I’m not sure what this particular merchant is doing, but I’m still using the same old, unscientific approach of checking to see whether affiliates are ranking higher than me.
In general, when I’ve had this rule in effect, I’d bid a penny higher than the bid cap, so if affiliates were turning up higher I’d give them a call to say, “What’s up?”
Presumably, the affiliate is bidding higher than the bid cap.
While this method may not be foolproof, it’s an indicator. If any affiliate manager has a more involved way to do it, I’m not aware of it.
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The merchant is obviously bluffing unless there is something fishy that is going on behind the curtains between the merchant and their reps over at Adwords or Overture.
The whole point of the QUALITY SCORE that both Google & Yahoo! (Panama!) include to come up with their final AdRank for paid search ads is that advertisers are rewarded beyond their bidding. How? By increasing RELEVANCE in their ads (resulting in basically higher CTR) to the searcher.
This means that my super-targeted AdGroups with super-targeted ad copy needs only to pay $0.10 for the 1st position on some keyword terms while others (including the generic merchant ads) are below me, but still forced to pay higher, perhaps $0.30.
There was a case study at Search Engine Strategies NYC (April 2007) where a marketer showed that at 8am their bidding was at the 1st ad position for $11+ for a keyword campaign when they launched it, and throughout the day, the chart of bid price fell to about $5/click and still remained in the 1st ad slot. Why? Because as they received more clicks for their brand new campaign, the system recognized more “relevance” in the ad vs the competitor ads — and the system rewarded them by lowering their bid price. The other ads on the same page could have still be paying $10, yet be presented BELOW the $5 1st place ad. Does this make sense?
Of course, this example is a little extreme in price differential and time frame, but the case holds true to all other SERP’s ad auctions.
Thus, unless you have identical landing pages (since landing pages are now scanned to determine AdRank too), identical ad copy, AND identical AdGroups (since overall AdGroup metrics are also taken into consideration), and same AdGroup histories, the “bid a penny over the published bid cap to see who’s bidding more than the merchant” strategy is seriously flawed unfortunately.
The issue is that the Affiliate Terms state rules specifying bid PRICE caps, and yet they are enforcing based on ad results. This is penalizing the super affiliates that know what they are doing, while it doesn’t affect the merchant. The reason for that rule usually is so that the merchant doesn’t have to pay sky-high bids to show up on their own terms. But here, the merchant would still pay their desired bid price and show up (albeit, potentially under an affiliate) on the page.
BUT isn’t this the exact type of affiliate you want to REWARD and offer a pass for the scenario? The ones that are doing their homework, not just slapping huge ad campaigns up and forcing the merchant to bid higher for no reason? Rather, here an affiliate took the time to figure out the audience and write compelling ads — that probably will sell a lot better than the generic merchant ads…
1) Merchants should figure out if they really want to cap the bid price or if their goal is to force everyone to be BELOW them on the ad results — and revise the affiliate terms accordingly
2) Merchants should really consider finding ways to reward these affiliate even more if they are successful in creating campaigns that the customers love (by show of clicks as above).
Just my $0.02…
Paul: Yahoo! Panama works like Google and you have no way of telling if affiliates come up higher than you because they bid more than you (or your cap) or because their Ads perform better than yours and thus outrank yours as well.
Microsoft is going the same route and I bet Ask and others will too.
Throw your cap idea based on bid amount out of the window today, before it is too late.
You could only specify that an affiliate is not allowed to outrank you, but you have to give them some time to adjust their bid.
They have to reduce it enough to come up behind you, but not too much that they still show up at all and preferable behind you.
An affiliate that fits this criteria would probably dump your program, because it is the same as if you prohibt an affiliate to send you more business than $x and then stop paying commission for everything they generate more than that.
The latter case shows you also an example why you might want to revisit your search marketing activities in conjunction with your affiliate program and your SEM policies. There are a lot of search marketing affiliates that beat you and your search agency, if you have one, and outrank both of you while paying less. Embrace and leverage it and not prohibit them to be successful.
Performance marketing is a “biatch”, right? Of course not!
It depends whether you’re talking about Google or Yahoo search marketing. Yahoo’s was supposed to be “transparent” in that you can see the other bids for a certain keyword. And, since ads are ranked solely by bid, if someone’s ranking higher than you it means they bid more, right? However, Google’s more complicated because they rank ads based on a combination of bid amount and click-through rate. So, an affiliate could actually bid less than the limit and rank higher than you if their ad has a higher click-through. And apparently Yahoo’s moved towards the Google method in the U.S. (I do search marketing in Spain) based on their web site (http://help.yahoo.com/l/us/yahoo/ysm/sps/start/overview_newadrank.html), which says: “In the U.S., both bid amount and ad quality will determine an ad’s rank in search results beginning February 5, 2007″? So I guess there’s no fool-proof method there.
Paul
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