Adjusting to the Link Economy

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Adjusting to the Link Economy
Adjusting to the Link Economy

Direct marketers have long honed the art and science of developing one-to-one connections with consumers. While that practice started with direct mail and database marketing, today—with remarketing, social media, and email—the Internet delivers on the promise of individualized marketing.

However, as direct as the paths to consumers have become, the path to a purchase is anything but.

In a perfect world, consumers would open your email, click a link to your e-commerce site, and then purchase the product you want to sell. In the real world, consumers see your email, click their search bar, and take a scenic route to purchase that often involves a hyperlink you don't control. This route is the basis of what I call “the link economy.”

Hyperlinks are, of course, a fundamental element of the Internet, delivering traffic (and sales) by connecting one end of the cyber-universe to the other. Thus, links hold profound economic power and the key to a dynamic marketplace that boosts revenue for marketers and earnings for publishers.

The link economy acknowledges a world in which savvy consumers have infinite opportunities to research or discover products. Through content—blogs, forums, apps, professional and consumer reviews, social media, and online video—shoppers decide whether or not to buy your product. Consumers are building well-worn paths through the publishers that help them the most. It's a game of influence—and one that can pay handsomely.

At the moment of decision, when consumers are looking at their favorite blogger's link to the product you sell, that is the route they will likely take. They will not dig up your email or search through Facebook for your post. What's more, if competitors carry the same product as you, that blogger has a choice of who to link to—a choice that, in theory, is easily swayed by the expected bounty earned for generating that sale.

In practice, however, this market for links is highly inefficient. Buyers can't find sellers and sellers can't find buyers. Prices are set by retailers, but it's difficult for publishers to know what these prices are, or even who might be willing to pay more.

Here's an example of this inefficiency: At VigLink, on behalf of publishers, we've sold a lot of links to retailers offering the $99 Apple TV and we've found wide discrepancies in what retailers are willing to pay for the link. One retailer, for instance, will pay 700 times more for the Apple TV link than another. Can you guess who? Neither can most publishers, and therein lies the rub.

The value of a hyperlink, really the average earnings-per-click, is the product of three values: the conversion rate, the order value, and the commission rate the retailer sets. When a consumer clicks the link and buys nothing, it's a wash—neither the publishers nor the merchant makes money. If the consumer buys, then the order value and commission rate determine how much the publisher and merchant make.

As a result, publishers are incentivized to link to merchants who make them the most money, and merchants are therefore in competition to win the link. With data from link monetization services, the publisher can make more informed decisions, and with link optimization software, those decisions can be automated. When consumers begin their investigation of your product, they might not find your links at all unless you compete in this market.

Of course, direct marketers should continue to build one-on-one connections with consumers—this practice is tried and true. But direct marketers, like it or not, are beholden to consumers who are less and less likely to take the direct route to a purchase, and to publishers that have the power to decide where to link to. Ignoring this digital market will leave many sales to competitors.




Oliver Deighton is VP of marketing at VigLink.

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