How did the deal come together with Global Media Minds, Joe Nemechek, and NASCAR?

The whole thing happened very rapidly. In NASCAR there has been a contraction in the amount of sponsorship money available for drivers due to the economy. GMM approached us literally weeks before the racing season started with the idea. We decided to take on the challenge as a case study with the goal of creating a different way of packaging various elements of online marketing within the world of NASCAR racing. GMM had all these parts for Joe in place that weren’t really being leveraged:  a late 90’s style website, a Twitter account that was sort of being used, and a Facebook account that was only partially up to date. Nothing was really integrated together. So we ripped it apart and put it together in the short timeframe we had. What you see now is just version one of our concept, there are two or three more evolutions yet to come.

How has the response been?

I have to say the attention we’ve gotten so far with this project is phenomenal.  We built the Media Trust brand leveraging social media but I don’t think you really understand the concept of engagement until you get behind the wheel of a social campaign with someone that is a celebrity. We first looked at Joe Nemechek’s personal site and his official site NEMCO Motorsports but decided that we should start from scratch with FrontRowJoe.com.

So we started with the fundamentals putting all the pieces together, setting up tracking to measure sign-ups and clicks, integrating Twitter and Facebook, getting Joe to personally buy into using the social platforms more methodically. Joe began posting regularly and the following grew quickly from about a thousand to just under five thousand users in Facebook and took the Twitter from in the hundreds to just under three thousand.

It’s groundbreaking because none of the other NASCAR drivers, to my knowledge, are remotely leveraging social media the way we did. Our efforts actually brought in two sponsors.  One of these is England’s Stove Works, which is not necessarily a typical sponsor. We were able to drive a half a million dollars in sponsorship revenue. For having put everything together in three weeks we’ve been enormously successful.

It’s kind of allowing Joe to be real spokesperson. Instead of the drivers just wearing the logos he can actually talk to the audience and react.

Exactly!  When we began working on the campaign we spoke with other companies who had sponsored NASCAR drivers and they all said, “We love NASCAR but we just could never figure out what our return was from it.” I talked to the CEO of Liberty Medical and he’s like “I love what you guys are doing!” And he even sent me a picture of his car and was like, “We love NASCAR, we’d love to sponsor it, I just couldn’t figure out how to make sense of it.”  Because what is my logo on the car worth?

But if you can have the driver talking about Liberty Medical its like  now he’s off and running. When the driver is talking about the brand you need the mechanisms in place to be able to really connect with the fan base. Not just through some static website but through interactive mediums like Facebook and Twitter. It’s amazing how quickly you’ll see people coming to that brand and transacting.

That’s how it was with England Stove Works. We drove half a million dollars worth of transactions initiated by our efforts with FrontRowJoe! In a way Joe became a super affiliate. That success with this experiment can certainly be replicated.

Quite an experiment; it seems to have out reached its goals. What were Joe’s team and GMM initially hoping for from this?

We really had no idea. This was a complete and total shot in the dark but it was better than nothing. Joe’s agency had been working with us on other projects and knew that we were able to look at the broad online universe and take a holistic new approach to the channel. It was either that or nothing so what have we got to loose in trying something new?  Let’s leverage Joe’s passion for the fans and history  as a driver and see if we can possibly generate revenue online. Let’s experiment and find out, we have nothing to lose, we have a willing driver, we have a great agency and a group of people to work plus if this model works it can be replicated within the NASCAR industry.

I’d say this has gone metric wise way past anything we could possibly imagine.  What’s great is that the season’s not even over yet and we’re definitely going to have a phenomenal case study.

How did you track the affiliate and social media ROI?

Everything was built in a dynamic environment so we could look at the results daily and start tweaking the campaign as we went. First there was the car itself which had no sponsors, so we thought “Let’s make Joe his own sponsor and put FrontRowJoe.com all over the car.” That would drive fans to a website designed purely with marketing in mind. We started to track metrics to optimize: how many people were coming in, from where were they engaging, what were they signing up for, the newsletter, what products were they clicking on.

Using Google Analytics we measured which channel, Twitter or Facebook, was stronger giving us a very clear picture of our efforts right down to the Tweet. We could see which Tweets and posts in Facebook worked, what type of call actions we used  in the posts did not. It’s been a very effective mechanism for allowing us to adjust as we go.

For the affiliate side, to track offers, we used our own proprietary affiliate tracking technology.  It’s really very interesting, prior to working with Joe, I didn’t realize how many affiliates are NASCAR fans. It’s huge!

For the New England Stove sponsorship we set up a tracking mechanism on their website. When a user came from NASCAR  a special discount or offer would trigger so we could see what the effect of the traffic that we were sending out was.

How are the offers on Front Row Joe picked?

At first it was fairly blind. We just looked at the demographics, the geographics, the “demo-geos”,  and where the races were held. We guessed the categories that would be popular, like DirectTV and offers from Force Factor because that was primarily more the “demo-geo” of Middle America. As the clicks came in we started to find out there were more females interacting with Joe and with NASCAR drivers than there were males which was something that none of us would have expected.  So what we are now doing is looking at the data of who is signing up into the database and which offers are getting interacted with.  Currently all the optimization is being done by hand but we’ll start applying technology to it.

So now that you’ve had this success what do you hope to replicate from the lessons you’ve learned?

What we want to do is really turn Front Row Joe into an actual brand. Not only for Joe, himself, but for NASCAR. The website will be completely rebuilt to focus on providing unique content from each race for the fans with content from the pits, from the front row with the drivers and will also provide visitors a much deeper integration with social media sharing features.  There have actually been other drivers that are interested in taking part after having seen this. Everyone is pretty astounded by the success, especially considering Joe has crashed and burned in every race but yet you’re still getting this incredible traction with the sponsors and the fans.

Once someone has gained some affinity with the fans it doesn’t necessarily matter if they’ve placed in the winner’s circle because they’ve built up this relationship over the years.

Exactly!  You know Angel, I’ve got a pretty big following within online marketing industry but I’ve never been able to generate the kind of response with my personal Tweets as I’ve seen Joe generate with NASCAR fans. The speed and responsiveness from those fans is just phenomenal! People are coming up to Joe in the pits and saying, “I saw your Tweet, “it’s faster than a tweeting bullet” that was great!”

My background is in mass media. Mass media and mass marketing is changing forever to “me media” and “me marketing” and I think this is a great demonstration of that.  And relationship is the point because consumers are getting so smart they can tell if someone has an  authentic social presence or not. We have tons of people coming on the site and saying, “Joe, is this really Joe?”

Which is why it’s important to have Joe excited and fully involved for this to work. You have to have the authenticity of the voice of these guys and this is what we’ve done with just one of them. The success certainly can be replicated.

Still, you have to be a little careful not to bastardize this because there is a lot of responsibility that comes along with engaging fans.  Social media is unregulated and if marketing agencies get a hold of a medium for the wrong reasons it can totally ruin this channel  just as quickly as it ruined other channels. I think there’s a big responsibility that comes along with this as we start seeing power of harnessing social media. Done right it can create a lot of value for the fans.

Smackdown: Consumers Privacy vs. Advertiser Revenue
Time: Friday March 12, 2PM
Hashtag: #smackdownprivacyrevenuet

The panel premise that the FTC could ban all forms of tracking consumer web activity is a nice but alarmist hook. Still, it is true that the FTC is being more aggressive in policing online activity and the assembled panelists should provide advertisers some clear insights into compliance issues.

Panelists include:

• Alan Chapell, President, Chapell & Associates
• Alison Pepper, Director of Public Policy, Interactive Advertising Bureau (IAB)
• Jordan Mitchell, Vice President of Data Intelligence, Rubicon Project
• Ingrid Sanders, Director AdAdvisor,  TARGUSinfo

Crime Scene: Digital Identity Theft
Time: Friday March 12, 3:30PM
Hashtag: #digitalidtheft

The theft of digital identity is often easier and sometimes more damaging than identity theft offline. As social media mixes more with ecommerce this will become a larger problem. Learning methods to make that ID more secure is valuable information. Hopefully Bill has the sense to not make it too pitchy.

Panelists include:

• Bill Morrow, Chairman & CEO, CSIdentity
• Aaron Strout, CMO,  Powered.com

Eight Ways to Deal with Bastards
Time: Friday March 12, 5PM
Hashtag: #8waysdealbastards

As the saying goes, no one ever has a good day in customer service. This is especially true when, let’s face it, some of your customers  are inevitably  bastards. This session offers a few copeing mechanisms.

Panelists include:

• Bryan Mason, Founder, Small Batch Inc / Typekit
• Jason Shellen. CEO & Founder,  Thing Labs
• Lori McLeese, Chief People Officer,  Room to Read
• Karen Walrond, Founder, Chookooloonks Media

Big Brother in Your Brain: Neuroscience & Marketing
Time: Saturday March 13, 11AM
Hashtag: #bigbrotherinyourbrain

I’m a science geek, so when you mention the word “neuroscience” in a panel about marketing I’m ready to jack in. The concept of using MRIs to analyze brain activity when exposed to different marketing stimuli is very interesting. So is the brewing battle of math (analytics) vs. creativity; somehow I don’t see the two concepts as being mutually exclusive. All the makings of a great session!

Panelists include:

• Roger Dooley, VP Digital Marketing,  Hobsons
• Gary Koepke, Co-Founder, Modernista!
• Eric Kogelschatz, Co-Founder, shark&minnow
• Dr. A.K. Pradeep, President/ CEO, NeuroFocus
• Dr. Danielle Stolzenberg, PHD, University of Virginia

Sleeping Giants: Digital Awakens TV and Media
Time: Saturday March 13, 5PM
Hashtag: #designemergingmedia

Giants always follow the money. Or the beanstalk. Digital has now proved that  there is money to be made online, that it is sustainable, and can draw large clients; therefore, it should be no surprise that the giants of traditional media are paying attention. Sponsored by Razorfish, who should know a thing or two about the whims of giants, the session will take on fundamental impact digital will have for advertisers and marketers.

Panelists include:

• Domenic Venuto, Managing Director of Client Solutions, Razorfish
• Andrew Pimentel, Director of Account Planning, Razorfish

Selling Subculture Without Selling Out
Time: Sunday March 14, 12:30PM
Hashtag: #sellingsubculture

Having worked with Jones Soda online marketing efforts for nearly four years I know full well how difficult it is to balance the need to post large sales numbers with the imperative to protect the brand/consumer relationship. This session provides some guidelines on how to hit those numbers without selling out.

Panelists include:

• Richard Nash, Founder, Cursor
• Raymond Leon Roker, Founder, URB Magazine
• Molly Crabapple, Founder, Dr. Sketchy’s Anti-Art School
• Jeff Newelt, Comics Editor, SMITH Magazine
• Gala Darling, Founder, iCiNG

Online Advertising: Losing the Race to the Bottom
Time: Sunday March 14, 3:30PM
Hashtag: #racetothebottom

We spend a lot of time in this industry thinking about “how” and “where” to advertise. The concepts of building real relationships with publishers, making sure the advertising is doesn’t take away from the content, and respectfully dealing with the audience are all topics that are usually just paid lip service. Glad to see this session challenging us to change the way we think.

Panelists include:

• Jim Coudal, Principal, Coudal Partners
• John Gruber, Founder, Daring Fireball

Open Science: Create, Collaborate, Communicate
Time: Monday March 15, 9:30AM
Hashtag: #openscience

Ok, I will admit this made the Top 10 because, well, as I stated earlier I’m a science geek. Ever since I interviewed Scott Maxwell for Gnomedex two years ago I’ve been fascinated about social media’s ability to pry open the doors of previously sequestered industries. It will be nice to see what progress NASA and others have made since then.

Panelists include:

• Ariel Waldman, Founder, Spacehack.org
• Dr. Kirsten Sanford, Ph.D, This Week in Science
• Jessy Cowan-Sharp, Collaborative Web Technology Developer, NASA Ames Research Center
• Natalie Villalobos, Community Manager, Google
• Tantek Çelik, Computer Scientist,  Microformats.org

Web Series 2.0: Big Campaigns on Digital Dollars
Time: Monday March 15, 11AM
Hashtag: #bigcampaigndigitaldollars

Big campaigns don’t always require big dollars. In the social space it is about smart engagement. Smart advertisers are turning to producers and content creators to help maximize their budgets. This is the perfect panel to find out how.

Panelists include:

• Melissa Fallon, VP of Television and Emerging Media, Davie Brown Entertainment
• Chris Hanada, Co-Founder, Retrofit Films
• Milo Ventimiglia, Co-Founder, DiVide Pictures
• Wilson Cleveland, SVP & Director, CJP Digital Media
• Andrew Hampp, Reporter, Advertising Age

Will Kiva Kill Your Nonprofit? Donations 2.0
Time: Tuesday March 16, 11AM
Hashtag: #kivakillnonprofit

New fundraising models are changing the ways donors can interact with nonprofits. Kiva, of course, is one  a leading example of success from  such a model. While I don’t feel that the Kiva model will hurt the majority of nonprofits, I do feel that they will need to adapt to new methods of outreach to successfully maintain their donor base.

Panelists include:

• Skylar Woodward, Designer/Lender, Kiva
• Ruth-Anne Renaud, VP of Women’s Philanthropy & Interactive Marketing, Opportunity International
• Milo Sybrant, Online Fundraising Manager, Amnesty International USA
• Michael Cervino, Vice President, Beaconfire Consulting
• Katie Bisbee, Executive Director, DonorsChoose.org

Hope you get back to your hotel in one piece and you enjoy the sessions at SXSW 2010.

The law also differs from its Amazon Tax brethren in that it purposefully, and with the support of large affiliates like ShopAtHome, attempted to spare Colorado affiliates from the fate they suffered in other states where similar laws have passed. For the Performance Marketing Association the removal of affiliate focused language was seen as a victory.

Unfortunately the attempt protect affiliates failed.

Amazon, who provided lobbyists during the fight against HB 1193, served termination notices over the weekend to thousands of Colorado affiliates saying:

We and many others strongly opposed this legislation, known as HB 10-1193, but it was enacted anyway. Regrettably, as a result of the new law, we have decided to stop advertising through Associates based in Colorado. We plan to continue to sell to Colorado residents, however, and will advertise through other channels, including through Associates based in other states.

Amazon is not alone in this stance. A handful of other companies including Oriental Trading Company, Hammacher Schlemmer, Terry’s Village and GiftBaskets.com have terminated affiliate relationships in the state. With Amazon’s announcement over the weekend many other are expected to follow suit including Overstock.

Many members of the PMA feel that such actions are due to advertisers who have not taken the time to familiarize themselves with the law’s new language. In Amazon’s case, Amazon does say it will continue to sell to Colorado residents, whether they will comply with providing lists of its customers who are Colorado residents to help with enforcement has yet to be seen. Knowing Amazon’s past behavior it is doubtful and a legal challenge against this legislation won’t be surprising.

As a model matures in order for it to maintain a business role, make no mistake social media is about business, its impact needs to be quantifiable. Forrester Research estimates that social media will make up 3 percent of overall interactive marketing spend in the US in 2010 with the highest delta of growth in any channel over the next four years. As social media’s channel grows so will the pressure to quantify.

Brian Solis, author and principal of the FurtureWorks agency, recently posted a well written piece about the Maturation of Social Media ROI on Mashable. In it he tackles the main crux behind the issue that many CMOs are spending against social media without being able to quantify a return on those efforts. Brian believes this is:

“A direct result of not tying activity to an end game, the ability to know what it is we want to measure before we engage. Doing so, allows us to define a strategy and a tactical plan to support activity that helps us reach our goals and objectives.”

Warm and Fuzzy Metrics

It used to be that simply being invited to or crashing the social media party was enough. Companies hired interns to catalog content and rushed to create Facebook Fan Pages and Twitter accounts, often because everyone else was doing it.

Then came what I like to call “warm and fuzzy metrics”. Words like engagement, participation, and involvement became key terms for defining online interactions with consumers. Similar to views in CPM, these terms are measured in volume of followers or retweets. Influencers sprouted from this tactic as a way to amplify that volume; after all you wanted to have the best DJ at your party.

Then came terms like trust and affinity; these were less fuzzy in nature and involved a brand’s core group of followers.

Of the warm and fuzzy metrics of social media ROI, only customer service is tangible. Both in terms of the increased ability for people to rate and review products, as well as the opportunity for customer service teams to engage and provide proactive response.

If your company is just participating in social media than maybe the fuzzy metrics are enough. If your company is running social media campaigns and considers social media a marketing channel than fuzzy metrics are a great way to get your budget slashed. It is no coincidence that, according to MarketingSherpa, inability to measure ROI, lack of budget funding, and management resistance are barriers to companies implementing social media campaigns:

For those who insist that “marketing is not sales”, I invite you to use that exact statement with your CMO and see how quickly your budget is diverted elsewhere. As David Vellante, co-founder of ITCentrix, Barometrix, and The Wikibon Project, cautions:

“I’ve seen multimillion-dollar print and television advertising initiatives get the green light because CMOs understood the media — and I’ve seen $10,000 social-media efforts scratched because execs didn’t get it.”

The Key is Return on Ad Spend

ROAS (Return on Ad Spend) is what many CMOs will look at when considering budget allocation against a marketing channel. By definition it has a tighter set of parameters than ROI because it doesn’t consider less fuzzy elements like branding or engagement. This metric for success is specifically looking for a direct dollar value generated as compared to the actual budget being spent.

If, as a study by Bazaarvoice indicates, 80 percent of CMOs expect upwards of 5 percent of their revenue to come through the social media channel then the spend against generating revenue better be tracked.

According to Fast Company, Dell made over $3 million in revenue through the Dell Outlet account on Twitter.  But, considering much of what happens in Dell’s Twitter account is coupon or offer driven, what was the true ROAS of hitting that $3 million? Never mind the additional cost of coordinating social media tactics and messaging within a company as big as Dell which, as Lionel Menchaca, Chief Blogger for Dell Inc says is challenging, “Executing against all those [social media] strategies will take a lot more effort and collaboration between many departments within the company.”

More telling is a recent report by Omniture on the impact of a social media campaign for National Geographic. While the campaign was seen as a success, in the report the Omniture analyst states that traffic from social media is 20x less likely to purchase than average visitor.

Laying the Foundation

What rings true for Dell is true for both large and small business interested in participating in social media.  Collaboration between all stakeholders is necessary in order for a campaign to reach its potential.  Here are the steps you need to take to lay a proper foundation for launch.

1. Know Your End Game: As Brian Solis said defining your end game is necessary in order to be able to quantify results.  Know what are you trying to accomplish and how you want to try keep track of it all.
2. Define Your Metrics: What metrics do you need to track to quantify results: Leads, Registration, Sales?
3. Check Your Tracking: I can’t tell you how often a new client doesn’t have the right pixel/cookie set on the right confirmation page. If your success metric is sales make sure you’re not just tracking leads. This requires testing.
4. Set Expectations: Benchmarking is great way for you and your CMO to have realistic expectations from a campaign. Fireclick and Coremetrics are two tools that can provide benchmarks based on industry averages related to conversion rates, cart abandonment, and other valuable data. They also allow you to pull data from a specific vertical.

Intelligence Gathering

This is where you gather the numbers that will let you know how your campaign is doing and where the dollars are. There are a lot of tools out there that will provide pretty dashboards but few that provide useful data. Here are some of the tools I recommend:

1. Google Analytics: Google Analytics is the defacto analytics system in most companies. You can track visits, page views, bounce rates, etc. Be sure, if sales are a key metric, that the ecommerce portion is activated.
2. Hitwise: Owned by Experian, Hitwise relies on ISP data of approximately 10 million users in the United States alone. Although an expensive solution, their Clickstream data provides some of the best intelligence on upstream and downstream traffic to your website.
3. Coremetrics: Along with their benchmarking services Coremetrics offers an analytics suite whose main differentiator rests in what they call their LIVE (Lifetime Individual Visitor Experience) Profiles. This is essentially an analytics expansion on the concept of customer types.
4. Fireclick: Owned by Digital River, is a streamlined version of many of the tools available for free through Google Analytics but in an easier to customize interface. The main advantage here is their Advanced Marketing Suite which ties you into other vendors and components in the Digital River portfolio.
5. Radian6: Radian6 is a buzz monitoring software that allows you to monitor certain keyword sets and capture data round them. The data includes such things sentiment, engagement, reach, and inbound links. It also allows you to port that data to your CRM.
6. HubSpot: In some ways HubSpot is more of a site optimization tool than an analytics tool. It does compile interesting sets of data around competitors and around reach as well as lead identification tools.
7. Omniture: I have a love/hate relationship with Omniture. Used correctly, with sufficient internal technical resources as well as buy-off from the marketing team on consistent use of campaign hierarchy, SiteCatalyst along with the other Omniture, is an amazing if overly complicated resource. It is however a very expensive one and there is a reason that Omniture holds yearly conferences on how to use their product.  They have a great Facebook app measuring toolset.

Making Sense of it All

Having the tools to capture the data you need is great but numbers are of little value if they are not actionable.  Here are some guidelines to avoid drowning in the data:

1. What to Do When the Numbers Don’t Match: First of all get the notion of the numbers matching out of your head. The numbers between two analytics systems will rarely, if ever, produce an exact match. The objective is to look for trends in the data and ignore anomalies that are not statistically relevant. If the data matches within 10 percent or less variable then consider the data to be inline. If the variant is 11 percent-49 percent then it might be worth doing some due diligence. For instance are all the pages that should be tagged, tagged correctly? If the variant is greater than 50 percent then something is wrong with the setup itself or with one of the systems you are using.
2. Spotting Trends is Vital: One of the most common mistakes I see is when business get excited about high sales numbers while completely ignoring the fact they overspent to get those numbers. Sales matter little if ROAS is in the negative. Trends are a great way to spot deltas which often provide indicators of the health of campaign. Sample key trends are:
   1. number of new to file customers
   2. number of transactions
   3. changes in repeat customers
   4. number of customer referrals
   5. uplift in other marketing channels
3. Looks for Wildcards and Outliers: Sometimes you are so focused on the campaign data that you become blind to important clues. My favorite personal example of this was during the measurement of a campaign that Jones Soda ran with I Can Has Cheezburger in 2008. If you looked just at the number of sales that directly came from the I Can Has Cheezburger website the campaign numbers barely broke even.  However, when we looked closer at the analytics data we saw 12,000 additional posts created because of the campaign. When attributable sales from those posts were factored in sales showed 172 percent month-over-month growth and 42 percent year-over-year growth! With the amount of distribution sources available in social media always take time to see if elements of your campaign have been distributed beyond the initial sites you targeted. It will allow you to spot new opportunities to expand your campaigns.
4. Cross-channel Cannibalization and the Last Cookie in Debate: Most advertisers use cookies to know which ad network to pay and which marketing channel to credit for sales. Shannon Paul, community manager for PEAK6 Online and OptionsNewsNetwork, had a great post on this debate here. Cross-channel cannibalization is when the marketing costs/efforts of one marketing channel are not considered because a different marketing channel is being given credit for them. This impacts both budget allocation and proper allocation of costs. Since social media buzz often serves to uplift other marketing efforts they are most impacted by improper allocation.For example, a social media click originating from a Twitter focused campaign refers a customer to the site but a coupon affiliate closes the sale by providing a coupon to the customer. In a “last cookie in” system only the affiliate in this example would get credit for the sale. In an ideal world both the first and last referrer of a customer would be cookied so that you would know which channel is referring new customers and which is closing them, thus properly giving credit to both channels and minimizing cannibalization. Awareness of the complexities of tracking multi-channel efforts is key in order to properly coordinate award of credit to all involved channels.

Final Thoughts

If you are managing a social media campaign or are a business eager to launch into social media, remember to embrace the numbers. Numbers are sexy. They help spot costs and inefficiencies you could avoid; help identify opportunities you could be missing; and often determine which budgets will be renewed.   The dollar signs are there, you just have to know where to look.

What’s most frustrating about the seemingly never ending folly of such bills is that even their authors, Senator Emmett Hanger, Jr. in Virginia’s case, seem to know they are bad bills. Just take a look at the fiscal impact statement (pdf) published by the Senate Finance Committee of SB660:

When similar legislation was enacted in Rhode Island and North Carolina, large online retailers ended their affiliate programs. If this were to happen in Virginia as a result of this bill, there would be no additional revenue collected from the enactment of this bill. In fact, by ending affiliate programs Virginia vendors  would likely lose business and remit less Retail Sales and Use Tax to the state.

The knowledge of what happened in Rhode Island is telling since despite the fact Rhode Island collected no revenue from the tax the Virginia Senate Finance Committee went on to approve the bill to the Senate floor.

SB660 now moves to the Virginia House where it will have slightly stiffer opposition than the Senate. Affiliates still have a chance to rally in opposition. One good pressure point, as Adam Viener of Imwave pointed out, is Governor Bob McDonald who delivered the GOP response to President Barrack Obama’s State of the Union address in which he said:

“We must enact policies that promote entrepreneurship and innovation so America can better compete with the world. What government should not do is pile on more taxation, regulation, and litigation that kills jobs and hurt the middle class.”

The fight against HB1193 in Colorado serves as a great example of what a grassroots effort can do. Although the bill was not defeated it was changed significantly by the efforts of a group of around 150 affiliates. Recently Lisa Picarille, Content Strategist for the Performance Marketing Association, wrote an inspiring article covering those efforts. In the article Lisa quotes Nicki Hayes, a director at Adperio, as saying,

“Personal, specific communication also seemed to help. While organized efforts are great, the biggest response I received was by physically going to the Capitol to visit Senators (with other crusaders) face-to-face, and following up with those Senators via email. If they see you putting the time and effort into fighting the bill, they will give you the time and attention to at least argue it.”

Many people in the affiliate marketing industry consider the battle against HB1193 as a victory, affiliates were removed as the target of the bill. It should be noted that the exact impact of the legislation if enacted is still unknown. There is some debate as to how the new changes will impact ecommerce in Colorado. Since retailers are risk adverse and Colorado did leave the ludicrous subpoena clause in the bill, those concerns are not without warrant.

That being said there is no doubt that it was the efforts of Colorado affiliates that changed the course of HB1193. They did so despite facing a one-party controlled legislature and a bill essentially introduced by Governor Bill Ritter as part of what has become  known as Ritter’s Dirty Dozen. Those are some incredible odds to overcome.

Affiliates in Virginia, and other states facing similar legislation, still have a chance to stop such bills.

For resources on how to contact and educate your local representative visit either the Performance Marketing Association here, or Affiliate Advocacy here. Both are great resources.

Under the guise of working towards stopping Colorado’s version of the so-called Amazon Tax, and in front of industry counterparts and members of the Performance Marketing Association (PMA) gathered to testify against the Senate version of HB 1193, ShopAtHome took the opportunity to flex its muscles.

Earlier Rebecca Madigan, Executive Director of the PMA, had emphasized how crucial it was for affiliates to present a cohesive front so that the negative impact such a bill would have on small business in Colorado would be readily understood by legislators.

With apparent disregard for the unity in message theme, Marc Braunstein, Co-Founder of the Belcaro Group who owns large affiliate ShopAtHome, did the industry no favors when he presented his testimony to the Senate Finance Committee.

In an unanticipated move, instead of giving testimony as to how the bill would hurt Colorado businesses, he stated in its current form he was not opposed to the legislation. Despite the fact that, according to his own figures his business might suffer a drop of 20% in revenue if the bill was passed, he assured senators that the legislation would not hurt ShopAtHome. He further stated that the intended targets of the bill, Amazon and Overstock who are expected to terminate Colorado affiliates, were of little significance to him and, that after a short educational period, advertisers would return to ShopAtHome because of their compelling model.

But Marc Braunstein didn’t stop there. He used his time on the microphone to flaunt ShopAtHome’s sales numbers, their ability to retain legal advisors to deal with such legislative matters, and even managed to suck up enough to the Senators that one suggested Marc should look into getting a binding exemption to the tax.

Now I don’t fault Marc for looking after his own business. Any shrewd business man might do so. And this is still a free country, Mr. Braunstein can use his time in a public forum as he sees fit.

I fault Marc for throwing fellow Colorado affiliates under the bus despite having no compelling reason to do so. Marc didn’t do so out of necessity, he did so because in his mind they were small and insignificant. He could have leveraged the size and obvious importance of ShopAtHome’s standing in Colorado to support his fellow affiliates. Rather, his grandstanding robbed affiliates of their valuable time in front of legislators who have the power to devastatingly impact their business. He was a one man filibuster.

In an industry that is full of cutthroats it is hard to stand out. But as many affiliates in the industry said on Twitter, Marc just won the public douche bag award. I hope he’s proud.

Nevertheless, despite such lack of clarity ThisNext continues to grow, announcing today that they have acquired competitor Stylehive for an undisclosed amount. Boasting 60,000 members Stylehive’s caters to a more female audience with products centering on the fashion and beauty markets.

The announcement also heralds the establishment of umbrella company Curatemedia that both companies will operate under. Prior to the acquisition ThisNext closed a Series C round of funding for $1.2 million dollars. The capital will be used to develop additional shopping tools, facilitate commerce functionality and to fuel the growth of Curatemedia into new verticals and categories.

They do have some heavy competition in the “social shopping” sphere with such sites as CNET Reviews, Kaboodle and Stylefeeder which was recently acquired by Time Inc. That of course is without taking into account the shopping that occurs on social networks like Facebook. Obviously this growth in social shopping proves CEO and Co-founder of Like.com Munjal Shah wrong when he stated that visual search was killing social search. That battle appears to be far from over.

What makes Colorado different than other states when it comes to the so called Amazon Tax?

So my background is not politics, but with all the grassroots battles we have fought in 2009 I’ve certainly learned a lot. The thing about Colorado that I haven’t seen in any other state is the political nature of this battle. Usually the thing that hits home and reaches state legislators is that these type of advertising tax bills will cost the state jobs. They will put small business out of business. And at the end of the day the State will still not collect any revenue from the tax. That message usually hits home.

They don’t seem to hear that in Colorado. In the House they kept saying over and over, “We have a budget shortfall and we need the money”. And they just don’t seem to hear the fact that there just won’t be any money. All they have to do is look at what happened in Rhode Island. Advertisers have control over their own business decisions and we saw almost 200 terminate relationships in other states. There is no reason why they won’t terminate in Colorado.

But what we’re seeing is this very coordinated effort by the Democrats, who happen to have control, in trying to push through all their tax bills regardless of whether the tax is sustainable, enforceable, or who it will hurt. Each individual bill doesn’t really matter to them I think. That’s my entire perspective from here, after getting beat down pretty hard yesterday (laughs).

The thing that we have to remember with politicians, the thing that I’ve learned, is that they always have some sort of higher purpose beyond the bill itself that they’re trying to achieve. In Colorado’s case the fight seems very partisan. Democrats have control of the House, the Senate, and they also have control of the Governor’s office. Bill Ritter, the current Governor, announced a couple of weeks ago that he’s not going to run for re-election. Essentially he is a lame duck governor. I think what we are seeing in Colorado is a very one sided push on legislation, sort of a rush to ram every bill through just in case the Democrats lose their majority.

On top of that, for a number of the House of Representatives in both parties this will be their last session. They are hitting up against term limits so we have a lot of lame ducks on top of the Governor. Because of that there was very little negotiation in the House from either Republicans or Democrats. Unfortunately as an industry we’re just getting dinged-up in the process.

How was the affiliate turn out during the House portion of the fight against bill 1193?

We had this amazing grassroots turnout against HB 1193 (pdf). We’ve had about 150 people actively writing letters, calling their legislators, and going to visit them at their office. We had 110 people show up at the Finance Committee Hearing last week. It’s been a tremendous show of force. I believe that’s going to make a difference. That’s the main tool that we have this tremendous grassroots participation and the citizens of Colorado showing up and expressing their dissatisfaction with this bill.

I have heard some express a little bit of frustration over lack of resources and coordination right now. Can you talk to that a little bit?

Yes, well…the PMA, as an organization, is trying to manage this, and it is taking up all of our resources, so yeah, we are a bit stretched. The issue that we face is there is a lot of activity going on in the background but we’re not necessarily telling the industry about it. That decision stems from counter-efforts we’ve been seeing from the American Booksellers Association (ABA) who are pushing heavily for this bill. For example, last week during the House hearing we heard testimony from a woman, the owner of a small bookstore, who testified she was advised by the ABA.

We had a similar problem in California. There we had a bunch of affiliates reach out to the blogosphere to say,  “We need as many people as we can to show up in Sacramento.” We used the affiliate community and all the blogs in associated industries to coordinate our presence there. Sure enough, in Sacramento ABA representatives showed up (laughs). We had announced positioning in our statements on the blogs, that we’re small business, that we are not establishing nexus; we had all these very logical arguments why this law is a bad idea. The ABA went up after us with point by point counter arguments. Like they had prepped from our announcements.

So when I heard this woman mention them, I thought, “Oh no, here we are again.  They’re already watching what we’re doing.” To counter that we’ve setup a registration form on the PMA site and we’ve asked people from Colorado to register with us so we can keep in communication with everybody via email only.

It is one thing to talk to the industry, to those involved on the ground, about the status of things; but what we don’t want to do is give the opposition the tools to out-maneuver us.

How will the House amendment attempting to “exempt” electronic affiliates impact matters?

It is a unique clause (pdf) that was negotiated at the House Finance Committee hearing. On the surface it looks like it is good for affiliates but in reality that’s just not the case. Based on the amendment, the House defines an affiliate as someone who makes a public referral to an online site or a face to face referral to an online site; specifically excluding an electronic solicitation of business.

Strangely that language essentially targets groups like the Boy Scouts, PTAs organizations, and churches who have web sites that have affiliate links as a way to raise money. I’m not at all sure about the political “logic” behind that (laughs).

But here’s the reality. By the nature of the industry model an advertiser does not know if an affiliate is physically directing traffic to their web site. They have no idea if they are referring business through online advertising or via face to face interaction. Rather than take the risk, advertisers will terminate if the bill passes.

This is particularly true in Colorado because of a particular clause in HB 1193 which is very unique. It essentially says the State has the ability to subpoena out-of-state advertisers believed to have nexus, and actually says that if they fail to comply those advertisers can be arrested. Now, there is plenty question as to the constitutionality and enforceability of that clause but ultimately advertisers are risk adverse. They will not take any chance at all and will likely terminate their affiliate relationships.

The “electronic” clause does not solve anything at all. It was a political move to pacify everyone in the room.

What is the next step in the upcoming fight in the Senate? What are some of the take-aways that we can learn from the loss in the House?

For each state that this comes up in we really need to understand what the political situation is and we need to make sure that our messaging reflects what we think might be successful with the political situation. We hope that other states aren’t quite as bad as Colorado because they’re in a real political battle that has, like I mentioned, nothing to do with the reality of the bills.

The fight in the Senate might be a little easier to manage. First of all there are fewer of them, which is helpful (laughs).  Unlike the House, in the Colorado Senate there is a much lower percentage of Senators dealing with term limits, so they have re-election on their mind which is something we can leverage.

We don’t quite know what the Colorado Senate is going to do, what their next moves are, who the decision makers are going to be, or when they’re going to have testimony. So we’re in this waiting period right now. In the meantime we are leveraging the political advisors we have access to in order to determine how to approach individual legislators.

What groups is the PMA coordinating with in Colorado?

We’re working with this group of political advisors which includes a dozen or so political experts from a lot of different companies, some very large companies like Google, Yahoo, Amazon, AOL, Microsoft, and Apple. We’ve been able to work with them and synchronize lobbying efforts. And there are other associations that have to do with internet legislation that we have been working with, organizations like Internet Alliance, Tech America, and Net Choice. We are all trying to fight these bills, maybe for different reasons, but sharing our information is the most effective route.

What would you like to see from the grassroots groups that are trying to self-organize in Colorado?

The local groups are fantastic because, of course, they know who their peers are and how to reach them. It was the grassroots groups that actually found the 150 people who have been consistently participating. We’re trying to work closely with them to create tight coordination of our efforts. There are a couple of critical reasons why we need tight coordination. One is effectiveness. The more people we can get to be on message at the same time  allows us to generate the more attention. It is very easy then to get the legislators to understand what we are talking about.

The danger is that if we don’t coordinate we risk the legislators getting confused, hearing different things that are not central to our argument, and causing them to fixate on things the opposition is saying.

For example, take North Carolina. That was a state where a similar law was passed. What we saw happen was that all of the legislators on both sides of the aisle, Representative and Democrat alike, became completely fixated on Amazon. The bill became all about “get Amazon, get Amazon, get Amazon”, and there was nothing we could do to convince them that there were small businesses that were being devastated in the process.

I am concerned the same thing might happen in Colorado if we don’t stay on point, if we don’t stay with really simple messages. There are probably a hundred reasons why this law is a bad thing, but we need to stick with 2 or 3 that we think will be meaningful and will change the minds of the legislators.

OK, so what are those 2 or 3 points?

Collectively with our lobbyists we are working to figure out what the vulnerable pieces are; where the opening in the armor is, if you will. In the House we thought small business and job loss should be enough but it wasn’t. What was really frustrating was that it wasn’t even raised by the Representatives who are supposed to be against this bill. So with this next round we are trying to figure out what is the right position.

It is something we will disseminate to the group soon. If local affiliates want to be informed we encourage them to get on our email list.

What can the local small affiliate who is worried about losing their commission, their business, and maybe their livelihood do to feel that they’re not just sitting and waiting for the other shoe to drop?

With this kind of a grassroots campaign where there’s already been a big push initially, it is common for participation to diminish quickly. It’s really hard to rally people. But here we have a core group that’s really excited, that wants to keep pushing and that core group is much larger than we’ve seen in other states.

Just to give you an example, in California there are 25,000 affiliates in the state and we got about 15 people to consistently help in terms of showing up in Sacramento (laughs).  Thankfully they were a very efficient 15 folks. There are 4,200 affiliates in Colorado and we have 150 that keep pushing really hard. It’s great to see that kind of turn out.

Obviously they can write letters to the representative in their district (here is a list of Colorado Senate districts). We will be distributing letters specifically for Colorado that LinkShare helped put together.

Beyond that it is really important to coordinate the push. Our lobbyists have been speaking with Colorado Senators since Friday. They’ve worked all weekend gathering information. We will be coordinating a campaign this week specific to the Senate.

The upcoming hearing of the Senate version of HB 1193, sponsored by Senator Rollie Heath, is scheduled for Thursday, February 4th with the Senate Finance Committee which will start consideration around 9:30 a.m.  It is vital that at this hearing we have a strong turnout.

What would you like to see advertisers do in terms of supporting Colorado affiliates in this fight?

I would like to see advertisers get involved and communicate with their affiliates as well as communicate with the Colorado State legislators. Advertisers can contact Senators directly or even better, have them work through me at the PMA and we can make sure information gets to the ears of the decision makers.

Is there anything else you want to cover in terms of messaging?

We need people to hang in there and keep fighting even if they are frustrated. This is definitely one of those marathon situations. There are so many analogies: this is a football game and we are only in the third quarter (laughs). If you live in Colorado and you haven’t heard what is going on you can register on the PMA website to get on our email list so you can hear blow-by-blow what we are doing to win the fight. We just have to keep working together and leverage the tremendous grassroots participation because I think that is going to be the most effective tool we have.

I want to thank Rebecca Madigan for taking time for today’s interview.

Like its distant second competitor Google, Baidu has been searching for ways to expand its profitability. Thus the appeal of tapping Rakuten’s infrastructure to create a ready-made proven ecommerce model custom built for China.

As Kentaro Hyakuno, Senior Executive Officer of Rakuten, put it, “Baidu, with its vast reach and deep user loyalty, is the perfect complement to Rakuten’s extensive experience in the online B2C sector.”

The mall, which at an estimated cost of at least the equivalent of $50 million in US dollars will be the largest of its kind in China, is scheduled to launch in the latter half of 2010 with Rakuten owning 51% and Baidu owning 49% of the venture.

The timing of this news coincides with LinkShare Symposium West which starts tomorrow, January 28 in San Francisco. With the launch of the Google Affiliate Network, LinkShare’s market space has been slipping. Being able to leverage its strong affiliate relationships in Q4 of 2010 to help back the launch of such a mall is definitely just what the doctor ordered. Conversely this has the potential of making LinkShare more appealing to US advertisers who are eager to find inroads to a Chinese audience.

According to Mark Kirschner, Chief Marketing Officer for LinkShare, the opportunity is real as “LinkShare is the affiliate marketing platform of choice for Rakuten, so everywhere they go, we go with them.”

It will be interesting to see what announcements LinkShare has in store for the industry at Symposium.

Sponsored by Colorado State Representative John “Jack” Pommer, who is also Chair of the Appropriations Committee, and Senator Rollie Heath, HB 1193 is comprised of the same DNA as the so-called Amazon Tax that was passed by New York State in 2008 and which is currently making its way through a series of legal challenges lead by Amazon. In its current incarnation Colorado’s version of the bill does not stipulate a minimum amount of revenue for nexus and  mistakenly treats affiliates as a sales force rather than as publishers  engaging in a method of advertising.

While I don’t condone the way Overstock President Jonathan E. Johnson III callously uses affiliates as bargaining chips, this type of tactic worked quite effectively in California with AB 178 which was ultimately led to a veto by California Governor Arnold  Schwarzenegger. Schwarzenegger even mentioned and appealed to Overstock directly in his reasoning prior to the veto.

In an effort to display small business solidarity and put a face to those in the affiliate industry who would be hurt by Colorado HB 1193, Brian Fox, Senior Director of Business Development at  Adperio, has organized a  meeting at the Legislative Service Building, located on corner of East 14th Avenue and Sherman St., which is directly across the street from the Capital Building. You can find more about the group on Facebook here.

To find out more about HB 1193 visit either the Performance Marketing Association here, or Affiliate Advocacy here. Both are great resources.

If you wish to contact Rep. Jack Pommer you may do so through the following: email:  jack.pommer.house@state.co.us; phone: 303-866‐2780.

If you wish to contact Senator Rollie Heath you may do so through the following: email: rollie.heath.senate@state.co.us; phone: 303-866-4872.