72 Kilowatts Internet Marketing

An Open Letter to the Affiliate Marketing Industry Leaders

Generally speaking, I would post something like this at Abestweb, but I feel in this case, because of the nature of my comments here, that wouldn’t be appropriate.  And again, in posting it here instead, it will be seen by MANY less people, and might give some people the impression that I don’t want it seen there.  That isn’t true either.

As one man, with a modest background in affiliate marketing, and without the resources, information, and full range of knowledge that many in this industry are privy to, I don’t pretend to have all the answers, nor do I even know all the right questions.  But here goes.

The time has definitely come for those that have positions of authority in this industry to check their egos at the door, and either back the PMA, or start an organization that they feel will make sense.   We can’t afford all the chest thumping that is going on presently.

With merchants setting commission levels to zero whenever they feel like it, OPMs using predatory practices to recruit and bolster their coffers and standing, affiliates casually and repetitively ignoring network and merchant terms and conditions, and networks just sitting by watching it happen, this industry is in trouble.

Yes, it’s been going on for years.

Now, however, it has been brought to the forefront by people speaking at conferences, spewing out truths, half truths, and negative spins.  We need look no further than the last Affiliate Summit, or the most recent Internet Retailer conference.

Our industry is deeply fractured, both ideologically and in organization.  Due to how some people feel about “community A”, they won’t post there.  Due to how the others feel about “community B”, they won’t endeavor to post there either.  And that list goes all the way to “community ZZ” I’m sure.

In part, that’s the nature of the internet, and has little to do with our industry in particular.  At the same time, we’ve all failed to appropriately communicate to the outside world what affiliate marketing should actually be about.  Buried in all the rants, the slanders, and the self promoting clap trap that gets penned on the net each day is a strong message.  A good core.

But it’s so far buried beneath our own self importance that no one will ever see it except ourselves.

So my request to all of you that have sway in this industry:

Lower your ego and your guard.  Lock yourselves in a virtual room or a real one.  And get this thing done.

Whether each and every affiliate, from the stay at home Mom to the Pepperjam’s of this world, realize it or not, we are all counting on you.  The NY tax was just ANOTHER in a myriad of reasons to show that this industry needs a collective voice, and a collective dialog.

We will never all be moving in the same direction, with the same set of ethics, values, and goals.  At the same time, we need to task our leaders with developing a framework for the outside world to see, and we need to do it fairly, openly, and honestly.

Now get to it.

Ethics and the OPM

As a former OPM (and if New York has their way, maybe a future one as well), I did a lot of thinking about the grave responsibility that comes with having the kind of data available to us that we did.  As what amounts to being a liaison between merchants and their affiliates, we had sales statistics, valuable keyword information, and perhaps most importantly, a list of all affiliates in a program, and the ability to contact them.

That brings up, in my mind, one of the critical ethics issues in affiliate marketing, which is ownership of data.

I heard a very popular OPM once remark, in a roundabout way, that they had used a list from one of the merchants they represented in order recruit for one of their other merchants.  I would argue that in fact that data doesn’t belong to the OPM, and therefore should NEVER, under ANY CIRCUMSTANCES, be used in such a regard.

An OPM contract should be no different than the contract of any other contractor.  Intellectual property discovered while under the auspices of that contract belongs solely and exclusively to that merchant.  I wonder how a merchant would feel if they found out their list of affiliates was being utilized to divert attention from their own programs.

Brian Littleton touches on it in their excellent pledge:

We expect that OPMs managing programs on ShareASale show due respect for the affiliates of the network and merchant program.  We expect that OPMs understand that each individual merchant program is its own entity and that OPMs should not utilize ShareASale tools to recruit  an affiliate from one program that they manage to any other program.   ShareASale goes to great lengths to protect the privacy of affiliates on our network and thus we expect OPMs to uphold that integrity.  When using the ShareASale interface, newsletters and such should be specific to the merchant program and not be utilized to recruit to other programs that are managed by the OPM or general recruitment.

He goes on to discuss keyword mining, which is a genuine and critical concern of affiliates.  It’s another set of data that I feel is too dangerous to be made known to a third party.

When I was OPMing, I did look at referal links of all transactions.  At the same time, I created no spreadsheets that contained this data, nor did I in any way let it leave the Shareasale interface.

With so many OPMs now acting as affiliates themselves, this problem becomes exponentially worse.

While SAS’s pledge to keep that information hidden for certified affiliates is a positive step toward alleviating this, I consider the vast amount of referral data that Linkshare passes on.  In it, almost every ounce of a transaction is transparent to the merchant, and therefore the OPM.  In Linkshare’s case, their protection of their merchants comes at tremendous peril to their affiliates.

This is something I’d very much like to see an industry association address, be it the Performance Marketers Alliance or otherwise. OPM ethics are rarely discussed, even at Abestweb, who is well known for their ability to uncover any potential issue that could affect the privacy or intellectual property of their affiliate members.  There have been some discussions on it their, however, normally in the form of deploring OPMs that act as affiliates as well.

Some photos from today

In my spare time, of which I have little, I like to take photos. Here’s some examples from my yard today. We have a bumper crop of cherries and roses this year.

Cherries and Garden

Is the PMA Right for you?

This was an interesting bit to return to after a few weeks of fishing.

It’s well known amongst the folks I talk at on a daily basis that I believe the time has come to form at the very least a lobby group for affiliate marketing. The scope of this group is somewhat vague, even in my head, as I consider the benefits and inevitable drawbacks of forming an industry association.

Groundwork is being laid, however, at the Performance Marketing Assocition blog.

It’s a daunting task they are undertaking, and some of the things I’d like to see addressed are:

1.) Forming a vocal lobby that attempts to represent all levels of affiliates and merchants.

2.) Establishing a set of ground rules for good behavior on the part of merchants and affiliates, without overstepping what would be the role of a good association.

3.) Endeavoring to “recommend”, and never to “mandate” when it comes to courses of action.

4.) Showing real value to affiliates of all sizes.

5.) NOT becoming a union. The industry is too broad for that.

I look forward to reading more on this effort. There have been concerns raised already, in particular at Abestweb, and elsewhere. I think it’s important, however, that we keep a level head on this, and work together in many respects.

The industry has grown to large to go unnoticed, as evidenced by the Amazon tax issue in New York.

If there truly is going to be an association, it’s important that everyone be included, even if at the end of the day they don’t necessarily feel that they were. I’d rather see the isolation be of their own choosing, and not by inaction on the part of the committee’s forming members.

Overstock Sues New York over Tax Law

I have no idea how I missed this yesterday.

Thanks to Linda for being first to press.

Overstock Sues New York

Some Quick Thank Yous

As June 1st draws near, and  New York affiliates haven’t heard from a lion’s share their merchants on what will happen that day, I wanted to say thank you to a few folks that have been a tremendous assistance to me in gathering info, and helping me get additional information out to the public.  So in no particular order, thank you to Hakio de Poel, Linda Buquet, and Shawn Collins.

Thanks folks

A Framework for Discussing what the Nexus Tax Means

When I initially read Phillip Dampier’s comment on 5 Star Affiliate Program’s blog, I was concerned that he was going the way of so many by just dismissing affiliate marketing as a haven for crappy websites built to make a buck.  In some ways, I suppose that’s exactly what he was doing, but I have to admit he has a valid point.

It’s self serving for New York affiliates to simply concern themselves with loss of commissions.  It’s a VERY valid concern, but it’s true that the reputation of our industry is sullied with people who have a vague understanding of what we do, and in fact, non existent to most.

So what are we to do?  Have you been able to explain to your neighbors and friends what you do for a living as an affiliate?  Alright, maybe the really smart guy 4 doors down that works in IT, but the rest just have their eyes glaze over.

So I think New York affiliates would be better served approaching this issue just like our affiliate oblivious friends:  as consumers.

So here’s the framework (and I think it’s a good one, not simply a set of phrases and pulpit bangers):

New York has, unconstitutionally in this case, extended it’s tax reach by creating their own set of definitions of business.  They’ve done it in a nefarious fashion:  by inventing a physical connection to a virtual relationship.

Traditionally, a tax nexus has been defined by an address where commerce is done:  a sales office, a retail store, or a distribution center (although not all distribution centers, as you can see here).

Now, New York is defining “at will” referral contracts as the basis for a nexus.

Many consumers agree with merchants decisions to terminate these contracts in order to keep from paying these taxes when they buy online.  My caution to those consumers is a simple one:  If this tax effort fails to reap rewards, it will be re-worded, and extended out through another means.

In other words, don’t hurt the pawns when your issue is with the King and Queen.  Calling for merchants to dump New York affiliates is short sighted.  It will cause New York to make up another non-sensical definition of what business is so that they can beat the Constitution.

As New Yorkers, none of us will win unless the notion of unfair taxation is defeated at its core.

Unhappy Friday Reading, and a Message to New York State

Linda at 5 Star was kind enough to point this post out to me on some thoughts from a legal brain on the current state of affairs for New York (and down the road, other) affiliate marketers.

First, the message to New York from John Dozier:

So, the final message is for the State of New York: If the momentum continues, New York affiliate marketers will be shut down entirely. You should have anticipated this consequence. No, you will not increase your tax base significantly. But you have added to your unemployment rates. We need to work together to save the many New York businesses going under.

I would encourage everyone to read Dozier’s post in it’s entirety, about 10 times.  I think it speaks a lot to what we can expect in the coming weeks, months, and years.  Industries our size do not go unnoticed forever.  They are not beyond the auspices of local, state and federal agencies, be they cruising for revenue, or trying to uphold the law of the land.

Further reading into the TSB from New York should also tell affiliates that think they can lie low that their marketing practices are NOT in fact a secret, and no-one else’s business.  In fact, New York has taken a deep interest in understanding EXACTLY how you promote your website.

Friends.  The time has come.  We need an organization.  Quickly.

To hide under your bed sheets and hope “they” will all leave you alone is now ineffective.

I’m not saying it has to be the Hall of Justice for affiliate marketing.  It doesn’t need to micro examine the business practices of every affiliate.  What it does need to do is lobby, educate, inform, and publicize.

And it needs to happen 2 months ago.

If the industry needs someone to step up and work on getting this thing going full time, it’s unfortunately looking like I’ll have lots of time on my hands.  While my affiliate work won’t be done, as I have word from a MINUTE HANDFUL of merchants that they aren’t dumping NY affiliates, I think I can also spend time doing more important things.

Just putting that out there.  Certainly not saying I am the most well educated affiliate marketer this side of the Missisip, I’m just saying I’m willing.

Big Shout Out to Eastern Mountain Sports

I’d like to personally thank everyone at Eastern Mountain Sports for recognizing an opportunity, and taking advantage of it:

We would like to welcome all NY affiliates to join the Eastern Mountain Sports affiliate program on Performics. 

Eastern Mountain Sports has always been a leader in the industry, especially in the Northeast. We currently have brick and mortar stores across NY and we also collect taxes on NY sales on our website, so the new law should have no effect on our affiliates and we encourage you to join.

Read the rest of the info at Abestweb here.

That’s forward thinking.  Since EMS already has a nexus in New York based on their retail presence, they are picking up where REI.com dumped outdoors affiliates late yesterday.  This is a strong move, and is to be commended.

Further, EMS actually let it’s intentions be known.  As a NY affiliate myself, I dread the Zero Hour emails I’m going to get next week, advising me I’m being dumped.  Regardless of each merchants understanding of the new New York Tax law, they should be communicating with their New York affiliates, and very few are.

Thank you Eastern Mountain Sports.  And to Downtown ECommerce Partners, who brilliantly run their affiliate program

Nexus and Lead Fees

Was reading Heather Paulson’s piece at Revenue again this morning, and I noted this:

Aside from these important resources, there were discussions on the call that can shed some light on the law’s interpretation of who is an advertiser, and who is a publisher.

An advertisement, which is a “passive, paid message,” and exempt from this law, is differentiated by the State from the very different and very much liable, ”commission- based or success -based fee.” For example, if payment is based on clicks, or views, and no sale have to be made for payment to be received, and then it is not considered a nexus point,” say the NY experts.

If there is a success fee, or commission, then web publishers are considered “sales reps” and the definition of “nexus” has been met; then there is liability for the merchant to register, collect, and pay tax to the State if they produce over $10,000 from an affiliate(s) in the State. (See example “G” in TSB-M-08(3)S)

There was some question on the DMA call about lead fees, and whether those constituted a reward that would perhaps generate a nexus.  

If I read “success fee” correctly, then I suppose it does.