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

NetworkQuality

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

MalwareMalicious 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

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

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

“Would the sale have happened without the effort of the 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?

Yet how many programmes reward small affiliates with higher-than-average payouts?

>500 100-500 <100

Average revenue per click

Average clicks per day

6% below

average

32% above

average

44% above

average

Weighted average for program

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, testMost 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

0

10

20

30

40

50ValueIndex

Value of Active Confirmed Registered UsersClass 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 UsersRecent class of users

0

10

20

30

40

50

0 200 400 600 800 1000 1200 1400 1600 1800

Size (Number of ACRUs per affiliate)

ValueIndex

Need to supplement volume-based tiers with

factors to reward for quality

How value-based pricing might workCase 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

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

Value of ACRUs

Old Pricing Structure

Rank-ordered affiliates

Value of ACRUs

Rank-ordered affiliates

Average payout (no quality tiers)

Value-Based Pricing

Tiered payouts

Overpayment

Underpayment

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, testMost 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!

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