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  1. #1
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    Merchants Allowing, Restricting, or Barring PPC Bidding
    A merchant wrote to me (in email): > "You recently registered as an affillate for (merchant_name). // I visited your web site and read about your "pay per click" bidding campaigns. We have noticed that other affilliates are involved in bidding wars with us for 'pay per click' phrases. What would you recommend that a merchant do? Back off and let companies like you do the advertising or compete?" <

    You have identified two options (yield to affiliates or compete with them for PPC), but there are other options. For example, you might choose to simply prohibit affiliates from engaging in PPC bidding at all, or you might create a list of specific restrictions, such as a list of prohibited keywords (your company name and domain name and "typo variations", for example). Such restrictions then require time and effort to enforce, and if affiliates use "bridge pages," enforcement may be difficult or inefficient. Of course, no affiliate should ever be permitted to bid using text ads that are misleading (for example, misstating your prices or policies).

    Some merchants feel that when affiliates bid for "their" keywords, it drives up bid prices without creating any new sales for the merchant -- in other words, it drains profit from the merchant.

    Most merchants, however, find that affiliate bidding "expands the pool" of available customers. In general, you are going to find that some of your affiliates will find PPC opportunities that you won't -- keyword phrase combinations or text-ad copy that works more effectively than your own PPC campaigns. For example, you may bid on the keyword phrases "widget" and "buy widget," -- while an affiliate might use a collection of narrower keywords ("green widget" and "widget repair") which draw a much higher click-through rate AND a higher conversion rate. Or perhaps your campaigns drop customers at your home page, but the affiliate sends customers directly to the relevant product page, thus increasing conversion rates. You may limit your bidding to 10 cents per click, but because the affiliate has identified a strategy that draws a higher click-through rate and a higher conversion rate, she may be able to bid 20 cents per click and still make a profit. Those are customers who would probably have found and clicked a competitor's ad if your affiliate wasn't there.

    In general, you should measure your "internal PPC" activity the same way you measure affiliate performance. If you pay affiliates a 15%* commission on sales, then you're implicitly saying that you can only afford to spend 18%* of sales on marketing, so you will want to run your PPC campaigns using that same measure. That means that your PPC bidding should not exceed $18* per $100 of sales generated. In theory, you should have better internal tracking data and a better understanding of your own product niche, which should mean that you generate a higher ROI than affiliates, so they should not be able to compete with you. In practice, there will always be opportunities for affiliates to make money while also helping to grow your business.

    A key factor is competition: if you have no competitors for your keywords other than your own affiliates, then affiliate bidding is more likely to "divert" sales. But most keywords have competition, and the main issue is making certain that ads for your company appear in better positions than ads for your competitors. If you sell widgets, and ten other companies are bidding on "widget phrases" on Google AdWords, your goal is to get the maximum number of customers to get from the search results page to your site.

    But even if there are no competitors for your keyword, if an affiliate creates ad text that is more effective, then it will increase sales. My perspective on PPC bidding is simple: in my role as a merchant, I run campaigns as effectively as I can, using my target ROI (in my case, I must drive $100 of sales for every $18* spent). If my affiliates (who earn 15%*) can profit from PPC bidding, they are welcome to do so. I have thousands of keyword phrases for which there are no competitors (that is, when my ad is shown, it is shown alone, or has an average position of 1.0 or 1.1), yet if an affiliate can "bump" me by paying a higher CPC, I'm happy, because 90% of the time the affiliate will bring me new business.

    In my role as an affiliate, I seek an ROI of at least 50% -- that is, for every $100 that I spend on PPC bidding, I want to see $150 in affiliate earnings (preferably $200 to $300). Since CTR and conversion vary widely, I worry that if my ROI drops below 50%, even slight changes may push me negative.

    Here are some discussion threads on ABestWeb about this issue:

    http://forum.abestweb.com/showthread.php?t=74368
    http://forum.abestweb.com/showthread.php?t=81638
    http://forum.abestweb.com/showthread.php?t=81156
    http://forum.abestweb.com/showthread.php?t=81044
    http://forum.abestweb.com/showthread.php?t=77446

    */ For affiliate sales, 15% is paid to the affiliate plus 3% to ShareASale.
    Last edited by markwelch; February 26th, 2007 at 09:40 AM.

  2. #2
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    Hey, at least they asked you. I see so many merchants baning affiliates from bidding on keywords that they bid on (not their trademarks).

    One certain merchant comes to mind who carries a nice selection of branded clothing. They forbid affiliates from bidding on the brands that they bid on. They pay 10% commission, yet my resources tell me they maintain a 20%+ cost of inhouse PPC. How stupid is that? So many merchants are driven by ego when it comes to these decisions. They have PPC that sucks yet they forbid their affiliates to "compete" with them and this simply leads to affiliates promoting their competitors, which is exactly what I did in the case I outlined above.

    Your response is spot on Mark. I am curious to see their response. Please post it when you get it.


  3. #3
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    I just remembered a key reason why some affiliates can far outperform their merchants with the same keywords: Negative Keywords.

    An affiliate could create an ad campaign with the exact same text ads, the exact same keywords, and the exact same destination URLs, and substantially improve ROI by adding negative keywords (which many merchants don't use):
    • Almost always: free
    • For non-downloadable software/music/video products: online, downloadable, MP3
    • For non-discount merchants: cheap, discount, and sometimes price

    Depending on the merchant and product, negative keywords can easily reduce unwanted (unprofitable) clicks by 30% to 70%. In some product niches, negative keywords can excise 99% of unwanted traffic while retaining "most" desired traffic.

    An affiliate who can mentally construct a rich set of negative keywords, and who can craft really good "exact match" and "phrase match" keywords, will almost always outperform a merchant who doesn't do those things. Of course, if the affiliate (or a competitor) is "cherry picking" the best-performing traffic, then the merchant's own campaigns will perform even more poorly.

    Ironically, the opposite is true, also. If most merchants are using negative keywords, then an affiliate may find some profitable traffic even from searches that might otherwise seem "unwanted." For example, if someone is searching for "free MP3 Jennifer Hudson," we certainly assume that they aren't ready to pay for a CD or iTunes subscription -- but perhaps 10% or 5% of those people would be willing to pay, and a clever ad-writer could create ad text that would mostly be clicked by these "wanted" customers and not very often by "unwanted" customers.

  4. #4
    ABW Ambassador beachcom's Avatar
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    Excellent post Mark. Like UncleScooter said "at least they asked".

    I haven't seen what your "PPC bidding campaigns" entails, but maybe the merchant realized your campaigns and/or strategies are superior to what they are currently doing.

    It's all about getting a customer to click on and buy something. Seems to me that if an affiliate drives a customer to my site using keywords I haven't prohibited and the customer buys, I pay 15% (or whatever) to the affiliate and get 85% or lose that customer to a competitor and get nothing. Do I settle for the 85% or nothing? Still, minus the cost of the PPC, I've made money. If I've got an affiliate who finds a keyword or phrase that I, as a merchant, haven't found...more power to 'em. If an affiliate outbids me on a non-prohibited keyword or phrase, more power to 'em.

    If a merchant wants to "compete" with me, other affiliates or the competition for keywords and phrases then thats part of the cost of doing business. I do very little PPC advertising but when I do, I personally don't look at it as competing. If a keyword or phrase is out of my price range, then I go to choice B, and so on.

    Just my opinion,
    Joey

  5. #5
    Moderator MichaelColey's Avatar
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    It's hard to beat PPC affiliates. They're highly motivated, educated, and experienced. Just a quick look at the alternatives and you'll understand why they can do so much better:

    1) In-House PPC People. Usually, these people start with little or no experience with PPC. They are usually paid hourly or a salary, so they have little motivation to increase ROI. They usually have a myriad of other responsibilities, so they're not able to give it the attention it needs. They often don't have the tools to effectively manage campaigns.

    2) PPC Management Companies. They're usually paid a flat fee or a percent of spend, so they're not focused on ROI. They have the tools, and may have some good people, but it's really hit and miss.

    Negative keywords can make a big difference, but PPC affiliates can also make a huge difference in many other areas:

    1) Keyword identification and research.
    2) Ad copy.
    3) Testing.
    4) Organization of campaigns.
    Michael Coley
    Amazing-Bargains.com
     Affiliate Tips | Merchant Best Practices | Affiliate Friendly? | Couponing | CPA Networks? | ABW Tips | Activating Affiliates
    "Education is the most powerful weapon which you can use to change the world." Nelson Mandela

  6. #6
    Outsourced Program Manager Jorge - SHOPiMAR's Avatar
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    Great thread Mark. I get merchants sometimes that are still not understanding not only the importance of allowing affiliates to do their own ppc, but also the many benefits, and you and Michael just highlighted many of them.

  7. #7
    Affiliate Manager MINDsprinter's Avatar
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    I think there are lots of opportunities to work with your affiliates to drive out the competition. For example, for affiliates you trust and who convert you can conspire to each bid for certain slots on the same keyword, so essentially the same link is showing up for the top 3-5 spots. As others said, you can allow PPC affiliates to grab the long tail keywords you don't want or don't have time to grab. I think working together is the key here. If you do it right suddenly you have a group of a dozen people all working towards the same goal. I think there is real strength in numbers there.
    Jason Rosenbaum
    Affiliate Manager
    MINDsprinting

  8. #8
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    MINDsprinter wrote (in part): > "For example, for affiliates you trust and who convert you can conspire to each bid for certain slots on the same keyword, so essentially the same link is showing up for the top 3-5 spots." <

    Whoa, whoa. "Conspire"?

    This conduct ("double-serving") is prohibited by Google. See https://adwords.google.com/support/b...y?answer=14179

    This includes "affiliate bridge" pages: http://groups.google.com/group/adwor...liate%20bridge

    In short, if you are "conspiring" with your affiliates in order to try to occupy the top slots, you are violating AdWords policies.
    Last edited by markwelch; February 26th, 2007 at 11:57 AM.

  9. #9
    Affiliate Manager MINDsprinter's Avatar
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    This conduct ("double-serving") is prohibited by Google.
    Well, let me know what you think of this. I'm not talking about direct PPCing really, but if say I as a merchant bid for the top spot, and my 3 best affiliates bid for the next three spots, and their ads took users to their website with my product page, would that be double serving? According to google, maybe not.
    Jason Rosenbaum
    Affiliate Manager
    MINDsprinting

  10. #10
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    MINDsprinter wrote: > "If I as a merchant bid for the top spot, and my 3 best affiliates also bid for the next three spots, and their ads took users to their website with my product page, would that be double serving? According to google, maybe not." <

    If your affiliates have web sites that are not merely "affiliate bridge" pages, and they choose to bid on the same search terms, it would not violate Google policies. The issue is, "what's at the affiliate site?" If it is merely their page with your product info, it's going to be considered an "affiliate bridge" page, and the affiliate's ads will be shut down.

    Google's enforcement is sporadic, at best, but your competitors will likely submit complaints to trigger scrutiny.

    Google's application of its policies is also inconsistent, as we've all experienced: one staffer may decide that a page is an "affiliate bridge" while another Googler may conclude that it is not.

    I certainly think that if a competitor provided Google with a link to a posting where the advertiser discusses "conspiring" with affiliates to occupy the top slots, that advertiser will likely face greater scrutiny and probably a less friendly evaluation. (Indeed, I suspect it could mean the difference between simply having the affiliate campaigns cancelled, and having the advertiser's own campaigns canceled.)

  11. #11
    Affiliate Manager MINDsprinter's Avatar
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    I certainly think that if a competitor provided Google with a link to a posting where the advertiser discusses "conspiring" with affiliates to occupy the top slots, that advertiser will likely face greater scrutiny and probably a less friendly evaluation.
    Ha! I agree with you there. Not that I've tried this mind you, but it appears to me to have some potential for working with your affiliates as opposed to banning PPC outright, which makes people mad, and for good reason!
    Jason Rosenbaum
    Affiliate Manager
    MINDsprinting

  12. #12
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    But mostly, bidding for position is not an exact science. If you bid $1.00 and I bid 65 cents, if my ad copy is better and my landing page is better, then my CTR will likely be better and sooner or later my ad will be #1 and you will be below me with no bid adjustment.
    I would suggest that you not tell affiliates to maintain a given position. If an affiliate is able to be profitable on affiliate margins and is able to surpass your ad at the same time, and you are profitable paying the higher click cost, then you need to re-evaluate your own PPC campaigns and pay more attention to that affiilate because they are obviously outperforming you in the PPC arena.
    I say "you" as a merchant in general, not you specifically.

  13. #13
    Affiliate Manager MINDsprinter's Avatar
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    That's true. Still though, if you can get yourself and a couple affiliates in that ad space it might be advantageous.
    Jason Rosenbaum
    Affiliate Manager
    MINDsprinting

  14. #14
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    I agree with Scooter on this one -- you absolutely should not try to "play the game" of maintaining a specific position (and certainly not coordinating to have multiple players each hold a specific position).

    Hopefully, we all know some of the economics here -- for example, conversion usually drops significantly if your ad moves from position #2 to position #1, and clicks drop significantly if your ad moves from position #1 to position #2. What this means is that most merchants can actually afford to bid MORE money (per click) to be in #2 position than they can afford if their ad is in the #1 position -- often much more for ads that contain "limiting" or "discouraging" language to dissuade "wrong clicks."

    The most important thing is to never get "caught up in the chase," nor let your ego rule ("I always want to be number one!"), but instead always run your campaigns with your ROI goals as your guide.
    Last edited by markwelch; February 26th, 2007 at 01:27 PM.

  15. #15
    ABW Ambassador isellstuff's Avatar
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    Ahhh, a topic near and dear to my heart. If a merchant limits my PPC campaigns by restricting bidding on consumer product brandnames, I replace them with a competitor and still outpace them in the results due to higher CTR and better ad copy.

    Merchants should realize that unless they have a monopoly, they are playing a losing game by trying to control PPC bidding by their affiliates.
    Merchants, any data you provide to Google Shopping should also be in your affiliate network datafeed. More data means more sales!

  16. #16
    Affiliate Manager parmstro's Avatar
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    Affiliate PPC
    We're focusing specifically on recruiting search publishers for the next little while, so if anyone has any tips on that, I'd love to hear it. We don't allow bidding on keywords, and we have some "non-compete" terms, (we just ask that you just don't outbid us on them), however we do allow linking to our main URL as well as deep linking into our site.

    What kind of non-monetary incentives would help attract search publishers (not that we wouldn't offer monetary incentives - I just feel relatively comfortable with planning that part) and are there any other considerations that most merchants miss out on? I've heard that search publishers don't really like tiered commission systems, so one thing I'm thinking of doing is creating some customized program terms.

    Anything else?

    Cheers,
    Patrick Armstrong
    Online Marketing Manager, ethicalDeal.com
    patrick@ethicaldeal.com

  17. #17
    2005 Linkshare Golden Link Award Winner  ecomcity's Avatar
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    Why doesn't ABW just put up a huge Generic merchant banner stating the truth....
    Go away affiliates if your unwilling to spend YOUR money advertising Our Products.

    ABWers have screamed since forum inception, they'd never join a program that required a fee to join. Same folks today are willing to layout millions, out of their own pockets monthly, to do the merchants a huge favor without one guarantee of repayment. Talk about drinking the Adwhore coolaid like some cult lemmings.

    If a merchant wants to panel the keyword sponsor Ads let the greedy buggers pay a slotting fee or the PPCSE costs to drive traffic to a well written product promotion affiliate landing page. This isn't the first time I mentioned this... and not a single greed driven merchant expecting affiliates to augement their advertising budgets has come forth to say they'd be willing to put their traffic money where their mouth is...
    Webmaster's... Mike and Charlie

    "What have you done today to put real value into a referral click...from a shoppers viewpoint!"

  18. #18
    Affiliate Manager GregRobert's Avatar
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    I realize that this thread is old, so my question may never get read .. but I am curious on how an affiliate manager can attract PPC affiliates. Should we add "PPC marketers welcome" to our program description?

    any insight welcome

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