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Web analytics platforms [i.e. Omniture (OMTR), WebTrends, Fireclick and Google (NASDAQ:GOOG) Analytics] have quickly morphed into sophisticated marketing measurement packages that help marketers track campaign ROI [return on investment] and monitor KPIs [key performance indicators] across multiple Web and [in fact] off-line marketing channels. Such solutions are now poised to take market share from popular “single channel action trackers” like Linkshare, Doubleclick’s Performics and Valueclick’s (VCLK) Commission Junction - even free-standing email campaign management packages. The small to medium enterprise sector is everyone’s growth market [looking forward] so look for things to really heat up on the M&A front.

The future clearly belongs to companies like J.L. Halsey (OTC:JLHY) who are moving in the direction of a single package offering [CRM email, Web and marketing metrics, content management, search metrics, etc]. I’ll bet a nickel Jeff Pullen of Q4Digital understands this opportunity.

According to one mid-sized Web retailer I spoke with last week,

“... affiliate tracking is becoming commoditized. There are many low-cost solutions for retailers who want to do it on their own.”

Indeed. Yet witness the tracking, reporting and media payment fragmentation occurring during the holiday season over at eBags, a Commission Junction customer, courtesy of Google’s new Checkout service. While Google did come up with a quick fix [allowing for needed third party “pixel URLs” to be placed on Google’s order confirmation page] this demonstrates fragmentation that online retailers face. The result: Too much data in multiple places.

Could established Web metrics solutions providers step in to provide fixed-fee cost-per-acquisition tracking among groups of affiliates accessed through alternative third parties [solutions and services providers]? And what of proprietary marketing and advertising [especially paid search optimization] technologies living inside companies like Did-It, Performics, Mercent and Reprise Media? Some of these solutions even take inventory “turn rate” into consideration when automating the paid search media buying process!

Warning:
If CPA affiliate marketing is to remain a stand alone business and not succumb to being a mere function of multi-channel e-marketing, significant consolidation in the space is required… unless they can each successfully uncork demand among small to mid enterprises [SMEs] for another year or so [domestically speaking]. Regardless, the future on the product development front is clear, as most clients prefer the “one stop shop” versus the cobble approach.

Jeff Doak Think Partnership (THK) seems to understand this opportunity given its approach to swallowing up a myriad of marketing solutions providers and its inclusion of Kowabunga! Marketing’s new MyAP v.9. MyAP [short for MyAffiliateProgram] is the brainchild of visionary CTO Jeff Doak, and is rooted in the multi-channel tracking concept. In fact, Kowabunga! marries a suite of traditional affiliate marketing services [i.e. affiliate payment] with centralized marketing analytics via its new platform. Uniquely, Kowabunga has courted and captured a significant portion of the SME market with its traditional affiliate offering [earlier versions of MyAP].

Google, as it races to capture that same customer, [fresh example not to mention 2007 being free] is testing waters with its own distributed cost-per-action [CPA] offering [an “affiliate network"] that could, some day, dwarf those of companies like Valueclick’s Commission Junction [the largest network] in terms of size of affiliates and advertisers. Further, Google seems to be moving toward feeding it with a soup-to-nuts e-commerce, Web analytics and self-funding e-marketing platform [aimed at SMEs].

Time will tell how long Google and Yahoo! (NASDAQ:YHOO)will be able to play the cost-per-click ad game among advertisers but I predict a CPA revival.

Prediction:
Affiliate marketing, like search engine optimization, will move from a freestanding business to a cog in the multi-channel online marketing wheel. It already is. The technology running the platform is already commoditized and advertisers will eventually reach a tipping point on how they pay for it. Payment scheme will move from variable to fixed and will be triggered by their realization that access to CPA affiliates is available through other third parties [primarily, service providers like netExponent , The Partner Maker and PartnerCentric).

Currently, tracking is fragmented and expensive… it could be easily be:

A) Centralized
B) Commoditized [cost less]

By whom? Webtrends, Clicktracks, Fireclick, Omniture, Coremetrics, etc. [Kowabunga?] who already provide marketing analytics and who do a better job of it based on their level of client integration.

The big, unseen wrench in the engine? Google [owner of Google Analytics, formerly Urchin] and its plans for an open source operating system.

Google seems to be playing this grab for the SMEs well so far. Is anyone paying attention? Again, this is not about the large retailers so much as it’s about the SMEs…which all the CPA affiliate networks are looking toward for growth in 2007.

Source: Small to Medium Enterprises: The Growth Market for Web Advertising