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Are traffic spikes causing online stores becoming a victim of their own successes? That seems to be the conclusion of a survey that Gomez, a web performance company, is touting.

Now before we add two and two together and get four, we must consider the source.  Gomez should not be considered an unbiased source and it is hardly surprising when a survey they’ve commissioned says web sites need better web performance. The results, however, contain some interesting nuggets to chew on, especially about customer expectations.

The study found that 67 percent of customers want Web sites to work no matter how high their traffic. If a customer runs into a slow site, 88 percent are less likely to return and 42 percent will spread some bad word-of-mouth.

Once you get nitty-gritty about the number of sites that are running into issues, things get iffy. According to the study, put together by Equation Research for Gomez during the 2009 Holiday season, “poor Web performance at peak times is endemic across the financial, travel and retail verticals harming both short-term revenues and long-term customer relationships.”

Endemic is quite a tough term here and seems a bit drastic considering what the results were. Only 33 percent of users of retail sites ran into poor Web performance during the Christmas season.

There are a lot of questions that are just hanging there like: Which sites were these people using? What do they consider poor Web performance? What, if any, impact does this have on the majority of users of the Web for e-commerce.

If you use Amazon, the iTunes store, Travelocity, eBay and Walmart.com, odds are you are going to rarely, if ever, run into a problem with a transaction. Of course even big sites can run into the occasional infamous problem on Black Friday. But if you are buying pecan clusters from Aunt Millie’s Cookie site which was built by her nephew using GoDaddy’s Website Tonight, then you may run into problems if there is a sudden run on her cookies.

One issue sites need to be aware of that could guard against performance issues, is awareness of who is talking about your product. If you have a product on a sleepy Web site that suddenly goes viral, that will cause servers to crash. Taking the temperature of the Web’s conversation about your product each day will trip any alarms which could lead to a frustrating (apparently) error screen.

Originally posted here:
How Your Traffic Spikes Could Turn Customers Away

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On the face of it, developments in digital publishing have signaled a decisive victory for aspiring and professional authors in recent months, judging by recent announcements:

Amazon recently declared that it’s Kindle e-book reader was its overall bestseller by number of units shipped and total revenue generated. According to a MarketWatch article, Amazon CEO Jeff Bezos recently mentioned during the company’s Q3 financial results (ended Sept 30, 2009) call that the Kindle is now the most popular product on its site by unit sales and dollar value across all product categories. Analysts expect that the e-book reader and ebooks will fuel the online retailer’s next stage of growth.

Google announced details of its upcoming Editions service, to be launched next year, which will allow ubiquitous access to books on web browsers and other devices. In a recent announcement,   Google Book Search’s publisher partnership program head Tom Turvey said the new Editions service would kick off with between 400,000 and 600,000 books in the first half of 2010.

Consumer electronics giant Sony has judged the e-book reader segment important enough to take some focus off its television and Playstation projects to develop it’s Reader product. According to the Wall Street Journal’s WSJ.com, Sony had sold about 300,000 units of the product from its October 2006 launch till end 2008. (The WSJ.com post is currently unavailable online)

With e-book readers experiencing a boom, writers might be looking forward to a boom for their wallets.

Whether you’ve already had a few published books under your belt, or you’re working on your first book, you will be wondering: What’s not to like especially with Google Editions’ payout model?

With Google Editions, the revenue split of 55% to Google and its distribution partners and the balance 45% going to your pocket is more than just making about half the revenue from your sales, it breaks the historical monotony long held by publishing houses. Most published authors receive a fraction of the value of books sold. It’s not uncommon for an author to receive a $0.50 to $1 royalty fee for each copy of a book sold. If you’re a superstar author such as JK Rowling, author of the Harry Potter series of wizardry books, or king of horror, Stephen King, you’ll have more room to maneuver.

In fact, the 45% royalty that Google Editions looks set to payout looks like the perfect out for many budding authors to quit their day job and do the “writing thing”.

Before you fire your boss, take note of a couple of big holes in the new business model.

#1 Quality, quality and quality

Someone investing a couple of hours reading a book would prefer a good book, over a poorly-written book in most circumstances (a fetish for spending reading kitschy/trashy romance/potboiler novels notwithstanding).

Yes, the possibility of self-publishing will break the hegemony/monopoly of the publishing houses, especially since manuscript acceptance rates of 1 in 10,000 are not uncommon. But just because you get to publish what’s in your mind, i.e. the “great American novel”, doesn’t mean that anyone else is going to like, or buy it. If your book meet Joe Public’s quality standards, you’ll have the consumer telling you “No”, rather than the publishing house.

The refund policies aren’t out for Google Editions yet, but judging by Sony’s ebookstore policy on refunds: “Please confirm all purchases before you complete them as all sales are final. There are no refunds for digital content.” It sounds like you can’t give a refund for a poorly-written book, but if everyone and his brother is blogging and tweeting about how badly your book sucks, you can expect sales to suffer.

#2 But I only like to write…

Assuming you’re going the self-publishing route and making the decision to avoid giving the publishing houses your fat writer’s paycheck, means having to ensure quality on your own.

There’s a myriad of service providers online to find proofreaders, book editors, designers and other specialists to make sure your novel looks like more than just a Microsoft Word document converted to Adobe PDF. Hint: the lack of a cover and extensive use of Times New Roman size 12 font throughout the book are dead giveaways…

Being able to post an accurate job description, screen service providers, screen competitive bids, and manage the team you’ve hired, will require more project management skills, than just being a dang good writer.

#3 Traffic Generation and The Lesson from Satellite TV

With the launch of satellite TV a couple of years ago, the complaint shifted from “There’s nothing to watch on network TV”, to “I’ve got 500 channels on satellite now, but there’s nothing to watch”. The lesson? Having lots of choice is always a good thing, but being able to stand out from the pack will play a direct impact on your sales.

Remember back in the early 1990s when there were just 20 websites in your niche? And you would make bank even if you had a garish bright yellow website and a couple of typos liberally sprinkled across your site? Google Editions may be that way too…for the first week or two.

Being able to market your book successfully means being able to put together the elements of a cohesive and integrated marketing plan. Almost every blogger or twitter user will be able to publish some content and generate a few random sales, but if you’re planning to make writing a full time gig, you’ll need a whole lot more marketing mojo in your corner.

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E-Books: The Bottomline
Here’s what e-book have going for them:
* More money in your pocket: The technology has eliminated the brokers and middlemen from the traditional book publishing ecosystem.
* Write what you like: You’re not constrained and restricted like you would have been if you had signed on with a major imprint.

But like Peter Parker’s Uncle Ben would say “With great power there must also come – – great responsibility!”

The balance of power and more importantly, profit, comes with the writer’s responsibility for viral/guerilla marketing skills. If you decide to DIY everything, you’d need to have decent editing, project management and marketing skills (the majority of which most writers lack). If you’re not represented by a publishing house, which invests heavily in a publicity campaign, you’ll have to find alternatives since most bookstores will probably not arrange “e-book signings” (especially if it’s a product which they don’t sell), unlike an author with a published paperback or hardcover novel.

In my opinion, unless self-published writers have the whole package, including management and social marketing skills up their sleeves, they might end up being the biggest losers in the new e-book paradigm.

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A few short years ago, who could have imagined how precarious business conditions would be for traditional newspapers and magazines. As 2009 comes to a close, it marks the end of another dismal year for print media. Symbolic of the plight of magazines was the October 5 announced shutdown of the 70-year old Gourmet by embattled publisher Condé Nast.

While a rebirth of print magazines is unlikely, these publications are still fighting for their collective lives. But now the battle is being waged largely on the Internet. Magazine publishing companies that compete with one another “are discussing the creation of an ad network that would sell targeted space across many of the industry’s websites,” says an October 6 Ad Age article. One magazine executive told Ad Age: “We’re getting killed by ad networks. …if we could just create some scale on our own and sell across it, we can get a lot better ad rates.”

Clearly, desperate times require desperate measures. While the industry has discussed such a possibility before, it seems to be a more compelling need today. “Now there are maybe 500 ad networks,” another magazine executive told Ad Age. “Last time the conversation started, there were maybe only 200 ad networks.”

Variations of a magazine ad network already exist. Time, for example, has a network for its own print and online properties. Other magazine publishers have created topic-specific networks, such as Martha Stewart Living Omnimedia’s “Martha’s Circle,” according to Ad Age.

A home-grown magazine-controlled ad network is just one strategy for survival. Another may be publishing electronic versions of newspapers and magazines. True, some already exist, but not in any formalized paid form. So it’s interesting to hear the latest rumor, previously reported by Ad Age, that a group of magazine executives supposedly held talks with Apple about digital editions of magazines to be sold via iTunes. Apple is also said to be in talks with The New York Times about producing a digital edition, says Wired.The discussions center around Apple’s new “tablet,” a product yet to be officially announced, that could provide a platform for reading digital magazines.

The Apple tablet in itself is significant new – it could very well catapult Apple into a brand new arena, competing directly with Amazon’s e-book device, Kindle.

But the real message behind Apple’s tablet, Amazon’s Kindle, Sony’s eReader, and similar devices is their ultimate purpose: to replace traditional print versions of newspapers, magazines, and books with electronic versions. And the message behind a potential online ad network created by magazines is pretty clear: We’re raising the white flag on print and surrendering to the digital world.

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There are few events that knock an 800 lb. gorilla off its particular perch. Sometimes laziness, atrophy, the lack of ability to adapt will do the beast in. Sometimes a competing gorilla that is younger, more aggressive, has access to better technology will usurp the spot. On rare occasion two 800 lb. gorillas will meet and marriage will do the trick.

Such is the case with Amazon’s purchase of Zappos.

A Tale of Two Gorillas

Amazon’s marketplace is a juggernaut. In Q1 of 2009 Amazon posted $4.89 billion in net sales an increase of 18% over Q1 of 2008 which should be considered an epic feat in a down economy.

Amazon not only owns the book vertical but seeks to replicate Google’s clout in search within the online retail space. Thus it has aggressively gone after every leader in a retail vertical: Ebay, Buy.com, Overstock, and of course Barnes and Noble. Amazon has paired its aggressive strategy with the production of cutting edge consumer products like the Kindle and a near zealous acquisition of numerous patents (they own the patents to 1-click checkout and 404 error pages).

Now in its 10th year Zappos owns the shoe vertical with over $1 billion in sales reported in 2008. Think about that; $1 billion dollars on a product where fit is crucial. You don’t just wear shoes one size too large “just around the house”.  Zappos achieved such growth through two key tactics: 1) aggressive purchasing of product lines from shoe manufacturers; 2) unique approach to customer service keenly focused on repeat sales.

On the purchasing side of the business Zappos buyers are often known to buy whole lines of popular products from shoe manufacturers or at least all the most common sizes of a particular shoe line.  On the customer end Zappos alleviates the worry about fit by offering free shipping both ways and unheard of 365 day return policy. More importantly personal touches as the recent BoxBreak promotion with Magnify.com, earn customer loyalty. According to a BrandWeek interview with Zappos CEO Tony Hsieh, approximately 75% of sales come from repeat customers.

Driving Forces behind the Purchase

Amazon was able to smother many competitors like Ebay’s Half.com or outright buy them like AbeBooks, but; they were never able to make much of an in-road into the shoe vertical.  Zappos’ presence was just part of the issue. The shoe vertical is a very competitive and crowded space where consumers often have a hard time differentiating between retailers (Shoes.com and Onlineshoes.com for instance).

Amazon amplified their effort with the launch of Endless.com in 2007. Boasting a far more elegant site than either Zappos or Amazon, Endless featured a UI design that made it feel like an upscale boutique. Endless also launched with a tactic right from Hsieh’s playbook, free overnight shipping on all orders. The tactic was designed to gauge into some of Zappos’ market share.

The result? While it did prompt competitors in the vertical to  redesign their own sites to improve the browsing experience for their customers, Endless gained relatively little market share. .

The problem was that Amazon now had skin in the game and the costs associated with building and advertising Endless were not cheap. It was perhaps Endless’ failure to dethrone Zappos that  made Amazon think of buying. What’s more, Zappos made themselves an appealing target because they were not just beating Amazon at selling shoes; Zappos was beating them in creating buzz.

Zappos had become the corporate darling in the Web2.0 world of transparency. The company had almost co-opted Twitter with hundreds of Zappos employees actively participating in conversations about themselves and the corporate brand. Hsieh was like a rockstar at the forefront of the media blitz from SXSW to Affiliate Summit. Hsieh even started a consultancy targeting the Fortune 1 Million  to teach other corporations the benefits of developing an open corporate culture. Best Buy, Southwest Airlines and dozens of others got in line.

What buzz did Amazon have going? Well they did earn tremendous growth in ‘09 but most of the media focus seemed to be on iterations of the Kindle or on the various affiliate nexus laws, nicknamed the Amazon Tax.

What a Deal

According to TechCrunch,  Amazon brokered a deal with Zappos consisting of $880 million in shares with an additional $40 million in cash. Now $920 million may sound like a lot of money but really is quite a deal with Zappos having posted sales of $1 billion in ‘08. Now Amazon President Jeff Bezos and Hsieh may have struck a meeting of the minds when they met earlier in the year as Mashable claims, but; even so why wasn’t the purchase price significantly higher?

Well, it comes back to those tactics key to Zappos’ customer success. The fact is free shipping both ways and a 365 day return policy, as Hsieh puts it mildly in the BrandWeek interview “gets very expensive”. It’s been long rumored among Zappos’ competitors that the company must be hemorrhaging money. Whether that’s true it is apparent that Zappos’ net earnings were significantly lower than its’ $1 billion gross sales.

Perhaps the biggest winners are the venture capital firms Sequoia Capital and Venture Frogs whose investment in Zappos’ “quirky” strategy paid off.

Potential Impact on the Affiliate Channel

Initial outlook of the deal indicates that things will remain the same in many ways. Zappos will remain in its Henderson, NV headquarters with its brand, operating methods and leadership intact.

Both companies can credit a large portion of their growth to the affiliate channel. Zappos has had an affiliate program as part of the Commission Junction network since 2000 and has consistently been one of CJ’s top merchants. Amazon Associates is one of the first and largest affiliate programs claiming 900,000 members world-wide.

Lately Amazon seems to be systematically chipping away at the channel that helped it achieve its growth. In fact Amazon hasn’t been overly friendly to its affiliates as of late, from cutting commissions, to terminating referral fees for search, and most recently eliminating credit to affiliates using url shorteners in general with Twitter specifically as a target.

Amazon is also at the epicenter of the affiliate tax nexus debate  playing out in legislatures across the country. It has even used affiliates as leverage by preemptively terminating affiliates in some states  in anticipation of new tax legislation.

Zappos meanwhile has enjoyed a fairly positive relationship with its affiliates. The question is if  Zappos will begin to mimic Amazon’s actions in the affiliate channel? Will Zappos leave CJ and run an internal affiliate program like Amazon currently does? How will this impact the Endless affiliate program which is also currently live on CJ?

Final Questions

As with any such blockbuster merger the playing field will change significantly upon completion. There are practical questions to be addressed. Will Endless remain in business or be absorbed? Will Endless become the high end product retailer and Zappos the low end retailer as mandated by their respective UIs? How will they coordinate differing plans and messaging?

Then there are slightly more existential questions. As people, Bezos is very different from Hsieh and in the same way the cultures of their two companies are very different. Amazon is not used to being as transparent as Zappos or, at times, as human. Which culture will survive? Will they be able to incorporate each other’s strengths or wallow under each others’ weaknesses? Management is a big part of this and for the short term Hsieh is staying. After a year under Amazon’s corporate coils will he leave for some other business where he can be “quirky” again?

The fallout will be interesting.

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Endless Two-Step: Real reason Amazon bought Zappos

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Local Content the Next Big Thing for Mobile

Pundits are fond of saying that mobile is the next big thing. Well providing local content may be the key to creating that reality. ComScore reported this week a 51% year over year growth in the mobile audience that is search for localized content. Downloaded applications are driving the fastest growth showing 83% year over year. However the built in mobile browser still reins supreme fulfilling 71% of local content queries.

ICANN’s Proposed Uniform Rapid Suspension Program Creates a Stir

Defending trademark rights online is a constant battle. It is especially true with domain squatters who use other company’s trademarks or trademark variants to make a profit. In order to fight such squatters ICANN has recently proposed (pdf) the Uniform Rapid Suspension Program (URS) which will allow trademark holders to submit a complaint against 25 domains for only $200. Once the complaint is filed a freeze is placed upon the domain and the registrant who would be the alleged violator in this case has 14 days in which to respond. At that point an examiner would make a decision as to the validity of the complaint.

There are many questions as to burden of proof and possibility of this unleashing a flood of unsubstantiated complaints. There are two great articles we recommend for more reading: One by trademark attorney Ryan Gile, the other on the domain industry focused website thedomains.com. Well worth reading.

Bing Launches Out of the Gate Strong

They may be annoying but the ads Microsoft has plastered offline in support of its new search engine Bing have been effective. And for a campaign that’s reported to run $80 million dollars they better be. According to ComScore initial results for Bing show Microsoft’s share of search results pages grow by 2%.  The question is, is this a sustainable trend or just a passing interest?

Online Advertising in Europe Strong in Search and Small Markets

IAB Europe finally released advertising expenditure numbers from 2008. Overall growth was slower than expected with six of the top 10 European markets growing less than 20%. However, growth remained very strong in small mostly Eastern European markets and Search remained robust with a growth rate of 26% accounting for 43% of online ad expenditure.

Amazon Pays $51 Million to Settle Suit with Toys “R” Us

According to an SEC filing, Amazon has agreed to pay Toys “R” Us $51 million dollars to resolve a lawsuit filed back in 2004 by the toy company. The lawsuit was originally filed by Toys “R” Us for breach of contract against Amazon stemming from Amazon’s management of the Toys “R” Us store within their marketplace.

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Cashing Out: Week of June 6-13th 2009 in Online Marketing News

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Is there any good news associated with the recession? There is for online advertising. According to eMarketer.com, “marketers are spending more on Internet ads, while spending less on advertising in other media…”

eMarketer projects that U.S. online advertising as a percentage of total media advertising spending will grow from about 10 percent in 2009 to about 15 percent by 2013. eMarketer points out that the upward trend has been occurring before the recession, but it could very well intensify in an economic downturn.

The IAB says U.S. online advertising revenues for 2008 were $23.4 billion, up 10.6 percent over 2007. Search was the leading category, increasing almost 20 percent over 2007. At the same time, advertising from all sources last year was down 2.6 percent compared to 2007.

As advertisers and ad agencies alike can tell you, digital media has been robust for years. There are three main reasons why:

1. Online advertising is immediately, easily measurable – unlike television, radio, or print.
2. Online advertising can be adjusted on the fly. Entire campaigns can be changed almost instantly so results can be optimized. This dramatically increases advertising efficiency.
3. Online ads complete the prospect inquiry/customer buy cycle in one seamless transaction. Whether it’s email, search, ad clickthroughs, or websites, an inquirer can receive the information necessary to make a buying decision, and just as quickly make a purchase online. This instant information-on-demand paradigm still can’t be matched by traditional media. Mobile marketing pushes the paradigm even further.

What’s also happened recently is the increase in audience and geographic targeting capabilities of the online world. The medium has grown, and so has the sophistication of media offerings.

The impending great advance in online advertising is likely to be the widespread availability of powerful personalization tools, similar to the recommendation model pioneered by online sellers like Amazon. Also coming into play are “behavioral exchanges” which sell information about website visitors. More about these developments next time.

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Economy Down, Online Advertising Up

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From an online revenue perspective, eBooks today represent a small market.

Amazon is out to change that. The e-commerce giant, doing well despite a sagging economy, recently introduced Kindle 2. This next-generation reading device comes with a library of over 240,000 books, worldwide newspapers, magazines, and blogs. It’s got 3G wireless for book downloading, an improved screen, and it’ll even read books out loud to you.

Sony offers the “Reader Digital Book,” a Kindle competitor. Both Amazon and Sony are banking on early adopters who want to read books electronically and remotely. With the Reader Digital Book priced at $400, and Kindle selling for $359, consumers will need to read a lot of eBooks to make their investment worthwhile.

But the more interesting Amazon announcement came on March 4, when the company said that iPhone and iPod users could get a new free Kindle application that gives them access to the entire Kindle library.

Just days after Amazon’s iNews, Barnes & Noble announced a $16 million purchase of eBook retailer Fictionwise. Barnes & Noble’s eBook sales sputtered in the past, but now it will try to give Amazon a run for its money.

The Amazon iPhone/iPod application and the Barnes & Noble acquisition may help ramp up eBook sales. But there’s no guarantee book publishers will be fully onboard. A recent article in Financial Times stated:

“What is perplexing for publishers is the long-term viability of the existing model. The profit margins are difficult to determine… E-books are sold at a fraction of the suggested hardcover price on the physical edition with many new Kindle titles sold at $9.99.”

The “existing model” that concerns publishers is the fact that eBooks sell for under $10, while hardcovers sell for upwards of $25. eBooks are a little more expensive than paperbacks, but paperbacks are typically published only after a hardcover edition’s selling cycle has ended. Publishers have to cover the costs of marketing and author advances, whether a book is published as a hardcover, paperback, or eBook.

Still, with book publishers facing continuing declines in profits, you’d think the industry would embrace any avenue to increase sales, especially if it actually decreases their dependency on printing and distribution. But book publishers are not known for being visionary.

Book publishers do follow consumer demand, however. So if a critical mass of consumers creates a true demand for eBooks, publishers would have to commit to publishing them. Will that really happen? Maybe the reading public will want to retain the admittedly old-fashioned but treasured tactile experience of leafing through printed books. Or maybe, as Amazon hopes, they will begin to see a book as one more searchable electronic document to be viewed on a screen.

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Barry Silverstein is a freelance writer/marketing consultant and co-author of the McGraw-Hill book, The Breakaway Brand.

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Kindling an Interest in eBooks

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“When it comes to paying the tax man in New York State, there is no way out through the Internet, a New York State Supreme Court justice has told Amazon.com Inc. and Overstock.com Inc.”

According to a recent Internet Retailer article the NY Affiliate Tax law will stand despite objections by Amazon and Overstock.com.

Bad news for Affiliates and Advertisers but good news for NY State. If this law holds up then it is only a matter of time before all 50 states have similar policies.

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Welcome to the year end wrap-up of Cashing Out. To ring in the New Year this Special Edition of Cashing Out will include the normal summation of the previous week and the Top 5 News Events we feel impacted your business in 2008.

First the previous week’s recap:

Verizon Hands Squatters a $33.2 Million Fee
In a settlement over 663 “unlawfully” registered domains that were “identical” or “similar” to Verizon trademarks, domain squatter OnlineNIC was hit with an awarded fee of $50,000 per name. According to the World Intellectual Property Organization complaints about cybersquatting have surged to new record amounts in recent years.

Large Increase in Greentech Investments Reported
According to Ernest and Young, venture capital firms have poured $4.6 billion globally into green industry investments representing a growth of 82 percent year over year. No surprise that in the United States companies focusing on solar energy and biofuels led in investment totals.

Pinnacle Award Finalists Announced
With Affiliate Summit coming up, co-founders Shawn Collins and Missy Ward announced the nominees for the annual Pinnacle Awards for the affiliate industry. Congratulations to all the finalists. Revenews is honored to have several members of its family as nominees for Best Blogger.

That’s all for the recap of the last week of 2008. Now on to the Top 5 News Events we feel especially impacted your business in 2008.

1) The Downturn
With both US and global economies reeling it is almost impossible today to have a business conversation that doesn’t include talk of downturn. Impact was felt as tech companies downsized in response with over 100,000 employees laid off in the last half of 2008. Startups were hit especially hard as VCs suddenly demanded that companies move toward sustainable business models.

Although there was plenty of doom and gloom to go around it is important to note that overall online sales continued to grow. Online sales overall increased 15% compared to last year. Amazon and Buy.com reported record sales over the holiday season. This speaks to the fact that if companies don’t panic and focus on growing their core business they can still see growth online in ’09.

2) Amazon Tax
With many states facing budgetary short falls, concern over other states following the poor example set by New York when it moved forward with what’s come to be known as the Amazon Tax law makes this number 2 on our list. In a time when states should be focused on stimulating the economy very little about this Amazon Tax makes any sense.

3) Microsoft and Yahoo Dance but Don’t Commit
At an offering price of $31 a share last February, Microsoft’s acquisition of Yahoo seemed like a sure thing. It would have drastically changed the advertising landscape which is why it made our list as number 3. After much dancing and posturing the deal ultimately went away, as did Yang.

4) Collapse of Newspaper Giants
Perhaps hurt the most in the tumultuous end to 2008 was the newspaper industry as it sought new ways to engage customers and make up for ever declining ad revenue. Industry stalwarts the New York Times, which had to borrow against its own headquarters, and the Chicago Tribune, which filed for bankruptcy protection, led the bad news. As the newspaper industry fights to survive it will look to the online space as a natural evolution of the business. So too will many former journalists who will migrate into the blogosphere, which is why this is made our list as number 4.

5) Skimming From the Top
When times are tough it is easy to scam people. In the affiliate channel both major networks have had scandal this year; Commission Junction who settled its class-action lawsuit and LinkShare whose ownership of OneCause crosses many ethical boundaries. Spammers, id thieves, domain squatters, patent trolls and yes affiliates all got in on the ever increasing action this year. Next year those sorts of problems will continue to grow as companies choose money over ethics in their search for a larger piece of a shrinking pie.

In Closing

And as we say goodbye to the old year and hello to the new one we would like to express to our readers our gratitude for being part of the Revenews audience. We hope to continue to serve as an information source for you in 2009. May you have a wonderful and prosperous New Year.

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Cashing Out: Year End 2008 in Online Marketing News

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You know those little icons on your desktop that designate the presence of a active program or the same icons in a browser that designate the presence of an active file? Mac or PC you have been using them for years, right? Well according to the US Patent and Trademark Office (USPTO) only Michigan based Cygnus Systems, Inc. owns the rights to visual representation of that active program or file via a thumbnail. And Cygnus is suing to protect those rights.

According to Ars Technica, application developer Cygnus first filed for the patent in 2001 as a continuation of an original application filed in 1998. The patent covers thumbnails, or more specifically the navigation and access of files based on representational thumbnails.  In May 2008 US Patent # 7,346,850 was granted.

It is a shining example of what is wrong with the US Patent system which is woefully incapable of dealing with either the rapid growth of new technology online or the expanding number of companies that exist in the space.

Established in 1790, the purpose of the US Patent Office is to issue state and federally recognized writs designed to help protect legitimate innovation. As long as there have been inventors there have been profiteers who seek to use intellectual property as leverage against a competitor or simply to extort money.  In such cases, the existence of a patent can protect the creative, intellectual and financial rights of the holder.

However, modern patent profiteers are not so easily contained.  As Supreme Court Justice Anthony Kennedy stated in a concurring May 2006 eBay Inc v. MercExchange, L.L.C., 547 U.S. 388 (2006) decision,

“In cases now arising… the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases. An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees.” (PDF of text of the decision)

The Case of Amazon

Let’s take as an example one of the most famous cases, US Patent # 5,960,411, known as the Amazon 1-Click patent which covers a “method and system for placing a purchase order via a communications network.” Twenty-three days after the patent was issued Amazon tried unsuccessfully to wield it as a weapon against Barnes & Noble in a suit filed in 1999.

This led to cries for a boycott of Amazon spearheaded by the slightly fanatical Richard Stallman. Thankfully, mainstream voices like Tim O’Reilly founder of O’Reilly Media, jumped in. O’Reilly stated he felt Amazon’s patent was, “a land grab, an attempt to hoodwink a patent system that has not gotten up to speed on the state of the art in computer science.”

The 1-Click suit was settled in 2002 under undisclosed terms. Shortly after the settlement Amazon CEO and founder Jeff Bezos posted an open letter on patents (interestingly the letter can no longer be found on the Amazon site). In the letter Bezos calls for patent reform stating that the “vast majority of our competitive advantage will…come not from patents”. He does however say that they will not give up their patents; instead Amazon will simply be more careful in how they use them.

But the fact is that Amazon also owns the patents for 404 Pages (US Patent # 7,325,045) and for Affiliate Referrals (US Patent # 6,029,141) among a host of others the common use of which can be found on almost every website online.

Think about it.  How many web designers and how many company websites use 404 pages?  Almost every website you see online today. And as for affiliate referrals, well apparently the whole industry is indebted to Amazon.

Hopefully the backlash from Amazon’s use of the 1-Click patent was strong enough that they learned from the “harvest of ill-will”, as O’Reilly put it, received from the online community. However, Amazon’s current patents, including the cookie patent which is still active, cover more territory than I feel comfortable leaving to any one company’s discretion.

Should Software be Patentable?

The case against patenting software or codeware is made using three arguments:

1. Software is already afforded copyright protection thus it is adequately protected
2. The creation of software code is not dissimilar to mathematical algorithms which are not patentable. According to Gottschalk v. Benson 409 U.S. 63 (1972) “an algorithm or mathematical formula is like a law of nature, which cannot be the subject of a patent.”
3. Software patents currently 17-20 years in term, have a disparate negative impact on freeware and thus stifle innovation.

Personally, I feel that the copyright argument only is tenable in cases where the software is sold via packaging or download. Designed to protect the publication, distribution and adaptation of an author’s work, copyright does a very poor job protecting code tied to web development as any site that has been scraped can testify, due to lack of enforcement ability.

The math argument is indeed perplexing due to the similarities between math and code. However, the way software has evolved, allowing for people and companies to interact with it through hardware in a way that is inherently different than the way math has evolved due to ease of access. The idea that under the math argument, patent law would treat have to treat software different than hardware which through common use it is coupled with, is untenable to me.

Finally there is the argument of the disparate impact on freeware. It is true that large corporations have the legal resources to wield patent legislation tactically against potential competitors. The reverse edge of the argument is that under the current structure corporations also have the legal resources to stifle Open Source software by patenting ideas that are already in the public domain.

Rise of the Prior Art Database

The call for patent reform as put forward by O’Reily and Bezos was published in 2000. In his letter, Bezos states that the process could take “2 years or more”. Ironically that is approximately the date of the settlement with Barnes and Noble. Aside from putting that issue to rest has anything significant change happened?

Although it was mentioned again in a Wired interview, the prior art database which would provide an easily accessible resource of prior art examples to help determine the originality of an invention, that Bezos’ offered to fund in his letter has never materialized.

Even though Bezos wasn’t able to put together his version of a public focused prior art database several other have stepped up to do so. The Open Invention Network launched what it calls the LinuxDefenders.org. Co-sponsored by the Software Freedom Law Center and the Linux Foundation its mission is to, “eliminate poor quality patents…and codify known inventions” thus protecting individuals from larger corporations. It advocates a peer review process for issued patents and the creation of defensive publications to high light prior art instances. Others include Wikipatents and the Peer to Patent Wiki.

Clash of the Titans

In 2007 a coalition of Patent Fairness was formed specifically to help push legislative reform. Members included Amazon, along with: Apple, Cisco, Dell, Google, HP, Microsoft, Oracle, Palm Inc., SAP, Time Warner and Visa among hundreds of others. Their stated mission is to “improve the quality of the patents being issued” and “re-balancing and strengthening the patent system”. Many of their goals were made into what’s known as the Patent Reform Act of 2007 (H.R. 1908, S. 1145).

The problem with reforming the US Patent System, as with any legislative body, is the complex number of special interests and industries such changes potentially impact. The Patent Reform Act sought to create major changes in the current system including:

1. eliminating so-called “submarine patents” often used by patent trolls that purposefully keep patents hidden only to target companies for lawsuits who unknowingly infringe on them
2. allowing for a post-grant review process via petition instead of the current limited options of litigation or USPTO reexamination
3. changing the system from a “first-to-invent” system to a “first-to-file” system which would bring the USPTO in line with the rest of the world

The Patent Reform Act met with heavy resistance.  General Electric, DuPont, Corning and many universities stepped up to defend what they saw as an attack on the biotech and pharmaceutical industries. The AFL-CIO  resisted the bill with concerns (pdf) that it would weaken protection for American manufacturers. And a coalition of headed by the Patent Office Professionals Association expressed concerns (pdf) that changes would “significantly weaken…the strongest (patent system) in the world”.

Despite the resistance the Act did pass the House of Representative in 2007. The Act however stalled in the Senate in 2008 where it fell out of the Judiciary Committee process allowing Senate Majority Leader Harry Reid to pull the bill from the floor schedule.

Cygnus’ Thumb

All of which leads us back to Cygnus Systems, Inc. which filed suit on Friday against Microsoft, Apple and Google over representational thumbnails. The lawsuit lays down a scattershot of features it feels infringes on Cygnus’ patent including those found in: Window’s Explorer, Apple’s Finder, Opera, iPhone, Safari, and Google’s Chrome. The suit not only goes after retroactive damages but also seeks a “permanent injunction” against further infringement.

Now I don’t know if Cygnus’s owner Gregory Swartz is a patent troll. He may genuinely feel he is simply protecting a technology that he developed.  In theory Swartz should have provided the USPTO with any examples of prior art he was able to find, “if” (as the law reads now in Rule 1.56) he was able to find such examples. It is telling that Information Week writer Dave Methvin found “after only five minutes of searching” prior art examples of the thumbnails in a book by David Karp titled Windows 98 Annoyances (got to love the irony in that name).

What I do know is that 10 years is far too long of a timeframe for a patent to be reviewed prior to being granted. As of the end of Fiscal Year 2008 (pdf) there are 1,208,076 patent applications still pending at the USPTO which essentially indicates a 3 year backlog. That’s a clear sign of an organization that doesn’t have the capacity to keep up with the times, much less the resources required to the determine validity of something as minuscule as a tracking cookie or as abstract as a 404 page.

Although the IEEE does raise valid points (pdf) against the structure of the Patent Reform Act as it languishes in the Senate, some sort of reform must happen. I think the easiest methods would be to a) shorten the length of software patents down to around 5 years; and b) modify US patent rule 1.56 to stop rewarding willful ignorance and require companies to search for prior art.

Without reform our industry can never hope to get out from under the thumbs of these patent trolls.

Originally posted here:
Cygnus Provides Reminder Everything is Still Patently Unclear

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In tough times companies are forced to make difficult decisions. Sometimes they make wrong ones. Best Buy made an epically dunderheaded one this week when it announced via email that affiliate commissions for two of its best selling product lines was being dropped from 1% to .25%. A quarter of a percent is insulting to anyone you refer to as a partner. The backlash on boards like ABestWeb.com has already built up as professional affiliates wonder how such a big player could display such a lapse in judgment.

Anatomy of a Bad Decision
Corporations are prone to knee jerk reactions. Especially in crisis situations or tough times. When it comes to cutting costs often the cutting is done by those not directly involved in day-to-day affairs.

In this case you can almost imagine the thought process: We are practically giving away commissions to affiliates on items that would sell anyways! Why don’t we cut the commission rate and increase our profit margin?

A bad decision is made even easier by the fact the Affiliate Channel is often a nebulous component to most corporations’ online marketing strategy. Difficult to understand, easy to undervalue, corporate advertisers often make the mistake of treating the channel with a “set and forget” mentality or deliver campaigns to affiliates with the expectation they will accommodate last minute promotions which should have been planned well in advance. Many such advertisers also make the assumption that affiliates will not make business decisions of their own and simply take whatever leftovers are handed to them.

Real Troubles
In Q3 of this year Best Buy reported that profits dropped 77% year over year. According to the report 4,000 employees at its headquarters were offered buyout packages in an effort to cut costs. The report also quoted Chief Executive Brad Anderson as saying,

“We believe that there has been a dramatic and potentially long-lasting change in consumer behavior as people adjust to the new realities of the marketplace. We also believe that customers will continue to reward those retailers who understand their needs and desires, and offer relevant solutions at fair prices.”

Obviously the company is taking serious steps to make themselves more profitable. While I genuinely wish the best for their employees, cutting the commission percentages on a few top selling items will not make or break the company. It will however sour relationships with affiliates.

It’s an Affiliate’s Marketplace
Anderson is right that customers will continue to reward retailers who understand their needs. So will affiliates.

Best Buy runs their affiliate program with Commission Junction. According to numbers released by CJ comparing same store retail sales, network wide CJ affiliates averaged 73% growth on Black Friday and 39% growth on Cyber Monday year over year. Impressive numbers when compared to comScore posting of overall online sales during the same time period.

Presumably sales were good for the Best Buy affiliate program as well. The email explaining the commission cuts seems to support that stating:

“The Best Buy affiliate sales force has exceeded our expectations during these trying economic times. These important contributions are greatly appreciated. This commission reduction originates strictly out of economic necessity in a growingly price-sensitive marketplace.”

According to Yahoo Tech News the Wii is the top selling item this holiday season. Laptops are another hot commodity. Many other merchants sell both including Buy.com, Amazon, Wal-Mart, and Target. All of whom are competing with Best Buy for the same customer.

As an affiliate you have a choice. Are you going to stay loyal to Best Buy and refer your valuable traffic to them for .25%? Odds are you are going to send the traffic to a merchant who is offering better commission on those same items. Whatesmore, as an affiliate it is just as simple to send all of your traffic to a competitor instead of attempting to redirect traffic for those few items whose commission you are being low balled on.

Gut Check
It would be one thing if Best Buy was withdrawing ads from areas that have a poor ROAS.

Because of their footprint it is doubtful that Best Buy will suddenly pull back from television or print ads, nor should they be expected to do so. The stores that provide jobs to the approximately 150,000 employees are obviously their bread and butter. But surely if they are pulling back from the affiliate channel due to a “growlingly price-sensitive marketplace” they are also pulling back from CPM buys online. As typical with corporations more comfortable with offline campaigns than online campaigns, this doesn’t seem to be the case you can still see them in remnant media placements.

So the affiliate channel, the one that creates the most return for the advertiser’s dollar is the one Best Buy has chosen to cut. It’s expeditious to cut revenue to a channel you don’t understand in order to create higher profitability on items you feel you will sell anyways.

The fact is in these tough times affiliates are sensitive as well. The professional ones will send their business to merchants who are truly interested in cultivating a partnership. Only time will tell what a dent .25% will put in Best Buy’s affiliate program and their overall sales.

Read more:
Best Buy Gives Affiliates a Slap in the Face

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According to the US Department of Commerce estimates, ecommerce grew by 4.6% in the third quarter of 2008 over third quarter 2007. Further, eMarketer predicts that ecommerce will grow by another 4% in November and December of this year. Of course, these numbers are significantly less than the 2007 totals according to the same eMarketer report, when online spending growth was in the double digits. However, these days, beggars cannot be choosers – and growth is still growth. In turn, it is important for businesses to take advantage of this growth – however modest the growth.

Where Are Consumers Spending Their Money Online?

Well, it turns out that this question is not as easy to answer as you may think. According to a September 2008 Piper Jaffray study, Americans prefer to shop at Amazon and eBay and comparison shopping sites that include Shopping.com, Shopzilla.com, and MySimon.com.

However, while no one online website dominates, the study did reveal that consumers did prefer to shop at fixed-priced third party websites. Why? Well, these types of websites offer a plethora of different products with a competitive pricing strategy. Thus, without a doubt, these types of websites provide the ultimate affordable one-stop-shopping destination. The runner-ups consisted of going directly to retail websites, search engines, auction websites, and lastly comparison shopping websites.

Other Influential Online Media

Surprisingly … or not so surprisingly, blogs are extremely influential when it comes to making a purchasing decision. According to a study conducted by JupiterResearch for BuzzLogic, fully over one half of surveyed American blog readers believed that blogs were useful for obtaining information about potential purchases.

Rob Crumpler, the CEO of BuzzLogic believes that blogs now rival search engines as a navigation tool for some blog readers. In turn, he believes that this newfound situation will have “interesting implications for advertisers.”

Further, as blog readership increases in the coming years, the number of consumers who will be influenced by blogs will only continue to increase.

What Does All of This Info Mean?

Well, since ecommerce is increasing in numbers albeit more slowly than research previously expected, it is extremely important for businesses to promote their online stores. Further, since consumers do not shop at any one online platform over another, businesses should ensure that their products are well represented on all of these platforms – when possible. Along similar lines, since blogs are becoming more and more influential when it comes to purchasing products, companies should work with bloggers to ensure that their products are well represented in the blogosphere as well.

Read the rest here:
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Tired of the same old tips-and-tricks about Web affiliate marketing programs?  “Communicate with them, treat them with respect” yada-yada.  What about what really works?  I pulled together a group of my most experienced, thought-leading colleagues to find out what’s moving the needle in affiliate marketing today.  The below innovations are what I discovered.  I’m happy to share these best practices.  Yes, they can be quickly and easily applied – helping you manage your affiliates and extract maximum sales efficiency.

Stay tuned to Revenews for candid interviews with these experts where they’ll “go deep” on their secrets to success.

Allow affiliates to access a knowledge-driven feedback loop to improve their ROI and, as a result, increase yours.

1. Let affiliates “connect the ROI dots” between their investments (media spending) and your ultimate success (sales or new customers).

2. Provide select, trusted affiliates with limited yet unfettered access to your internal metrics and customer behavior data.

Strengthen relationships with superstar affiliates and open doors for potential superstars by actively, yet cautiously, investing hard and soft dollars in them.

1. Invest in affiliates: Underwrite affordable, educational opportunities and conferences for them.  Sponsoring affiliates is very popular in the European realm.

2. Sponsor low-cost, virtual innovation forums and Webinars that offer training opportunities for top affiliates.

3. Provide limited access to Web metrics (ie. Google Analytics, Omniture) and optimization tools that are already at your disposal yet possess a high perceived (and applied!) value among affiliates.

4. Invest in affiliates: Subsidize the media buying of select, high-value affiliates by providing matching contributions to their expenditures or allowing access to your media buying prowess.

If you were paying attention that’s TWO strategies with supporting tactics.  That’s plenty to chew on and begin to take ACTION on.  I’ll be back in a few days with the final three.  Also, stay tuned for more actionable tips and interviews with experts in a variety of performance-focused Web marketing strategies.  I’ll be publishing interviews in the next few weeks.

—-

Jeff Molander is a leading Web marketing expert, author and speaker.  He is CEO of Molander & Associates Inc., and can be reached at jeff_at_jeffmolander.com.

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5 Easy to Implement Affiliate Marketing Tips for Marketers

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Amazon Corrects SEO About Obama Gone Horribly Wrong

Chalk it up to on overzealous marketing or corporate dunderheadness but Amazon has done the right thing by removing a tag that designated a Barack Obama mask as a “terrorist costume”. Amazon claims the tag was added by a customer using a dynamic product feature.

Layoff Troubles

Online companies continued to announce layoffs including:

Motorola – Was the biggest announcement this week cutting 3,000 jobs
Symantech – Eliminated 800 jobs amounting to 5% of its workforce.
SpotRunner – Cut 30% of its staff amid rumors of even more layoffs
Circuit City – Reduced its staff by 17%
Razorfish – Trimmed 2% of its staff

J.P. Morgan Predict Further Slump in Online Ad Market, Mostly in Display

J.P. Morgan analyst Imran Khan has yet again revised ad growth projections from earlier in the year. Most notable slump was in Display dropping from an estimated 16% growth to an estimated 6% growth. Recently released stats by the Rubicon Project seem to support this showing remnant media buys dropping 11%. It will be interesting to see how and if spending cutbacks impact CPA buys.

Google Settles with Authors

Google paid approximately $60 per author totaling $45 Million dollars as part of a settlement (pdf) with The Authors Guild and the Association of American Publishers. The lawsuit arose over Google’s Book Search function which contains works protected under copyright that were scanned in without the author’s permission.

Zazzle Adds Embroidery

Affiliates and consumers can now get something new in Zazzle as the company announced it would add embroidery to its portfolio for ways to customize. According to Zazzle this move represents the first on-demand service of its kind and will be offered on shirts, jackets, hats and bags. Embroidery is an estimated $47 Billion dollar a year industry.

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Cashing Out: Week of October 26th-November 1st, 2008 in Online Marketing News

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For most of us, today is another Saturday. For a chief of the Surui tribe in the Brazilian Amazon, it’s a unique day, because San Francisco Mayor Gavin Newsom has issued a proclamation declaring October 4th as “Chief Almir Surui Day.”

Chief Almir and the Amazon Conservation Team will be in the Bay Area to attend the world premiere of a documentary film by Denise Zmekhol called Children of the Amazon. They’ll also participate in a unique panel tomorrow, October 5th.

In June, a team of Googlers went to the Amazon to train indigenous people including Chief Almir’s Surui tribe on how to use Google Earth, You Tube and other Internet tools to show the world what’s at stake with deforestation in the Amazon. The tribes are using this knowledge to preserve their history, culture, and develop a long-term sustainability plan to protect their rainforest and create economic opportunity.

Filmmaker Zmekhol joined us on the trip and filmed dozens of hours of footage. Out of this footage has come a story about cloud computing from under a lush canopy of Amazon rainforest, where a group of emerging technologists are eager to share their story about their culture and their plan to preserve their forest and their way of life. (Learn more about our trip here.)

Posted by Tanya Keen, Google Earth Outreach

The rest is here:
Amazon conservation in San Francisco

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