2010 Affiliate Industry Preview Series: Interview with Larry Adams of Google

As part of the ReveNews 2010 Affiliate Industry Preview Series, I interviewed industry leaders to get a sense of their plans and goals for 2010. Today’s interview is with Larry Adams, Product Manager at Google.

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

I think the industry is very healthy.  I think there’s a lot of innovation coming from different companies and there are people trying to launch new networks all the time so I think there’s obliviously a lot of opportunity remaining.

How has the affiliate industry evolved?

I think fundamentally it’s been pretty consistent and I think that is part of the reason it’s been so successful. The model has been simple, understandable, and accessible to a lot of different advertisers online.  I do see advertisers getting more sophisticated in understanding their customers and therefore taking a deeper look at the pricing structures that they’re offering  and what the customer is really worth to them.  Similarly I’ve seen publishers take really interesting approaches on how they target customers and how they acquire new customers and I think the networks role in all of this is to be able to provide the platforms that facilitate this evolution.

Couponing continues to be a strong segment of many of our advertisers affiliate programs.  But I think what we’ve seen is publishers taking new approaches and not just focusing on the discount or the promotion but trying to provide different more targeted kind of shopping experience, providing more personalized recommendations.  Those are the cases were content is really being developed that have been more intriguing to me.

What do you think are the biggest lessons the affiliate industry learned in the last decade?

Most of the things we think are going to be huge shocks to the industry tend to be pretty minor blips, if anything at all.  I think there’s a tendency to really have this defensive attitude around the industry in that people are out to “get” the industry.  I think the issues are usually overstated.

History shows that despite all of these hurdles that were thrown and obstacles and various things that were going to kill affiliate marketing, it continues to grow every year.  We have clients that have been on our roster going on 10 years now.  I think that the industry can continue to thrive and grow despite these obstacles is a strong testament.  I think the real critical innovation that affiliate marketing provides is this flexibility that is established when a publisher and an advertiser form a relationship with one another and the trust that is formed there allowing publishers to try new things thus allowing advertisers to reach new customers.

Can you give me a “for instance” of one of those events that were going to kill the affiliate industry?

I think when comparison shopping engines first went from CPA to CPC and started to be very aggressive with customer acquisition a lot of people thought that it would be really harmful to the rest of the affiliate space. That hasn’t been borne out  to be the case.

What impacts did the recession have in 2009?

To the extent that a lot of the affiliate marketers are retailers I think there was a natural contraction in the retail industry.  I think an oblivious impact as well was financial services area. There’s a lot of people doing affiliate marketing in lending areas where that money pretty much dried up so I’m sure that there are a lot of individuals and businesses that took really big hits.

Here at Google, and I think many of our competitors as well, had customers who went out of business, advertisers who went out of business.  When that happens, the network, the publishers,  and the people that work with the advertisers are harmed.

But I think overall the general shift of consumer purchases from offline to online acts as a natural counter balance to that and so I think we were less effected probably than retailers overall.  I’ve seen plenty of growth despite the recession.

Last year was a transition year as you moved from having been Performics to the Google Affiliate Network.  How did that transition play out for you guys in 2009 especially considering  the economic climate?

There’s a tough logistical thing that we had to do in integrating a business into a much larger business that takes a long time.  We’re part way through that process and we’ll continue to evolve even after we think we’re completely assimilated.

We’re sitting in Google offices and our engineers are Google engineers and our sales and service organization are Google sales and service people; but we’re still a centralized business, the majority of the business is still run out of Chicago.  That is where our product development and a majority of our service and sales staff are.

It’s a interesting and challenging problem, Google presents lots of resources and opportunities for us and it’s also a big and complex organization from both a personnel level and a technological level; so that is a challenge to navigate.

One of the things that I’ve noticed from both the publisher’s and the advertiser’s side was the change in the interface to Google’s interface and the change to Google’s set of logins.  What was the feedback on those kinds of changes?

The feedback was generally positive, I mean, to be fair it’s pretty much just a surface-level change.  The account level stuff is where we’re really starting to do some meaningful integration into Google systems.

We need to remake our platform in a way that makes it easy for people who use other Google products to use our product too and so it starts with just making sure the logins are consistent. We are working deeper from there and actually we started at the service level and we went down to the basement and now we’re redoing all the plumbing in the infrastructure and are gradually building up new interfaces that are going to be running on top of Google’s technology.

We think that is going to make a really big difference for us in the long term in being able to offer features to both our advertisers and publishers that help continue the evolution of the industry.

One other question that has to do with Google technology that was asked on ReveNews  that I think I should touch  on quickly. Products from the Google Affiliate Network advertisers were showing up inside AdWords displays on the right hand column and not just in the normal natural search results. I wanted to clarify whether this was a beta tool that was specifically for the Google Affiliate Network?

It’s not a Google Affiliate Network product.  It’s an AdWords feature product listing experiment that the AdWords team is doing both with ad format and also with pricing model, so, it is a CPA pricing model that is targeted for products that retailers sale.  AdWords used some of our (GAN’s)  infrastructure to enable that end-to-end CPA based tracking and they are also using the advertisers Google Base feed for content for those ads and then the AdWords team have a bunch of their own systems that actually produce the ads when query is entered into the search engine.

One thing that obviously had a big impact in 2009 and the later part of 2008 was the so-called Amazon Tax.  How were Google Affiliate Network affiliates and merchants impacted by those laws, especially in states like New York?

It certainly ate up plenty of our time.  We spent a lot of time thinking about it, I know that our team spent a lot of time understanding the issue, talking with our own lawyers, talking with Performance Marketing Association.  So it’s not just a risk to our business but it’s also a cost to our business just for the fact that we have to spend time thinking about it.  I think from a practical standpoint there wasn’t a lot of action that happened because of it.

There were some advertisers that took a more aggressive stance and removed publishers from certain constituencies but I would say overall most advertisers  are going to operate their programs and not make changes due to any legislation that’s been passed so far.

Editor’s Note: At this point Kristin Hall, Industry Marketing Manager at  Google, who was also on the call contributes:

I can definitely say that it has taken a lot of time but I think it’s a example of growth that the industry needs to take and I think that the formation of the PMA  is a step since our  industry need to be organized in its approach.

The New York legislation took us all by surprise.  It seemed absurd when it was introduced and when it passed I think everyone was surprised and law created a precedent.  I think that our being part of Google has been very helpful to the industry, we’ve been able to elevate the discussion and use Google’s expertise in the policy area as well as Google’s contacts and insight into the various different state policy issues.  We have been able to get very large Google counterparts working together as a coalition to oppose this legislation.

While it hasn’t had a significant financial impact I think the work is not done and that we have a lot of hard work to continue to do in 2010.  It’s important for the industry to push like we did in California.  We need to replicate that effort in other states, it’s going to come up again this year very soon and we’re much better organized and prepared and I’m happy to say that Google has played a large role in that, but, it will continue to be an issue.

During the fight against the California version of the tax, Google, and Yahoo, and Amazon, banned together.  How close were we in California to having the industry be dealt a major setback?

Kristin: If I can be frank I think it would have had a significant impact.

I think if it had passed in California, once it passes in New York and California it would have had a huge impact.  It wouldn’t have been as devastating because I think as Larry said the resiliency in this industry I think is remarkable, we would have found ways to make it work, people would have had to explore different pricing models.  There is still a huge source of sales on the advertisers’ side for the multi-channel retailers who don’t have nexus issues but I think that the fact that we were able to stop it in California really important.

This, you  know,  is less of an issue for offline and multi-channel retailers who more than likely collect tax in multiple states with the infrastructure and resource to do so. The challenge with this legislation it’s happened so quickly it’s so nebulous, that many retailers just haven’t had time to prepare so the easiest thing to do is, the most reasonable action is to sever those relationships with affiliates. It’s just the retailers don’t have time to make those decision and run the analysis to figure out whether or not it would be worthwhile so they severed those affiliate relationships.

Affiliates have great small business entrepreneurial stories to tell, and we can tell the story about how such a tax harms them.  There are non-profits and schools that use affiliate marketing to monetize and raise funds so there’s a political opportunity there to talk about how this legislation affects us.  We have a very strong story to tell and that is the good news, but we have to continue to tell it.

I think many affiliates need to understand the importance of it.  It was not easy, as Connie Berg of FlamingoWorld can tell you about the fight in Minnesota, she had a hard time getting other affiliates to join her in that discussion and we need people when the time comes in the publishers’ particular state we need to rally and tell the story and thankfully now we’re prepared and we have the infrastructure with the PMA and other associations to do that but affiliates have to do their part if asked to tell their story.

I feel like we are in a much better position take on legislation in various states this year than we were heading into 2009. We’re much better organized as an industry. We have a strong case, but it will continue to take time and resources to educate legislators.

What are Google Affiliate Network’s goals for 2010?

Larry: The mobile opportunity is really big particularly with the increase of phones that are going to be better capable of  browsing websites and things like that.  I haven’t seen very many commerce orientated sites building mobile orientated experiences and until they do that I don’t think there is a huge opportunity for affiliate marketing yet.  I think with a lot more smartphones out there people will become more comfortable and start buying stuff on their phones.  I think if you look at what Amazon does for their mobile shopping experience and compare that with what most other retailers do, which is nothing, that’s why there isn’t tons of opportunity in mobile just yet with some notable exceptions.

For social, there are lots of people trying to figure out how to monetize and we frankly think that no one has figured it out yet.  I think we’re going to see a lot more interesting experiments, some of them are going to be creepy and people shouldn’t be doing them.  If you follow social media blogs you can see examples of what not to do every couple of weeks.  But I think there are good and useful things that social media can be used for to promote advertiser’s products and services and I’m hoping publishers will figure that out and we’re hoping we can help them help to enable that with their advertisers.

Kristin: We are excited about 2010,  we see good things about the affiliate business.  The mantra at Google and it really is true is “focus on the user”, and we’re going to continue to do that.  We have, as Larry said, a lot of hard work to do.  I think we’ve made progress and we’ll continue to make progress in 2010 and so we’re excited about the future.

I want to thank Larry Adams and Kristin Hall for taking time out during his busy schedule to take part in our 2010 Affiliate Industry Preview Series. Stay tuned for our next conversation with game changing and innovative “mystery” guest, that will be published after Affiliate Summit.