By Melissa Campanelli
November 06, 2008

eM+C: As search marketing evolves, some marketers compete head-on with their Web affiliates in the search space. Does Napster compete with its affiliates in this way?

Jeff Ferguson: I wouldn't say we compete with our affiliates, although they may think differently on occasion. But we certainly do allow affiliates to operate in the paid search space. I say we don't compete because their appearance in paid search results is part of both our affiliate and paid search strategies.

eM+C: Are you finding that in this environment you can increase revenue without cannibalizing your search campaigns or threatening your affiliate-generated sales?

JF: It's only cannibalization if you're replacing a good activity with a bad one. Cannibalization is bound to happen, but simple economics keep it from being a problem with us. If an affiliate decides to get in a bidding war with us, we stick to our bidding guns because we know both programs are fine-tuned for a positive ROI. If that affiliate wants to spend a bunch of money, it still gets the same payout and we get the extra volume.

On our brand terms, affiliates help us compete against other music brands. We may pay a little more for these than what we pay with our own listings, but compared to the cost of a lost lead, it's worth the price.

But neither strategy would work if we weren't smart about spending.

eM+C: I also understand that marketers are being challenged to measure which strategy is working best in this type of an environment because of channel overlapping. How are you able to measure true ROI for both marketing tactics?

JF: Every channel for Napster is measured, and its ROI is calculated down to the penny. If any channel starts to slip, we take a hard look at what's happening and weigh what making changes to things like cost-per-acquisition goals and payouts will do to volume, and adjust accordingly.

eM+C: Can you offer our readers any best practices or tips on creating a more harmonious existence between the affiliate and search marketing channels?

JF: I've always taken a somewhat laissez-faire attitude toward affiliates at first to allow them the freedom to be creative with their campaigns. We provide some guidelines, of course, and make it clear we won't have anyone messing with our brand or doing anything evil. But for the most part, we let them try and fail at their own pace. Occasionally this can backfire, for sure, but being too restrictive with affiliates just stifles their creativity and therefore their opportunity to succeed.

Also, do the work on calculating your ROI, and don't blame your affiliates for your own lack of understanding of the cost of doing business. If either program has a negative ROI, then it's time for an audit and to make some hard decisions about cost per acquisition and payouts, and economic Darwinism will do the rest.

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