Google on the Offensive Again

Google isn’t letting up. I’m going to set aside the AdWords API release to focus for a moment on their latest move that strikes at a core value offered by affiliate networks (granted, some seem to tout it more than others).

This time Google offers the community some exciting news - the ability to centralize ad campaigns of all flavors (search, e-mail, banners/CPM, CPC traffic partners of all kinds, etc.) across a centralized conversion reporting tool. Yes, it even reports on Overture. Think about it for a minute (as some have). It’s fairly exciting stuff for advertisers and agency types who are responsible for campaign management. This is the type of streamlining people like myself have been begging for… although I don’t yet have all the details (someone? anyone?).

IMPACT ON AFFILIATE NETWORKS
But what of the impact on affiliate networks? Some view this type of service (centralizing conversion data) as a key product offering. This begs the question “who’s tracking and reporting solution is easier to use and generates better reports?” Indeed, time will certainly tell but without question this is yet another ding to affiliate marketing networks/solution providers. Google’s move essentially commoditizes such “action tracking” technology… a tool that is already a commodity (although affiliate networks continue, largely, to deny it). We can see this in many places, some rather discreet.

Let’s not forget Google’s “image ad” play. If I were ValueClick, I’d be sitting up and taking note of that and as well as new competition for everyone in the space. This stuff seemingly comes out of the woodwork.

AFFILIATE NETWORKS: NOT DEAD YET
Golly no… they’re nowhere nearly dead or even badly injured. Indeed, affiliates were first to charge into search and “make it work” for advertisers while affiliate networks have, to varying degree, stood on the sidelines leaving themselves with access to a relatively smaller piece of the revenue action (typically 20-30% of the affiliate’s piece). They, in effect, were reduced to being a middle man.

Although stuck in the middle, networks had a front-row seat and, therefore, have come to understand *how* affiliates do the voodoo that only they do. Now, they’ve said, it’s their turn to tap into new revenue streams and, of course, cement relationships with clients (through added services… search services).

Why are networks providing everything from keyword arbitrage in paid placement opportunities to optimizing advertisers’ pages (providing natural “organic” search turf coverage)? Why are affiliate networks themselves moving into search services – competing with the very affiliates within their networks? Simply stated, their revenue source (affiliates) is not only too small (and becoming smaller) but somewhat threatened. They are being forced, by their investors / market expectation, to grow revenue and, concurrently, shift revenue dependency away from search-focused affiliates.

A COG IN THE PERFORMANCE WHEEL
Other than moving into search services, what other new revenue sources are there for affiliate networks? Aside from search marketing’s ability to threaten the financial stability of an affiliate network via shrinking affiliate-generated revenues, there are other forces at play here. Affiliate networks have, in large part, been acquired or are in the process of succumbing to acquisition. The industry is consolidating and with good reason – the need to diversify (essential in growing otherwise flat-lining revenues) is critical. Many agree, there’s only room for a few “affiliate solution” players.

The need to consolidate aside, affiliate marketing is no longer in-and-of-itself a “stand alone” business; rather, it’s becoming a true cog in the performance advertising wheel. Witness the success of Performics and AvenueA as they have quietly transformed into performance advertising agencies that focus on every imaginable type of online performance strategy… from CPC to CPA and even our old friend CPM!

If this is all true, we must ask ourselves, why certain players are, or are contemplating, acquiring any of the “remaining” affiliate networks. In short, what’s the upside? Perhaps we can learn from exploring why “already acquired” networks were purchased.

About Jeff Molander

Jeff Molander is the authority on making social media sell and corporate trainer to small businesses and global corporations like IBM and Brazil’s energy company, Petrobras. He’s an accomplished entrepreneur, having co-founded what is today the Google Affiliate Network. He’s adjunct digital marketing professor at Loyola University’s school of business and author of Off the Hook Marketing: How to Make Social Media Sell for You.

Website: JeffMolander.com

Blog: Off the Hook Blog

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You can find Jeff on Twitter @jeffreymolander.