This famous opening line from A Tale of Two Cities accurately describes the life of two keywords that reside in two very different countries (paid search campaigns). These two keywords were identical twins separated at birth. One keyword moved to Country A, which followed the law of last click attribution. The other keyword moved to Country B, where they followed the law of attribution management.

“It was the spring of hope” for the keyword that moved to Country B; “It was the winter of despair” for the keyword that moved to Country A.

Let’s now examine why these two identical keywords live such very different lives. Each of these keywords are classified as general terms, such as “toys,” “furniture,” “office supplies,” “laptop” or “shoes.” Thousands of searches are done each day for each one of them, and very often, more refined searches, such as “outdoor toys,” “leather sofa,” “automatic stapler,” “MacBook Pro” or “black high heeled shoes,” will follow them. Like all general terms, they most often occur at the top of the conversion funnel, which we would classify as “introducers,” meaning they’re often the first step of a purchase path. We can also classify some terms “influencers”—the middle step(s) in the path, or as “closers”—the last step in the path or conversion funnel.

On the surface, each of these keywords has a very similar life, in terms of search volume, click cost, and where they appear in the purchase path. However, how they are valued by their countries is where they differ greatly. To highlight this, let’s look at some metrics for these keywords over the last 500 clicks:

Keyword	Last Click Profit	Profit per click	Attribution Profit	Profit per click
A	$100	$.20	N/A	N/A
B	$100	$.20	$250	$.50

As the chart shows, these keywords performed exactly the same. They each contributed 35 times in purchase paths (introducers + influencers + closers = total contributions by that keyword). When each keyword is valued solely on its ability to close, they too are exactly the same ($100 last click profit). However, in Country B, the land of attribution, they don’t just see value in a keyword’s ability to close, but also in the keyword’s ability to introduce and influence people to buy. Therefore, when Country B determines the value of a keyword, they also include the number of times it was an introducer and influencer into their value calculation. This is what is known as attribution management, the process of properly identifying and valuing the chain of marketing initiatives and advertisements that lead to a sale or conversion.

These countries both have the same goal established for every keyword in their country. In order for a keyword to be allowed to continue to live, it needs to achieve a $.20 profit per click. Based on the charts above, keyword A is currently generating $.20 of profit per click, and keyword B is generating $.50 of profit per click. Based on the established goal, each of these keywords should be allowed to continue to live today.

Each of these countries also calculates the maximum bid price they can afford (assuming its conversion rate remains constant) to pay per keyword while still achieving the $.20 profit per click. In keyword A’s case, they are currently at the maximum bid, which is $.10 per click, whereas keyword B could have a bid price of up to $.30 per click to still achieve the goal of $.20 profit per click (500 clicks x $.30 cost per click = $150 ad spend, producing $100 of profit. $100 profit divided by 500 clicks = the goal of $.20 profit per click).

These two countries share another similarity in that they apply more financial resources (ad budget) to keywords that are performing above the goal of $.20 profit per click. By applying more financial resources and increasing the max bid, they are able to get more clicks on that keyword, which in turn yields more profit for that country. Under this system, general terms in country B can often be among the top performing keywords in that country, but in country A, these general keywords may be stuck at a lower bid or even paused (killed).

As you can now clearly see, the lives of two identical keywords are incredibly different simply based on how their performance is valued. Keyword A is close to being killed, whereas keyword B is regarded as a hero, performing far better than expected. In the world of online marketing, if you are still using last-click laws to value your marketing, you have likely killed a lot of innocent keywords and rewarded other keywords that are not truly deserving of that honor.

In Country B, which has far more progressive laws for the valuing of keywords, they are able to identify the real value of a keyword by looking beyond just its ability to close. As a result country B can then move on to more sophisticated attribution models, like implementing law that excludes giving credit to branded terms that occur at the end of a purchase path, as they deem branded terms at the end of a path are only used for navigational purposes rather than contributing to a conversion.

In this tale of two keywords, Keyword B will experience “the best of times in the age of wisdom,” while Keyword A will live in “the worst of times in the age of foolishness.”

How to structure a proper attribution model

So, how can you make sure that your marketing campaigns experience “the best of times in the age of wisdom”? To start, here’s a low cost process that you can go through to see the impact of attribution:

1. Determine the average number of visits per conversion on your website. You can get this information from any web analytics tool, including Google Analytics, which is free. If the average number of visits per conversion is much greater than one, then you know your average customer is requiring more than one visit to your site to convert. If you’re using last click attribution, you are giving too much credit to the last click and no credit to the influencers and introducers that are also integral to the conversion.
2. Bucket your keywords into the following 3 categories: introducers, influencers and closers (do this for your paused keywords as well). This exercise is going to require some educated guesses, unless you have a technology that does this for you. An introducer would be the most general terms that describe your business, like “toys,” “shoes,” etc. Closers are brand terms, model numbers and exact product names. Anything that is not classified as an introducer or closer can be put in the influencer bucket.
3. Count the number of introducers, influencers and closers you currently have in your active campaigns. Are you heavily favoring your closers and ignoring many introducers and influencers?
4. Count the number of introducers, influencers and closers you currently have in your paused campaigns. Are you finding that the majority of these paused keywords fall under the introducer and influencer categories and very few are closers?
5. Run a report that shows the number of times these closing keywords have converted each month over the last year, in order to establish a baseline.
6. Of introducers and influencers that you have paused, select a large enough sample size that generates significant traffic and truly describes the business you are in, and turn them back on. For example, if you’re selling baby furniture and you have the keyword “baby furniture” paused, turn it back on.
7. You’re going to have to measure the impact that these introducers and influencers have. First, count the number of conversions they currently receive under last click (just because a keyword is typically an introducer or influencer doesn’t mean it will not act like a closer some times), and more importantly, ask whether the keywords defined as closers now have more conversions, especially your branded terms, compared to the baseline report you created in step 5?
8. While you’re studying the numbers above, you will likely recognize two things that could concern you:
   • Your overall conversion rate has decreased
   • Your cost per acquisition has increased.

   This is to be expected. Why? As you invest in introducers and influencers and only measure by last click, your introducers and influencers will appear to not contribute to conversion rate. Because you are buying more advertising, you may find that your overall CPA does rise, but that is not always the case.

9. Ask yourself this question: Is increasing conversion rate and lowering CPA the reason why you’re in business? No. The reason you’re in business is to generate profit. It may seem counterintuitive, but overall profit can increase even while conversion rate decreases and CPA increases. So, the real metric to look at is total revenue. How much of an increase in revenue did you receive by adding introducers and influencers back into your campaign versus not having them at all? If you see a healthy rise in revenue, then you can likely conclude that having introducers and influencers in your campaign has been successful.

Follow these steps and you’ll likely discover why more and more marketers are developing more sophisticated attribution models for their paid search campaigns, rather than simply crediting the last click in the conversion funnel.

If that sounds familiar you are one of the growing number of people using/playing Foursquare, a mobile app that uses the location of your mobile device to encourage users to “check in” wherever they might be in exchange for points and recognition like becoming the Mayor of McDonald’s, or wherever else you might happen to be. Yelp recently launched a similar feature and GoWalla provides its own spin on this conceit. So more people are checking out checking in. You might wonder, what does all this have to do with local search?

There’s this thing called Second Life. It’s been around for a while and every year hundreds of thousands of people sign up to create virtual selves that interact in virtual worlds with other virtual people and use virtual money to buy virtual goods. That virtual money is of course paid for with non-virtual (aka real) money. So what if instead of experiencing Second Life on your computer, you could experience it in the real world? That’s the promise of these new location-based gaming applications—overlaying a virtual world upon the real, physical 3D world.

Besides amassing points and badges, the benefit of using these check-in services is that they can present relevant nearby offers and promotions to users. If you are at a mall and you check in to a Gap store you might get an offer for a discount on a shirt. If it’s around lunch time you might get pinged about a discount meal offer at a nearby California Pizza Kitchen along with a review of the pizza by a friend who is using the same app. The relevance of location, time, social recommendations and perhaps demographic information combine to make powerful media targeting.

We are now in what I call the 2D version of location-based gaming. There’s not a lot more to it than what’s described above. But in the not-too-distant future I believe we will see a James Cameron of local search emerge and create the 3D version that will rock the world.

Imagine a game that happens via a mobile device but incorporates real world location. Now imagine that instead of merely checking in and getting relevant coupons, you are actually playing a game that requires you to interact with the location and the people there. Maybe the game requires you to go to a McDonald’s (Burger King underbid for the QSR sponsorship) and order a specific item to unlock some secret. The guy at the counter pings your mobile device once the sale is made and then you are given a message to sit at the table near the ketchup counter to await your next instruction—and enjoy the Filet O’ Fish while you wait. Then another player sits down, gives you the secret handshake and provides you with your next mission, to find another clue to the game while trying on a new Wonderbra at Victoria’s Secret (warning: gender targeting can sometimes be off. We’re still in beta after all).

What if the world basically becomes a walking version of the Wii?

The implication for brands is pretty clear. There will be opportunities to interact with potential customers by integrating with the game. This is no different than what is going on in virtual worlds like Second Life. The difference is that the interaction will be happening both online and offline simultaneously and it will likely be accessible to a lot more people.

So what does this mean for the service providers who are not location-based (e.g. plumbers) and those who are not ideal hosts for fake shoot outs (e.g. banks, gynecologists, etc.)?

In the 24/7 always on world of reality-based virtual gaming, there will always be an excess of inventory. As these types of experiences become the new time suck, most likely for a younger demographic, creative local businesses will find a way to get their message out. At first this will be the realm of two-for-one shots at the local bar type deals. But just like ATMs found their way into casinos, clever banks, chiropractors and others will find ways to participate if the customers are there. Don’t be surprised if the next time you are named the Mayor of the local dive bar you get a friend connection request from a virtual DUI attorney.

Lesson 1: Being timid is like sending your competitors a fruit basket

Since each ad position, as a rule of thumb, tends to get about 40% more traffic than the position below it, dropping several positions in the rankings, or dropping out of bidding entirely, results in multiple competitors getting substantial increases in traffic at the rate they were paying for their lower position. You wouldn’t send your competitors a fruit basket, so why give them higher ad positions at a discounted rate? One reason that might spring to mind for many account managers is “Because it saves me money,too!” An account manager I will call “Mike” once asked me something like, “If a word can get 100 clicks a week for $2 each, why not instead reduce its bid and get those same 100 clicks spread out over a month for $1 each?”

It’s a very good question, since Mike’s method sounds like it would get the same click volume for less cost, but there are two key times when it can be problematic: (1) when you don’t have a monthly budget limit, and (2) when you do. Let’s consider the first case first.

Lesson 2: There is only one “bidding strategy”

Some PPC marketers talk about “bidding strategies” the way they talk about market strategies and business models, as though there are many of them available and the marketer’s job is choose which is most appropriate and most likely to succeed in a given situation. In their book Search Engine Marketing, Inc., Moran and Hunt provide a table of what they claim are many different strategies, but as Google’s chief economist Dr. Hal Varian’s YouTube video “Google AdWords Bidding Tutorial” shows us, there is only one: For each keyword at each time, bid optimally.

Consider a keyword (called “A”) which has a 5% conversion rate and makes $300 in revenue per conversion. A second keyword, “B” is identical to A except that it has only a 2% conversion rate. The monthly performance figures shown in the table below for these keywords are fictitious, but realistic.

We can see from the table what a striking difference the lower conversion rate makes in both the monthly profitability of the words and in the range of bids over which a word is profitable, which is why people like Tim Ash, author of Landing Page Optimization: The Definitive Guide To Testing and Tuning for Conversions, are such vocal advocates of conversion optimization. According to Dr. Varian’s method, if we had no budget limit, we could find our best bid for each keyword by just selecting from the table the bid with the highest profit (which for keyword A would be $7.20, bringing a profit of $2,443 per month and for keyword B would be $2.40, bringing $719 per month). These are the only optimal bids for these words, since our economic goal as advertisers is to maximize the amount of profit we make per heartbeat.

In that rare utopia where an advertiser has an essentially unlimited budget, AdWords acts as what I call “the bank of Google.” I have one client in particular who, despite the economic downturn of the past year, can’t spend money on pay-per-click (PPC) advertising fast enough, because for each dollar they spend they ultimately generate on average $2 in profit. For them, AdWords is like a bank where for every $1 deposited, their account is credited $2 by the end of the day. In fact, in “Online Ad Auctions” (The American Economic Review, Jan. 2009) Dr. Varian has shown that the ratio of value delivered to advertisers divided by the revenue to the auctioneer (that is, Google) should be about 2 to 1, at minimum.

So when the budget is essentially unlimited, for Mike the account manager to overbid on any keyword reduces profit by wasting money and to underbid reduces profit by wasting time. He has only one optimal bid for each word and should use that bid until the performance estimates on the table change.

Lesson 3: Sometimes a pawn is your strongest piece

Done properly, PPC marketing is a measurable profit center, even though some see advertising as just an expense and therefore put artificial limits on spending levels. So, if we were not permitted to spend more than, say, $500 per month, we could put it all into keyword A (the more-profitable keyword), bidding $4.60 per click for a profit per month of $2,380, which is far more than we could make on keyword B. The question is: How much of our $500 budget should we consider shifting from the more-profitable keyword (A) to the less-profitable keyword (B)?

At first glance that question sounds absurd. If we have a limited budget, why not spend it all on keyword A, which has a higher conversion rate and generates two to five times as much profit at any bid as keyword B? Well, because it so happens that there is a better way to spend $500 than by putting it all into keyword A. If we were to bid $3.20 on keyword A and $1.70 on keyword B, then we will make $2263.34 + $706.80 = $2,970.14 (which is far more than bidding solely on keyword A) and still meet our budget limit. You can check the math for yourself.

The lesson for online marketers is that bidding optimally on multiple keywords simultaneously under a constrained budget is not simply a matter of reducing our bids until some desired spending level is attained, as Mike suggests, nor just selecting the largest profit from a table, as Dr. Varian suggests for the case of an unlimited budget. It requires rigorous calculation to avoid missing available profit, and there is no simple shortcut except to be aware of the pitfalls of budget-constrained bidding and to avoid them.

The numbers are similar on the spending side, Efficient Frontier reports. Google is the clear leader, but the company’s 74.5% share is actually down year-over-year. For the year, Yahoo remained steady at 20.4% of spend, while Bing grew 25% from Q4 2008 to Q4 2009.

The report offers an overall positive outlook on search advertising. Efficient Frontier says the retail sector led a strong Q4 2009 that was up 6% from quarter to quarter and from year to year. Retail advertisers spent 17% more in Q4 than they did a year earlier, but retail CPC was down 9% from Q4 2008 levels. The report suggests lower cost-per-click may be due to search engines experimenting with new ad formats:

“Google and the other engines are adding more features to provide comparative shopping data within the SERP, a move that is likely contributing to a retail CTR drop-off of over 40% YOY.”

Looking ahead, Efficient Frontier is optimistic for 2010. The company expects that a “moderate amount of CPC growth will accelerate growth in Q1 and throughout 2010,” and that “2010 spend growth will exceed earlier estimates of 10-15%.” The report also predicts solid growth for Bing in 2010, saying that a 30% gain is possible, which would put Bing between 6-7% of click share by the end of the year. But there’s also a warning that Yahoo’s falling share of paid clicks could offset Bing’s gains if and when the Microsoft-Yahoo search deal is approved and takes effect.

Partners during the pilot phase included Digsby and UberTwitter, among others, while advertisers included sports networks, news organizations, and entertainment sites. Here’s an example of ads from the program being shown in OneRiot’s feed, tied to the “Conan O’Brien” trending topic:

OneRiot says the RiotWise ads have been performing at 3-4 times industry standard CTR for ads in realtime web apps. Says OneRiot GM Tobias Peggs: “Our ads make sense to buyers, make sense to users, and transparently deliver revenue to developers across the realtime web ecosystem.”

Today’s launch makes RiotWise available to all developers via the OneRiot Developer Network.

Early days of mobile advertising

Before smart phones hit the market, mobile advertisers were confined to the small screens of traditional mobile units. Web access on those phones was painful and expensive“web pages” on those phones often consisted of nothing more than several hyperlinks. Needless to say, the technology never really took off. The iPhone changed all of that in late 2007, by offering a full touch screen HTML browser. Suddenly web-on-mobile devices started to make more sense for both phone users and advertisers.

AdWords and mobile

Soon after the iPhone launch, Google introduced a new feature in the AdWords “Settings” tab. This feature enabled online advertisers to syndicate AdWords ads to mobile phones. With the flip of a switch, online ads could be displayed on browser-based handsets around the world.

Sounds great, right? In theory yes, allowing online advertisers to syndicate pre-existing ads to users on a new type of device with little-to-no work sounds great. Except that these ads were originally designed for users accessing the web from a relatively fixed location on a screen ranging in size from 10 to 20+ inches.

Why does this matter? Users accessing the Internet via PC (laptop or desktop) are in a totally different mindset from their mobile counterparts. Generally, PC users will spend large chunks of time in a fixed location and may spend hours searching and researching.

The PC experience is much more tolerable, searching from the comforts of your home or office is much more enjoyable than trying to navigate a 2-4 inch touch screen while walking down a busy street or riding on a bus.

Additionally, PC users have more time on their hands—when you are on the go you probably have a task to accomplish and you are usually in transit. Mobile users “snack” on the internet in small browsing sessions, and generally access the web when they need a quick answer.

Now you can start to imagine why ads that you have strategically set up with PC users in mind may not be as effective in AdWords’ mobile version.

AdWords mobile optimization techniques

1. Turn off your mobile ad syndication if you haven’t done so already. You will turn it back on when you are ready.

2. Make a copy of your AdWords campaign and append the word “mobile” or another designation to differentiate the new mobile campaign from the standard campaign.

3. Adjust your bids to a lower value. At this point, few advertisers have enough data to clearly suggest how effective mobile ads are versus their traditional AdWords counterparts. Additionally, few advertisers are opted in to the AdWords mobile option. Why risk a higher CPC if you don’t have to?

4. Review your ads. You want to ensure that your ads are clear and to the point. Remember, most mobile users are accessing the web on 2-4 inch screens. The goals of these ads should be relatively similar to those of your traditional AdWords ads. However, there may also be additional opportunities for geo-modification due to enhanced targeting capabilities of mobile devices. Also, be sure to take advantage of Google’s new in-ad phone feature. This will allow users to call your business directly from the SERPs for the price of a standard click.

5. Review your landing pages and optimize them to be more mobile friendly:

• Remove non-essential images; these take up space.
• Be sure to include your phone number. Many smart phones have a tap-to-call technology built in that will allow your visitors to call your company directly with a simple touch of the screen.
• Use contrasting colors and simple fonts. A clean design is even more important on mobile devices.
• Organize your content in short lists, and bold important terms if possible.

6. Review your current keywords. Certain keywords may work better than others in the mobile space and testing will reveal their value.

7. Revisit your goals and manage your expectations. Mobile advertising is a great way to stay connected to your audience when they are away from their PC. Reduced expectations for your mobile campaigns should be set as users will be less likely to make a purchase on a mobile device. Lower CPCs should help offset the difference in conversions.

Calls to Action to consider monitoring:

• Direct calls to your business
• Clickthroughs to specific links
• Sharing features (email a friend, tweeting, SMS sharing)

8. Test and monitor your campaigns on an ongoing basis, just as you would with any AdWords campaign. As more consumers switch to smart phones and our lives become increasingly mobile, expect online advertising to follow suit.

With more people using advanced devices and with advancements in mobile technology, opportunities to market to mobile users will increase as well. I’m not suggesting that mobile advertising will become a staple in every advertiser’s marketing mix in 2010, but if you don’t test the new advertising opportunities your business might be missing out. Before launching your first AdWords mobile campaign adhere to the best practices listed above to minimize your risks and increase your ability to control your campaigns.

Unlike most click fraud, Edelman says this scheme actually leads to sales on the advertiser’s web site — making it harder to identify than traditional click fraud. But if the sale happens, it only happens after the buyer has been passed from site-to-site through a series of affiliates that all take a piece of the pay-per-click fees. As he explains to Forbes,

“The retailer may think it can detect click fraud by a low sales conversion rate,” says Edelman. “But here, the traffic converts. Based on that high conversion rate, they might even decide to raise their bid [in Google's advertising auction system] and have no way to realize that it’s all a ruse.”

Google didn’t respond specifically to Edelman’s example, but the company gave this statement in the Forbes piece:

“A Google spokesperson responded in an e-mailed statement that it’s the company’s policy “to prohibit [advertising] partners from being associated — whether directly or indirectly, intentionally or unintentionally — with parties who buy traffic in ways that cause a poor user or advertiser experience,” and that it responds quickly to any violations of that policy.”

Edelman, it should be noted (as Forbes does), is currently involved in a lawsuit against Google involving the AdWords program; his bio also lists Microsoft as a “representative client.”

VigLink is in the news today primarily because the company has announced that it has closed a round of seed investment, for $800,000 in total. From the press release, funding sources include:

Google Ventures, and individual investors including LinkedIn Founder Reid Hoffman, longtime Google executive and current LinkedIn VP of Product Deep Nishar, and noted technology entrepreneurs Niel Robertson, Hadi Partovi, Ali Partovi, Carlos Cashman, and Micah Adler. The financing, which was co-led by First Round Capital and Google Ventures, will be used to accelerate VigLink’s market expansion.

At Search Engine Land, we don’t tend to focus on affiliate programs. But I felt VigLink was worth a closer look because of the Google involvement and because of questions the company’s program raises in terms of Google’s guidelines about paid links.

Google’s involvement is straight-forward. Google has a venture capital arm, Google Ventures. The company likes VigLink’s prospects enough that it has decided to back it with funding (how much isn’t disclosed).

On the paid links front, my understanding is that VigLink passes Google’s paid links requirements. I’ll get into that more, but first, how it works.

Install Code & Get Affiliated

VigLink provides code to those who are in its program. Similar to code used for something like Google Analytics, you insert this so that it’s present on every page.

The code reports to VigLink all the outbound links on your site — or specifically, all the outbound links that people are actually clicking on. If notes these links and checks to see if the companies the links lead to offer affiliate programs. If they do, then VigLink turns those links into affiliate links that earn you money.

VigLink’s demo page gives a real example of how this works. On that page, there’s a link to a book at Amazon called “Four Steps to the Epiphany.” The link in the page looks like this, if you hover over it:

http://www.amazon.com/Four-Steps-Epiphany-Steven-Blank/dp/0976470705/

Click on that link from the demo page, and you’ll see how it looks like this in your browser’s address window:

http://www.amazon.com/Four-Steps-Epiphany-Steven-Blank/dp/0976470705/?tag=vig-20&sid=151gu6ptz593e

That part I’ve put in bold? That tells Amazon that this person came from VigLink. If they buy something, then VigLink earns some money off the sale, since VigLink is an Amazon affiliate through the Amazon Associates program.

VigLink has enrolled itself in thousands of affiliate programs similar to those that Amazon offers. Anyone using VigLink code on their web site is effectively becoming part of VigLink. VigLink would look at your site, and if it sees a link to Amazon that doesn’t have an affiliate code on it, then it would add a tag to make it part of VigLink. The same is true for other online retailers such as eBay or TigerDirect.

Visitors to your site see none of this. If they hover over a link, they won’t see the affiliate code. Nor does VigLink operate like some of those programs like Vibrant that automatically try to make any word on your site. Only links that you’ve already created are turned into affiliate links, assuming there’s a relevant program.

Advantages

The plus side is the time savings. On my personal blog Daggle, for example, I link to things all the time. If I’m really thinking about it, I might add my Amazon affiliate code to a link to relevant information in something I’m writing. If I’m busy, I probably won’t bother. Other companies I link to might have affiliate programs, but it’s not worth my time or effort to sign up for those.

VigLink aims to correct such laziness. For example, I’m in the closed VigLink beta right now. I can see that in the week or so since I put the VigLink code up that I’ve had 53 clicks from my site over to Amazon. Of these, 47 clicks were on links where I had added affiliate codes. The other 6 clicks? I never added the code, but VigLink did it for me, using their code.

Similarly, I had nine clicks from my site to TigerDirect. I’m not a TigerDirect affiliate member. I have no affiliate code on those links. But by adding VigLink, it added its own code to those TigerDirect links, making them earn for me.

Now, I’ll earn more if I do affiliate links direct. VigLink takes a cut of any affiliate sales (how much varies and isn’t specifically disclosed, to my understanding). If you’re really worried about earning as much as possible, you’d want to do your own direct affiliate links. And if you do, VigLink recognizes these and doesn’t replace them, the company says. It only act on links where it sees a failed monetization opportunity.

Disadvantages

On the con side, the biggest is probably disclosure to your readers. When I affiliate a link, I usually make a note of this to my readers — and that’s something recent FTC guidelines now say is a requirement. VigLink suddenly makes any link on your site into one that requires disclosure. But since you don’t know which ones — and right now, since you can’t selectively choose which links might be affiliated — to cover yourself, you probably should have a blanket disclosure statement as part of your articles.

Another con is that the program doesn’t automatically find words or products that probably should be affiliated. If you write about a product but don’t link to it at some site, you’re not going to earn. In contrast, a program like Google AdSense tries to automatically look at your content and put ads near your content. And a program like Vibrant will actually turn words in your stories into links. Of course, many people find that type of word-to-link transformation annoying, myself included.

Paid Links & SEO Issues

From a search engine optimization perspective, VigLink seems a minefield. Google wants any paid link on a web site to be blocked from its crawler or flagged with a nofollow attribute, lest the site owner face a paid links penalty. VigLink potentially makes any existing link into a paid one, and site owners don’t know which, nor can they control the implementation.

Since VigLink uses JavaScript, there’s the potential that if Google does NOT read the JavaScript, it won’t see the paid links. That would mean the site is effectively getting a cloaked paid link. The search engine sees a non-paid one, but humans see a paid one. Arguably, this could be a guideline violation. Then again, since the site owner may not have deliberately set out to place a link in return for payment, Google might not view it that way.

If Google DOES read the JavaScript, as it does in some cases, then some of the links are definitely transformed into paid links — and currently, without any nofollow attribute attached to them, VigLink tells me. Some of them probably do not have redirect blocking that would make up for the lack of nofollow, so again, there’s a potential guidelines violation.

Google Gives All Clear

VigLink said it has talked closely with Google and been assured that its program will not cause site owners to violate paid link guidelines. I’m also waiting for a longer statement from Google. But Google also reassures me that it has seen the VigLink program, and it doesn’t pose any problems.

Other Issues

Another search marketing concern is the lack of control you have over where your site’s reputation can flow. Some sites want to ensure external sites receive get PageRank or reputation credit that’s typicaly passed through links. A program like VigLink, if done to Google’s paid link requirements, means that this credit is blocked. This isn’t the case within domains, by the way. VigLink says it never changes a link within the same domain or subdomain of a hosted site.

Long-term, if VigLink is successful and attracts imitators, the links that Google depends upon for much of its relevancy would be lost, since it wants to ignore any that are paid. Of course, affiliate links aren’t a new issue on this front. In the past, Google has suggested that there’s always enough of a sample of non-paid links for it to do good link analysis.

Ideally, I’d like to see site owners have much more precise control over what links get affiliated and which don’t. I’d also like to see VigLink insert nofollow attributes to links that are processed through JavaScript. Similarly, I think it should consider placing nofollow around any links on a page that it may make paid when the JavaScript processes.

CEO Oliver Roup told me last week these are all things that might happen in the future. But on the nofollow front, right now it’s not so pressing, since Google’s given the program a clean bill of health as things are now. As for granular control, VigLink says that if that comes as needed during the beta, it’ll happen afterward.

Of course, much of this is moot right now. VigLink is in a closed beta. You can’t sign up for it. You can, however, generate what’s called a “pre-sales” report. This is designed to show you links on your site that could be monetized by VigLink when it opens generally in the future.

Postscript: James Morell alerted me to Skimlinks, which seems to operate in the same way as Viglinks. I haven’t looked at Skimlinks in any great detail. In a quick visit, one key difference between it and Viglink is that Viglink says members get paid each month, regardless of how much they earn. Skimlinks says there’s a roughly $160 minimum earning needed in a month (50 UK pounds).

The first step to a successful behavioral targeting process is finding the right targets. It is not always obvious which users should be “bucketed” together. Creating effective buckets requires knowledge about the site and a careful analysis of the data. It is important to have clear objectives; this way we can pinpoint the type of person we are targeting, measure our success and optimize for maximum effect.

This can be done using any web analytics tool that provides advanced segmentation. But you also need to think hard about the marketing implications of segmentation and persona creation. I chose to use Google Analytics in this example since it is free and it provides a very powerful segmentation feature.

What exactly is a persona?

According to Wikipedia, “A user persona is a representation of the goals and behavior of a real group of users.” This definition meets the objective of behavioral targeting as provided in my last article: create a unique experience for each visitor. If users have different goals and behaviors when they come to a website, why should they have the same experience?

Web marketing guru Bryan Eisenberg is among the pioneers that introduced personas into the online world as a way to segment users on websites and provide personalized experiences. This technique requires understanding the website objectives and users very deeply. As Bryan notes in some of his writings, personas can be used to optimize websites and target users in pretty much every aspect of online marketing: campaign creation and expansion, competitive analysis, offline advertisement and onsite content targeting.

It is important to differentiate between pure segmentation and persona creation. While segmentation is critical to behavior analysis (or, as Avinash Kaushik says, analyzing data in aggregate is a crime), personas cannot be achieved by clickstream data only. This requires a deep marketing analysis: understanding who is your market and what they want from you. Behavioral targeting takes advantage of both techniques. We can target different segments, such as new visitors, returning buyers, Canadian returning visitors, or any segment that shows a special behavior. And we can target different personas, trying to show different content to people coming with different goals to the website.

Creating personas

Building personas is a deep marketing exercise: you must understand your audience and the product you are offering. Although data should be used (as seen below), the structure should come from the company’s understanding of the market and the customers. Bryan Eisenberg provides a series of helpful questions on measuring personas for success, which can be very useful to get started and build your personas. Below are a few of them:

• What does this persona do on a daily basis?
• What’s the persona’s life mantra?
• What’s this persona’s unspoken question regarding this product?
• What does she expect from this product?
• What information will this persona need to be persuaded to take action?
• Why is she motivated to take this action?
• What actions do you want this persona to take, and how will you persuade her to take them?

You can also take a look at this nicely formatted persona sample (PDF) to get an idea on how to create a document to convince management of the value of this exercise.

Creating your persona using Google Analytics

First of all, it is important to note that it is very difficult to translate a persona into a measurable segment based on clickstream data, but it is possible to reach an approximation. Let’s suppose we want to develop a persona called Danny Sullivan which I believe represents the kind of people that visit my site. I would start by trying to answer the questions above about him, and I might as well try to find a person that has the same lifestyle as Danny to help me (Jim Sterne?). Then I would go about trying to find some metrics and dimensions on Google Analytics that help me pinpoint the persona and turn them into an advanced segment. Here’s an example:

Click for a high resolution image.

As you can see above, I believe that Danny (the persona) has the following behavior patterns:

• Since he is always on the road, he probably visits the site using his smart phone (iPhone, Blackberry or Android)
• Usually in the United States
• He has been to the website before, so he is a returning visitor
• He reads many blogs using feeds, and probably gets to one of my posts through Feedburner (see new integration between Feedburner and Google Analytics)
• Since he comes to my site every day, ‘Days since last visit’ equals 1 or 2
• And since visiting my site is probably the first thing he does in his daily routine, his visit probably happens before breakfast, or at least earlier than 10am.

This is a somewhat simplistic example, but it shows that it is possible to create personas using Google Analytics to understand how each targeted audience is behaving on your site. This shows us what we are succeeding or failing to provide to each kind of person on the website.

I’ll illustrate how we will use the information above to feed the behavioral targeting cycle in my next post.

Myth #1: Google will pick the best creative for you

Most marketers think if they develop a campaign on Google, the search engine will automatically determine and serve the best-performing ad copy from the available set. Many marketers believe this means they should continually add creative, since the engine will take care of testing for you. But all that testing may not be helping as much as you think. Google determines which ad copy to serve based on which version has the highest click-through rate, but your highest CTR ads aren’t necessarily your best-performing ones. To get around this problem, you need to do two things: set the creative rotation in Google to “show evenly” to perform an accurate test, and then do your own tracking and measuring of ad copy to see which ones are performing the best.

Start by determining what you want to test, and defining a start and end date for your test. Once you implement the ad copy, ensure you are tracking conversion at the creative level using the dynamic insertion parameters provided by the engines. Also, be sure to choose a relevant metric like conversions-per-impression, instead of just click-through rate. Compare each creative in an ad group vs. the average of the ad group without that creative. By doing this, you find out which creatives are driving the most conversions, and once you know this, you can jettison poor-performing creatives and manually rotate higher-performing ones into rotation.

The bottom line: Pause creatives that come in below the average; continue to monitor those that are near average for any changes; and keep running creatives that are out-performing the others using a metric such as conversions-per-impression rather than the relatively meaningless click-through rate metric.

Myth #2: You have to look at all prior clicks for accurate bidding

Most marketers bend over backwards trying to attribute conversions back to every click in the visitors’ path to come up with accurate bid prices. It’s understandable you’d want to accurately attribute conversion to each keyword by looking at past clicks, but multi-click attribution can be difficult to track and even more difficult to understand and make actionable. Many marketers avoid tackling the attribution problem head on by simply over-investing in early-consideration terms, even if the ROI isn’t there, because they believe these terms influence purchases down the line.

The truth is, you’ll get a reasonably accurate picture of conversion and ROI for campaigns by attributing value only to the last click, because the majority of people do not click on multiple search terms before making a purchase. In fact, research into a leading client of ours spanning hundreds of brand-name and product-name keywords found that only 26% of paid search conversions had more than one prior click on a paid search term. That means three-quarters of all paid search conversions happened after just one click—so if you measure back just one click, you’ll get a pretty accurate measure of ROI. What’s more, we found that almost half of these multiple-click conversions had the same term for all prior clicks—making last click attribution accurate in more than 85% of all cases.

The bottom line: Evaluating and implementing a complex scheme for attributing conversion across multiple clicks can be valuable, but the impact from a measurement standpoint is likely small. Instead, you may be able to get a lot more value from focusing on other low hanging fruit for optimization such as keyword expansion, adding negatives or creative testing.

Myth #3: “Portfolio management” is really, really hard

Many marketers get stuck believing that optimizing their keyword portfolio to increase profit is inordinately complex. As a result, they turn to outside help, and in many cases will simply hand over bidding to a third party. The truth is, at a basic level, portfolio optimization doesn’t have to be hard, and in many cases, it’s downright easy.

When thinking about portfolio management, it’s crucial to calculate a “headroom” metric—or the bid price minus the cost-per-click. For example, if you bid $2 on a keyword and your CPC ends up being $1.40 after the auction is complete, you have what is known as “60 cents of headroom.” You could pay 60 cents more for this keyword and still meet your pre-defined ROI targets.

Using this metric, you can look at all of your keywords in your portfolio that have substantial headroom. If these keywords are in position #1 in the auction, don’t change anything, as your bid is already working to place you at the top of the heap. These keywords are maximizing your profit, and generating excess returns for you. However, if you have keywords with headroom where you are in a competitive position in the auction—maybe 2nd, 3rd, or 4th place—it might pay to raise your bid on these keywords to move up in the rankings. You’re already getting several top position keywords for lower than you’re willing to pay, so it’s OK to pay a bit more for some other terms.

The bottom line: By increasing your bids on competitive keywords with headroom, you can wring more margin out your overall portfolio while still meeting your ROI goals.