The Hidden Affiliate War

It’s been a few weeks since Google implemented its one-ad-per-domain rule. The rule was designed to provide a better user experience for searchers by eliminating multiple ads that lead to the same domain. Affiliates may bid on direct links, but they compete with merchant sites and other affiliates in the auction. This competition results in an invisible bidding war within the AdWords system.

Google suppresses duplicate ads, displaying only the ad with highest AdRank (normalized click-through x bid). However, the bids remain in the background of the bid landscape, even if the ads aren’t shown. Billed CPC (define) escalates, so only one bidder “wins.” Others with the same domain lose.

Many affiliates want to retain the conversion advantage from depositing a searcher directly on the merchant site. These affiliates use tricks to circumvent the policy or find loopholes. They use .net and .biz domains, which Google’s system may not catch. They misstate the destination URL completely and send the pay-per-click (PPC) search traffic to the merchant site. Some will abandon Google entirely, due to the reduced upside opportunities. Others will remain within the invisible bid landscape, hoping to rise to the top AdRank often enough to make a profit and get some volume.

Affiliates who to stay in the mix, hoping to bid high enough and have compelling enough creative to win ad display, often have more than one aim. Large affiliates who receive a bonus or incentive from the merchant based on maintaining specific volume levels have an unfair advantage. They’ll choose to dominate the listings. Often, these players use the most compelling copy, skirting the edge of editorial guidelines to maximize CTR (define) to get a high AdRank.

In some cases, affiliates may use copy the marketer wouldn’t approve of if she directly bought the ads. By enabling these power affiliates with high payouts, however, the marketer may create a bid environment hostile to her own activity. In that case, the marketer could find affiliate ad shown instead of her own.

Some affiliates will continue to use direct-link ads. Yet if authorized by merchants, the highest percentage of keyword-arbitrage affiliates will use their own sites and domains to move arbitrage into a “remote” shopping environment based on data feeds or Web-services from merchants. To maintain approval from the engines, these affiliates will generate landing pages that provide a good user experience but don’t create an exact clone of the merchant site experience.

In some ways, affiliates are even more data-driven than their counterparts in marketing departments. When affiliates engage in search keyword arbitrage, they risk their own money, so they tend to follow strict rules:

  • Go first for low-hanging fruit.

  • Try for brand terms, if the merchant allows it.
  • Start conservatively on any untested keywords.
  • Use highly compelling creative in Google and highly selective creative in Overture.

Affiliates essentially experiment to identify the highest returning “bets,” leaving the leftovers to other affiliates and the marketer. This assures the affiliate of a good return. Affiliates build landing pages, sites, or both to arbitrage keyword traffic against sales at the merchant site. They must maximize conversion at every stage of the purchase process. Affiliates want to drive the searcher to the merchant site as quickly as possible at the site’s best possible point.

Web services and product data feeds are already in place at many merchants to help affiliates looking to engage in the new style of PPC keyword arbitrage. These services and data feeds provide a toolset for the affiliate to build landing pages for paid search. Many toolsets even push out the first few steps of the sales process to the affiliate site, allowing for partial transaction stages.

These tools can also offer affiliates a highly tempting option: to build organic pages that might qualify as search spam. Some merchants will look the other way when affiliates build spammy pages, claiming plausible deniability. Yet the facts are plain. Any pages that contain duplicate content (served via a Web service or data feed) without value-added content could encourage search engines to change their organic algorithms to ferret out and penalize sites with duplicate content. The merchant site itself may be penalized if the product copy sent through the data feeds and APIs (define) is the same used on the primary site.

A few merchants and affiliates who take advantage of paid search and pushing the line on acceptable practices may cause major algorithmic changes at Google, Yahoo, and MSN.

Search engine marketing may become an industry where the unintended consequences result in a cure worse than the disease.

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