Cover Story: Finding the Perfect Balance

Moves like this are consistent with Gaiam's intent to improve its cash position this year rather than focus too heavily on sales. "If most people out there were doing search focused on actual bottom-line contribution rather than top-line sales," Marshall points out, "they'd find that a lot of the terms they're bidding on, they're actually losing money on. That was the case with us: Some keywords weren't converting, or they were getting the sale but we were paying too much to get them."

Although it has, essentially, given up some sales by going after less popular, more profitable terms, the company's profitability has increased in low double digits, Marshall says. "There are a ton of people caught up in the relative newness of pay-per-click marketing," he notes. "They aren't paying enough attention to their bottom line — they're just excited to get the new sales. That worked for a while, but the space has gotten so competitive now that all marketers have to be smart about where they're spending their money."

Banner Ads Out, Affiliates In
As for its myriad other uses of Web-based marketing, Gaiam largely has shied away from banner advertising because banner ads typically don't convert, according to Marshall. Instead, the company has succeeded with affiliate marketing. In addition to some retargeting programs that enable Gaiam to keep up with prospects that visit its site without buying, the company has a broad range of affiliates.

Some coupon sites are effective drivers to Gaiam's site, and the company has broader affiliate programs, such as Upromise. Gaiam also targets companies that write articles about green living or fitness — the types of companies that have "a real alignment with our mission and values," Marshall says.

The key to Gaiam's affiliate marketing success is only approving affiliates that make sense for its brand. "We use LinkShare for the program," he says, "and somebody comes in and we get to approve it. You'll never see, for instance, a Gaiam ad on a car parts site. We have a fairly tightly controlled group we work with."