Closed PPC Brand Bidding Groups & Anti Competition Legislation

[EyeOfTheTiger]

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Hi All,

Interested in a discussion here.

I am like many others here Im sure, being constantly turned away from closed bidding groups on brand names for merchants which I know have brand bidding agreements with a number of "select affiliates".

My thoughts are that this is bad for me as the affiliates that are allowed to brand bid are getting their sales at a cheaper cost than me, attaining more traffic, more sales and more exposure for their sites at the cost of the brand owner and thus making greater profits than me. While this is all part of the game these profits are invariably being invested back into the business and probably being used to cover other merchants and sectors that I operate in, again making this more difficult for me to compete and driving me out of the market.

Surely isn't the existence of selected affilaite having brand bidding rights anti-competitive and thus illegal. Isn't this just form of a glorifed cartel of some sorts?

I don't understand really why anyone with a closed bidding groupd would allow brand bidding anyway. Surely it creates confusion amongst end users ??? Or is it just a case of more exposure for the brand, in which case why offer only to a select few affilliates.

Do you think that if this was taken to court on anti-competitive legislation there might be a result in that all brand bidding would cease or be opened up to ALL affiliates ???

Anyhow, rant over.

Mike

[a4uforummember]

this subject always creates a lot of controversy, there is currently another thread about 'AA' brand bidding... also known as 'the shambles'.

If in a competitive arena affiliates can demonstrate added value upon generics, then maybe yes, they should be awarded the opportunity to protect the merchants brand upon 'brand+generics' in competitive areas.

But then you see the real jokers, SKY TV... allowing brand bidding!!! in a non competitive area, come on, where is the affiliate added value coming from there then? a blind man riding a galloping horse can see that someone has been spun some bull!!! at 50 quid a go, come off it.

[ian]

I doubt its illegal, and exactly how business works. If a merchant decides to do closed group bidding (for a number of reasons) the networks help select the chosen few. Should they

a - go with affiliates with a good track record
b - go with the first few people to apply, who may or may not be any good

The network will go with option 'a' as its the path of least resistance, will make them look good in the eyes of the merchant, and get the job done quickly. If you want to break into the inner circle

- get to know the account managers
- do some good work in generics and make sure they know about it
- ask to be considered next time a group is being formed esp if its in the same industry. see point 1, get to know the account managers, its who you know!

I'm sure its the same in all industries. Take media advertising, if you had £10m to spend would you go for an unknown small ad agency, or with one of the big boys? The small agencies that break into the big time are the ones that make a name for themselves, so some good work with smaller accounts and work their way up.

[drivetowin]

Mike

Before I start this post let me say that I do almost zero ppc and am most definitely not a member of any closed groups for ppc.

It is a common misconception that affiliates who are allowed to brand name bid are getting cheaper traffic - and in the sense that it should be easier to convert then yes they are - but, particularly with Google's new 'quality' algorithms, the cost per click for this traffic is probably much higher than you think - indeed I had a long discussion with a major insurance company a few weeks ago who was looking for advice on what to do - they had a handful of affiliates they were allowing to brand bid - the problem they faced was that Google decided all of the landing pages were too similar and so not offering the visitor a good experience (or should that be good choice) and upped the bid price to a level which for affiliates (even those brand bidding) was unsustainable - as a result although those handful of affiliates could do ppc they weren't doing any as they could not make a profit on it.

Are closed groups anti-competitive - again yes and no - I can understand the frustration of trying to gain entry to a closed group - and as I said in the other thread I think there needs to be far more transparency on who to contact to join the closed group for a particular merchant. But they're not anti-competitive in the sense you mean in that the manufacturer of any product or supplier of any service can set terms and conditions which resellers (which is what we are in this scenario) have to fulfil - this is common in any industry - as many will know I am helping buycheapcondoms with their affiliate programme - they recently had to increase the price of one of their products (as did everyone else selling the product) because the importer decided on a minimum price they were willing for that product to be sold at - below that they would not supply as they felt prices set too low were devaluing their brand - otherwise the importer would not supply them - unfair? - yes - but then whoever said life, and particularly life in business had to be fair?

I think again though, this is an area where there needs to be more transparency - merchants should clearly state the criteria for being considered for inclusion in any closed group.

Closed groups can add real value to a merchant, especially for brand+generic terms ie tesco mobile phone, tesco dvd recorder - though little or no value for pure brand - but - and its a big but - this value only exists if the activity is firmly policed.

Very few merchants and in my opinion not a single network have effective policing in force - the rules should be simple - one time is an error, twice is deliberate and you are off the programme. Do that on more than a couple of programmes and you are off the network. Sadly, to the best of my knowledge there is not a single network with the balls to put such a policy in place - indeed I have even heard of networks saying to affiliates "hey mate, you've been spotted, cut it out.................................but leave it a few weeks for the heat to die down and it will be alright" - no it wont - if you break the rules you get kicked off (and not just that site - the whole account) - until networks get tough, affiliates (and those affiliates who are to use Paul's words 'teachers pets') will continue to get away with it.

The first network to put such a policy in place, and make a song and dance about it, and have policing which works 24/7 - imho the thing Google ever did to make rogue affiliates life easier was to introduce the automatic time display of Adwords ads - will be doing the whole industry a big favour.

It is not too late for the house to be put in order, but are any of the networks big enough to step up to the mark?

[jonsp]

I've not been around as long as you so have only been invited to a couple of brand bidding programs. They don't seem to make much sense, if a guy types in BrandName he wants to find the quickest way to Brandname.co.uk, as a brand bidding affiliate I have to sit behind BrandName and share some scraps with a few others.

Better to make a nice site for a generic term, hopefully a good site will get conversions because it offers some value in terms of showing the user why he's getting a good deal with Merchant X. Better conversions mean more money to spend on PPC. With brand bidding you'll always get the lowest quality consumer - someone who searches for Brand without having the intelligence to type Brand.co.uk then sees the site he really wants at the top of the list. I'd much rather have a consumer researching the market by typing in a generic term and put a good quality comparison site in front of him that delivers a clear value.

Also from google's point of view as much as they might like getting CPC from brand bidders it doesn't help the user so long term they're probably going to make it harder. When a guy types Brand all he really wants is brand.co.uk - anything else is just getting in the way and only serving the affiliate.

Jon

[dawso77]

I agree Drivetowin, I have seen an affiliate booted off for three strikes (which i implemented) only to be allowed back in 5 weeks later without the network telling the merchant, naughty naughty!

I love all the talk of brand protection with closed group bidding but has anyone done any controlled tests to prove if its worth it or not...i doubt it....after all we're all marketers, arent we?

[drivetowin]

I should add as well - some networks will do all they can to get merchants to allow brand bidding and brand bidding via a closed group.

Don't dig as deep as looking for backhanders (though, as I guess in any industry, they may happen, I have never actually seen any evidence of backhanders taking place) - just think of the 30% override - that's enough motivation.

If you don't believe me - ask one of the networks to show you the volume of sales when brand bidding is allowed and the volume when it isn't - 30% of that makes a big difference to anyones market value.

To my knowledge (and if any other networks do this please stand up and be counted) - the only network which actively advises new merchants against allowing brand bidding is Affiliate Future............when buycheapcondoms launched with them recently I was very very impressed at the way AF clearly explained to them the benefits and pitfalls of allowing brand bidding in any form.

[Sinbad]

Excuse the simple question but why would a merchant allow any kind of brand bidding?

Like has been said most people who type 'brand' into google are looking for www.brand.co.uk - I can't understand why a marchant would then pay affiliates to forward this kind of traffic on through PPC.

[Qui Gon Jinn]

Will add a long opinion in due course when got a bit more time.

Re: Policing, going back to previous threads, networks or merchants may engage by being firm with an affiliate but they won't with the likes of competitor merchants (even those within their own network) or "ebay" .. double standards & cowardliness, what kind of message does that end out? Affiliates are easy targets.

With regard to threats, a polite email and telephone call is best approach & should suffice .. in case it's inadvertent or overlooked because there is a problem where all too often policies are changed without affiliates being duly informed by the network & if are mostly inadequate periods of notification when policies change (go back to discussions on contract law). Genuine mistakes are made by all parties. What I endorse & say to anyone, make sure you print copies of merchant details & ppc polices out, you'll be surprised how often you'll need to pull these out.

Unfortunately with say for example CJ and their network quality, you have the characteristics of a "police state", threatening accounts when all too often they are mistaken. A networks roll should be more of a facilitator not a policing unit ...

The solutions are simple & etiquette is required. Firstly the merchant should register marks with respective ppc search engines (if they don't own the mark, then c'est la vie), compulsory emails plus internal mail notifications (where applicable) of the slightest changes which take place to a policy, an adequate period of notice applied to these (contract law?). If an affiliate is found in breach refer to a polite email & telephone call to rectify asap. If this is not implemented then suspend the relationship between merchant & affiliate (Not the Account)

And any termination's should be only between the merchant & not that affiliate not a whole account. Otherwise the network is jeopardising prosperous & ethical relationships with existing merchants, which shouldn't be their realm.

BTW have you seen a typical email from CJ network quality? Quite disgusting & merchants think so too.

The role of the network needs to change, maybe it shouldn't be their jurisdiction to police these, but yes send email or contact obo of client. On a side not perhaps management of programs should now be outsourced as .. again as I have stated in previous threads, I do think that networks have too many programs to handle.

Do we really want to see networks image portrayed a "police state" and acting like "The Borg"

Possibly, there is room for an independent company who can manage this as a whole by simply monitoring ppc policies. This will save account managers time by out sourcing to this company allowing the account manager to focus on promoting the program & attracting new & existing affiliates into the program. Because at the moment it's out of control & networks are handling hot coal.

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Marketer .. You'll be surprised of the loss in traffic .. ie not a 100% transition even when someone is looking for a brand, but that is another case study altogether.

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Re brand bidding, there is a thread here called "PPC : Is the Brand Bigger Than The Generic Term"

http://www.a4uforum.co.uk/showthread.php?t=43759

The pitching is maybe the wrong way around, as affiliates who are good with generics, will choose who they want to promote in a sector. The brand bidding should maybe be offered to the affiliate as leverage to push those their way.

Do we really want networks to move towards & be perceived as a Police OR Nanny State, where from affiliates perspectives it won't be all things equal.

Oh and re closed groups & "teachers pets" or the occassional "cartel" or whatever it's refered to, i wouldn't be surprised is a couple of networks get found out, about time this came out, when most networks are honestly trying vary hard to do what is a very difficult job.

[nickhx]

Back to the competition law issue raised by Eye of the Tiger, I think there is strong argument that closed bidding PPC brand groups breach UK competition law.

The Chapter I prohibition of the Competition Act 1998 (the UK competition legislation) prohibits agreements which "affect trade within the United Kingdom and which have as their object or effect the prevention, restriction or distortion of competition within the UK."

From the OFT website: http://www.oft.gov.uk/Business/Legal...ca982.htm#anti

Prohibiting anti-competitive agreements

...Both prohibitions relate to agreements between businesses that have as their object or effect the prevention, restriction or distortion of competition. Many different types of agreement may fall within the prohibitions. Chapter I and Article 81 provide an identical illustrative list of examples of agreements to which they apply:

* fixing purchase or selling prices or other trading conditions
* agreeing to limit or control production, markets, technical development or investment
* sharing markets or supply sources
* applying different trading conditions to equivalent transactions, thereby placing some parties at a competitive disadvantage
* making conclusion of contracts subject to acceptance of supplementary obligations.

Chapter I applies where the agreements at issue have an effect on trade within the UK.

It seems to me that a case could be made against closed brand bidding groups on the basis that they are an arrangement which falls under the "agreeing to limit or control production, markets, technical development or investment" limb.

Interested to know others thoughts on this.

[KieronD]

at 50 quid a go, come off it.

Just so you know, affiliates who are allowed to brand name bid usually get a much lower CPA than normal. In some cases it can be half of the standard CPA.

[KieronD]

Like has been said most people who type 'brand' into google are looking for www.brand.co.uk

If we're being honest that's very true. Google see it this way too, hence the quality score landing page updates.

[drivetowin]

Paul

I agree with you wholeheartedly about lack of notice - that is something the whole industry suffers from - both ppc and seo and just generally - merchants changing terms at the drop of a hat - this should be the subject of a separate thread imho but is another area where networks are sadly lacking - and as more networks enter the market is likely to get worse - as networks fight harder and harder to win business so like a paper bag in a rainstorm their contracts get weaker and weaker until they are no more than a pile of worthless pulp in the corner. With all of the money networks have/make you would think they could draw up a steadfast contract but most of them have contracts that a second year law student could drive a coach and horses through.

I can't agree with you on your point on policing though - you know as well as I do that there are some affiliates who have had more warnings about brand bidding than most people have had hot dinners - so why do the networks let them stay - money - pure and simple. Well enough is enough, if an affiliate brand bids on every programme (and especially those who brand bid where the merchant has clearly banned it from day one - no room for error there) - then the network should strike them off - if they were willing to do it for spyware they should do it for this - the loss to merchants and honest affiliates is to my mind probably higher from this than it ever was from spyware, certainly here in the uk.

Yes, I will concede that there can never be a one size fits all approach and of course the first step should be negotiation between the merchant/network/affiliate but where that does not work networks must prove their worth and uphold the rules.

[hpops]

I think theres a real debate to be had here: My thoughts

1) Closed group bidding definitely has a positive impact on incremental sales for merchants - I've personally been involved in studies that unequivocally prove this. I doubt whether the information from these studies will ever become public as they clearly contain client specific and confidential information.
2) The use of a "closed circle" of "brand-bidding affiliates" has had, and will continue to have a negative impact on the affiliate marketing community. Its divisive, and probably is anti-competitive
3) A merchant has a right to make a decision on who joins a closed bidding group, in order to do so a tendering system is the only fair way of making these decisions.
4) Closed groups (and I should declare here that I am a member of a couple) tend to be poorly managed by networks. There is widespread breaking of bid caps, copy not updated, misleading PPC ads. I was once removed from a closed group for not driving sufficient volume, I'm absolutely certain that the only reason that this happened was that I was the ONLY member of the group who kept below the proscribed bid cap.
5) I agree with Paul that there is a space in the market for a "compliance" service - in fact I keep seriously considering developing a service in this space. But surely there shouldn't be a space to fill - this IS a networks responsibility.
6) Without tendering, responsible policing, fair positioning decisions, content/bids/ads checks, and a genuine sense of adding value from each publisher involved the whole area could wither and die - and that would be a great shame

[drivetowin]

Hpops

I agree 100% with what you have to say