How Google Killed Affiliate Marketing

Apr 19th

Rumor has it that eBay just bought the web 2.0 toolbar company StumbleUpon, which helps users stumble into new and interesting pages based on the votes of friends and others with similar interests. THE SAME DAY that rumor came out Google added a toolbar feature which recommends websites you might be interested in based on your recent search queries.

Competitive Intelligence & AdSense Funded Startups

Google's biggest advantage over their competitors may not even be the cheap computer cycles. It is probably consumer trust. StumbleUpon only had to raise $1.5 million in funding before being bought out, largely due to low cost structure, but also because they turned stumbles into unmarked ads, offered a sponsorship based model, and published AdSense ads on their site.

Google can buy out or clone any service that threatens their ad market and media dominance.

Asset Pricing & Public Relations

Since StumbleUpon was an AdSense publisher, Google saw their growth rate, and had better market data as to their value than eBay possibly could have. As soon as they started talking about sales, Google could make the best offer, or decide if it was just cheaper to clone something in-house, then overshadow competing news by adding the feature to the Google suite ahead of the buyout news.

Advertising leads to exposure, which leads to more exposure, which leads to market dominance. Now Google is recommending content. Maybe those same content sites chose to advertise with Google from time to time, or maybe they syndicate Google's ads and convert well. If you were Google, and you were recommending ads and content based on earnings wouldn't that lead to recommending biased content that converts?

Trademarks & the Sketchiness of Relevant Recommendations

Google maintains that they are legal with their keyword based ad targeting. Judges struggle with the cases:

"The large number of businesses and users affected by Google's AdWords program indicates that a significant public interest exists in determining whether the AdWords program violates trademark law," Fogel wrote in his decision.

Maybe they are legal, but when you get to content websites or contextually targeted ads you can't be certain why Google is displaying an ad. Is it site targeted? Page targeted? Geographically targeted? Automated based on a keyword and trademark in the page title, or personal character flaws, or conversion data?

Arbitraging Your Brand One Click at a Time

With pay per action ads Google turned the link into a virtually unmarked ad unit. They will likely control distribution based on how much revenue an ad makes Google. If you buy distribution from lead aggregators, and they buy Google CPA ads, their ads may be automatically targeted by Google against any media mentioning your company, at first you will think these aggregators are doing a great job, and you might even pay them a higher commission. But then you may start to notice fewer direct inquiries.

Upon further inspection some of these lead aggregators use domain names similar to your brand, like VillanovaU.com, and their ads appear on just about any content related to Villanova. Eventually you realize that you are best off brokering a deal directly with Google, so you do.

Introducing Google Tax

This is how Google will kill many mid market players and get a piece of the action for most large businesses. They will keep automating recommendations and arbitraging against your brands and trademarks until you decide to broker an ad deal directly with Google, and if you don't give Google a big enough cut they will just recommend an arbitrager, some high converting currently hot scam, or a competitor of some sort.

Affiliate marketers funded search and showed business the value of search before getting pushed around by ad quality scores. The lead aggregators will show businesses that they can just work directly with Google. Off the start the numbers will look great, and they will keep doing well until direct inquiries gradually decline as the Google Tax is applied.

I think Werty was the person who coined Google Tax, while he was between paintings, working on his garden.

Published: April 19, 2007

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Comments

Jeff Molander
April 24, 2007 - 10:54pm

Some of the smartest (insightful), most honest thoughts I've read in a while. I appreciate reading your thoughts, Aaron.

Check this quote from Schmidt:

“Anti-trust is a legal matter and something which has a lot to do with the structure of markets. The Internet is very open, very, very dynamic—framework that’s global—and it’s not obvious that the kind of dominance that Microsoft and IBM had in earlier technology markets will become the norm in information markets… which is what Google is in.”

On the subject of market power and role (key to the discussion surrounding the Doubleclick acquisition hype), Schmidt is very clear on how Google shall navigate the waters.

He says Google will facilitate “free and broad application of information” and has strict rules about “trapping data” (there won’t be any of that!) and content ownership among users (a must).

He suggests that providing an environment which facilitates ownership of customer data and playing in the very vast and open Internet (one that is, he suggests, so vast that nobody can dominate it) will allow them to "compete."

Hawaii SEO
April 19, 2007 - 8:35am

You've been thinking too hard today. So have I. I need to chill out for a week or so and take a breath of fresh air before I come to any conclusions or formulate any strong opinions about the recent events in search.

Peter van der Graaf
April 19, 2007 - 8:44am

Yeah, feed the anti Google lobby!

Will a couple of SEOs be able to fuse an entire anti Google movement? Consensus is slightly moving against Google, but the masses still idolise the search engine. Maybe it would work if Al Gore uncovered "an inconvenient truth" about Google.

Jeremy Luebke
April 19, 2007 - 5:01pm

It is the webmasters & tech geeks who created Google. How do you think all the moms & pops found out what Googling was? We told them what to think.

We can do the same thing but in reverse. If Google gets the reputation of a Microsoft in the industry, the news will eventually spread back to the moms & pops that Yahoo, Ask, or MSN is better.

It's all a matter of time.

Justin Anderson
April 19, 2007 - 9:59pm

Kind of sounds like Google is becoming the next Walmart... getting into everything they can and telling businesses how to operate if they want to do business with them.

brian james
April 20, 2007 - 12:47am

Google who? As of March 7, 2007, they are now the WORST search engine for results. I don't cater to them, I could care less about them-THAT is how you KILL a giant. People are sheep-grow some balls.

Julie
April 20, 2007 - 4:38am

Google's recent data-collection additions and vague statements about stamping out this and that are really putting me into tinfoil hat mode. Add their database to the DoubleClick database (and mining capabilities), and I'm pondering going back to adding with a stick and some rocks.

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