While it had been anticipated and rumored for weeks, the announcement that Google made last week regarding their Affiliate advertising policy still touched off a lot of hysteria and teeth gnashing throughout the search community, and we’ve spent a few days digesting what the real impact is going to have on AdWords customers. Simply put, [...]

While it had been anticipated and rumored for weeks, the announcement that Google made last week regarding their Affiliate advertising policy still touched off a lot of hysteria and teeth gnashing throughout the search community, and we’ve spent a few days digesting what the real impact is going to have on AdWords customers.

Simply put, Google will no longer display more than one advertisement with the same Display URL per results page. Instead, they’ll display one ad per Display URL, based on highest AdRank
(Click here for a quick Google tutorial on AdRank) and then place it with the other possible ads for the keyword.

“It’s the end of affiliate advertising!” some have Chicken-Littled. Why? Because companies who rely heavily on affiliate marketers to promote their products and services often had a large number of competing ads per page that all seemed to be pointing to the same URL. While some companies didn’t anticipate or appreciate the extra competition for ad space on Google, the change was made for the sake of the user experience. Users felt that seeing a number of ads all pointing to the same domain was an indication that Google’s results weren’t as relevant or varied as they should be. Of course, Google wasn’t going to allow their percieved relevance to come into question.

We had a conference call with some Google representatives last week to discuss the new policy, and after some reflection, we don’t think the changes they’ve made are all that revolutionary, and they certainly won’t kill affiliate advertising. Specifically:

• Google is primarily monitoring for duplicate Display URLs
  
  
• They will also be monitoring to ensure that the Display URL matches the clickthrough URL (Not a new policy for Google, but they’ve stepped this up from a polite suggestion to an enforced policy)
  
  
• Affiliates no longer need to attach the “aff” tag at the end of their copy – this could have a positive impact on some advertisers’ CTRs
  
  
• Multiple ads that lead to the same domain will now compete twice for real estate: once against their duplicates and once in the general auction

Essentially, the days of companies with affiliate programs owning 80% of the real estate on any given reply page are over. For some marketers this is a good thing, for others it’s a severe blow to their “capture ‘em all” strategy. While none of these changes should cause anybody to head for the hills, there are still some issues to be hammered out:

• Click Price Inflation – We know that Google’s AdRank is calculated by some sort of alchemy of clickthrough and bid rate. We also know that every advertisement launched on Google is assigned a 1.5% default CTR. What does that have to do with this topic? In order to beat out the competition and make it onto the search page, affiliate advertisements must win on AdRank. Because all new affiliate ads will be auto-assigned a 1.5% CTR, the only way to assure that your ad will show up is to consistently overbid the market. We predict a ton of short term inflation in the affiliate market, as companies and their affiliates jockey for position
  
  
  
• Domain Management – Another way that brands may want to work around this problem is to set up a second, affiliate-friendly domain. In other words, “RogersBelts.com” could set up a mirror site at “RogersBeltsaffiliates.com” that their affiliate partners would drive traffic to. We don’t think too many companies will take this route (at least not immediately) as it requires the complete rearchitecture of a lot of legacy systems. Still, it would remove the primary brand from the heat of competition, and protect their right to advertise, unimpeded, against their most important keywords
  
  
  
• Sales & Marketing Functions converging – Search has become inextricably linked with affiliate marketing. As the engines begin to regulate and enfore the way that companies can use their advertising services, these affiliate-based business models will need to develop much more cohesive strategies that take into account the realities of the search marketplace. For instance, many affiliate programs have traditionally lived within the sales department while search has fallen to the marketing folks. Not any more – the affiliate programs will have to be constructed with an awareness of the rules set up by Google now

At the end of the day, does the policy even do what it’s supposed to? (Namely, cut down on the amount of percieved ad clutter that a user sees) You tell us. This is a screenshot of a Google search we did for E-learning institution the University of Phoenix.

Still looking mighty cluttered to us. While you can’t see them all on this screenshot, there are a total of ten different ads, all ultimately pointing to the University of Phoenix. The bottom line is that while this program might cut down on some of the affiliate crowding in the market, determined, smart AdWords marketers will still find a way around it. The intent on Google’s end was good, but the execution seems to fall a bit short. That’s ok – we guess that Google’s not done making tweaks to the program, and there will undoubtedly be additional changes announced in the near future.

We’d love comments from any of you regarding the impact (or lack thereof) of this policy that you’ve seen thus far.

This entry was posted on Thursday, January 20th, 2005 at 12:06 pm and is filed under SEM: Bid Management, SEM: Paid Search. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.