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What’s Behind buy.at’s Affiliate Marketing Globalization Strategy?

buy.at logoYou’ve got to ask yourself, do Valueclick (VCLK), Linkshare, DoubleClickPerformics, Think Partnership’s (THK) Kowabunga, Digital River’s (DRIV) OneNetwork and Shareasale have anything to worry about when buy.at (operated by Perfiliate Technologies Ltd) launches its U.S. operation, sets up shop on Wall Street and announces its intent to expand its performance-based network to a U.S. audience? Sprinkle in a dash of buy at Inc.’s President, Malcolm Cowley suggesting that this market is “in need of a shake-up” and the European market for affiliate technologies and services has my attention.

What’s Shakin’?
Mr. Cowley’s first order of business was to nab entertainment Goliath Ticketmaster. Next they’ll move on to target retailers and other entertainment companies says Cowley boldly. Yet I’m here to throw a wrench into the mix by questioning Mr. Cowley’s understanding of the U.S. market and point to what I consider to be Germany-baed Zanox’s costly failure to cash in on the U.S. market as evidence that all may not be as it seems in the States.

Via ClickZ’s Jack Marshall, Mr. Cowley says…Malcolm Cowley

“… the major difference between U.S. and U.K. networks is their relationship with agencies. ‘I would say that the U.K. was slightly ahead of the U.S. in terms of agency involvement. We work closely with agencies in the U.K.,’ he (Cowley) stated. ‘In the U.S., I think we have a huge opportunity to bring big interactive agencies into the picture.’

I find it hard to believe that Mr. Cowley actually believes this to be true — let alone that domestic affiliate marketing networks would leave money on the table (bypassing agencies) for nearly a decade now. North America has plenty of large and boutique, multi-faceted performance/affiliate marketing agencies — PartnerCentric, netExponent, AMWSO, AffiliatePeople, Forge, Pepperjam, Schaaf Consulting, Linkprofits and at least another dozen others on the boutique side. Multi-faceted agency firms like SendTec, Converseon and Commerce360 come to mind on the “interactive agency” side and are joined by just about every digital agency under the sun in claiming affiliate marketing expertise. So what’s going on here? Where exactly are U.S. companies leaving money on the table?

Follow The Leader
U.K. digital media and advertising markets tends to follow in the U.S. market’s footsteps. With this in mind, yes, the U.K. market is more competitive today given the phase it’s market is in. The U.S. market has cooled off for a variety of reasons that U.K. and European marketers (retailers in particular) would be wise to understand.

Affiliate marketing continues to have a “reputation problem” (SPAM, spyware, etc.) here in the States. Just ask Kris Jones of Pepperjam. Yet issues far more serious than these nuisances are negatively impacting the U.S. market — and are beginning to effect Europe too. These deal with the relative lack of value offered to marketers by affiliates. In short, marketers are starting to do some simple math and finding that all roads lead to search — much as comparison shopping search engines receive a majority of their traffic from search (confirmed again this week at Search Engine Strategies Chicago by Hitwise analyst, Heather Dougherty).

Distribution partners are competing with retailers in search for the same customers… and marketers are starting to pull back on their marketing and programs (looking for incremental sales… something they thought they were getting all along). They have been for years now. Back in 1996 MarketingSherpa’s Anne Holland and Stefan Tornquist even leaked it.

Affiliates & Search: Been There, Done That!
Let’s get real — affiliates and shopping comparison engines beat marketers to the punch with search marketing and many (like Pepperjam, DoubleClickPerformics) still leverage retailers’ lethargy into big money. As retailers increase search marketing efforts they’re coming to realize affiliates’ dominance of the space. They’re competing with affiliates for the same customers and clicks. This has led to the prime realization that affiliates have, for years, been grabbing “low hanging fruit” opportunities — such as purchasing search ads from Google based on the marketers’ brand and trademark. Isn’t this happening in the U.K. and Europe? If affiliate “typo-squatting” on URLs is happening ( here’s an example in the UK with European, Tesco) then surely all of these issues are at play — or will be soon.Nick Robertson

More evidence: When contrasting the U.S. and U.K. affiliate marketing spheres one cannot overlook this year’s ASOS “grubby affiliate” episode. While most affiliates and bloggers were happy to attack Nick Robertson given his inflammatory statement few offered it more than surface level analysis. Mr. Robertson was, in fact, characterizing (and taking action with) affiliates based on experiences similar to those held here by most large U.S retailers. With this in mind Cowley’s remarks seem even more odd.

Bottom line: Affiliates in general earn a poor reputation and are not valued if they are nothing but low value opportunists who do not deliver incremental value to advertisers. Value is now being measured here in the States (mainly based on incremental sales).

Ka-Ching: The Exit
Those affiliates who are not “grubby” (those who offer value) are busy either being acquired or positioning to be acquired based on having matured from “grubby” to “scrappy” through innovation and having bonded with retailers’ customers — earning their loyalty (i.e. in the States, TrafficStrategies, MeziMedia/CouponMountain.com, etc.). The customer loyalty that mature, well-groomed affiliates have worked hard to secure is being honored by both advertisers and networks.

Affiliates: Making the Cut
Affiliate marketing has forever changed. Affiliates that haven’t made the leap to “publisher” or agency (i.e. Pepperjam.com,Shawn Collins South African-based Clicks2Customers, FatWallet.com) are relegated to the disrespectful scenario that is so prevalent in the United Stats. Indeed, I say disrespectful and can back that up with dozens of examples. Here’s one that just happened. I cannot think of a bigger name (indeed, a living brand) than Shawn Collins — and notice how he gets treated.

If an overseas company were to come to the States intending on shaking things up I would think they would do so with a “social affiliate” approach in mind. My comments speak directly to the challenges (and the opportunity!). As do Jay Weintraub’s (one of the smartest and most successful entrepreneurs in performance marketing) and those of AMWSO’s Dave Oliver in comments (thanks, Dave!). There is tremendous opportunity to take affiliate marketing in a new direction — one that may result in an Affiliate Marketing Renaissance of sorts.

I hope to learn more about the European perspective on the U.S.-based affiliate and, indeed, digital performance marketing marketplace. While the folks over at TradeDoubler, Perfilliate/buy.at and DGM are brilliantly talented and savvy I’m — for now — fairly convinced that there are some serious gaps in understanding about our market across the pond.

About the Author Jeff Molander

Jeff Molander is the authority on starting sales conversations online. He teaches a proven, effective and repeatable communications process to spark buyers curiosity about what you're selling. He's a sought-after sales prospecting trainer to individual reps, teams of sellers and small businesses owners across the globe. He's an accomplished entrepreneur, having co-founded the Google Affiliate Network and what is today the Performics division of Publicis Groupe.

Jeff also serves as adjunct digital marketing faculty at Loyola University’s school of business. His book, Off The Hook Marketing: How to Make Social Media Sell for You, is first to offer businesses a clear, practical way to create leads and sales with platforms like Facebook, LinkedIn, YouTube and blogs.

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Leave a Comment:

Malcolm Cowley says

Hey Jeff

Glad to have caught some attention.

Just for the record my title is President of buy at, Inc which is the new US subsidiary we have set up.

On the agency side I was talking more about the Ogilvy’s and Avenue A’s of the world when I was quoted as opposed to the companies you mentioned.

The UK market is a far more transparent place these days and the channel has lifted up a fair few notches due to the involvement of these types of agencies who control most if not all off the online and sometimes the offline spend of the major brands in the UK market across all areas , search , email , display and affiliate.

Concentrating 100% on being a leading affiliate marketing network as opposed to trying to be a pseudo competitor to those types of agencies has enabled us to sit at tables and have transparent mature conversations about how our channel fits into the overall online mix.

I agree with some of your other comments around incremental sales and over time I am sure you will hear of some of the initiatives that we lead US brands into under the overall banner of affiliate marketing. In the UK the channel has matured so much that there are many brands now looking to move significant money into the affiliate channel from other online channels such as display.

The affiliate channel is definitely changing and buy at, Inc will be looking to lead from the front bringing over our experiences where applicable to help foster some of the positive aspects of that change we have witnessed in the UK market – 2008 is going to be an exciting time for the performance space.

You referenced a major European player in your commentary – note their success does not include the UK market.

The UK market is a highly competitive one for networks and the constant battle for market share has led to increased development on all levels from technology through to compliance to help increase confidence in the channel leading to an increase in budget being spent in the channel vs. other online media.

At buy.at we spent 2/3 years researching the US affiliate landscape before setting up shop it was not a rushed decision and many US trips and illuminating conversations were had.

It was this planning and knowledge that enabled us to secure our first headline grabbing client which is a key milestone and early indicator we are not here to “play”.

The UK has battle hardened us and we have not only survived but risen up to become the largest independent affiliate network. I think we have a little more pedigree and certainly a lot more bite than those “Europeans” whose footsteps we are following in.

I look forward to meeting up soon for more debate

Best

Mal

Reply
Jeff Molander says

Malcolm:
Thanks for the thoughtful and detailed reply. I am much more clear and perhaps others are too. I find myself mostly in agreement with you and now see things more clearly — in that companies like Brian Littleton’s Shareasale are not fully taking advantage of their being so focused. As you point out, you’ve done well “sticking with your knitting” within the niche while others (and this holds true in the States) compete w/ larger agencies. Merger & acquisition activity drives this trend. As companies like Performics and to a lesser degree Linkshare diversify the complete service set (offered by sister companies) things change in the eyes of agencies. Even branching out into search marketing/adv is a step toward where the agencies would like to dominate (or at least dream of it in most cases).

Thanks again for contributing and letting everyone know about how you look to move forward. Good luck and I hope to see you at some point soon, yes…. perhaps in NYC!

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Search Engine Strategies Chicago Day 3: ADSDAQ on Advertising Exchange Panel says

[…] What’s Behind buy.at’s Affiliate Marketing Globalization Strategy?, Jeff Molander […]

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Jonathan Gluckman says

Hi Jeff

Thoughtful article as always. As CEO of Clicks2Customers, Id like to put the record straight as to your comment that we failed to make the transition to agency. The facts are as follows. In 2007/8 we transitioned from Search Affiliate to Specialist Search Agency focused primarily on retail. Although our initial success as an agency was in the USA, with clients such as Walmart, Overstock and US Autoparts amongst others, we took the strategic decision to focus on growing our footprint in emerging markets. Today we are the largest search agency in retail in Australia with 6 of the top 10 online retailers as clients, the largest search agency in South Africa across most verticals, and recently opened in SE Asia and Brazil.

We still have a small presence in the states and are considered by some (including the likes of George Michie of RKG) as being one of the best search agencies in the business.

Hope this sets the record straight

Jonathan

Reply
    Jeff Molander says

    Hi, Jonathan…
    Sorry about my poor writing. You are not an example of one who did not make the leap; rather one that DID, along with others that clearly did. It’s my poor writing that’s the problem here. So I apologize for that.

    Reply
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