Ad$ense: Threat or Savior for Publishers

The second half of Stephen Messer’s lunch talk at Affiliate Summit was a discussion on the effects of AdSense on affiliates. This is a hot topic and I am glad to see that it is getting focus at the highest levels of affiliate networks. Lunch wasn’t the place to highlight the issues as I see them so I will take it as an invitation to continue the debate.

AdSense is the best thing since sliced bread for affiliates

While I like that Stephen raised the issue in a public forum with all possible affiliate constituencies in attendance, I disagree with his premise and conclusion.

Stephen’s main points were:

• Google disintermediates publishers (affiliates)
  
• Google gives the same results to all publishers
  
• Google does not give transparency into the revenue share it gives publishers
  
• Google does not give information on customers

Read that list and change “Google” to “The average merchant”. That sounds more true to me.

Disintermediation: Merchants have been disintermediating affiliates for years. If we send a customer to a merchant and the user makes a purchase, the merchant is counting on retaining the customer and sending e-mails to the customer in order to get the customer to go to the merchant directly. I have an interesting e-mail that Amazon sent me last week stating precisely that. Then there are merchants like Buy.com that have decided to become affiliates and send e-mails to customers to get them to go to Yub.com, Buy.com’s shopping mall full of affiliate links.

Same Links: Google’s AdSense evaluates each page, discerns the most appropriate keyword(s) from the content on that page and serves results based on that. Affiliate networks allow affiliates to choose from a list of links that are the same for all affiliates or use datafeeds that are the same for all affiliates. In some cases, there are special links or coupons for top performing affiliates (and, yes, we love those!) If you are thinking that you have no control over the results on your page, publish better content.

Revenue Share: It is true that Google doesn’t give the revenue share percentage but it’s not hard to figure out if you really want to. On the affiliate side, there is no transparency in VIP commissions. This is one of the reasons for the rise of CPA networks (the other great risk to the Big 3 networks). CPA networks give “near VIP commissions” from the first sale. A small affiliate can do well with most merchants in CPA networks. The big networks generally don’t help small affiliates. Mid-tier affiliates get some help and get VIP commissions on some programs. The top tier lives large. (If you don’t know about VIP commissions, get out of affiliate marketing.)

Customer Information: Google gives us no customer information. Linkshare gives more customer information than any network. That said, Google allows publsihers to use channels. Publishers can measure if affiliate offers or AdSense performs better for any given merchant.

The missing piece of the argument is that AdSense is supplemental to affiliate marketing for publishers (note that I am calling us publishers here because this choice makes us all more than merely affiliates). Merchants need to earn their placement on publishers pages. The days of affililates being the cheap source of performance-based traffic may come to an end. Google pays on the click. Publishers do not need to wait for the merchant to convert the user.

Competition Grows

If it weren’t enough that AdSense were competing for space on publishers’ pages with affiliate links, Yahoo is in beta with the Yahoo Publishers Network (YPN) and MSN must be working on a similar service for its soon to launch paid search network. Even if Google doesn’t release the revenue share numbers, the amount paid to publishers will have to increase once competition sets in. The market will get very interesting. Google may get hit by a bommerang.

What about eBay Power Seller

Stephen used the example of eBay growing its business with power sellers and later cutting them out. I don’t think that this is a parallel that can be drawn at this point. Publishers are not dependent on Google as their sole “storefront”. As publishers, we have our own sites. I think that the argument does apply to search arbitrage where Google did exactly the same thing to these people who relied on Google AdWords as their “storefronts”.

Shopping.com

Earlier at lunch, Stpehen mentioned the success that many affiliates are seeing including Shopping.com’s sale to eBay for $600 million. YES! [We all have a goal now.] Google accounted for 42% of Shopping.com’s revenue. Google was Shopping.com’s single largest vendor, far above the 10% that makes it significant for accounting purposes. A large part of Shopping’s valuation was based on revenue from Google. I’ll be thrilled when AdSense hits 20% or 30% of our revenue.

Again, thank you Steve for setting the framework for the debate. It is important for all of us to get a better understanding of the implications of contextual search on affiliate marketing.

Obviously there are differing views on this topic. I’m sure that both of us have missed some points. The comment lines are open. Servers are waiting for your comments.