case study : ebay partner network's quality click pricing exposed

…or, why eBay Partner Network introduced Quality Click Pricing

‘How Incremental is Affiliate Marketing?’, and other difficult questions...

Chris Howard and Julia Nisted

14th October 2009

eBay Inc confidential

2

Quick eBay Partner Network background

• eBay Partner Network launched April 2008, replacing eBay affiliate programmes on 3rd party networks

• Affiliates promote eBay in 13 countries worldwide

• Recently announced Quality Click Pricing, a new CPC payment model rewarding publishers for quality traffic

• >100k affiliates in 27 countries

• Business models include portals, content sites, blogs, shopping comparison, deals and loyalty sites


3

Why we love affiliate marketing

Measurable, Performance-based

Spend

Revenue

ROI Positive

Rewards entrepreneurs

Rapid growth, huge opportunities


4

Affiliate industry has been too complacent over concerns

Networks and affiliate managers often have incentives misaligned with asking these questions

“I let my network deal with who’s on the programme”

“I know there’s some fraud in there, so I just pay 20% less per lead

than I would for the same lead from SEM”

“I don’t care where the traffic comes from, as long as the numbers

look good”


5

Why building trust in affiliate marketing matters

Affiliates as ‘dark secret’ of Marketing

“We can’t go on together with

Suspicious Minds”

Suspicion from Marketing Directors

Budgets for Affiliate Marketing Shrink

Uncompetitive monetisation option


6

What are the difficult questions we should all be asking?

“Did the affiliate’s efforts generate the lead/ sale?”

“Does the size of an affiliate matter?”

“Are my good affiliate numbers driving business performance?”

“How do you keep compensation structures simple but reward for all benefits affiliates bring?”

“Are the affiliate’s leads worth what

you pay for them?”


7

How have we dealt with these issues in the past?

Improved front-door security

Better defined Ts and Cs

Investment in fraud detection

Removed lowest quality affiliates

Since launching eBay Partner Network:

Now adapting pricing to reward good affiliates and reduce incentive for fraud


8

What is Quality Click Pricing?

• New CPC pricing model for eBay Partner Network globally

• Two main components to determine CPC for each affiliate:

• CPCs updated daily for easier optimisation

• Designed to better reward good quality affiliates

Short-term Value Long-term Value

• Incremental sales revenue• Incremental PayPal revenue• Incremental ad revenue

• # of incremental new users• Lifetime value of new users• User engagement with eBay


9

How does Quality Click Pricing address difficult questions?

Click on affiliate website

Strong link between affiliate integration and item bought

Weak link between affiliate integration and item bought

Item bought on eBay

Time from click to

purchase


More incremental sales driven by affiliates weighted more heavily

15 mins

7 days


10




Quality Click Pricing pays affiliates for value of their leads

0

10

20

30

40

50ValueIndex

Average value per lead by publisher - illustrative

Not compensating the best affiliates for traffic they bring

Rank-ordered affiliates

Average Payout under old model

Large numbers of affiliates driving

below-average leads


11



CPC based on quality, not quantity, of traffic

>500 100-500 <100

Average revenue per click

Average clicks per day

6% below

average

32% above

average

44% above

average

Weighted average for program

Revenue per click for different sizes of affiliates in eBay Partner Network(Data for October 2008)


12

How does Quality Click Pricing approach difficult questions?


• Rewards for incremental sales and leads – not just cookies dropped on users’ machines!

• Fraud indicators built into algorithm

“How do you keep compensation

structures simple but reward for all benefits affiliates

bring?”

• Publishers get a single variable (EPC) to optimise for

• Earnings calculation incorporates revenue from variety of sources


13

What does this mean for affiliates?

Concentrate on adding value for the user and the merchant

Ensure your site is relevant for the merchant

Develop a great end to end user experience

NOT

Take care of inbound traffic sources

Optimise, Optimise, Optimise!


14

Examples of good affiliates


15

Our hopes for the affiliate industry

Engage with the difficult questions




“How do you keep compensation structures simple but reward for all benefits affiliates bring?”




16



Demand more from your network

Where is my traffic coming

from?How are

applications vetted?

Is this in my company’s best

interests?How do you guard against

fraud?


17



Demand more from your network

Support the good affiliates!

Tools Data Education


18

Thank you for listening!

Questions?