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Advertisers Look Elsewhere as SE Ad Space Dries Up
Brett_Tabke




msg:526380
 11:24 am on Jul 19, 2004 (gmt 0)

New York Times [nytimes.com]

"In the long term, we'll hit a wall where a lot of the search buys that make sense today won't make sense anymore because prices will have risen so high," Mr. Cassar said. "So for the search engines to grow their revenues, they'll have to increase supply."

 

King of Bling




msg:526381
 11:41 am on Jul 19, 2004 (gmt 0)

IMHO this bodes well for AdSense clients.

KOB

adfree




msg:526382
 12:03 pm on Jul 19, 2004 (gmt 0)

Good for AS users, partners both side of the aisle.
Wondering if ad pricing will increase and/or how gmail can ease the situation.

Envision




msg:526383
 12:10 pm on Jul 19, 2004 (gmt 0)

The writing has been on the wall for a while now. Itís a case of supply and demand. We have seen a steady increase in bid prices since the beginning of ppc advertising. Itís why there are certain terms that are reaching the $100 per click limit at Overture.

This does bode well for adsense publishers, but it is even better for the webmasters that
bring ppc ad placement in house and cut out the middleman. It may take a little while
to put an advertising system in place and acquire advertisers, but after the initial work is
complete, it becomes a steady steam of income that can be extremely lucrative;)

Envision




msg:526384
 12:34 pm on Jul 19, 2004 (gmt 0)

Another point to consider is that when Windows SP2 is released, there will be many former popup advertisers with more money to spend on ppc advertising.

I don't know about the rest of you, but with the upcoming Google IPO and current ad market conditions, it is really starting to look like the second Internet Boom is just around the corner.

sherwoodseo




msg:526385
 12:44 pm on Jul 19, 2004 (gmt 0)

It also means that, as PPC goes stratospheric, so too does the value of getting natural listings.

heh heh heh.

HughMungus




msg:526386
 1:25 pm on Jul 19, 2004 (gmt 0)

After Netflix dropped $8 in one day, I read this about them:

"The company says it will advertise more on television in the third quarter, and is cutting back on online advertising because of second-quarter rate increases."

goodroi




msg:526387
 2:52 pm on Jul 19, 2004 (gmt 0)

The demand will continue to increase for a few more years since most small businesses and many large businesses have not fully entered the search engine realm. Once the market is fully saturated, the ROI on PPC will be very tight and people will look again at SEO. We are witnessing the maturing of search engine marketing.

This would be a good thread for Overture to announce their product which will compete against Adsense. They both need additional inventory. Let's start the competition:)

jcoronella




msg:526388
 3:14 pm on Jul 19, 2004 (gmt 0)

IMHO this bodes well for AdSense clients.

And for affiliates.

In general, when an industry is not mature you get extreme ineficiencies in the supply chain opening up opportunities for middle men like adsense junkies and affiliates. As it matures, you get a tightening down of margins due to increased competition. The same will happen here, and the suppliers (SE's) will vertically integrate and edge out web masters to get a bigger piece of the pie.

We are already seeing pieces of this with SE's trying to answer questions based on queries (definitions, equations, simple facts, froogle)

ThomasB




msg:526389
 3:33 pm on Jul 19, 2004 (gmt 0)

It also means that, as PPC goes stratospheric, so too does the value of getting natural listings.

That's hopefully the time when more people understand a SEO value and you don't have to convince them with case studies, .... :)

bostonseo




msg:526390
 3:39 pm on Jul 19, 2004 (gmt 0)

Good point about affiliates. I think we will start to see more business development deals done exchanging text box type ads. Webpage real estate is very valuable.

Also the trend towards pay for conversion will take off. Just my prediction.

ownerrim




msg:526391
 3:42 pm on Jul 19, 2004 (gmt 0)

That's just it. I don't know if ppc CAN go stratospheric. advertisers will only pay higher bid prices as long as their ROI is good which I believe they pay fairly close attention to. You have to remember that ppc advertisers are looking for quick kills i.e. fast conversions. It's not like Ford Motor or Proctor & Gamble who are just trying to keep their product images fresh in your mind so that when you go to the store you'll buy one of their products. Anytime a ppc advertiser sees a lower return on investment, they're going to adjust their bids accordingly. This applies to everything even mesothelioma which commands huge bids only because the stakes are so high. But there aren't that many gamblers out there with as much to gain as a mesothelioma attorney.

metatarsal




msg:526392
 3:43 pm on Jul 19, 2004 (gmt 0)

I probably speak for quite a few (I'd be intereted to hear)- but taking a broader view, the economics of PPC / CPM simply don't add up in certain ecommerce sectors.

I see competitors in the top bar of Google, and wonder how long until they figure they are losing money.

Sure enough, give it a month or two, and they've gone.

This is why - in my sector - I've decided to stick it out; by accepting a lower turnover and relying on my natural listings until my competitors fold.

I've seen 2 or 3 go already.

The cash has to comer from somewhere - and go to somewhere. If a large proportion is going to Google / MSN / and so on, someone is losing it.

And that's us.

If you can't beat natural selection - go into hibernation...

adfree




msg:526393
 4:03 pm on Jul 19, 2004 (gmt 0)

>As it matures, you get a tightening down of margins due to increased competition...

Until then though we will see ads become more stable in pricing to the upside, if not going up as long as demand outperforms supply.

jcoronella




msg:526394
 4:39 pm on Jul 19, 2004 (gmt 0)

I see competitors in the top bar of Google, and wonder how long until they figure they are losing money.

There is definitely a lot of 'ego bidding', but there are other things in play ala the "Proctor and Gamble" example.

- Your CTR can go up for your #1 free listing when you are also #1 on paid.

- Users who see you on a generic listing "widgets" which may not convert, can click on you more often for "large blue widgets" when they see you later.

- Branding is not dead.

- The value of a customer is not the value of the first sale.

Tracking cannot be done simply on one term. You have to play like the TV guys and look at a campaigns affect on your total sales. It is a very tricky thing, and on certain items you can pay 3 times for a user from 3 different providers before they will buy. Other times you will overpay the first time, but they will come back again and again.

chicagohh




msg:526395
 5:43 pm on Jul 19, 2004 (gmt 0)

This is why - in my sector - I've decided to stick it out; by accepting a lower turnover and relying on my natural listings until my competitors fold.

I've seen 2 or 3 go already.

If your in a lucrative market you can be sure those 2 or 3 competitors that folded will be replaced almost immediately.

Another reason for being a loss leader is to build a client database. If you sell widgets and lose $2 on each sale, but build up a large database you can market to those same people during November/December selling widget accessories. $2 for a very qualified lead is terribly cheap. If you have a nice product, you can milk those same people for huge profits on most major holiday's.

Lose money now - make large sums later.

metatarsal




msg:526396
 5:52 pm on Jul 19, 2004 (gmt 0)

Lose money now - make large sums later.

Agreed in principle - but it's a complex equation. In a lucrative market; great - but in a very competitive one you can't always rely on customer loyalty.

In some sectors, I still hold that CPC/CPM etc. is probably money down the drain. In fact I'm convinced of it.

The earlier mention of 'ego bidding' was particularly interesting - I got drawn into this - but realised my competitors had just dug in - and were ignoring it.

I am now dug in for good too - and I pay nothing to MSN, Google - anyone. I might not even renew my Yahoo listing (it's convenient when your business credit card date expires - all these accounts stop automatically - along with the auto billing ;-)

I can't see any difference in sales.

I suspect they (CPC, Adwords etc.) now rely on: people in certain niches; the big players; or (most of all) newbies who think anyone can go on the WWW and make a fortune.

ownerrim




msg:526397
 8:51 pm on Jul 19, 2004 (gmt 0)

"We are already seeing pieces of this with SE's trying to answer questions based on queries (definitions, equations, simple facts, froogle"

I mentioned this in another thread, but when checking keyword phrases to investigate whether or not I should develop content for a particular new area, I was very surprised to find two pages supplied by "google answers" sitting at the top. I thought to myself "if this is a trend, it's a bad one. very bad".

At some point, a lot of the info serps might be owned by google itself. Hopefully, "their" content pages will play by the same rules.

yowza




msg:526398
 10:06 pm on Jul 19, 2004 (gmt 0)

metatarsal - This is unrelated to the thread, but do not think that your card will not be charged because it is expiring. I thought the same thing and I got nailed.

crisscross




msg:526399
 3:22 am on Jul 20, 2004 (gmt 0)

Anytime a ppc advertiser sees a lower return on investment, they're going to adjust their bids accordingly. This applies to everything even mesothelioma which commands huge bids only because the stakes are so high.

Yes, especially since reading this we are all going to add mesothelioma and other high CPC ads to our UNRELATED sites/forums to trigger adwords.

1. START DISCUSSION

"Has anyone here every had mesothelioma?"
"What the hell is that?"
"Mesothelioma is..."
etc...

2. Insert mesothelioma-trigged Ad word
3. PROFIT

PS: Anyone have a list of high CPC keywords?

George




msg:526400
 6:05 am on Jul 20, 2004 (gmt 0)

There are several possibilities for the future. One I think has been missed here is that it is very possible that in many quarters the s/e will become the merchant.

The branding aspect will push PPC higher still too. That is certainly my fear. Get a P&G for whom a few million is cheap advertising, and us "smaller" PPC guys will not stand a chance. We cannot wait for them to run out of cash, as they will be playing a different game.

The future of PPC is not great for me, I need to find the next bandwaggon before this one goes :)

I am with You JC:
- Your CTR can go up for your #1 free listing when you are also #1 on paid.
It can be difficult to assess, but I think I see it.

Michael Anthony




msg:526401
 8:49 am on Jul 20, 2004 (gmt 0)

"In general, when an industry is not mature you get extreme ineficiencies in the supply chain opening up opportunities for middle men like adsense junkies and affiliates. As it matures, you get a tightening down of margins due to increased competition. The same will happen here, and the suppliers (SE's) will vertically integrate and edge out web masters to get a bigger piece of the pie"

This is a well informed comment which scares the hell out of me. Around 6 years ago, my travel biz was doing well as a telesales operation and we turned down a seven figure offer. 4 years later, having seen our margins slashed by the web and other more efficient vertically integrated players, we shut the biz as the workload just didn't justify the income.

If the above is right, and my gut says it might be, then any affiliate depending on PPC for his/her traffic will need to do some big thinking. Once the corporate monsters with their loss leader, brand building, market dominance minded marketing executives get involved, we have a major problem.

In the travel industry, this "threat" was always countered by people telling me that their niche was so small that it would never come to a big corporation's attention. Wrong - anything with a decent margin will eventually get made more efficient in the name of building volume at the cost of smaller profits. The consumer wins and the middle men get burned.

However, a lot of the companies that I send leads/sales to from my own PPC activities are huge, multinational concerns who are clearly able to buy their own expertise in if they want. Have they decided that my fees as an affiliate are a cheaper route to their targets than an in house solution? I pray to God that this is the case, or we are all doomed!

As for the SE's getting into bed with the merchants, or becoming the merchants themselves, I'm not too sure. Why hasn't Ebay become it's own supplier yet a la Amazon? Why doesn't Amazon offer pharm services, injury lawyers, debt consolidation etc.?

Although I agree with the view that in some highly competetive industries the margins will get squeezed, there is also a counter argument. If we see affiliates as just super efficient advertising agencies, who are only paid when a sale/lead is created, the first place we will see casualties will be in the ad agency arena, especially where there is no online expertise. SEM will become the model - anyone fancy a running a print ad as an affiliate, paid only if the readers convert?

So, IMO, the current super affiliates will eventually replace traditional ad agencies as the place where big merchants buy their customers. In markets where the product has become a commodity (think air tickets, DVD's, CD's, etc.) and the only differentiating factor is price, the affiliate is an endangered species, as supply chain efficiencies dictate that the shorter the route from producer to customer, the fewer people have to take a cut of the pie, and the customer gets a lower price.

In markets where you are selling a service, or high ticket, non commodity items, the super affiliate will replace the ad agency, and the small affiliate will still have a place.

And IMO the SE's won't replace the affiliates. At the moment, they make say $10 per click from a loan merchant. To replace that $10, they'd need to hire full time marketers to offer a better deal to the merchants than their current affiliates. All this will be a risk, whereas the $10 per click is established, automated, and carries no risk or staffing overhead. A year ago, when it looked like G was the only game in town, maybe. But today we have SE competition, and all those PHD's are obsessed with winning.

Anyway, that's my 2 cents :)

JuniorOptimizer




msg:526402
 9:56 am on Jul 20, 2004 (gmt 0)

Always take those 7 figure buy out offers. Holding in too long is something that happened to me too, and it sure is no fun.

crisscross




msg:526403
 10:53 am on Jul 20, 2004 (gmt 0)

One thing that would increase pricing would be if Google or Overture allowed publishers to co-brand Adsense.

In local sites, the client connections are with the publisher, not with Google/Overture. Currently publishers do not have much incentive to bring their clients into the adsense system. If the network would make a simple affiliate or advertiser introduction system, especially one that is co-branded, that would funnel cash back to the publisher so then the publisher would have the incentive to introduce adwords to their clients.

GlynMusica




msg:526404
 9:27 am on Jul 22, 2004 (gmt 0)

I wonder if Overture will go back to allowing any keyphrase to be bid on instead of an "approved list" of volume keywords....if supply is short it would open it up a little bit.

Glyn.

skibum




msg:526405
 10:22 am on Jul 22, 2004 (gmt 0)

As one who is working with a few mega corp CPG brands that don't sell online, they are generally not buying and are not interested in buying keywords that most merchants or affiliates go after. This will of course vary by the brand and type of company. So far there is no shortage of SE traffic available and there is little if any competition for the keywords that drive the conversion events within the sites.

The goal for these brands is to snag consumers looking for information, to associate the brand with these keywords, provide a great experience online, and get them thinking of the brand when they eventually do go out and buy something in this area. These tend to be keywords that even Ebay or Amazon would have no interest in because there is not a purchase intent behind them.

Some are still hesitant to spend much but others seem willing to go from a 5k flier to 250k per year on PPC overnight after they see the results of an initial test.

raymond4unc




msg:526406
 2:38 pm on Jul 23, 2004 (gmt 0)

"The future of PPC is not great for me, I need to find the next bandwaggon before this one goes :) "

I tried making money on PPC and didn't have enough conversions to continue in the program- IMO. I got booted d/t invalid clicks. I needed to come up with something else, and I have. Word of mouth. I make web pages for free and also host them for free as well. These people actually ask me to sign up for different affiliate programs "by Monday before I buy" as a way of saying thankyou. They want the links on their sites for ease. My thought would be why not just sign up themselves? Most people just don't have the time, feel like they would have to learn a whole new area, etc. I'm building and growing and the more people that click on the ads the better, I don't have to worry about being kicked out of any program. I don't make a lot off of any one person, but it does add up as more people tell you where they shop online and you put a "personal" link right on their homepage. Just for the record, I only thought google ads looked good on a page while I was in the program!

Michael Anthony




msg:526407
 5:58 pm on Jul 23, 2004 (gmt 0)

raymond4unc, I think u have your wires crossed, We're talking about making money by BUYING PPC ads and then selling the resultant sales/leads/whatever, not making money from running Adsense on our sites.

hannamyluv




msg:526408
 7:03 pm on Jul 23, 2004 (gmt 0)

I see this as an issue with the immaturity of the internet marketing world. There are still a huge amount of companies out there who are just plain afraid of the web. They have a site, people shop at it, but they don't have a clue as to why or what to do to increase the sales.

I think M. Anthony mentioned that he hoped that these businesses were letting him do PPC because it was cheaper than hiring a person. I hate to say it, but it's not true. It is cheaper to hire someone. The saving grace right now is that these companies don't perceive that it is cheaper. Everything they read right now is that internet experts are hired for huge money. I suppose experts are hired for huge money, but you don't need an expert to run a ppc campaign. A relativly bright admin can do it after a few hours training.

Will companies figure that out? Yes, but I don't know how fast. It could be years. But mark my words, by the time they have figured it out, the rest of us will be onto The Next Big Thing.

Michael Anthony




msg:526409
 8:22 pm on Jul 23, 2004 (gmt 0)

Hannamyluv, my version of building PPC campaigns can't be taught in an hour, thank goodness!

I accept your point though, but let's not enlighten those corporations any quicker than necessary eh? :)

This 39 message thread spans 2 pages: 39 ( [1] 2 > >
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