there was this view that as a network you kind of wanted to not necessarily 'mix it up' with the publishers," Chris theorized. "You didn't want to get in the fray, if you will. We realized that mentality was dead wrong. Over the last 12-18 months we have tried to rectify the impacts of that policy. We are really focusing on outreach by engaging with publishers online through posting on message boards and blogs. The goal is not to get into non-productive non-business orientated debate. But if we can better inform the publisher community, dispel rumors, put forth facts, and product information we want to do that.

"We have had a great year, taking a large share of big business from CJ and LinkShare in 2007," Chris continued proudly. "This success was driven by two initiatives. For the first time we offered a self-service platform, AffiliateDirect. We basically took our technology platform and said 'let's let an advertiser work directly with publishers and go at it themselves'. This helped expand the addressable market for the network by allowing more small to medium sized advertisers in.

"Second, we have always had this focus on quality over quantity," Chris went on. "We have always had this focus on service, and that is resonating with big advertisers. Our compliance lab and our technology to monitor our network are leading. I think it is the strongest network integrity effort in our industry. I believe our service structure is deeper and better. There is a proven, repeatable methodology in affiliate program management at DoubleClick Performics and it works to deliver results for advertisers and publishers. "

One of the big controversies that caused a lot of negative buzz on affiliate forums and message boards was the revelation that Kathryn Frankel, a former DoubleClick Performics employee, had been running her own affiliates sites while employed by the network. How do you feel DoubleClick Performics handled that situation as a network? What did you learn?

"When I step back and look at how we handled that situation, I think we handled it absolutely correctly," stated Chris. "As soon as we found that one of our employees was engaged as an affiliate the employee was terminated. Kathryn Frankel could either work with us or she could work as an affiliate. She could no longer do both. That action was immediately taken.

"We absolutely have a confidentiality clause with every one of our employees that we will enforce and defend. Anybody who speculates that we wouldn't is being foolish," stated Chris emphatically. "If we find that any employee is using proprietary confidential information we will take swift and decisive action."

He went on to say, "If you went and worked for a network then moved to an ecommerce marketer, which people do all the time, do you gain marketing knowledge? Do you gain business practice knowledge? Absolutely. Can you go out there after working inside an ecommerce company, assess a website, and say, 'wow this website is better than that one. I would want to make mine mirror after that'? Of course you can. But that does not fall into the auspices of confidential information.

"Anytime any one of our employees is in a situation where he or she is creating a conflict of interest we will take immediate action," finished Chris. "We will defend our clients, both advertiser and publisher, and all confidential information."

What are DoubleClick Performic's plans and goals for 2008?

"If you really had to itemize where we are making our investments in 2008 and what we think we need to concentrate our resources on it is: a continuous and even ramped-up investment in technology around our core platform; developing a stronger presence in social media formats; and, continued transparency and outreach within our initiatives for our publishers and advertisers."

Growth in the core technology in order to provide better reporting and transparency around the payment system is important to DoubleClick Performics. "We are investing in what we call matchmaking," said Chris. "We want to provide richer profiles and more transparency, making all of the contact information about the publishers available to our advertisers. Some networks don't. Those networks, I think, are fearful of an advertiser cutting them out by working directly with the publisher. We are beyond that paranoia. We feel that increased transparency, when combined with improved technology, provides an ideal situation for growth for both publishers and advertisers."

This summer DoubleClick Performics hosted their annual client conference entitled the Age of Ingenuity. A large key to that ingenuity, for Chris, is DoubleClick Performics focus on taking a leading role in social media. "We feel very strongly that we have to become practitioners in social media," emphasized Chris. "Our company's focus is on finding new distribution channels. That goes way back. That's why we are also the largest SEM out there. We saw the opportunity in paid search management and moved on it before most. We saw it because we saw the space through the eyes of search affiliates. We certainly see social media as a huge opportunity. We know what we need to do to be successful internally, how to get organized and how to partner with our affiliate publishers. We will become practitioners to mine, measure and improve return on ad spend in all aspects of social media advertising."

Everyone wants to know about Google and DoubleClick Performics in 2008. What can you tell us?

Since Google's 3.1 billion dollar acquisition of DoubleClick speculation has run rampant both inside the affiliate industry and beyond. Currently the deal is undergoing antitrust scrutiny from the Federal Trade Commission and the recent 'unfair competition' scrutiny from the European Commission. The FTC seems likely to approve, after all Microsoft did land Aquantive. The European Commission may be another matter.

Within the affiliate industry, the potential resources DoubleClick Performics could get access to could be a large differentiator between networks. What does Chris think about the possibility? "Unfortunately, I cannot comment on the proposed merger," replied Chris coyly.

As an industry we will have to wait and see.