Affiliates: Google Partners, or Parasites?

The search ecosystem is turning into a complex web of interrelationships between search engines, contextual publishers (publishers who display text ads via contextual or keyword-level targeting), and affiliate marketers.

Some affiliates aren’t publishers in a traditional sense. Instead, they buy media and hope to convert that traffic into revenue. The focus in respect to Google and affiliate marketing is in two areas: affiliate SEO (define) spam and changes in Google’s policy regarding multiple AdWords ads per domain (which mainly affects affiliates).

There’s a shifting relationship between Google and constituencies in the contextual, search, and affiliate universe. Some relationships are adversarial, while others are symbiotic.

Contextual ad platforms, which serve text ads against content, are hot. Firms are joining the ranks already dominated by Google, Overture, and Kanoodle. Some entrants have been around a while but are getting more aggressive. ContextWeb, for example, developed a text targeting-based ad server a couple years ago, even filing a patent on the technology.

Meanwhile, new ad networks that use contextual and behavioral profiling are popping up, providing new options for publishers. They join a crowded marketplace that includes Advertising.com, BURST!, Fastclick, Tribal Fusion, and ValueClick. Tacoda recently announced plans to launch a network.

With so many networks, publishers feel like they have something everyone wants: inventory.

Publishers have more options than ever when selecting partners to monetize page-view inventory. Many publishers targeted by Google’s AdSense program are prime candidates for other ad networks, as well as for affiliate networks. This pits Google against both affiliate and ad networks for access to contextual inventory. Even banner networks compete for real estate with AdSense and other contextual networks.

Affiliates and publishers follow the money. They give their inventory to the network with the largest return or effective CPM (define); it’s very Darwinian. If a network can’t pay good CPMs, publishers will route inventory to other players.

Ironically, the same affiliate networks that try to obtain screen real estate on affiliate publisher sites include affiliates who don’t have Web pages at all or just microsites that buy keyword search advertising in Google’s network (most I talked to opt out of content). If this sounds almost circular, wait — it gets better.

AdSense revitalized niche publishing. Along with similar contextual ad platforms, it funds blogs and very specific sites run by enthusiasts. SEO spammers who clog the index with duplicate or low-quality content have joined these legitimate publishers and bloggers. Sometimes, their content is plagiarized, copyrighted work. Many legitimate publishers have had to become increasingly vigilant to protect their content.

Ironically, some of these less-than-ethical “publishers” run AdSense on their pages, often in conjunction with affiliate offers, links, or both. So in a sense, Google’s AdSense funds SEO spammers, along with legitimate publishers who generate content or categorize it in unique ways, making it valuable to searchers.

Google recently introduced a “nofollow” tag. It’s used primarily on blog comment pages to eliminate the incentive for SEO spammers to robotically clutter comment areas with links to siphon off PageRank. With adoption by other engines, this could help. But older blog software is susceptible to comment spam, and SEO spammers tend to prefer abandoned blogs.

When Google’s next major algorithmic change occurs — and it will — the search engine may see a reduction in contextual inventory as SEO spam is flushed from top results.

The marketplace is breaking into four sectors:

• Publishers and site owners. These players have page-view content and perhaps some pure-search inventory. They own the eyeballs (or just rent them, as users can be fickle). These firms sell inventory directly to marketers, or engage reps or networks. The publisher wants to join the network with the highest-quality sites. Quality keeps prices up, and the publisher benefits.
• Helper-software publishers. Publishers of toolbars, adware, and spyware fall into this category. They’re different from site owners because the ad inventory they generate occurs via pop-ups, -unders, or other non-user-generated page views. These firms sell inventory directly to marketers, or engage reps or networks.
• Networks. Ad networks aggregate advertisers, generate scale, target, and centralize billing. Every network seeks new publishers whose quality level matches the existing network sites. Alternately, the network must use a formula to compensate publishers based on their traffic quality. Google’s “SmartPricing” is an attempt at this. It charges marketers and pays the publishers less for lower-quality clicks.
• Arbitrageurs. Arbitrageurs, such as affiliates who buy search engine marketing (SEM) listings, seek and financially exploit inefficiencies in the system.

It’s ever more difficult for advertisers and agencies to figure out where to spend marketing dollars for maximum scale, within the parameters of specific business objectives. Eventually, the marketplace will settle down as networks find the right quality level and the industry consolidates.

In the meantime, the lines between friends and foes are fuzzy indeed.

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