| Shawn Collins: Thank you for Gene Kavner, joining us | | | | merchant. The merchant will then make money on |
| today for a little chat. If you're not familiar with | | | | other affiliates who they did not necessarily need to |
| Gene, he was formerly of the Worldwide Leader of | | | | pay as much. Getting that traffic and getting above |
| the Associates program. He's also an experienced | | | | the noise level is one of the biggest challenges in |
| entrepreneur and very active in the affiliate business. | | | | today's internet, which is full of many opportunities |
| He's a blogger with the site It's great to have you | | | | for many different affiliates to make money. |
| here, Gene. | | | | Shawn: Sure. I saw in your blog that you stated that |
| Gene Kavner: Good morning, Shawn. Thank you. | | | | widgets are the future with affiliate marketing. Could |
| Same here. | | | | you share some examples of widgets that maybe |
| Shawn: Great. Just have a handful of questions here. | | | | affiliates could leverage? |
| I'd love to hear what you think about them. I'll jump | | | | Gene: Sure. Widgets are actually a reasonably new |
| right in. One thing I'm curious How would you define | | | | phenomenon in the world of online marketing. |
| affiliate marketing, and how is it different than a | | | | Basically a widget is a piece of code, a little |
| traditional advertising? | | | | component, somebody could easily place their |
| Gene: Well, actually, affiliate marketing is not very | | | | website and it displays something for a consumer or |
| well understood. We all understand what advertising | | | | reader of the site. It is also something that |
| is basically a merchant or somebody that's got | | | | somebody who's reading the site should be able to |
| something to sell would typically approach a media, | | | | easily grab, copy, and paste right from the site |
| whether it's offline media, such as newspaper or | | | | they're watching and put it on their site. We've seen |
| television, or an online website, and purchase some | | | | YouTube, for example they've done a phenomenal |
| impressions effectively, purchase inventory that they | | | | job at allowing people to grab videos from each |
| would have and allow their product to be introduced | | | | other's site and putting them on their site. This has |
| to their viewers or customers or readers of the | | | | been not a big thing in the affiliate marketing, and I |
| website. Affiliate marketing actually is the same | | | | really do believe this is about to change. |
| formula for getting traffic, except for it's the other | | | | One of the biggest challenges that I just mentioned |
| side of the coin. This is when the merchant would | | | | for an affiliate manager is to get traffic and get |
| come up with a set of tools that would allow | | | | affiliates to come and display their products. What |
| websites to come to their site, grab those tools, and | | | | any program should be able to have going forward is |
| display those merchants' products without necessarily | | | | allowing an affiliate to not only display advertising to a |
| the merchant needing to go and establish a | | | | particular merchant, but to allow any reader of that |
| relationship with those particular websites. In fact, | | | | website to easily grab a piece of code from that |
| merchants would not necessarily even need to know | | | | website and quickly put it on their site to display the |
| all the different websites that are grabbing their tools | | | | same ad. In this case there should be a compensation |
| and displaying those products with the merchant on | | | | incentive for that originating website as well as to the |
| their site. So effectively it's the same thing it's who | | | | merchant. So let's say your site, Shawn, displays an |
| needs to approach who. In traditional advertising it is | | | | Amazon ad, for example, to something, and I come |
| the merchant who approaches websites, and in | | | | to your site and grab it and put it on my site, you |
| affiliate marketing it's basically the websites approach | | | | should get some compensation from Amazon based |
| the merchant. | | | | on the sales I make off of this ad as well, because I |
| Shawn: Ok. Great. That was a nice explanation. | | | | noticed it on your site. It's not yet something that |
| Maybe I'll have to crib that once to get a lot of | | | | people implement; this is what I believe many, many |
| family and friends asking what affiliate marketing is all | | | | merchants will be moving to in 2007 and 2008 and in |
| about. I always have to try to figure out what to tell | | | | the next number of years because it allows people |
| them there. Also, with your experience on the | | | | to break through a lot of that clutter and allows |
| affiliate management side, what do you consider to | | | | them to display some very interesting content. |
| be some essential elements for an affiliate program? | | | | We've seen that happen already in non affiliate |
| Gene: Well, I've made the list. There's actually about | | | | space, and I think it will expand greatly into the |
| seven really important items of any affiliate program | | | | affiliate space as well. |
| that every single program should have. Not too many | | | | Shawn: Sure. Yeah. And Amazon has certainly done |
| merchants or affiliates follow all of those steps, but | | | | quite a bit of innovation with their affiliate program. |
| I'll go through them as quickly as I can. I have a little | | | | What would you consider to be some of the best |
| bit more information on my site, but number one is; | | | | tools that Amazon has provided to affiliates over the |
| Affiliate program is a relationship between a | | | | years? |
| merchant and an affiliate or a website. Every single | | | | Gene: Well, in the last year, definitely the biggest, the |
| affiliate knows who their merchants are, but | | | | most innovative, improvement has been what they |
| merchants typically are not even made aware who all | | | | call their e Store. When I ran the program, what I |
| the affiliates who sign up. Certainly merchants do not | | | | noticed is there are many, many people who were |
| need to contact every single affiliate, but they should | | | | building Amazon storefronts using Amazon Web |
| have information as to who these affiliates are. They | | | | Services. Web Services is a fairly complicated piece |
| should have their names. They should have their email | | | | of technology that you have to really understand |
| addresses. Any affiliate that is performing very well | | | | programming and have a lot of expertise in building. |
| they need to establish a relationship with them and | | | | Because we saw so many people going out and |
| understand what is driving that affiliate. | | | | building those kinds of stores, what we basically |
| Number two; every single merchant needs to also | | | | thought is that if we could build a store that you can |
| understand how, what I call elastic every single | | | | just point and click and build in five minutes without |
| affiliate is. There are some affiliates who will make | | | | requiring any expertise, you will have a lot of people |
| more money for a merchant if a merchant were to | | | | adopting them. People who don't have the same |
| pay them more. Then there are certain affiliates that, | | | | expertise that you need to build the web services |
| if you pay them more, they will not necessarily drive | | | | store, and this is what we did. We build a store that |
| additional traffic. For example, affiliates that did, on | | | | literally takes two minutes to build, and you can have |
| paper, click inventory out there to drive traffic to a | | | | the entire store front of products that you could put |
| merchant will actually make more money for the | | | | on your site out of the Amazon catalog. So you can |
| merchant if the merchant were to pay them more. | | | | have a store about affiliate marketing books for |
| So merchants need to be aware who those affiliates | | | | example, if let's say you would want to have them |
| are. Affiliates such as bloggers typically depend on | | | | on your site. Another site about GPS equipment may |
| the traffic they get over the internet, so if you pay | | | | want to have various global positioning systems that |
| them more, it is not quite likely they will drive | | | | Amazon sales on their site, and build their own store |
| additional traffic to the merchants, so merchants | | | | without any programming whatsoever. |
| need to be aware of the distinction between kinds | | | | There are a number of other initiatives and |
| of affiliates and pay them on a different scale based | | | | innovations there are for example, popover links. You |
| on the type of an affiliate they are. | | | | can mouse over some Amazon links and without |
| Next is; every single merchant needs to be able to | | | | clicking on them, a little java based pop up will happen |
| offer their affiliates tracking ID's. That's point number | | | | that where you can see a little bit more detail about |
| three. These affiliates have different ways of driving | | | | the product that is being sold such as price, |
| traffic to the merchant. Some ways work, and some | | | | availability, customer rating, and so on. |
| ways don't work. Tracking ID's is what allows | | | | Omakase links is another innovation that Amazon has |
| affiliates to understand which of their marketing | | | | made recently where you can basically put a little |
| mechanisms works, and which of them don't work, | | | | piece of code on your site, and a Amazon ad will |
| so they can focus just on the marketing efforts that | | | | appear, and it will base a product on not only the |
| work. Without these tracking ID's, an affiliate, which | | | | content end out of your website, but also on what |
| has some marketing programs work and don't work, | | | | the visitors have typically seen on other sites, and |
| they do not know which ones work, which ones | | | | what they've bought from Amazon in the past for |
| don't, so they could be likely to drop the entire | | | | example. So Amazon makes a decision to put an ad |
| program if overall it's not performing, rather than | | | | that will generate the most amount of revenue to |
| focusing on the performing marketing techniques. | | | | the affiliate based on who the customer is, and what |
| Number four: merchants need to be able to | | | | the website it is that their typically visiting. |
| incentivize affiliates to produce more traffic and more | | | | There's still a lot more work, it's a very complicated |
| sales for them. They need to be able to offer what's | | | | technology. A lot of work for Amazon to do, but |
| called ladder compensation system. As an affiliate, if | | | | they've done a really, really good job to date in |
| you sell more of the merchant's products, you should | | | | getting those products out. There are a number of |
| get accumulatively larger percentage of sales than | | | | other products that are in beta right now, but I |
| somebody who is not doing too much in sales. This | | | | cannot discuss, but some of them actually my |
| incents affiliates to do more and more and more for | | | | website has. So if you go to my site you can notice |
| the merchant. | | | | some new interesting tools that you may not see on |
| Number five; some affiliates are just better at | | | | anywhere else from Amazon, but those are the kind |
| negotiating, so merchants need to have a way to | | | | of things that they're still working on, and I can't |
| compensate different affiliates differently. Not just | | | | discuss too much. |
| based on the kind of an affiliate they are, but simply | | | | Shawn: OK, great. Well another thing I wanted to |
| based on the fact that some affiliates want to make | | | | touch base on is, as a blogger the recent decision |
| more money, and some affiliates do not, are not as | | | | with the FDC I guess the announcement that people |
| good at negotiating and you can simply pay them | | | | should have to disclose if they're getting |
| less. There are some very big affiliates that simply | | | | compensated in any way, so what is your position on |
| will not deal with a particular merchant if their pay | | | | that? |
| structure is too low. However, that merchant doesn't | | | | Gene: Well I've followed the discussion pretty closely, |
| necessarily need to raise the fees for everybody. | | | | and there are a lot of very passionate opinions out |
| Some affiliates would be happy to make what they | | | | there in the Internet space. And I respect certainly |
| make. There needs to be a way for a merchant to | | | | everybody's perspective, and it's just not an easy |
| select this affiliate will make so much, and this affiliate | | | | one way answer. But you know, I personally believe |
| will make so much. | | | | that we listen to recommendations based on the |
| Direct links; number six. Direct links are also extremely | | | | track record of a particular blogger, or a website that |
| important. In the days of Google, where we all | | | | we visit. A website that is not respectable, the |
| depend on free search traffic coming to our site, a | | | | website that simply produce an opinion based on |
| merchant should get a second benefit of an affiliate | | | | whether or not they are compensated, are typically |
| program, which an increase in it's page rank to the | | | | not the sites that people will go to, and listen to, and |
| site. If affiliates offer direct links, linking directly to a | | | | buy products. |
| merchant's site, that causes a merchant's site to go | | | | We have off line media that takes advertising for |
| up in its page rank. If an affiliate program redirects | | | | example; you know any magazine will take |
| these links through the program, the merchant does | | | | advertising from potential companies that they will |
| not get the same benefit. It is really important for an | | | | review in an editorial portions of their page. So at the |
| affiliate program to allow a direct link from an affiliate | | | | end of the day we live in the world where there are |
| to the merchant. | | | | biases, where people are compensated, some people |
| Number seven; and this is the last point, but it's not | | | | are not compensated. |
| any less important than any of the other ones: Every | | | | So my overall perspective is no, I don't believe that, |
| merchant program should have a two tier affiliate | | | | that should be a requirement, because while some |
| program, meaning if an affiliate finds another affiliate | | | | people who do get compensated, they may be telling |
| for that merchant, the merchant should compensate | | | | the exact unbiased perspective on their product |
| that first referring affiliate for that find, based on | | | | even though they're being compensated. So it's not |
| sales that second merchant makes. Effectively the | | | | automatically that they're somehow affected by that |
| two tier structure incentivizes people not only to sell | | | | advertising. So I guess my perspective is no, we've |
| merchant product but also find other people, other | | | | done very well in the off line media where people |
| affiliates, who sell the same merchant's product. It | | | | don't necessarily disclose, and I think this should carry |
| effectively serves this double benefit to the | | | | itself in the online media as well. |
| merchants. | | | | Shawn: OK, great. One last question for you about |
| So these, Shawn, are the seven really important | | | | the futuristic marketing as far as 2007. I was curious |
| parts of affiliate programs. There are some affiliate | | | | what you think about, whether or not video and |
| programs that actually do all seven; some that barely | | | | mobile phones will play prominent roles in the industry |
| touch on a couple of them. For us to be successful in | | | | this year? |
| the affiliate program and for merchants to be | | | | Gene: Well honestly I've seen places where they |
| successful, this is what I see the world moving | | | | actually do work. I think video is going to be the first |
| towards, is everybody getting those really important | | | | area where we will see some innovation on. It is |
| features into their programs. | | | | difficult for an affiliate to produce their own video |
| Shawn: That's some great insight. I've often | | | | clips, so they would basically need to grab it from a |
| wondered, from your seventh point, why the big | | | | merchant. And it's again, somewhat expensive for |
| affiliate networks don't offer two tiers, and maybe | | | | those merchants to produce them. So, we will see I |
| with some prodding they'll do it in the future. | | | | think with the video clips will start getting introduced, |
| Gene: Amazon, for example is one of those big main | | | | it's not necessarily going to catch on fire the same |
| programs that does not offer a second tier. Google, | | | | way as other ways of marketing is has gone. |
| on the other hand, does. You definitely see some | | | | As far as the mobile phones, the interesting part of |
| really big names that do offer it and some big names | | | | it, interesting country to watch that has done just an |
| that don't. Overall, it's about how much traffic those | | | | incredibly great job is Japan. In Japan, every cell |
| merchants get, and as they see a lot more and more | | | | phone with a video camera is equipped in a way that |
| affiliates displaying advertising for programs that have | | | | you can take a photograph of a particular ad in a |
| two tiers, they will all move in that direction as well. | | | | newspaper or magazine, or even while shopping at a |
| Shawn: Sure. What do you think is the biggest | | | | store somewhere, and taking a picture of a bar |
| challenge for an affiliate manager? | | | | code, and it will automatically translate the bar code |
| Gene: Well, I think the biggest challenge obviously is | | | | into a particular website that also sells those |
| for many people, if you're an affiliate manage, is how | | | | products, and give you a price of the product, and |
| do you get above the noise level of all the different | | | | with a single click you can actually order the product. |
| affiliate programs out there. If you are a brand new | | | | They've been doing that for a couple of years now. |
| manager on the scene, there is probably already 20 | | | | The U.S. is behind Japan, and I think we will see that |
| or 30 other affiliate managers trying to push a | | | | innovation take place, if not in '07, probably in 2008 |
| different merchant that sells somewhat similar | | | | 2009 time frame. It's just some technologies are |
| products. Getting above noise level is really, really | | | | catching on still here while they're certainly ahead in |
| tough. One of the most important things that an | | | | Japan and that space. But as far as mobile |
| affiliate manager would need to do is figure out how | | | | technologies, Japan is definitely the country for us to |
| to incent certain affiliates more than their | | | | watch and follow what they've been doing. They've |
| competitors, going after certain big name affiliates | | | | done some very exciting things. |
| and being able to offer a higher commission structure. | | | | Shawn: OK, very interesting. I really appreciate your |
| Effectively, I know it is kind of buying traffic, and | | | | time Gene. Thanks a lot to Gene Kavner for |
| you can only pay so much, but many affiliate | | | | answering a bunch of questions here, and best of |
| programs will in fact build their program around some | | | | luck in the New Year. |
| affiliates on which they do not make any money, but | | | | Gene: My pleasure Shawn, the same to you. Look |
| these are the affiliates that bring the name, that | | | | forward to seeing you at the affiliate summit. |
| bring the traffic, and bring the recognition to that | | | | Shawn: Great same here, thank you. |