Value Based Advertising Model Needed? Welcome to the Affiliate Marketing!

Advertising Age recently put out an interesting article where they suggest that the current cost-based compensation model that exists between advertisers and advertising agencies is flawed and provides the wrong incentives, further suggesting that a value based model is needed. "The current cost-based compensation model for advertising agencies is flawed for a simple reason: It misaligns the economic incentives on each side. The client pays whether the agency adds value or not, and the agency is paid a fixed amount regardless of the value it creates. Clearly, this model is not in the best interests of the client or the agency." "Even more perniciously, the existing compensation model focuses entirely on the wrong things: efforts, activities and costs. It does this at the expense of the right things: output, results and value. " The article goes on to suggest that one of the main factors keeping advertising agencies from moving to this type of model is the lack of information and trust on value based metrics as well as control over the value creation process. Hello?  Welcome to the world of affiliate / performance based marketing.  Those of us in the industry have been doing this years! It works like this, Top Affiliates, call them Online Advertising Agencies, decide who they are going to create a value based relationship with, then they spend their time, efforts, and dollars to promote these advertises on pre-agreed terms which are managed by affiliate networks, a 3rd party that both the advertiser and marketer trust to manage the technology that facilitates the relationships and track the results.  Special links from these networks are...

Utah Passes an Anti-Trademark Bidding Law

The Utah State legislature quietly passed through a bill outlawing advertising via search engines on competitor’s keywords, stating that a company’s name is an "electronic trademark" for the Internet. Google claims the law violates both free commerce and free speech rules and things that the law will be held unconstitutional. Here is a snippet from the Daily Herald Article: This law is one of those bad ideas that should have been killed at birth. Not that anyone didn’t try. The Legislature’s own lawyers warned that the bill had a "high probability" of being deemed unconstitutional by the courts. Unfortunately, lawmakers chose to ignore the lawyers and put the state on a high-speed connection for litigation. The bill is constitutionally flawed. Advertising enjoys a great deal of free-speech protection, especially on the Internet, which gets a constitutional analysis much like print. Utah’s law is essentially a state-imposed gag on Google and other services, censoring attempts to deliver advertising because a Utah business has declared that words used in the search are part of its trademark. Read more… If they allow individual states to have different rules and regulations, it’s going to get very confusing very fast.  Perhaps Google should provide a way to opt out of a specific region.  Right now if you didn’t want to show your ads in Utah, you would have to turn on local targeting for your campaign and select every stat except Utah.  This would then display your ads as local, and add the little geography indicator underneath all of your ads, something an advertiser might not want when opting out of a specific...

American Blinds vs Google in Trademark Case

There have been several legal cases over the past few years where companies have challenged Google’s right to allow competitors to bid a company’s keywords to drive traffic to their site.  Currently in the US, anyone is allowed to bid on a competitor’s trademarks so long as the ad doesn’t use the competitor’s name in the ad copy, thus causing possible confusion.  In the UK the decisions have gone the other way and competive trademark bidding is not allowed. On Friday, a U.S. District Court judge ruled that a American Blind’s trademark infringement suit against Google can go to trial, this case is sure to be watched closely by the Industry. Google had asked the judge to declare that Google’s sale of trademarked terms was legal and didn’t constitute use of commerce under the Lanham act.  However the judge ruled that American Blinds did precent enough of an argument for the case to go to jury, saying "he evidence suggests that Google used the mark with the intent to maximize its own profit so the intent factor favors American Blinds." The case is over 3 years old now, and should go to trial this fall. Google, which generated advertising revenue of $10.5 billion in 2006, says it is confident of presenting a solid case in a jury trial. "Judge Fogel rightfully concluded that they did not prove that two of their marks are protectable, and we are confident that they will be unable to prove their remaining claims at trial,” says Michael Kwun, Google`s litigation counsel. But American Blinds, which derives about 50% of its revenue from the web,...