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Friday, January 07, 2005

Google's New Affiliate Policy Benefits (Nearly) Everyone

Google has finally formally informed advertisers of a long-rumored change to its policy regarding affiliate advertisers. Where multiple ads promoting the same URL are shown for the same search query, Google AdWords will show only one -- the one with the highest AdRank (the combo of clickthrough rate and maximum bid that determines position on the page).

Why the change? Many users had begun to notice multiple ads for companies like eBay. These were largely driven by affiliates who used keyword replace techniques to show their ads as widely as possible.

Clearly, by restricting duplication of these types of ads, the user experience goes up.

But it's not an all-or-nothing change. I experimented a little bit with an Amazon Associates campaign on AdWords this fall, so I feel like I understand what is likely to happen. Instead of my affiliate AdWords campaign (which I had running on a wide variety of products, not altogether successfully, but it was very educational!) simply being "shut down," it will just be cut back a bit. Where no other advertisers are clever or bold enough to appear on a given query, it will be bombs away for my ad. Where multiple ones appear, I'll only get to show my ad if I've bid high (taking a risk) or written particularly compelling copy that pulls a high CTR, or some combination of the two that makes my AdRank #1.

That's what'll happen to all of the affiliates currently playing around with AdWords. No one is going to be shut out completely.

This will certainly make the economics of affiliate advertising tougher. Only a few really good ones will survive, since lowballing at five cents will be harder with the new policy. But that's just how it ought to be. There's no free lunch.

A nice side effect of the new policy is that affiliates will no longer be required to identify themselves with the word "aff" in their ad text. Again, that probably benefits users, since "aff" is ugly to look at. And it helps the more thoughtful and hardworking affiliate advertisers blend into the woodwork rather than being "outed" with an ugly-looking "aff" notation.

Finally, it takes the heat off some parent companies who don't like affiliates competing with them on keywords. Instead of needing to police those affiliates directly, they now have the option of bidding a bit higher, or getting off their duffs and optimizing their ads, or both. Most affiliates won't be able to compete.

For those affiliates who actually build their own websites, this policy change does not affect them at all. It's mostly aimed at the types of advertisers who are playing the "Google Cash" game of sending searchers directly from an AdWords listing right to a parent site, with an affiliate code on the URL.

Posted by Andrew Goodman




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