Interview with ’super-affiliate’ Jamie Harwood (UK PPC affiliate)

Interview with ’super-affiliate’ Jamie Harwood (UK PPC affiliate) Source E-Consultancy.com July 2 2008

Six years ago, Jamie Harwood, like many new affiliates, was working out of his bedroom and wondering how long it would all last. Now, he’s sitting on an estimated fortune of £18m and is one of the most successful players in the affiliate space.

Here, we talk to the head of UK Web Media about the secrets of the affiliate game and where he sees new opportunities emerging in the industry. He also tells us what retailers could be doing to improve their use of the channel and lays out his plan for international expansion.
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How did you get into affiliate marketing originally and where are you at now as a business?

It all started in my bedroom, just like many affiliates, in the evenings and weekends. Adwords was about a week old and I played about with it a bit, then found out about networks and started to use Tradedoubler. I proceeded to get busier and busier and I started to take on more people.

We have 23 employees at the moment. We have eight major sites - in finance (comparenow.com), broadband (broadband-finder.co.uk) and mobile phones (mobile-phones.co.uk) - as well as others. We also run lots of different niche sites in various different sectors that have been developed for merchants.
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Do you see yourself as an affiliate, a media owner or a search agency?

We started off as an affiliate and that’s what I know. CPA is something we have always had to work to and that is us. We know how to drive business using the CPA model.

Over time, our sites are starting to look more like those of a media owner. We receive millions of impressions each month. And along the way, lots of clients have come to us and asked if we can do their search for them. We have different parts of the business now; we have search, we run our portals, and then we have new business, which is about identifying new niches and opportunities.

I’m proud to be an affiliate. We’ve got rid of the bad name that affiliates used to have and it has matured into an industry that is understood a lot more. We’re not perceived to be grubby little men in our bedrooms. You can much more easily explain it to businesses and as an industry, we’re finding platforms that really work.
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Where do you see your business in three years’ time?

In three to five years’ time, we want to be perceived mainly as a media owner. We will have a number of large portals and websites in most consumer sectors. We will still use CPA but we will also use CPM and other models, which we are naturally moving into now anyway.

We have to look at how to take a long term position in the industry. Search is getting so competitive and the big players are coming in. Margins are getting tighter, so we want to have real estate that we own in particular sectors. That’s hopefully the best way forward, but I’ll tell you if it is in three years’ time.

In the last 18 months to two years, we’ve really started to think there was longevity in this. We are becoming much more process driven and structured and efficient. We used to have fantastic ROIs and a small spend, because of the budgets. Now the ROIs are coming down so we are making sure our in-house technology is really good, so we can get the best ROIs out of every pound we spend.
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Is there still room for the smaller, bedroom-based affiliates or is it all about the big publishers - or ’super-affiliates’ - now?

Yes, definitely. The way I look at it is you have the small affiliates that target particular niches and sectors, and become very good at that. They might have one niche site that does large volumes. Then there are larger affiliates that have a number of sites and do more volume stuff across the network. I always believe there is space for both.
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How have you structured your business to be flexible enough to respond to new trends and opportunities?

We have some very good people now. We have the more mainstream part of the business - the portals - established. Then the other key members of the company are looking at the industry and talking to new companies and trying to see new trends and opportunties. We also work with over 150 merchants so we can very quickly see new trends; what is picking up and what’s not.

For example, literally, out of nowhere, last year garden shed sales were going through the roof. We were very quickly able to move in on that. The industry changes monthly and we see patterns in consumer buying, so it’s hard to put a traditional business model next to it. I like the fact that we have that ability to manoeuvre very quickly and move into sectors we hadn’t thought about six months ago.
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How long does it take you to set up a new property?

About a week. We have a very good back-end system and in-house designers, content writers and techies and can get stuff up very, very quickly. That’s what keeps us ahead of the game and as soon as we start resting on our laurels, we’ll be in trouble.

How are you acquiring your traffic and how has that changed over the last couple of years? Have you moved away at all from paid search as costs have risen?

We very much started with CPC. With SEO, with Google changing as much as it used to, things could change rapidly. You could have a site that was doing very well one month and the next month nobody would visit it. You would not make as much money with CPC, but you could control it more and grow the business in a more sustainable way.

That’s what we did until about a year ago. Now, we spend a lot more time and effort on SEO and are getting some great results.

We’re also looking at little bits of offline advertising. We are doing some niche magazines and dipping our toes in the water, to see if we can increase volume. It seems to be working but it’s slower and harder to measure.
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What effect have you seen from the introduction of Google’s landing page quality score in the last couple of years?

As much as people don’t like Google, I think Google has really helped to professionalise the industry. There were some dubious sites and pages out there. It has said it needs quality sites that can help the consumer.

Since the quality update, we have had to look at what we are doing a lot more, rather than the best way to get someone on and off the page. We are doing SEO as well and we are looking at the consumer journey a lot more.
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How has Google’s brand bidding change affected your business?

To be honest, there was a huge furore about it but Google now has an algorithm that is pretty good. If you don’t have a relevant site, you will not be able to afford the click prices.

Now, we see a lot more low hanging fruit like un-affiliated brands, but I don’t think it has had the massive impact everyone thought. It has raised search costs for some merchants where competition has come in, but I don’t think it was the massive thing everyone expected.

There has been very little change, although merchants have come to us and talked about brand protection, asking us to sit second or third in the listings.
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Are you concerned that merchants might move away from the last click wins model? Would this decrease affiliates’ share of online marketing budgets?

I think ‘last click’ has been a good foundation and has got us to where we are, but going forward, merchants want to see where value is being created.

Personally, I think we will move more to a route where CPA is divided between the last click and other people involved in the sale. I don’t think it will happen this or next year, but I think it is two or three years away. I think it is definitely where merchants want to get to and I think it’s a sensible way of doing it because there are so many facets to online sales.

Generally, I think we will move to a multi-cookie approach which will allow merchants to see the value affiliates add and what our role is in the chain.
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Do you think affiliates might lose out when that happens?

No. From what I can see, merchants still pay twice for a lot of sales. By having these duplicate cookies and single track solution, they are starting to understand better where sales are coming from. If they have been paying twice for a £30 sale, they can go to someone and pay £60 now. That means affiliates can go and look at how they generate more volume.
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Is there anything you wish merchants would change in their use of affiliate marketing?

One of the biggest things we see is failure to allocate a correct CPA for sales. Affiliates are still one of the cheapest routes to market and yet we could probably do a lot more if we were given a little bit more of a budget.

We will try and provide the most possible sales but sometimes we think, ‘If we had a few more quid, we could go and do a lot more’. For us as a business, we want to provide the best service we can. It is about sustainability. The merchants need to wake up a little bit to the fact that affiliates can do a very good job but they need to allocate a proper CPA.
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What do you see as the most innovative and exciting things going on in the digital arena?

I think technology is improving a lot in terms of giving site owners the ability to create innovative tools, and that is really exciting. I also enjoy the fact that the lines between search, affiliate and media are becoming very blurred. It’s great to watch the industry mature.
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How will you raise cash for the expansion you mentioned? Will you use existing cash resources or are you considering an IPO?

We are in various talks at the moment and that’s all I’m going to say, I’m afraid.
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Have you had any takeover approaches?

Yes, we do get spoken to quite a lot by a whole mixture of people. It’s generally people trying o find out more about what we do. Affiliates have done a great job of growing their businesses but also remaining under the radar, and suddenly people are seeing their turnovers and want to find out what they are up to.
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Have you any international plans?

Yes. We do work in Europe at the moment and we are looking to take some of our sites into Europe and America.

One of the reasons we have been very good in this country and one of our biggest challenges will be to understand culture and how advertising works over there. But we have some very good technology now and I would rather be very good in one country and have satellites around that, rather than having a broad spread across different territories.

We’re looking at six months to a year for European expansion, and America in about 18 months.
www.UkWebMedia.com
Interview conducted by E-Consultancy.com (c)

Rock on Jamie et al it’s been a pleasure watching you guys grow over the years.

What to buy American Business Associates

When I come to the US, I like to bring a little bit of representational England with me to give as gifts and tokens of appreciation. Christmas, I always struggle to know what to buy my fellow US colleagues, but this time, I think I have cracked it. Forget Fortnum & Mason, forget Harrods or even Marks and Spenser buy them McVitie’s Hobnobs and Jaffa Cakes, PG Tips, does the job even better. Hobnobs in particular went down a treat and my American friends got such a kick out of adding milk and sugar to their tea. So next time you have to buy your associates a little touch of England, send em a packet of Hobnobs and some PG Tips, ok not quite the same as sending them posh nosh, but do we want to encourage a false representation of what makes us British?
Very big Cheddar Cheesy grin.

By the way why is a Jaffa Cake a cake and not a Jaffa biscuit? Find out the shocking truth here
Happy 4th July Uncle Sam from Jess who cant for the life of her understand why she would know about the Jaffa Cake saga… a mind full of really odd and in some ways utterly useless information, tooo funny.

Voucher/Coupon codes Good or Bad?

Voucher codes a good thing or bad thing?
The UK has seen a dramatic increase in affiliates requiring and using “Run of site” discount vouchers. Many sites have been set up for the sole purpose of offering discount vouchers to the general public. We all know consumers are after a bargain.
So is this a good thing or a bad thing for the industry?

For new and small businesses that want to focus on new customer acquisitions and sales a “run of site” discount voucher will do the trick in most cases.
It helps build a brand and gets the merchants company out there in front of their target market and its all pay on performance. Just as a fyi, if a merchant offers 10% off a product o their customers who came via an affiliate link, the affiliate gets 10% less commission, in some cases affiliates are agreeing to less over all affiliate commissions just so they can have a voucher/coupon code to pass on to their visitors, there are even some affiliates who in addition to less commission will accept a reduced cookie or simple a session cookie, so this really is good news for the merchant, or is it? Just for the record, Im not a big fan of run of site voucher codes, but some ecommerce platforms cant support anything else. See hints and tips blow.

A generic run of site discount voucher/coupon needs to be carefully thought through, how does this affect the overall margins? Example on white label goods, margins can be already tight. Short term financial loss for long term financial gain approach based on the life time value of a customer perhaps?.The savvy merchant will know their metrics, they will know what the life time value of their customer is and be able to work out the financial cost associated to acquiring a new customer. They can factor this in with regards to giving a run of site vouchers/coupons to their affiliates. They will have their analytics in place and be able to interpret and understand the numbers.
Here is the first problem, there is a given industry assumption that the merchant knows what they are doing when they give out a run of site discount voucher/coupon to affiliates, we all assume that the merchant has factored in the costs associated, the affiliate commission, the affiliate network override, the cost price of the product (VAT), the postage and packaging, the storage, the labour costs. It may come as no surprise then when I say that some small to medium merchants don’t have a the foggiest idea of analytics or how to work out the cost of acquiring a new customer and focus only on first time sales. Just what the percentage is that don’t understand, I wonder if I would be too far off by suggesting 85% of small online businesses are operating a business using a scattergun approach, could be higher. I feel a survey coming on, any volunteers?

When run of site voucher codes gets out of control.
Scenario, you are anymerchant.com you rank No1 for your name on organic search (if you don’t then most likely you are new, less likely but possible you are black listed) Back to topic, so you rank No1 for your name then below you comes “ anymerchant.com discount voucher here”. As a consumer, what am I going to do?
A) Go to anymerchant.com browse products and buy direct?
B) Got to anymerchant.com browse products then go to anymerchant.com discount voucher here affiliate site and grab the voucher code and use it?
C) Go directly to anymerchant.com discount voucher here?

Just look for your self, type in discount vouchers or discount coupons then cross reference, some sites are still promoting voucher codes from merchants who have closed their affiliate program. Is this ok? I don’t think so. Some sites force cookies meaning the visitor gets cookied before they even see the merchant’s site.

Affiliates who don’t stick to the rules.
Well again it may come as no surprise that some affiliates don’t stick to the rules as has been laid out in the terms and conditions. Whilst rogue affiliates are few in numbers they are a real pain in the ass to deal with when I comes to run of site and in some cases category or product specific voucher codes (we will talk more about category and product specific voucher codes later on) such a pain in the butt that AffiliateProgramAdvice.com is now reviewing voucher codes re their clients (period).
The problem is three fold, the first I have explained above, the second is… if a merchant gives an affiliate an exclusive discount voucher code to a trusted affiliate (what is an exclusive voucher/coupon code?, myaffiliatesite.com has a merchant voucher/coupon called myaffiliatesite.com, means that myaffiliatesite.com is building a brand and by having a voucher for visitors to use helps reinforce the brand of the affiliate site for the purposes of coming back. Its also a clear signal that the affiliates site has the backing from the merchant.) What we have seen in the UK is an epidemic of rogue affiliates stealing and promoting some other affiliate’s exclusive discount/coupon code. It’s a mess out there! “Jess kick the rogue affiliate off the affiliate program”! I hear you shout? Errrm not that easy. Some rogue affiliates have no clue which merchants codes they have
a) stolen from other affiliates
b) which were legit
c) What planet they live on.
Essentially, even though the affiliate no longer earns commissions, they are still displaying voucher/coupon codes that most likely expired anyway (affiliates who don’t display expiry dates regardless of the code being authorised for that affiliate or even stolen codes, it may not have occurred to them but this can cause a logistics nightmare for customer care, if an affiliate promotes a voucher that has expired the consequences not only harms the merchant and the industry, but an irony if the affiliate thinks he/she is pulling in traffic this way then what are the chances of that referred visitor coming back to the affiliates site? Or even remaining in the merchants affiliate program. Im please to report that the majority of affiliates do display an expiry date).

Thirdly, the human resources that goes into policing this is not cost effective and a useful way to utilise time, are we really turning into an industry where by 70% of the time is spent on policing and 30% o relationship building?

”Jess get the networks to sort it out”. Errrm not that easy either, some affiliate networks are better then others at policing rogue affiliates. But the majority of affiliate networks are not kicking the rogue affiliates out, rather they keep them for the sake of the legitimate codes that they have been issued, remember the affiliate network gets a % of the sales and leads. The networks have responded by offering a voucher/coupon tracking code that the merchant has to implement on their website, all fine and dandy but for a lot of merchants it was all they could do just to get the basic pixel tracking in place. The assumption here is that merchants are technical, marketing, analytical when in reality the basic day to day running of their online business is their priority. My question has got to be, if we report a rogue affiliate, what on earth are they still doing in that affiliate network weeks/months later, still promoting other merchants? A rogue affiliate is a rogue affiliate, period! There can be no allowances made. Aff networks holler “we are cleaning up the industry!!!” In this particular instance I would say you are doing some light dusting but have yet to take the vacuum cleaner out! The industry is getting to the point where by what started out as genius is degenerating into a cacophony of anarchy and all because there are few to police this bad practice and those that do police end up being seen to be the bad guys and get stick on forums and blogs for being “mean” “not affiliate friendly” simply because the networks allow this to continue. A merchant has ultimate control over how his/her products should be promoted, if the affiliate breaks the rules then not only should they be ousted from the affiliate program but ousted from the affiliate network too. This way I can give exclusive voucher codes to my trusted affiliates and know that they wont have to do battle with other affiliates who know the bucks, pounds and Euros that they generate for the networks will protect them.

Voucher/coupon codes offline and the general public.
Scenario, you got a great offer being promoted in some relevant magazine “get 10% off when you purchase x product, enter coupon tottenhamhotspursrule at check out (don’t knock em we won the Wembley cup). There are affiliate sites out there where the general public can post vouchers/coupons for other registered members. Now your offline stats are skew. If this has or is happing to you, contact the website owner either via the network or directly and state “You do not have our permission for your users to display this code, please remove”. The law states that information in the general public arena is acceptable, in theory anything a merchant publishes in a magazine for example, is not protected per say. Copyright infringement? Not when it comes to coupons/vouchers. So there is very little you can do here. Weigh up the pros and cons first.

So what can you do?
Never issue run of site voucher codes unless you are a new online business and you are looking to acquire new customers. Attach affiliate terms and conditions and one of them MUST be for affiliates to display an expiry date, at the very least. I hate run of site vouchers, my preference would be to have a generic first time customer incentive (providing the e-commerce platform can support this). A one time only discount either % or free P&P. Going forwards keep offline and online promotions the same and issue codes for either category or product specific only. This way merchants can work on their products that have bigger margins. Another good use of voucher codes is based on basket value, get % off when you spend $£x.00

Keep promotions short, issue clear guidelines to affiliates and to your PR agency or media partner. Category and product specific coupons will do the same job as a run of site voucher/coupon, how ever this will not resolve the problem of the code being plastered all over the net.

Don’t issue voucher codes unless you have the analytics in place in which to measure by. Merchants and affiliates alike should be measuring every click. Acquisitions, retention, sales, clicks, impressions, campaigns, basket abandonment, bounce rates, competitors (and their affiliate program). It’s a lot of work and data mining but if you don’t invest in this from day one I will hurt you financially down the line and you will be operating your business blindfolded and using best guess and not looking at worse case scenario.

You can use the affiliate networks voucher/coupon tracking code, ask them for it, this would be the easiest way providing you have a tech head that can implement it on the site. If you do have a tech head then ask them to write a script that will do the same job if your network can not provide the tracking.

Id hate to see the day when I could not issue an exclusive code to one of my trusted affiliates, that day is fast approaching, unfortunately.

I love the guys and girls that I work with and have built up a good long term relationship with and these affiliate partners are a merchants dream come true by the way they promote them. I wont have a word said against them and some require exclusive voucher codes and for me, no problem at all. But it’s the rogue affiliates that are forcing merchants and agencies to rethink the whole voucher code allocation.
Solution, aff networks have got to get a zero tolerance approach or voucher codes for affiliates will soon become a thing of the past, can we all look beyond the here and now and start reading the writing on the wall.