Winning With Authority

It’s all good – from online advertising being up 25 percent, according to the IAB; to online commerce on the rise 23 percent, according to comScore; to Google search queries that are up 41 percent, per Nielsen//NetRatings. It’s clear that online marketing grew strongly through the first three quarters of 2007.

However, as industries grow, so does the attention paid by state and federal legislators, regulatory bodies and enforcement agencies. From the Federal Trade Commission (FTC), to Congress, to state attorneys general, to the courts, those empowered to oversee online marketing took a more active role in 2007. While the focus was more on enforcing existing laws to protect privacy and eliminate fraud than expanding authority, the active deliberations over the government’s role in guiding online marketing indicate that more rules could be on the way. Here is a rundown of the key governmental activities and what they mean to your future.

Targeting the Targeters

Behavioral targeting, which delivers relevant ads based on consumer interests as determined by prior online activities, is growing in popularity with online marketers, but privacy advocates are calling for government intervention. Marketers’ ability to more closely track – and share – information about likes and purchases will likely lead to a showdown in the courts or the halls of Congress.

Privacy groups prompted the FTC – for the first time in seven years – to hold a “town hall meeting” to discuss behavioral targeting and consumer protection. More than a dozen privacy groups either spoke at the November event or issued statements calling for greater FTC oversight of behavioral targeting.

Pam Dixon, executive director of the World Privacy Forum (WPF), says more government intervention is needed because the industry has been unwilling to self-regulate, and because it must be made simpler for individuals to prevent their online activities from being tracked. “The oversight has not been there,” Dixon says.

Opting out of cookie tracking through a Web browser doesn’t guard against other technologies used in tracking, Dixon notes. The current system for allowing consumers to opt out of being tracked isn’t working. Her organization issued a report criticizing the National Advertising Initiative (NAI) – a group that was formed after the last FTC meeting on targeting – as ineffectual because technology has far surpassed its requirements.

NAI has been criticized because of a lack of publicity and public awareness, and because many marketing organizations have not joined the voluntary effort. Advertising.com, DoubleClick.com, Revenue Science.com and Yahoo are current NAI members, and Microsoft and Google submitted applications to join late in 2007.

Dixon says technologies such as Flash and Microsoft’s Silverlight have grown well beyond the narrow definition of tracking by cookies as originally set up by the NAI. Deleting cookies and configuring a browser to protect against tracking are too cumbersome for most consumers, she says. According to the WPF report ” … the opt-out is counterintuitive, difficult to accomplish, easily deleted by consumers, and easily circumvented.”

The WPF and eight other organizations are calling for the FTC to set up a national “Do Not Track” list, where consumers could opt out of being tracked. The proposed system would require marketers to comply regardless of the technology being used. “It has to be a one-stop shop for consumers … they should not have to opt out individually to different types of ads,” according to Dixon.

Alissa Cooper, policy analyst at the nonprofit Center for Democracy and Technology, which joined in the request for a Do Not Track list, says legislative action might also be necessary to create and enforce the list. To make consumers more aware of how they are being tracked, Cooper suggests making the privacy controls in Web browsers more accessible to consumers, and to code information into the ads themselves about the tracking techniques. For example, right-clicking on an ad could provide details about the tracking mechanism and how to opt out, she says.

Cooper says marketers have a “tremendous amount of interest in behavioral targeting,” but “it remains to be seen if the cost of building behavioral programs is worth it in the end.”

Just days after the FTC meeting took place, the Center for Digital Democracy and the U.S. Public Interest Research Group filed a complaint with the FTC asking for more involvement in regulating behavioral marketing activities. New marketing technologies “have sharpened the precision with which Internet users are tracked and targeted,” including “schemes on the part of both Facebook and MySpace, that make clear the advertising industry’s intentions to move full-speed ahead without regard to ensuring consumers are protected,” according to a letter from the groups to the FTC.

Mike Zaneis, the vice president of public policy for the Interactive Advertising Bureau, says a Do Not Track list is unnecessary and would be overly complicated to administer. Zaneis says the online marketing industry is “in near unanimity in opposition,” to the government overseeing a Do Not Track website.

Government-imposed protections could “block large swathes of the Internet,” Zaneis says. Sites that personalize e-commerce options or that customize content might be blacklisted under such a system.

What Consumers Want

Unlike the Do Not Call list, which was set up by the government because of frustrations with telemarketers, Zaneis says there is “not the same outcry from consumers.” Research conducted by the IAB indicates that consumers would be willing to pay to receive more relevant ads, according to Zaneis.

One member of the U.S. House of Representatives believes more oversight is needed. Representative Edward J. Markey, a democrat from Massachusetts, urged the Federal Trade Commission to look into targeting practices. “The Federal Trade Commission should promptly investigate the privacy impacts of Internet tracking and targeting techniques to ensure that loss of privacy is not the price consumers must pay to realize the benefits of online commerce,” according to a statement by Markey.

IAB’s Zaneis believes that Congress should not draft new privacy laws, as the FTC currently has sufficient authority to enforce existing laws. “The FTC has enough precedent … in defining the rules of the road.”

Within days of the FTC meeting, social networks Facebook and MySpace unveiled plans for intertwining data about individuals and their purchases with online advertising that could prompt congressional action or litigation.

Facebook’s “Beacon” program was altered in December after an outcry from users. The program originally alerted all of a member’s online friends when a purchase, such as books, CDs or tickets, were made on a partner site. This feature was changed to an opt-in. Similarly, Facebook’s Social Ads puts ads for related products near member’s activities, such as when they rate or purchase music.

Some Facebook members have complained that delivering information to friends about purchases has interfered with gift giving, as significant others prematurely found out about holiday and birthday gifts.

Political action group MoveOn.org is using the social networking tools of Facebook to protest the behavioral program. MoveOn.org, which has successfully organized members to communicate en masse with their congressional representatives, has formed a Facebook group to petition the behavioral programs for what the group sees as an invasion of privacy.

Competing social network MySpace expanded its behavioral targeting program to search member pages for words indicating interest in specific categories (such as music or travel) and enables marketers to target the audience that will see its ads.

The European Union is also investigating behavioral targeting practices, and new rules there could ripple across to practices in the U.S. The Article 29 Working Party is considering whether culling data about buying habits and Web-surfing history violates consumer privacy. While U.S.-based sites may not be directly affected, changes in targeting policies could be enacted globally to provide consistent experience to consumers.

Government Becoming Adware-Aware

The FTC also clamped down on propagators of adware for failing to disclose the less-than-noble intentions of their software. In March, the FTC settled a case against software company DirectRevenue for using unfair and deceptive methods to get consumers to download adware and for obstructing its removal. As part of the agreement, DirectRevenue forfeited $1.5 million in “ill-gotten gains” from adware distribution and agreed to cease and desist from distributing same.

As part of the government’s increasing prosecution of adware peddlers, the FBI and the Department of Justice cracked down on a major distributor who was hijacking computers to generate spurious ad revenue. John Schiefer, a former security consultant, pleaded guilty in November to masterminding the installation of adware on 137,000 computers.

Schiefer installed the software onto a network of unwitting individuals’ PCs to create a botnet that generated ad revenue and also stole PayPal and bank account information. According to the U.S. Attorney’s office of central California, this was the first prosecution for using a botnet in violation of federal wiretapping laws. The software generated more than $19,000 in revenue from a Dutch advertising company, which had to be refunded as part of Schiefer’s plea bargain agreement.

Adware proponents were on the losing end of a significant court battle. In September, software distributor Zango (which the previous year settled an adware case with the FTC) was unsuccessful in arguments before a district court in Washington to prevent software tools company Kaspersky Lab from classifying Zango’s software as posing a potential risk to a person’s computer.

“Zango lost big,” says Ben Edelman, a spyware expert and assistant professor at Harvard Business School. Based on the ruling, Edelman says software tool vendors are “inherently protected” from liability in their efforts to protect consumers from adware, spyware and other malicious software.

Despite these prosecutions for distributing adware, deceptive advertising software is still abundant, according to Edelman. A suit filed in California in 2006 against Yahoo alleges that the search company distributed popups that were bundled with spyware software, generating allegedly bogus ads, says Edelman, who is co-counsel in the case. The ads were also placed on “parked” domains – websites created by scripts that did meet the criteria of quality content that Yahoo promised its advertisers. A trial date has not been set.

Congress Eyes Spyware Legislation

While legislators on Capitol Hill did not take action on many of the online marketing and privacy issues that were investigated by governmental agencies or decided in the courts in 2007, two competing anti-spyware bills passed the House of Representatives.

In May, the House passed the Internet Spyware Prevention Act of 2007, which focuses on providing funding to the Department of Justice for enforcing laws against spyware and the practice of phishing (fooling consumers into revealing personal data). Less than a month later, the Securely Protect Yourself Against Cyber Trespass Act (SPY ACT) was passed, which gives greater authority to the FTC to seek larger fines, and more broadly defines acts that surreptitiously collect personal information.

The IAB’s Zaneis says his organization supports the SPY ACT because it emphasizes greater enforcement of existing laws. The IAB testified in Congress against passage of the SPY ACT because it overemphasizes the requirement for consumer consent and could stifle innovation, according to Zaneis. He says that the Senate has not moved toward developing similar legislation to either House bill, and is unlikely to do so anytime soon.

Affiliate marketing expert and blogger Shawn Collins is wary of any spyware legislation that Congress would craft. “My fear is about some comprehensive anti-spyware law that includes harmless cookies,” Collins says. He is concerned about elected officials’ lack of knowledge of online marketing, worrying about laws “written by bureaucrats who never touch a computer.”

Spammers Put in the Can

No legislation or regulatory action in 2007 addressed the continuing problem of spam, but the existing laws are being enforced more vigorously. The CAN SPAM Act of 2003 was used in the prosecution of “Spam King” Robert Soloway, who was arrested in May for sending billions of spam emails. Also getting busted for spamming were Jeffrey Kilbride of Venice, Calif., and James Schaffer of Paradise Valley, Ariz., who will each spend more than five years in prison. The pair was sentenced in October for spamming AOL customers and others and was asked to return more than $1.1 million.

IAB’s Zaneis says he doesn’t expect any legislation in the near future regarding spam because the existing laws are sufficient. “The industry must keep doing what they are doing … now it’s an enforcement issue,” he says. The industry has “stepped up,” and an FTC spam summit meeting in July provided the necessary feedback about what was working and the latest authentication tools that could block spam, according to Zaneis.

Florida Takes on Lead Generation

An investigation into ringtone sales in Florida could affect affiliates’ lead generation practices across the country. Florida Attorney General Bill McCollum’s office’s investigation of “unfair and deceptive trade practices regarding online ringtone” sales by AzoogleAds resulted in a $1 million settlement from the company and an agreement to change the wording of its advertisements.

Ringtones previously described as free, though they required a monthly subscription fee, will have to include language describing the applicable fees, according to the agreement with AzoogleAds. Collins says that due to the lack of self-regulation among affiliates, “it was a positive for Florida to get involved.” Ideally affiliates would set up their own rules regarding lead generation practices, but Collins says no one in the industry has volunteered to fill that role.

The FTC is also investigating lead generation practices, with network ValueClick in its crosshairs. John Ardis, vice president of corporate strategy at ValueClick, says the FTC began looking into lead generation in the spring, but only ValueClick’s name was made known because it was the sole public company being investigated.

“Lead generation has become big enough in the last year for the FTC to review it, as it should,” according to Ardis. He says that the investigation has “put a cloud over lead generation,” but he hopes that the resulting clear rules from the FTC that will improve consumer confidence and allow lead generation to become “bigger and better.”

Fair Play: Q & A with Kellie Stevens

Kellie Stevens is the president of AffiliateFair-Play.com, which is committed to providing a better understanding and interpretation of the behaviors that impact the affiliate marketing space. Stevens’ goal is to create a fair and competitive marketplace, and she does this by focusing on the actual behaviors – not the technologies – leading to unfair competition and abuse in the marketplace. Her tireless efforts, which started in 2000, have won her the respect and affection of many in the industry as well as the ire of those who are looking to skirt ethical practices. Regardless, Stevens vows to continue her mission to provide the community with resources for striving toward fair practices in affiliate marketing.

Lisa Picarille: What motivates you to find out who is using adware or acting in an unethical manner?

Kellie Stevens: Many of the behaviors I research and document go beyond just ethics. They are behaviors which I strongly feel impact negatively on the affiliate marketing channel as a whole. Affiliates who are automatically redirecting the merchant’s own traffic (both organic and paid traffic) as their own commissionable traffic, devalue the channel overall. Affiliate links showing extensively in adware security companies have deemed that security risks have contributed to blocked affiliate links and tracking cookies flagged as security or privacy risks. This impacts on everyone. Those are just a couple of examples. It’s the overall impact on affiliate marketing, from a business perspective, that is my main motivation.

LP: How did you get started pursuing those exhibiting bad behavior?

KS: Back then there was very little information available. Security companies weren’t researching these adware companies and their software. You couldn’t go to a security site and search their database. Only a few people were even talking about how some affiliates were driving sales and revenue. So I installed a few applications to see for myself. I began talking about what I saw in the community. The day came when I had a couple of applications installed on my computer and I went to my e-commerce site checking on a customer issue. When I got to my shopping cart, I received a pop-up with a blatantly false message encouraging the customer to buy a product from the adware company. That was very personal. I contacted my State Attorney General’s office and found out they knew very little about adware, but they wanted to hear more. I talked with them about six months later and they had a much better understanding; they didn’t like the practices at all but felt there were no existing laws in place to prosecute. Things gradually evolved over time as I continued testing for myself to understand what was going on out on the Internet and reporting back to the community on a somewhat ad hoc basis.

LP: How much of your testing is done without being paid?

KS: When I first started, and for quite some time, it was all done for free. As the demand for the information and my expertise grew, I gradually increased the amount of time I spent doing research and reporting. I’m now doing this full time, so of course it’s not all for free now. I still try to balance my time, providing some amount of information for free because the issues are too important to the industry. I haven’t sat down to put numbers to how much of my activities are devoted to free content and revenue-generating information.

LP: How much is consulting? And do you work with the big networks? If so, how often?

KS: I do private consulting as well as the subscription service through AFP. But again, I haven’t sat down and put numbers to the time (hour-wise) I devote to each area. I know I put in a lot of hours each week because there is always something that needs addressing.

I don’t disclose my clients’ identities for confidential reasons. I will say that over the years I have had contact and dialogues with all the major affiliate networks to varying degrees, whether that contact was paid or otherwise. I always welcome the opportunity to discuss the issues facing the industry, whether I completely agree with the points of view or not. I have always appreciated when the networks have approached me asking, “Kellie, what do you think about”?” Dialogue is extremely important if constructive change is to happen in the industry.

LP: Why do you think that there are individuals like yourself who pursue adware folks, but that there are no formal entities to police these rogue behaviors?

KS: There are probably many reasons. The idea of some type of formal entity has been brought up several times. It’s something I’ve had requested of me on numerous occasions. In fact, I am continuously educating people that AFP doesn’t do any type of “certification.” The largest stumbling block to having some type of formal entity is probably the fact that as an industry we have yet to come to a universally (or close to universal) accepted agreement as to what behaviors are and are not acceptable. You have to define what you will be policing before you can police.

LP: You are performing a very valuable service for the industry, yet you seem to maintain a low profile. Why?

KS: I don’t think I maintain a particularly low profile. I am out and about in the community. I don’t use my research findings to just sensationalize and garner PR for myself. I think the information is too important to dilute with such tactics. And doing so marginalizes my ability to bring about change towards more fair business practices in the industry.

I have found that I have been more able to achieve change by working quietly “behind the scenes” when it comes to specific issues/incidents at times. My ultimate goal has always been, and remains: changes in certain policies and practices in the industry.

I am focusing more of my energies in 2007 towards educating the community on issues related to adware, so in that sense people will probably be “seeing” more of me.

LP: Are you ever worried that these adware firms will retaliate against you?

KS: Anyone doing this kind of work should be cognizant of such possibilities. I have spent quite a bit of time over the years cultivating the way I both approach my work and present the information to minimize those types of risks. Ultimately, I want to be spending my time doing my research and providing information to the community, not dealing with retaliation tactics, legal or otherwise.

LP: And how do you protect yourself from this potential pitfall?

KS: I try to use common sense along those lines. That means being able to support what I report and staying clear of approaching matters in a way that is viewed as just being inflammatory. My goal is to be able to provide people with objective data and information from my research. So far, this approach has served me well.

LP: What’s the best part of doing your job?

KS: I probably have to say, when I see positive change happen. When I see a merchant or network change their policies or implement internal mechanisms to better catch bad behavior. When I have an affiliate come back and tell me their conversions (and revenue) have significantly increased after they took action on information I provided them. Or when a merchant tells me they are showing higher growth and ROI/ROAS in their affiliate channel based on the information they received from me. At the end of the day, that’s what it is all really about and makes the hours in front of the test computer worthwhile.

LP: What’s the worst part?

KS: I don’t know if I would call them the worst part, but there are some things that I find frustrating.

I find there is still quite a bit of misinformation and old information out there. I see people making [what appears to be] business decisions based on the inaccurate information.

I become very frustrated whenever I hear people say, “I don’t like the practices, but there’s not anything I can do about it and it’s just a cost of doing business.” In my honest opinion, that kind of apathy just encourages the bad behavior. There are many things that could be done within our industry to combat the bad behavior. It’s a matter of being committed to doing what can be done. And to say it’s the cost of doing business is devaluing the affiliate channel.

I really become frustrated when I see companies using anti-parasite policies, compliance and fraud detection as primarily PR spin to market their business, when in reality they are eyeball-deep in the relationships. People shouldn’t believe everything they read, but rather, engage in due diligence in understanding the business models/practices of those they partner with.

LP: What’s the most misunderstood element of dealing with adware?

KS: That could probably be a full article by itself; there are so many. One is that it is easy to monitor all of the potential bad behavior out there. It isn’t by a long shot. Could the industry as a whole be doing better? Yes, but that doesn’t make it an easy task. I remember catching wind of a particular application that I wanted to test. It took me two years to finally track down a copy of the software to test. When I did, they were using quite a few techniques to hide the fact from networks and merchants that adware was involved. Programming has become much more sophisticated, allowing adware to “hide” itself more easily from the end user (that it is even installed). And distribution methods have become more stealthy and sneaky as well.

A more global, or big picture understanding of how adware is operating within online advertising as a whole is still not fully understood by many, nor are all the different ways it can impact upon online businesses and affiliate marketing in particular.

There are still many misconceptions about the very basics of how adware functions. I still hear people talking about adware replacing their affiliate links on their websites, and their implementing programming on their site to prevent this. But the majority of adware does not even do that. In fact, some of the “protective coding” they implement could actually put their traffic at higher risk for interception by certain types of adware.

LP:What percentage of commissions do you estimate are lost to the bad behavior of adware?

KS: Lost to who? Affiliates, merchants or networks? All three happen now. There are also many ways a commission can be “lost.” Some of those ways are very blatant and obvious, like the automatic overwriting of an affiliate link by adware. Other ways are less obvious, like lost traffic or redirection into another advertising channel.

I don’t think anyone knows the exact dollar amounts, in truth. I’ve heard speculation of anywhere from 5 percent to over 40 percent of revenue in the affiliate channel attributed to adware. I’ve seen reports which put total revenue for adware, which included all advertising channels and other means adware companies have of generating revenue, at anywhere from $2 billion to $20 billion a year.

The problem with coming up with hard data along these lines is knowing all the adware players and those using adware [i.e., third-party ad buys]. Security companies face an ongoing battle detecting adware applications on the end user’s computer. Most adware companies are privately held, so their financial information is not public knowledge. Others operate outside of the U.S. When you start factoring in very rogue players and the world of botnets, the picture becomes extremely cloudy.

I think most agree that there is a significant amount of online advertising dollars that end up flowing through adware coffers.

LP: What is the future of adware? Will it ever be wiped out?

KS: Adware is here to stay. You don’t put the technology genie back into the bottle. As with all things related to the Internet, what we will see is the way in which adware is behaving and playing on the Internet. This has been the case so far as well.

LP: Who should be responsible to help in this fight? The government? Merchants? The networks?

KS: I think everyone is responsible to varying degrees and in different ways: affiliates, merchants, networks, consumers, regulators and adware companies themselves. Whenever there is a lot of money up for grabs, as there is in online advertising, there will always be people out there who are willing to use unscrupulous tactics to get their hands on some of the dollars. It’s unfortunate that adware has become synonymous with such tactics. My dream is to see the industry become more proactive on addressing the issues surrounding adware and being less reactive primarily when the stuff starts hitting the fan.

Out of Commission

How to Limit Commission Theft

  1. Find a trusted network and merchants. Ask other affiliates about their experiences with network partners, and if you are not being protected, take your business elsewhere. Likewise, if a merchant partner advertises via adware that is known to facilitate commission theft, you may be better off without them.
  2. Study your reports yourself for anomalies such as drops in conversion rates. Look at your server logs as well as network analytics to identify inconsistencies between the ratio of customers who appear to purchase and your commissions. If you are driving traffic but people suddenly aren’t buying, it may be a problem of theft.
  3. Test the software yourself. Even though isolating a computer and infecting it with suspicious software is a hassle, what you learn will be invaluable. Watching the activity when visitors come to you or your merchants’ websites will enable you to understand the scope of the problem.
  4. Educate yourself through affiliate marketing forums and the legal landscape. Affiliates and software experts are the best source of information available. While there is some misinformation, being well-versed in the issues is your best defense. Several court cases are pending that could decide the legality of overwriting commissions.
  5. Tell customers not to download software that you suspect is assisting commission theft. If the evidence convinces you that some free applications are harming your business, advise your current and potential customers not to use it.

We all operate to a great degree on trust. Whether you are an affiliate, advertiser, network or merchant, being able to succeed in business largely relies on others adhering to their written or implied agreements. We assume that most people will be honest and not interfere with our transactions.

“The overwhelming issue [in affiliate relationships] is about trust,” says Joseph Matheny, chief technical officer of advertising network AdValiant. But unfortunately that trust continues to be violated by some who capture commissions rightly due to others or take credit from a merchant that is not earned.

“There are those who haven’t bought into the rules of affiliate marketing,” Larry Adams, product manager for Performics, says. Subversive software, the anonymity of hiding behind affiliate IDs and sneaky scripting on websites make it easy to steal commissions and avoid detection. The potential to redirect commissions without fear of prosecution “provides a strong financial incentive not to follow the rules,” according to Adams, who says, “this is not a problem that is ever going to go away because there is economic opportunity.”

While there are reporting and auditing tools that can flag some of the most blatant attempts at padding commissions, dishonest affiliates can marginally enhance their earnings from their partners with little fear of detection or repercussions. Scott Jangro, president of marketing services company MechMedia, estimates that loss of commissions due to theft is “in the single digits” and “part of doing business that you should expect.”

Not-So-Grand Larceny

Commission theft generally falls into two categories: when tracking mechanisms meant to follow visitors from an affiliate or advertiser to a merchant are ignored or overwritten, or when someone claims a commission from a merchant for a transaction that they did not initiate. Unethical affiliates can stealthily overwrite competitors’ cookies during visits to their sites, or they can “advertise” with companies that disrupt the buying process by launching pop-up windows that falsely create commissions by erasing the true referring ID.

Like its brother nemesis click fraud, commission stealing has existed since before the Web was dynamic and will likely always plague online marketing. In 2002, networks Commission Junction, Be Free (which was subsequently acquired by CJ) and Performics agreed to address the problem by creating a code of conduct for affiliates to follow. LinkShare developed it’s own formal code of conduct.

CJ and Performics agreed that affiliates should insert a text identifier known as “afsrc=1” in their query strings to identify themselves to merchants and publishers. Affiliates and software developers should look for that string and back off from attempts to claim their own fees.

Performics’ Adams says employing afsrc=1 “will protect against software used by a lot of marketers who play by the rules,” and distribute applications that respond accordingly when they detect the code. The affiliate code of conduct has been revised twice since its inception, and Adams still advises new affiliates to implement the afsrc=1 code.

Implementing the afsrc=1 code “protects from a narrow class of programs” such as consumer rebate software like Upromise or eBates that follow the rules, according to attorney and adware/spyware expert Ben Edelman. But many adware companies do not conduct themselves along these guidelines, according to Edelman. Affiliates rely on the networks and each other for policing with “some affiliates paying bounties to those who turn in others,” he says.

The afsrc=1 parameter and affiliate code of conduct is not enforced consistently and “gave too much wiggle room to the networks,” according to Kellie Stevens, president of Affiliate Fair Play. Stevens, whose company provides affiliate consulting services, says “afsrc=1 is now a moot point,” because it is not uniformly implemented and is ignored by adware applications. “Many affiliates have no idea [about afsrc=1] and don’t know they are supposed to be using it,” according to Stevens.

Adware from companies such as Zango (formerly known as 180solutions) and DirectRevenue enable their advertisers, who are affiliates or merchants, to insert pop-up windows that can interrupt the buying process and cancel commissions from other affiliates and/or create commissions for themselves. These applications, which consumers download in order to receive free software, music or videos, have led to several lawsuits (some of which were dismissed) claiming unfair business practices. Zango recently settled a case with the FTC over charges of deceptive practices with consumers and paid a $3 million fine, but did not admit guilt.

Dave Methvin, software expert and chief technology officer of PCPitstop.com, began studying how Zango’s software works because customers who had their PCs scanned at his website were emailing him about problems browsing the Web. “It became a crusade because so many of our users had infected computers,” he says.

Methvin installed the Zango software and watched as his visit to a Verizon website was interrupted by a pop-up window that created a commission for an affiliate whose site he had never visited. “When I started the transaction, Verizon wouldn’t have owed anyone a commission,” he says.

“Clearly there are unfair things going on,” says Methvin, who likened Zango’s enabling of partners to interfere with affiliate relationships to someone who provides a criminal with a gun and bullets but doesn’t want to be held accountable when it is used in a crime.

Zango’s software looks for keywords contained on a website or for specific URLs, and when found, launches a Web page or pages from affiliate websites in pop-up windows that have been observed to generate as well as overwrite commissions.

Zango director of public relations Steve Stratz says his company’s software does not itself overwrite cookies or otherwise subvert affiliate commissions. However, Stratz confirmed that Zango’s terms and conditions with its advertisers does not prevent them from altering cookies or creating pop-up windows that interfere with transactions, and he has no intention of asking them not to. Stratz says Zango sells to its advertisers all of the URLs and keywords that are used by its clients to open up pop-ups, including pages that open up only when someone visits a merchant’s shopping cart. Zango’s software will load pop-ups when a trademarked product names appears on a page.

“For us to regulate the world of cookies and the various and sundry ways that they are used goes beyond the scope of our mission as a company,” says Stratz. He says if companies want to protect their home pages or trademarks from pop-ups, they can always outbid their competitors. “We don’t apologize for the aggressive nature of our ad network,” Stratz says, adding that 200,000 people willingly download Zango software each day.

(For more on Zango, see the Affiliate’s Corner column on page 94.)

Network Protection

Technology does not exist that can prevent cookies or affiliate links from being ignored or to proactively defend against commission theft, according to attorney Edelman. It is impossible to prevent cookies from being overwritten, although consumers can protect their computers by installing applications that detect adware or spyware.

Since there is no panacea for protecting commissions, affiliates should employ the strategies for limiting loss, which foremost requires carefully selecting and working with your network partner.

The primary responsibility for monitoring commission theft lays with the networks, according to Steve Sauve, chief technical officer of network MaxBounty. “The merchant is paying a network for a service, and it is our responsibility to do quality control,” he says.

Sauve says that on average his company terminates two to three affiliates per month for commission stealing. In his experience defrauding merchants is a bigger problem than affiliates stealing from one another. “You need to actively monitor the network and watch to see where the traffic comes from,” he says. If an affiliate’s commission is out of alignment with the historical conversion rates, Sauve says the network should investigate.

Performics’ Adams says networks need to be proactive to make certain that affiliates aren’t participating with adware software vendors. “One of the most transparent things is anomalous performance. If they’ve been in a network for a while without showing results, then jump up to the top 20,” then something is likely amiss, he says. Performics tracks daily and trailing averages, and has a network performance group to monitor how affiliates drive traffic. “Looking at geography [of the initiating IP address] is also a good clue [for identifying bogus commissions], as illicit activity is often offshore,” according to Adams.

If affiliate reports show an unwarranted boost in performance, or if another affiliate has suspicions, Performics undertakes a remediation process to determine if the affiliate should be bounced from the network.

Affiliate Fair Play’s Stevens says if an affiliate isn’t getting enough support from the network in battling lost commissions, then it is time to shop around. However, larger affiliates “have to participate with the big networks because they need big brands to draw the traffic.” She says that networks need to be more candid in instructing new affiliates about the occurrence of commission theft and more closely monitor the commission-reporting process.

Merchants should aid affiliates by terminating relationships with those who are known to steal commissions, according to Stevens, but they are constrained by a lack of information. She says that if a dishonest affiliate is part of a large network, it may be hard to identify that specific affiliate, and so the merchant would be forced to terminate the entire network; a difficult decision if the network overall is performing well. Merchants sometimes make side deals with known cheats because of the revenue they generate, Stevens says.

Networks such as ShareASale are drawing affiliates by being selective about the companies that they choose to do business with and promoting their “clean” affiliate relationships, according to Stevens.

Selectivity

According to AdValiant’s Matheny, networks could eliminate 50 percent of the lost commissions by caring for their affiliates properly. His company is developing MediaTrust, a custom link-generation technology that would make it more difficult for software to circumvent the referral process.

Matheny, who has a background in Internet security, says that the system is similar to a public and private key system used in encryption software where each side (in this case the affiliate and the network) holds part of the information necessary to complete a transaction. The software, which is due in the first quarter of 2007, would make it more difficult for an application to fake a referral transaction.

The best method for understanding if, or how, commissions are being stolen is for an affiliate to set up a test computer and install any suspicious software, according to Performics’ Adams. He recommends you visit your site and your merchants’ sites with the “infected” computer and watch for deceptive behaviors.

Since the networks have offered little details about commission theft, affiliates should search forums and message boards for links to investigations of adware by software experts. “There is not a lot of centralized factual information,” advises Edelman, who says affiliate forums are the best places to start.

Affiliate Fair Play’s Stevens says that lack of a concerted voice among those in the industry is hindering the fight against commission stealing. More sharing of information between networks would deter affiliates from bad behaviors because they wouldn’t find it so easy to hop from partner to partner, she says.

AdValiant’s Matheny says he recently spoke with a competitor about starting a consortium for sharing information and establishing industry standards. Presenting a unified front amongst competitors would have a psychological effect, according to Matheny, if commission thieves believe that “we won’t let you get away with it.”

Affiliates who take undeserved commissions “should be flagged,” by those in the industry, Matheny says. MaxBounty’s Sauve says his company would volunteer data about affiliates to a group effort, “but there would be a danger of false positives.”

Sharing too much information would reveal how commission thieves are tracked and bad affiliates could use the knowledge to avoid detection, according to Performics’ Adams. His company prefers handling issues with clients privately to establishing a blacklist of affiliates who have cheated. “We wouldn’t want to throw them under the bus.”

JOHN GARTNER is a Portland, OR-based freelance writer who contributes to Wired News, Inc., MarketingShift, and is the Editor of Matter-mag.com.

Marketing Muscle

Over the years stories about intimidation and goons knocking on the doors of various affiliates and search marketers have circulated at industry events. Some of these scary accounts have taken on a life of their own – much like a game of telephone where fact and fiction are often intertwined as the stories are told over and over again.

The victims claim to have seen a variety of intimidation tactics including death threats issued over the phone, visits at their homes from large, scary-looking men, threats involving physical harm, character assignation campaigns, general bullying and harassment, as well as cyber attacks on their websites and ultimately their livelihoods.

Most of the victims say the perpetrators of this behavior are typically overzealous business rivals or companies they spoke out against that are seeking to silence them.

Retelling of these accounts is often reserved for late-night, alcohol-fueled chats at a bar with colleagues at trade shows and conferences. But trying to get the sober details is much harder. It’s difficult to confirm and corroborate many of these stories since the alleged victims are hesitant to speak in depth, or on the record, for fear of future recrimination.

So are these frightening tales the equivalent of urban affiliate myths, exaggeration or truth? Actually, it’s often a combination all three.

One industry watcher, who asked not to be named, was skeptical of some of the stories.

“It’s somewhat of a Curtis Sliwa syndrome,” he says, “where he faked some crimes and attacks as a way to get more attention for himself and the Guardian Angels. These supposed allegations on the part of affiliates are a way to boost their profile. I may be cynical but unless I see a police report I tend to believe these stories are a way to raise themselves in the industry.”

However, he does admit that regardless of the veracity of the accounts, “they seem to resonate with people.”

Anti-adware/spyware expert Ben Edelman knows the feeling of having his work, which typically exposes unethical behavior on the part of an adware vendor, spark a negative response from those he has criticized.

Edelman says that he’s experienced several instances of threats at varying levels from a variety of unhappy companies that he’s exposed. The Cambridge, Mass.-based lawyer and Harvard graduate student says that’s he not willing to speak about all the incidents right now. He declined to speak about two incidents that he referred to as “very, very nasty.”

However, he did recall a time in the fall of 2003 when for two weeks, a private investigator hired by Claria (formerly Gator) was parked in a dark-colored sedan in front of Edelman’s apartment. He claims the driver followed him to class, around the Harvard campus and to other destinations. The driver submitted to questioning in a courtroom and admitted to being hired by Claria. The driver also said he was simply attempting to serve Edelman with a subpoena, a claim Edelman, who is an attorney, disputes, noting that if the driver wanted to serve him he could have simply knocked on Edelman’s door and done so.

Edelman says he found the situation “puzzling but consistent with [his] view of the company, which likes to play hardball.”

Edelman also says the “intimidation efforts were unsuccessful.” Although, he claims the company subsequently “did some other things that were more effective.” Those are the matters he doesn’t want to elaborate on.

Others have also seen the nastier side of how unhappy companies deal with dissent. That fear makes most afraid to even broach the subject.

One PPC search marketer questioned about his experiences with a particular company – one that is often named one of the most prolific at stealing commissions from affiliates – yielded this response about the company’s CEO:

“He’s not a guy to mess with either – do your checking very discreetly. I trust you’ll be thorough as well, but honestly, I believe this guy is not someone you want to piss off. It ain’t national security, but my affiliate income depends on keeping my distance from this man. I can go no further than this and provide no details.”

Another source that was contacted via email about the same subject would only say, “This company is a bunch of thugs. Be very careful and watch your back. Seriously, tread lightly.”

So just how far outside the law will a company go to get its message across?

To put things in perspective, Edelman says, “The people that I’m exposing are powerful people, but not that powerful. They can’t rig elections or bribe the government.”

Regardless, Edelman has taken practical steps just in case a company or individual wants to take out-of-court retribution.

“In the event that my apartment building were to burn down, I have an off-site backup of all files,” he says. “It could happen randomly or intentionally.”

He recalled a story from his mother, who actively pursues nursing home reform, where a colleague of his mom’s had her home burned to the ground. “It was proved to be arson; they just couldn’t prove who did it.”

In his Search Insider column from August 2006, David Berkowitz, director of strategic planning at 360i.com, wrote, “Manage your search engine strategies so well that competitors want to kill you – literally.”

The column detailed a discussion Berkowitz had with an unnamed search marketer in the health care field whose wife reportedly fielded a death threat via the telephone from an angry competitor.

According to Berkowitz, “The victim of the threat competes with his search engine marketing firm. He owns more than a few domains related to his business and services, including a growing number of local variations on the top terms. He gives some of the domains to his SEM, keeps some others and sees which sites can rank highest in the natural search results. For more than a few highly searched terms related to his business, he and his SEM will split ownership of the first and second rankings. The funniest part is that he gets irritated when his SEM holds the No. 1 position, since he’s determined to figure out how he can beat it. For several terms, he’s cornered the market, at times holding at least seven of the top 10 listings.”

Berkowitz explains to Revenue that he was shocked to hear this story and that the recipient of the call “was caught off guard ” and they don’t know who was the source of the phone call.”

For the most part, Edelman admits that the bulk of threats he receives are legal “and don’t involve henchmen.”

“Most are threats to see me in court,” Edelman says. “But most are not followed through, because I have the documentation to back up my allegations and I am correct. The best way to protect myself is to be right every single time and be able to prove that I’m right. The bottom line is that if people want to mess with me, they will lose because I have the facts to protect myself.”

Virtual Threats

Still, that doesn’t stop other threats that take advantage of technology. The most common are DNS (denial of service) and DDoS (distributed denial of service) attacks. But someone looking to harm your business via your website can unleash a variety of deadly technical attacks using spam, adware, spyware, Windows Messenger boxes, various worms, trojans, phishing, SQL injection, cross-scripting attacks, botnets, UA porn running, traffic laundering, viruses and rootkits, according to a spyware researcher, who asked not to be named.

In February 2005, Edelman fell victim to a massive DDoS attack that knocked his server off-line for nearly two days. His Web-hosting company claimed he was the target of the biggest DDoS attack they’ve ever suffered – some 600 MB per second. Edelman says Claria did not perpetrate the attack and he still doesn’t know who was responsible.

This potentially harmful behavior is why many of those posting on public message boards claim they prefer to post anonymously.

“It’s not about saying whatever you want without backlash,” says one very vocal poster in an affiliate forum, who asked not to be named. “It’s about protecting your business and your livelihood.”

An event that took place nearly four years ago is probably the one that sparked most of the talk of goons and henchmen being dispatched to the front doors of several affiliates – most of them very vocal posters on the AbestWeb.com forum. Many of the frequent contributors to that message board and community strongly voiced their opinions on the actions of World Media.

At the time, Virus Port had merged with World Media, a big adware company and one of the first to garner people’s attention for redirecting affiliate links. World Media had a huge installed base of users for its popular bundled peer-to-peer program called Morpheus. Many of the ABW posters were not happy with the company’s actions and posted their complaints.

Kellie Stevens, the president of AffiliateFairPlay.com, was among those who received a knock on her front door – but it wasn’t “muscle.” She claims that World Media hired a local private investigator and dispatched him to her home. She refused to let him inside and instead spoke briefly to him through the cracked door so she could get his business card.

Stevens described the man as “preppy and not threatening.” Later that evening she called the PI and had a lengthy discussion with him. He told her he was hired by World Media. He didn’t know the specifics of the situation or why. He was just letting her know that the company was considering filing both civil and criminal charges against her because of something she posted on a message board. She says the conversation went on for about 20 minutes as she explained the situation and the PI, who was also an ex-FBI agent, ended their talk by saying that people have the right to free speech and that, if in the future Stevens needed any help, she could call him.

“I’m careful about what I say and post and I have accurate information,” she says. “As long as I’m accurate in my reporting they [companies] may not like it, but I’m not just trying to cause a flame fest or incite a riot, though I’m aware it can happen.”

A very successful search affiliate says there are a handful of companies that he believes are “dangerous from a business perspective but not a physical one.”

“I point out issues with these companies all the time. I post on message boards. I file consumer complaints. I send information to the CDT [Center for Democracy and Technology]. I have been a thorn in the side of many adware companies,” he says. “My sites are all publicly registered. My name and address are all there. It wouldn’t take much more than five minutes for someone to track me down and it hasn’t happened yet. So, I’m not worried they are going to show up on my doorstep, I’m more worried they are going to launch a DDoS attack and shut down all my sites.”

Still, others who received visitors to their home during the World Media matter say they were intimidated.

“People who might have taken the activism to the next level stopped,” Edelman says. “So it worked – not that those tactics are acceptable, because they are not.”

For most affiliate marketers, the idea of someone showing up at their home is truly frightening – mostly because they work alone and use only the computer to connect to others. It’s not like the typical worker who heads to an office filled with other people, where visitors come and go all day.

“Part of what is scary for most of these people is having others out in the virtual world know where they live, and usually just putting that fear into them is enough to make them stop whatever their activities were,” says one industry observer who asked to remain anonymous.

Berkowitz says this behavior definitely surprises him. Although, he explains that there may be times when a threat is slightly more “merited,” because the person being threatened is not operating in a totally ethical and above-board manner.

“At least when it comes to search there are many ways to game the system,” Berkowitz says. Still, he admits, it’s obviously something that needs to be looked at on a case-by-case basis.

On the flip side, Andy Rodriguez, president of Andy Rodriguez Consulting, an outsourced program management firm, is not at all surprised that this type of strong-arm behavior takes place.

“In this industry, the amount of cash and the revenue potential attracts a lot of people that don’t always make the best decisions and it’s easy to see why threats and violence can come up. Plus, in this day and age, people have the tools and technology to use DNS and computer attacks. It’s the same type of intimidation but they don’t have to go to your front door,” Rodriguez says. “The good news is that the government has the same tools and technology to track down the criminals and those threatening others.”

The bottom line according to Stevens is, “When there is a lot of money to be protected, people will go to great lengths and you need to keep that mind.”

A Call to Action

Someone is hijacking your traffic and stealing your commissions. That someone might be a competing affiliate marketer, or worse, the merchant whose products you are promoting.

To my dismay, I discovered that traffic from one of my sites was being diverted when a friend sent me some screen captures of that site’s home page. The first screen shot showed my site open in a browser window with 80 percent of the page behind an AdultFriendFinder pop-up window – despite the fact that my site does not have a pop-up to AdultFriendFinder.com on the home page.

The main domain in the pop-up window’s address bar was AdultFriendFinder.com, but the affiliate ID was not my affiliate ID for AdultFriendFinder, or for any site within FriendFinder’s network.

A portion of the URL included my domain name (preceded by .sub), which clearly indicated interest in referrals from my site. However, this was not so FriendFinder could compensate me – their long-standing, loyal affiliate – for referrals from that page, but rather to ensure that its Zango advertising campaign was returning a good ROI. This fact was made apparent from the prominent white-on-blue banner splayed across the bottom of the pop-up window that read, “This ad served by Zango software downloaded by Zango.com. Click here to learn more.”

Enter Zango, a company formed by a merger of Hotbar and 180solutions in June 2006. During its incarnation as 180Solutions, the company was dropped as an affiliate by the major networks, including Commission Junction and LinkShare, for invalid activity (cookie stuffing, etc.). 180’s detrimental effects on affiliate commissions have been well-documented by anti-spyware expert Ben Edelman and others.

Zango’s current service works as follows. In exchange for access to free programs and tools, surfers are required to download the Zango Search Assistant. With the Search Assistant installed, Zango’s advertisers’ Web pages are popped open when certain keywords are detected in Internet search or browser windows.

Now enter Zango’s advertisers. If a domain address is listed in an advertiser’s campaign and a visitor to that site has the Zango Search Assistant installed on their computer, the advertiser’s window will pop open, virtually obliterating the view of the first page visited. The situation occurs regardless of whether a Zango surfer reaches the page via paid or natural search engine listings.

But wait, it gets worse. Merchants and their competitors are bidding on their own and each other’s domain names, to ensure that their own ads are popped by Zango when their sites are visited. So, even if the Zango surfer finds your site behind a pop-up and clicks on one of your affiliate links, chances are good that the merchant site that opens with your affiliate ID embedded will be covered up by yet another pop-up window coded with an ID that isn’t yours, which means that as an affiliate you can say goodbye to your commissions.

Zango claims a customer base of 20 million users that grows by “more than 200,000 new opt-in consumers every day,” according to a September 26, 2006 press release from the company.

When you add 100 million MySpace teenyboppers who all want to redesign their profiles with VideoCodeLab’s free design tools – available through a Zango download – it’s no wonder that advertisers are jumping on the Zango bandwagon.

However, I can’t understand why a merchant partner would list an affiliate’s domain name in its Zango advertising campaign and risk accusations of commission shaving, or worse, losing affiliates by the boatload. So, I asked FriendFinder’s CEO Andrew Conru, and Lars Mapstead, vice president of marketing. Both stated that Zango supplied FriendFinder with a list of keywords that included my domain name. In another conversation, Mark Ippolito, Zango’s vice president of sales, confirmed that Zango provides its advertisers with a list of suggested industry-related keywords upon request.

To their credit, FriendFinder removed my domain name from their campaign soon after my request. The pop-ups continued, however, and further research uncovered that LoveAccess.com, another dating service with an affiliate program, was also bidding on my domain name. Steve Piotrowicz, director of marketing for LoveAccess.com, had “no comment” on my request to remove my domain name from his campaign or on how Zango’s advertising tactics impact affiliate marketers.

To find out which of my other merchants’ sites were being advertised on Zango, I opened a test advertiser account at Zango through AdConnect.Zango.com, and learned that the scope of the problem extends into every sector of the industry. Commission Junction merchants such as LowerMyBills, Esurance and Magellan’s had bids up to .518 cents per impression and up to 12 advertisers bidding on their URLs.

Attempts to enter URLs for Google, Yahoo, eBay, WeightWatchers and Expedia were “predenied” by Zango as they were insufficiently targeted, Zango’s Ippolito explained. However, he flatly refused to remove my domain name from Zango’s list. (If only it had been that easy!)

Interestingly enough, when I suggested to Ippolito that advertisers should bid on the term Zango, after hesitating a moment he replied that Zango “retains the right to refuse certain listings.” Go figure.

When asked how he would react if paid traffic to his site was repeatedly diverted to other sites, Ippolito responded that my question was “irrelevant” and “best discussed over a glass of red wine,” followed by another assertion that although Zango’s business methods are “aggressive,” they are “entirely legal.”

Legal? Let’s take that scenario off-line. How long would it take the police to arrest Zango’s workers if they showed up with 10-story sheets of plywood to block 80 percent of a storefront each time someone was poised to enter the premises?

What Zango does is legal only because the case hasn’t yet been properly made. Even given a successful outcome, worldwide enforcement would be a logistical nightmare.

So, what’s an affiliate to do to prevent shaving to the point of decapitation? Ending your affiliation with the merchant would seem to be the easiest solution. Unfortunately, giving up does not solve the problem. Merchants and affiliate competitors will continue to bid on your URLs, and their Zango pop-ups will still obliterate your home pages to divert traffic from the other merchants that you promote.

A more drastic alternative would be to give up affiliate marketing entirely and go back to work for some employer who wouldn’t steal from your paycheck. That, however, is not an option for most of us and it certainly will not make things right.

Here are a few suggestions that may help to start making things right:

  • Open up a Zango advertiser account and enter your own domains and the domain names of your merchant partners to find out which are being targeted.
  • Contact Zango at 425-279-1200 and leave a message demanding that your URL be removed from their keyword lists. They probably won’t respond, but your call will be on the record come court time.
  • Next, contact applicable merchant partners and ask that your URLs be removed from their campaigns immediately. Discuss your concerns for lost revenue, and you may want to introduce the term “commission shaving” at some point in your conversation. If your merchant’s program is affiliated with a network, file a complaint with that network as well.
  • If either Zango or your merchant partners refuse to stop popping in your territory, file a complaint with the Better Business Bureau, the FTC at http://www.ftc.gov/ and your local district attorney’s office.

Regardless of complaints from affiliates or the threat of class action lawsuits, it is time for ethical merchants to take the high road and close their Zango accounts.

As for those affiliates who cherish their little 45-cent Zango leads too much to play on the white side with real affiliates – the Zango affiliate voodoo dolls are currently in mass production.

ROSALIND GARDNER is a super-affiliate who’s been in the business since 1998. She’s also the author of The Super Affiliate Handbook: How I Made $436,797 in One Year Selling Other People’s Stuff Online. Her best-selling book is available on Amazon and www.SuperAffiliateHandbook.com.

Taking A Stand: Q & A with Brian Littleton

ShareASale is an affiliate network that has taken a hard stance on spyware, adware and parasite-ware by not allowing any downloadable applications into its network. That business model has won legions of affiliate supporters. ShareASale is growing, and is still considered the smaller, nimbler, more fun network – throwing memorable parties and playing host for standout social events. The company’s founder, president and CEO, Brian Littleton, is committed to affiliate marketing and creating a successful business by building strong relationships and sticking to his beliefs. He recently won AffiliateFairPlay.com’s first-ever Fair Practice Award (see Revenue September/October, page 18). Meanwhile, he, and everyone around him, is having lots of fun making it happen.

Lisa Picarille:What made you decide not to allow downloads or applications within your network?

Brian Littleton: Several years ago when the issue first came up to us, we took a look at how some of the software download applications worked – and it was obvious to me that they didn’t belong in any affiliate channel that I had any control over. As an affiliate network, our main job is to track a consumer from the point of a “click” to the point of a “sale” and commission the referring affiliate. Based on our testing, it’s impossible to accurately track this and commission the proper affiliate if there is a download or application in effect. Further, we witnessed some extremely disturbing distribution methods and behavior from some of the players in that market. Thus, to ensure that ShareASale is not party to any practices that contradict our values, we do not allow any downloads or applications within the network.

It is my opinion that these downloadable applications, most of which involve customer loyalty of some kind, should be a completely separate channel from the affiliate channel, one that is tracked and commissioned differently. They perform an entirely different service than that of an affiliate – and actually remind me more of the type of action such as using my “Reward Miles” credit card for a purchase as opposed to a “sales generating” affiliate. I love consumers, but it has never been my understanding that a consumer has the right to dictate where a commission on a sale should go. That doesn’t make sense to me. A lot of times, loyalty applications and affiliates could actually help each other out if they were properly channeled, but that may take time for affiliates to welcome back into the clickstream a party which has, in the past, taken money out of their pocket.

LP: What are the pluses and minuses to that business stance?

BL: The only minus is the occasional client who wishes to work with an affiliate who we do not work with. In those cases, we try to convince the client why partnering with a download or application is disadvantageous to their affiliate strategy. If that doesn’t work, we guide the merchant to another network. We don’t really see a financial downside to that, because our ultimate goal is to be a sustainable and long-term “sales focused” network. Also, it’s our view that the loyalty channel, which is essentially what most of the download applications are, does not belong in the affiliate channel. The affiliate channel should be focused on bringing in new customers, new businesses. Affiliates are able to extend beyond the brand and seek out different demographics. The purpose of a loyalty marketer is to drive consumer loyalty; it’s a different goal.

LP: Is there any other type of business/entity that ShareASale doesn’t work with; religious groups, sex sites, etc.?

BL: We review each and every application into the ShareASale Network – and have done so for as long as we’ve been in business. While I don’t want it to be our job to prejudge anyone’s ability to become a successful affiliate, it is important to me that we keep a certain level of quality in the affiliate applications. To that end, we screen for things such as adult content, hate groups, etc. More important to us than the actual site content is being able to verify an affiliate’s contact information as well as their ownership of the site that they have applied with. Because of the effort we put into this process, I feel we offer a great value to merchants in taking as much time as we do to verify affiliate information. Beyond that, we believe in every affiliate’s right to “start small,” and tend to err on the side of the affiliate in deciding if their site should be accepted for content reasons.

LP: You seem pretty tight with the ABW crowd. How has that relationship impacted your business?

BL: The ABestWeb community is a great friend to ShareASale, and I hope to continue to participate there as long as they will have me. I don’t have any explanation as to why our network has become popular there except to tell you that I think it is because we make a dedicated effort to take every request seriously without regard for whether an affiliate generates $5,000 per month or $5. Every business has “big” clients that are important, and obviously we have some relationships that garner more of our attention at times; however, one of our greatest assets is the collaborative expertise of all affiliates and merchants in this industry who are willing to give us advice on each issue we come across – and I’m always grateful for the advice that they have given me over the years.

LP: People cite ShareASale as the fourth-largest affiliate network. Do you aspire to be among the “big three”?

BL: I aspire to put together the best product that I can for the market that we serve. If you take a close look at the individual networks that are out there, I think you will find that each has strengths within its individual market that makes it as successful as it is. For us, we started out with the hopes that we could provide a solid technology platform and a network of quality affiliates to a market that was being mostly ignored by most networks. We wanted to provide an alternative, mostly for small to mid-size companies, who didn’t feel like their needs were being addressed, and to that end we’ve been fairly successful. Our goal isn’t necessarily to become one of the “big three” but just simply to continue improving both our technology tools and network of affiliates. There are distinct markets within which we compete very well, and within those markets we want to be not only the best solution available but also a solution that our customers are happy with.

LP: Do you any feel pressure to expand?

BL: I founded ShareASale in the year 2000, and have been able to launch and run the company without the assistance of outside capital. A close friend of mine in this business, and I, often discuss the pluses and minuses of being “independent” and I can tell you that I don’t feel any pressure to expand outside of what I feel we do best. We’ve added people nearly every year, but we do so within the realm of what we need. Expanding a business isn’t an important goal of mine. Doing what we do, and doing it well, is important to me.

LP: How many merchants are in your network?

BL: At the time I am writing this there are 2,071 merchant offers in the network. That does include some merchants who may have multiple offers so the true number of merchants is a little lower than that. Of the 2,071, there are 1,866 who are participating as “pay per sale” merchants – which is our focus. Pay per sale could indicate a revenue share, such as a percentage of a sale, as well as a flat dollar amount.

LP: How many affiliates?

BL: While we do discuss some numbers with merchants who call to ask, I try to avoid discussing the size of the network mostly because I think concentrating on the numbers isn’t a very good way to describe to a new merchant how affiliate marketing works. It is my personal feeling that merchants are mostly responsible for their own success whether they participate in ShareASale or any other network. Using a number like “100,000 affiliates in the network,” for example, is misleading to a prospective merchant because there is really zero likelihood that all 100,000 would ever become sales-generating affiliates in their program. For some merchants, one or two affiliates can make a successful program, and for others, it is 1,000 or 2,000. … ShareASale has been a successful platform for both of those types of merchants.

LP: Would you consider a merger or acquisition to grow the company?

BL: As a businessman, the potential for mergers/acquisitions is always a discussion that I would be open to. It isn’t, however, our main focus. We want to finish our own goals in putting together the best technology that we can, coupled with a quality network that merchants can grow with. I feel like there are large opportunities for growth even without considering the possibilities of M&As.

LP: Performics and Zanox are both based in Chicago, like ShareASale, and Zanox would give you a presence abroad. Would you consider teaming up with another company to expand your business?

BL: I’ve been lucky enough to meet with the folks both at Performics and Zanox, as well as LinkShare, who also have offices in the Chicago area. We’ve got quite a good group of affiliate marketers in Chicago including several merchants and affiliates. It should probably be renamed “Affiliate Row” as there are about five companies specifically concentrating on affiliate marketing within a five-block radius or so in this part of Chicago.

LP: Are there any plans to expand into other geographic areas?

BL: Geographically, I can’t say that we do – but in terms of markets we are hoping to have a full Spanish-language site available soon so that we are able to move into markets that otherwise would not be open to us.

LP: So, it’s a Hispanic version of ShareASale? When is that happening and what prompted that move?

BL: In my opinion, just taking the United States as an example, Spanish-language populations are and will continue to be important avenues for economic growth. It is one of my personal goals to learn Spanish myself – as well as a goal of this business to be able to provide a product for that market.

LP: What are the biggest challenges facing ShareASale over the next year?

BL: Growth puts a huge strain on resources both technological and human. Over the next year we expect to continue on a fairly high growth curve and thus will be faced with continual challenges to remain ahead of the curve. Things such as database design, fault management and even something as simple as timely payments can be affected purely by the scale of their scope – so we’ll be quite busy just tackling those challenges. Affiliate marketing itself is also becoming more challenging for merchants, and ShareASale will be providing tools to merchants to counter those challenges. Take, for example, the collision between the “affiliate channel” and the “loyalty channel”; we will need to provide better tools to merchants so that they can separate, track and commission these two channels differently without conflict, so that the two channels can be complementary and help each other grow. There are countless examples just like that one, where a technology provider has opportunity for innovation and we will be working on each one.

LP: What are the goals for the company over the next year or two?

BL: As has always been our goal, we want to put together the best product we can. Our affiliates tell us that they want more and more brand name merchants, so we are working on that. Our merchants tell us they want better reporting tools and methods for multi-commissioning a sale, and we are working on that. In our particular industry, I haven’t found it to be too effective in laying out goals too far in advance, due to the ever-changing landscape. Being a relatively small company, we have used to our advantage our ability to be flexible – and customize our solutions for merchants and affiliates as they need them. That is probably one of our biggest advantages; actually, as we get a lot of feedback from clients who tell us we were the “only one who would do what we needed,” etc.

LP:Why did you put together Think Tank? What are you looking to accomplish at this event?

BL: The ShareASale Think Tank is an event that we are putting together for November 4, 2006, at the Wynn Las Vegas – despite various unofficial events, parties and get-togethers. … This will be our first organized event including both sessions and social activities. Our goal is pretty simple: We want to bring a select group of ShareASale merchants to the Think Tank and allow them the opportunity of “pitching” their program in front of some of the best and brightest affiliates in the industry. Affiliates in attendance will be able to critique individual offerings, brainstorm new ideas on conversion/creatives/etc., all leading to an improved program for the merchant as well as a new personal relationship with those affiliates in attendance.

Of course, true to ShareASale, there will be social events to keep everyone from feeling like they are at a conference. If things all go well we are hoping to put on a Think Tank event every six months or so with different focuses to encompass all of the diversity that is an affiliate network.

LP: Tell me what you consider to be ShareASale’s greatest differentiator in this marketplace.

BL: To me, it is simply the willingness to work with our two greatest assets: merchants and affiliates. Affiliate marketing technology isn’t something that you can create and put into a box to sell off the shelf. Each new merchant who comes on board has the opportunity to work with us directly to make sure that they are getting exactly what they need in terms of specific reporting, creatives or even payment setup. Affiliates are treated the same way if they have specific needs that we are able to accommodate. Our ability to be flexible has allowed us to not only win client contracts in areas of competition, but also strengthen existing relationships. Especially with merchants, it has been really helpful for some of them to be able to deal directly with me on certain issues such as customized technology and contracts. We also have been able to continue to provide a level of support to our clients that has remained high despite the increased growth in number of merchants and affiliates – and this is something that is important to us going forward as well. Everyone at ShareASale pitches in and helps us where we need help on a given day; it isn’t unusual.

Leading the Way

Online lead generation gets no respect. Online lead generation affiliates less so. While the sector is growing by leaps and bounds – 290 percent over 2005, according to the Internet Advertising Bureau – people like Peter Martin and Robert Jewell just seem to drag its reputation through the mud. These guys had the honor of being sued by New York State Attorney General Eliot Spitzer in March for selling the private details of up to 7 million customers to marketers when they said they wouldn’t. Spitzer called it the “largest deliberate breach of privacy in Internet history.”

“There are people that don’t do things on the up and up,” Dan Felter, chairman of the recently formed Online Lead Generation Association (OLGA), says. “Online lead generation, when done properly, can be done well,” says Felter, who is also CEO of Opt-Intelligence, a lead generation firm.

High-profile busts like Spitzer’s only give a black eye to an industry trying to police itself and keep undue regulation at the door. Last year the online lead generation machine brought in $753 million, according to the Internet Advertising Bureau (IAB), which predicts over $1 billion for the lead gen space in 2006.

Revenue for online lead gen made a healthy gain to reach 6 percent of all Internet advertising spending during the first half of 2005, according to the IAB. That’s $347 million. Go back to 2002 and it was only 2 percent of Internet advertising spending in the first half of that year, or $114 million. But that is a year-to-year increase of 204 percent, IAB figures show.

DEFINING THE SPACE

Just the phrase “lead generation” also means different things depending on who you’re talking to.

When an advertiser needs new potential customers to sell to, one method of getting names and ways to contact these people is to buy a list. This list of people is called the leads. Generally these people have already expressed an interest in the product – be it iPods, real estate, cars, mortgages or other retail goods – and have agreed to be contacted by the advertiser. This is also known as permission-based marketing and in some cases it is called co-registration.

The most popular online lead gen technique is the “opt in.” This is where a customer registers online to join a free newsletter or newspaper or social network and sees a page where he can request to receive additional newsletters or marketing from third-party companies. Generally, you check a box to say it’s okay. Interaction with that page is sometimes required to complete your registration.

Some companies also practice “double opt in,” where you check a box but also must follow a link in an email as a way to confirm your email address but also, in essence, asking you twice that you really meant to opt in. Popular opt-in trends include an effort not to ruin your surfing experience by serving you multiple pages of opt-in options and by allowing you to bypass offer pages.

Suspect practices that used to be commonplace but are now considered intolerable are “opt out,” where you are automatically signed up for other offers and you must uncheck the boxes to refuse; pages where offers outweigh content; offers of free products for forwarding the offer to others; free offers that still involve a fee; offers that require the downloading of adware or spyware; and, of course, offers that do not explicitly say they will not sell or give your private information to other advertisers.

Since there is a commission for every lead generated, it becomes attractive to enter a pay-per-lead or pay-per-sale contract with an advertiser. And with that model being very much like the affiliate marketing model, affiliates have flocked to lead gen. The flood of lead gen affiliates in the online world – like anything – breeds bad eggs and good.

POLICING LEAD GEN

Enter OLGA. Chairman Felter helped start the trade group when he realized what a stench surrounded the word co-registration, or co-reg. When describing what his company, Opt-Intelligence, does he tries to avoid the word co-reg. “If you could see the people’s faces at conferences when they finally got what I did,” he recalls.

OLGA currently has more than 25 lead gen companies as members and considers its mission to define best practices and champion transparency in the industry. Felter boasts that lead gen could become “almost as valuable as search.” However, he adds, “barriers to enter the market are pretty low.” Hence, the surge in online lead gen affiliates operating in a sometimes-ethical vacuum. “It’s the cutting corners that give lead gen affiliates a bad name.”

Felter says, early on, when opt-out was more common ,”advertisers all got burned by co-reg.”

The offers would end up on disreputable sites – such as porn – and the advertiser would essentially receive a “data dump”: raw lead information with no indication if the leads were from opt-in or opt-out and no way to measure the quality of the lead. That’s why Felter hates using the word co-reg, but also why the industry is poised to explode as burned advertisers come back to the well.

And as they return, now is the opportunity to prove that this time around advertisers, publishers and lead gen companies can all get along and share the wealth. “There is something called common sense,” Shai Pritz, CEO of Unique Leads, says. “If somebody is doing shortcuts, it will come back to bite them.”

Jim Vines, CEO of LeaderMarkets.com, agrees that it isn’t really very hard to figure out when someone on your network is doing wrong. “Having been an affiliate myself, I know the way traffic should look.” He claims to know when something doesn’t look right. Usually it is too many leads over a short period of time coming from a single affiliate. Vines says he goes the extra yard by talking to all their affiliates on the phone before sending any offers. “I have to personally see if they know what they are talking about before I send them anything.”

It might stand to reason that an industry that requires so much policing is inherently ineffective. “There is nothing wrong with the tool but how you use the tool,” Vines says. He adds that policing just comes with the territory. At least to Vines, the fun of it all is the personalization. “Leads are just the icing on the cake,” he says. “Whenever an affiliate calls, we know them. Our job is to help our affiliates find the campaign that is working the best for them. We can help them figure out what list is best for them.”

GOOD LEADS

Matt Hill, CEO of eForce Media, says they apply technology and science to matching leads to clients. Others, he says, create leads by traffic driving – but so many requests go unanswered because there is no matching. A guy looking for a mortgage deal ends up getting a thousand calls by mortgage brokers, Hill says. Or leads come but no calls are made because the company can only afford to buy so many leads per day. “Most companies in this space only sell about 50 or 60 percent of their inventory,” he says, “so it doesn’t matter if leads fall on the floor.”

Pritz at Unique Leads also aims high, which is why he runs a closed network. “The affiliate managers will say what offers they want and we create the links for them,” he says. “The control is better that way. There are human beings involved; we do what we can to make sure the system works.” Unique Leads likes to see website screenshots and have an understanding of UI experience of each site they sign and they always make the users sign privacy policy forms.

“Like every industry on the Internet there are black hats and white hats,” says Hill. “It’s a business that’s been around longer than the Internet. But since the Internet, it is becoming more sophisticated.” He says his lead gen company’s mission is to find the most perfect match between leads and clients. He says there are still some big companies who do opt-out co-reg because the volume they get is so big it cannot be ignored – but in the end, he says, “those companies will weed themselves out.”

“Some websites say, if I throw a few opt-outs on my page I make 20 cents more,” says Felter, adding that the websites figure a few opt-outs won’t be noticed. And some companies will turn a blind eye to it all because the sheer numbers of leads (regardless of their quality) are meeting their quotas.

Chris Jeffers does B2B lead generation as CEO of netFactor and says that his buyer is a marketing executive. “They are frustrated because less than 2 percent are converting and completing online registration,” he says. “This is critical for sales – sales says, ‘give me quality’ but marketing is rewarded for providing tonnage.” This means sales and marketing are effectively operating against each other. Quality leads can help close the gap.

GUIDELINES AND BEST PRACTICES

That is another aim of OLGA: to define the best practices for the whole industry. The founding members of OLGA include Felter; Stephan Pretorius of Acceleration eMarketing; president of Feedster, Chris Redlitz; and Kitt Collier Odukoya, director of marketing at EarthLink. Member companies include Active Response Group, CoReg Media, eForce Media, Flatiron Media, Innovation Ads, LeadVerifier, MediaWhiz, Monster Worldwide, ON24, SendTec, Unique Leads and WiseClick Media.

Initial guidelines that OLGA endorses include that advertisers always know where their offer is being placed; that advertisers clarify that they are buying an opt-in only; that the leads did not come from offers “forced” onto customers via opt-out or opting in as a requirement of registration; that it is easy for customers to bypass all offers if they prefer; that the registration process in general is about the content and not all about signing up for offers; that an auto-respond email include opt-out and unsubscribe links; and that it is always clear what exactly the customer is signing up for.

If trade associations and policing succeed there is no doubt the industry will grow even more than it has already, provided there are no more high-profile debacles that could trigger a call for federal regulation. No one wants that. “We need to keep rules flexible so that people can operate their businesses,” says Sujay Jhaveri, CEO of Flatiron Media. He says “pro-business people in the business world” will take care of tempering regulation. He notes that the CAN-spam legislation passed in California was much stricter than a version that went federal. Testing the limits of regulation will probably continue. “You are dealing with a marketplace that is very profitable,” Jhaveri adds. “Online multilevel marketing will mimic off-line eventually.”

Other events to look forward to in online lead generation will be consolidation. Hill of eForce says there are many lead gen companies that have maybe 10 employees who are operating in niche areas that are ripe for acquisition. In fact, eForce just completed funding for that very purpose, he says: to add companies’ expertise to what they do. And, he adds, the transitions are very easy since the employee counts are so low; you see an immediate profit increase by applying the traffic you acquired.

Vines of Leader Markets says being a former lead gen affiliate helped him be a better president of a lead gen network; that is, he wants to remain small. “Some affiliates can do six figures of traffic per month,” he says. “They don’t want to feel like they have come to a cattle call.” That’s why he wants to keep it personal with his network. “I’m not looking to become the next CJ or LinkShare,” adding that while the challenges are many, so are the rewards. “If someone is gun-shy, they probably shouldn’t be in it,” he says.

OLGA’s Felter says the key terms are transparency and awareness. “You’ve got to watch your metrics. What are you getting and is it valuable?”

New Network Flavors

The affiliate network menu is expanding to offer many more options than just vanilla, chocolate and strawberry.

Call them what you wish – ad networks, sub networks, CPA networks, CPA ad networks. No matter the name, these aggressive challengers are mounting pressure on the “Big 3” affiliate networks.

CPA ad networks, which use a cost-per-action payment model, are providing increased competition, which is likely to mean publishers will benefit from more choices, bigger payments, a wider range of potentially lucrative offers and what some observers claim is a more nurturing environment.

Affiliate consultant Shawn Collins refers to ad networks as the “hybrid of affiliate marketing – part merchant and part affiliate.”

Like traditional affiliate networks, CPA ad networks rely on publishers willing to promote their advertisers’ offers. But unlike their cousins, ad networks act more like direct CPA-deal brokers and generally focus on lead generation, registration-based offers and bounty programs. In addition, CPA ad networks often don’t require start-up fees and advertisers to prequalify, thus lowering the barrier to entry. It’s estimated that one needs approximately $5,000 to get a CPA network off the ground.

However, many claim the life span for the bulk of these emerging ad networks is limited and this crop will never be able to truly compete on a larger scope with the bigger established networks such as Commission Junction, LinkShare and Performics. “

CJ started in 1999 and the landscape has changed over the last six and a half or seven years,” says Kerri Pollard, director of publisher development at Commission Junction. “There’s been an increase in competition and new CPA networks.”.

Some affiliate managers argue that CPA networks fail to add value because they poach advertisers who are already in merchant affiliate programs. Others insist CPA networks add tremendous value because they attract new and unique advertisers who in turn, deliver new valuable customers.

Regardless, CPA networks are emerging as major players in the online marketing world. These marketing companies have direct access to groups of advertisers who, through a wide array of techniques, have the potential to drive a high volume of clicks, sales and new customers.

Maybe that’s why you can’t attend a conference or trade show related to online marketing without seeing the booths of the exhibit hall jam-packed with CPA ad networks looking to woo affiliates and garner some attention.”

Who’s on First

With so many players in the game, it’s difficult to keep tabs on everyone. Some well-known current networks include CPA Empire, DirectLeads, Endai Worldwide, Adteractive, Metarewards, The Vendare Group, XY7.com, YFDirect, eMarketMakers and TheBizOppNetwork. In addition, several new ones are popping up nearly every week.

In 2005, many of the major players gained a bigger foothold by partnering with other companies. Affiliate Fuel, also known as Thermo Media, LLC, was acquired by Experian in April. PrimaryAds was bought by Think Partnership for nearly $10 million. And ValueClick purchased Web Clients for $141 million.

For affiliates, much of the appeal of these ad networks is the size and frequency of payments. Affiliate networks usually pay on a monthly schedule or when a certain revenue level has been achieved, whereas CPA networks typically pay affiliates weekly so they don’t need to float the costs of advertising or, in the case of incentive sites, the costs of the incentives themselves. CPA networks often negotiate top-rate commissions for their publishers. In many cases, these deals are much better than what a publisher can negotiate from the merchant’s affiliate manager.

A post on the ABestWeb.com forum from an affiliate sums up the appeal of CPA networks:

“As an affiliate, I love them because they often pay considerably higher commissions than the major networks, they often pay quicker, and most don’t allow reversals,” writes Michael Coley, president of AmazingBargains.com.

While the affiliate appeal is high, some downsides to dealing with ad networks exist, including poor practices, such as cookie stuffing, adware, spyware and spamming. “

The biggest problem I’ve had is that campaigns will get canceled without any notice sometimes, so I end up having to find another source and switch out my links,” Coley continues. “I don’t think any of them are ‘clean.’ Most seem to work largely with email marketers, some of which are notorious for spam.”

Merchants claim to be somewhat cautious for a variety of reasons. Although CPA networks reduce the risks for publishers while maintaining the direct-response needs of the merchant, the merchants have no control over how their offer is presented. “

As a merchant, you don’t know who is promoting you, and the CPA network is not going to tell you, because you’d cut them out of the deal if they did,” according to Collins. “

What I like least about CPA networks is they build loyalty between the network and the affiliate with merchants’ money,” says Beth Kirsch, group manager of affiliate programs at LowerMyBills.com.

J.T. Stephens, director of auctions marketing and business development at Overstock.com Auctions, offers some tips for advertisers dealing with CPA networks:

  • Communicate your business needs;
  • Provide networks with an email suppression list of marketing companies/ affiliates on your blacklist and a list of your top affiliates that the network cannot contact;
  • Be on the alert for unsavory affiliate activities (adware, spam, spyware); and
  • Do not let the networks determine how to market your offer.

Many CPA network advertisers are huge proponents of free iPod offers and promotions. That tactic is likely to bring in customers more interested in the prize or giveaway than the merchant offer. This type of promotion fuels the perception that CPA ad networks only cater to less-savory advertisers.

Still, some figures state that big brand names make up 30 to 45 percent of all CPA advertising. Big-brand sites can also act as affiliates accepting CPA ad buys, such as MSN, when it has remnant inventory. Big-name publishers are selling CPA buys, but often it’s directly to the advertiser and not through the network.

Everybody into the CPA Pool

Though networks generally make more money selling on a cost-per-thousand (CPM) basis, some will sell leftover inventory and run CPA offers, according to an executive at one of the major affiliate networks, who asked not to be named for fear that the industry stigma associated with CPA practices would be damaging. In most cases, the networks are “booking these revenues as CPM,” the source says.

Another network executive says her network will continue to stay focused on its overall value proposition.

“We want to make CJ remain the preferred place for the new publishers,” Pollard says. “We have many different categories of publishers. They are the backbone of affiliate marketing. The top request from our 1,500 to 2,000 advertisers is overwhelmingly, ‘How can we help publishers trying to make money?'”

Pollard claims that by leveraging CJ’s connection with its parent company ValueClick, it can provide more value than CPA networks can by going beyond affiliate marketing to include lead-generation business, click integration, tracking and email.

“It’s a bigger and better picture to the clients. We have more synergies and offer them in a streamlined way,” she says. “But there is a lot of value that CJ brings as a trusted third party and the value associated with that is worth a lot to our clients. It’s currently a win/win situation and we want to make sure it remains that way.”

Rob Key, president and CEO of online agency Converseon.com, says the Big 3 are doing well with fraud initiatives and payment services. He also applauded LinkShare’s efforts in the area of analytics, which he says adds a higher level of sophistication to its program. However, he feels there is some room for improvement in the area of data feeds and customization.

“There will always be a place for LinkShare, CJ and Performics,” Key says. “But the space is expanding and people want more customization than the Big 3 can offer.”

He claims the movement toward more customized platforms has “topped out in the networks, which are looking to be all things to all people.” Instead, by offering specialized services, certain network alternatives help “people look beyond the traditional and reinvigorate.”

Converseon’s network-agnostic custom platform is designed to aid companies that are trying to get a view of their data across all channels, Key says. “You can’t do that if the affiliate data is off to one side, like it is with the networks,” he says, adding that the traditional networks will see continued price pressure.

Pollard expects to see consolidation in the CPA network space over the next year or two and says there’s no threat of a CPA network displacing any of the Big 3.

“I also expect that one or two other larger players may come in, but nobody that’s the size of LinkShare and CJ. CPA networks will evolve for months and years, but many of them will not be around for long,” she says.

The increasing power of ad networks was brought to the forefront at the end of last year when Commission Junction ousted AzoogleAds from its network. Because AzoogleAds was a CJ affiliate that grew into its own revenue-sharing network, many industry watchers claim it was just a matter of time before CJ kicked out the sub network.

Joe Speiser, AzoogleAds.com cofounder, called the move by Commission Junction “flattering,” adding that his company was clearly “dangerous enough from ValueClick’s point of view” to warrant giving up the “nearly 80 percent of traffic we brought in on the eBay campaign.” That’s a huge factor, since eBay is CJ’s biggest campaign.

Speiser also says that CJ was threatened by Azoogle’s growing presence.

Pollard says despite the incident with Azoogle, CJ has no plans to ban sub networks.

“Our business is always changing and we never want to put policies in place that hamper publishers and stop them. I want the creativity to remain,” she says. “Sub affiliates are great partners and we want to continue to have relationships with them.”

From Pollard’s point of view, sub affiliates “have found good niches and are good at servicing the advertisers.” However, she notes that it’s important for CJ to maintain network quality and ensure sub networks do not do business with affiliates that are engaging in questionable practices, such as performing downloads and software installations.

Collins says CPA networks are a dime a dozen. “A good amount of them fail quickly. If 10 new CPA networks open today, most of them will fail within months,” he says. “I guess it’s sort of like affiliates; there are a million affiliates and only about 10,000 that are doing things. Some aren’t going to move the needle,” Collins continues. “The networks certainly don’t need to sweat it just yet.”

Rather, according to Collins, pay per click is a much bigger threat to the networks than CPA. He expects a viable challenger to soon emerge (such as Direct Response or KowaBunga) that is backed by significant capital from a public company.

Regardless of the challenges, Pollard claims the good news is that the performance marketing pie is getting bigger and there’s room for everyone.

Denied

On a cold Minnesota afternoon, affiliate marketer Connie Berg checks her email fearing the worst: a message from a dream merchant saying her affiliate application for either iShopDaily.com or FlamingoWorld.com has been denied.

You see, Berg’s sites post coupon information – a once-hot commodity now shadowed by merchant belt-tightening and recent incidences of customers getting expired or invalid affiliate-posted codes.

“No matter how much we try to convince them that 99 percent of the coupon sites are simply shopping sites that also post coupons, they don’t seem to want to give us a chance,” Berg says.

It’s certainly a frustration for Berg, still an ideal candidate with 90 percent of her traffic from direct bookmarks or type-ins and a “deal alert” newsletter going to thousands. But she’s been caught in a war between ideologies that surrounds many once-highly desired affiliate sites. Merchants are looking twice at any site that could potentially cut its profits, give the wrong idea about its brand or send an unapproved marketing message.

That’s why affiliate application turndowns extend even beyond coupon sites. Under fire are affiliate sites offering coupons, incentives, discounts, email marketing, heavy search buys, forums, downloads and even mass-market and cross-cultural appeal rather than the merchant’s defined niche.

“Five or six years ago, it was about who had the biggest affiliate program,” says Chris Kramer, media director of NETexponent. Kramer, who approves affiliate applications for The New York Times, Financial Times and others, says, “Now it’s more about ‘who is this affiliate, what are they doing and do I have to worry about what they are doing?'”

Performics, for instance, denies 20 to 40 percent of the applications it receives for programs including Bose, Eddie Bauer, Harry & David, HPshopping.com and Motorola. While AffStat 2005 found onequarter of its merchants still auto-approving applications, the buzz is that the remaining three-quarters of merchants are creating additional safeguards to determine who gets in, and who stays in.

“When we talk about this issue of merchants denying affiliates, it’s mostly due to brand sensitivity,” says Kraig Smith, co-founder of Chicago-based Media- Impressions.com. His clients include Apartments.com, Healthcare Media, HEE Corporation, LifeGem Memorials and Performics. “Many big-brand offline marketers are concerned about protecting their brand in affiliate marketing.”

After all, these days merchants can be more selective – mainly because there are plenty of affiliates to choose from.

“There’s a lot of filibustering going around about how many affiliates there are,” says Chris Henger, Performics’ vice president of marketing and product development. “There are legitimately probably 50,000 to 100,000 types of affiliates active at any point in time. While it used to be easy to stand out as an affiliate with a professional site, now you’re just one in the crowd.”

“The whole [affiliate] industry has gotten more sophisticated,” says Elizabeth Cholawsky, vice president of marketing for ValueClick, Commission Junction’s parent company. “These are real businesses with real employees working day to day to grow their revenues and customer base.”

Even Vinny Lingham, a Commission Junction super-affiliate and founder of Clicks2Customers.com, the affiliate search marketing technology provider that won CJ’s 2004 Horizon Award for Innovation, gets denied for about 10 percent of the programs he applies for.

“We’ve mainly been denied because of the fact that we’re search marketers,” he says. “From a search marketing perspective, 90 percent of the merchants realize they can’t market through search engines as well as the affiliates can.” The result, he says, is that some merchants pin search-oriented affiliates as the culprit if their own search campaigns don’t produce.

Perhaps, but Kerri Pollard, Commission Junction’s director of publisher development, says it’s more about being concerned with how an affiliate will fit into the merchant’s overall integrated marketing strategy.

“Paid search has become such a big component of all the affiliate programs,” Pollard says. “They want to make sure that whatever the publishers are doing doesn’t conflict with their own search campaign.”

Still, Lingham’s site takes top affiliate status in many programs, even globally, and Clicks2Customer’s parent company, incuBeta, is one of Business Day’s “Technology Top 100 Companies.” “In reality, if we or any other super-affiliates are not working for your company, we’re building your competitor’s business and market share instead.”

Why Deny?

Oklahoma affiliate Joel Comm has begun running DealofDay.com, a community of 125,000 bargain hunters, since he sold off ClassicGames.com to Yahoo in 1997. Three to 5 percent of his applications are denied, and the bulk of those come from financial-related merchants.

“Some merchants, like financial services, just don’t want to be part of coupon sites,” he says.

His response if denied? “I’ll just put someone else there instead,” Comm says. “There are some affiliate managers that just don’t get it, and others where the affiliate relationships are managed by the legal team – dotting their I’s and crossing their T’s. That ties their hands.”

That’s particularly apparent in the financial services arena.

“I don’t know if it’s as much price point as it is brand concern, but there is a correlation between higher price point products and brand concern; that’s not accidental,” says Peter Figueredo, CEO of NETexponent, the agency that manages the Financial Times’ affiliate programs.

NETexponent’s Kramer says one of the reasons is that financial service companies, ranging from American Express to mortgage companies, are governed by strict rules, codes and laws.

“They can’t have affiliates out there advertising ‘no-fee balance transfers’ when there really is a fee, because they can get fined,” Kramer says. “But when it comes to companies such as Financial Times, it’s more based on brand integrity. They’ve invested a lot of money in protecting and developing their brand,” and wouldn’t want “just anybody” representing that brand. Financial Times also “fits a tight demographic of highly educated, higher-income customers,” he says. “It doesn’t serve their needs to have their ads on sites where their ideal customers are not going to be.”

However, as a trend, “declines by merchants are on a case-by-case basis,” ValueClick’s Cholawsky says. “Some merchants are tiptoeing into affiliate marketing and are very restrictive. Others accept every application. We try to encourage merchants to be more inclusive, since we’ve seen that as one of the best practices. Otherwise, there is relatively little change” across the board.

Either way, the networks say tough requirements work both to the advantage of merchants and affiliates.

“Affiliates don’t want to be associated with a network that has a lot of fraud running rampant on that network,” says Danay Escanaverino, head of Global Resource Systems’ quickly growing affiliate network, Filinet.com. “If we allow fraudulent affiliates, generating bogus leads or clicks, that makes the program difficult to run for our other affiliates, and advertisers start losing faith in the program. It’s in everybody’s best interest for us to be a little bit more vigilant about who we allow in.”

Pay-per-click or pay-per-lead merchants, however, have higher rates of declines, attempting to weed out applications likely to send bogus clicks for quick cash. It’s an issue faced every day by Jonathan Miller, who approves applications for 27 affiliate programs managed by ForgeBusiness.com.

“We get inundated with affiliates trying to get into our programs,” says Miller, who since 2001 has received tens of thousands of applications, if not more. “We used to take just about anybody that signed up, but over the past year I’ve realized that things have become a lot more fraudulent and, in some programs we manage, as many as 90 percent of the applications in some periods are fraudulent.”

It’s usually only a temporary spike, made up by syndicates doing mass submissions from outside the United States, but Miller still usually denies 30 to 40 percent of the applications he receives, many of which are fraudulent.

Though common for pay-per-click or pay-per-lead sites, other merchants generally see fraud in no more than 5 percent of their applications, says a KowaBunga insider. (KowaBunga runs MyAffiliateProgram .com.) The rate of fraudulent applications often depends upon the type of merchant, the type of product, whether the merchant pays per lead or per click, and the dollar amount of commissions for average sales. “If you have lucrative offers,” Miller says, “it will be tested by forgers.”

So Miller, like other affiliate managers, is adding extra safeguards. He now has all the network fraud protections and verifies Social Security numbers and compares application info against the Whois.com registration information for the domain. Even after an application is approved, he watches for any telltale activities, such as lots of immediate clicks or changes in banking information at the end of the first month. Then, before paying out checks that are often in the thousands of dollars, ForgeBusiness.com requests not only a W-99 form but also additional proof of the affiliate’s identity, such as a faxed copy of a driver’s license, Social Security card or business license.

“We are willing to share our identity with our affiliates,” Miller says, “and we’re now requesting that our affiliates share their identity with us.”

Still, Miller says, “There is always a worry that we will be denying legitimate affiliate applications, which is why we call every affiliate that applies that makes it through the fraud software on our networks. If the affiliates can’t be contacted, then we either wait and hope to hear from them or their application is rejected.”

So while merchants of pay-per-click and pay-per-lead programs must still watch out for fake applications, ValueClick’s Elizabeth Cholawsky says – though the company hasn’t made an official statement – that she’s not seeing any more or less overall affiliate fraud than there was years ago. If the website is legitimate, the email address gets a response, and if the tax ID number checks out, then “the initial barrier [into CJ’s program] is fairly easy for a new affiliate.”

Though acceptance is easy, Commission Junction doesn’t cut a check until it’s reviewed by a “network quality team.” In June 2005, it redoubled its efforts, bringing in Cyveillance’s phishing, identity theft and corporate-brand-abuse protection software, which includes affiliate channel compliance and control features.

With more eyes on applications, Commission Junction can now relax some of its other requirements, such as denials of applications from affiliates in certain geographical areas: “We used to exclude all of Asia, all of Russia, but now we just exclude a couple of pockets,” Cholawsky says.

Meanwhile, officials at both Commission Junction and Performics say the number of applications isn’t going up, and the number of active affiliates are about the same even with new entrants (as new ones enter, old ones drop off). At the same time, the number of merchants with affiliate programs is growing year after year.

“As affiliate programs become standard, we’re starting to see it as part of every online merchant’s sales efforts,” Cholawsky says. This seems to say that the issue of perceived growth in affiliate denials isn’t a result of increasing competition for a limited number of spots.

So what is the answer? Though requirements and the number of applications remain stable, what used to slide is now inexcusable. “Three years ago you would see the ‘under construction’ symbols, and maybe that’s what kicked you out; today I’d be shocked to even see ‘under construction’ signs,” Performics’ Henger says. “We probably have a more discerning eye today as to what is a quality site that we want to let into the network.”

Other affiliate sites are being turned down because they’re missing something that could be easily fixed (see sidebar page 51).

Once you’re in the network, remember to reread your affiliate agreement on a regular basis.

“We put a lot of work into post-screening as well, checking month to month on the top sites to make sure they’re consistent with the rules we set,” Kramer says. As such, he says, affiliates are increasingly concerned about guidelines, especially regarding search or email marketing, once they get into the program. “Years ago, nobody cared about search and it was definitely a free-for-all, where you could do whatever you want,” he says. Now it’s a much different model.

These days, affiliates like Berg have to push for acceptance into the programs they want. But they are doing it.

“I’ve had some merchants that I was able to get into by really pushing it with the networks,” Berg says. “American Eagle was really hard to get into; I had to basically promise away my life that I wouldn’t do this or that. They gave me a data feed so I can post real-time products, but they were really particular about what they would allow on the site – and I follow it to a tee.” That means no coupons for American Eagle’s site and no inclusion of the words “discount,” “sale” or “coupon.”

And affiliates like Berg are learning to cut their losses.

“Sometimes I’ve actually dropped some merchants because they didn’t even want their name mentioned in the title meta tags, even when they are the only store on that page.” She’ll either find other merchants who carry the same products or chalk it up as a lesson learned. “Sometimes,” Berg says, “you get into their program, but the restrictions are so tight that you just have to walk away.”

JENNIFER D. MEACHAM is a freelance writer who has worked for The Seattle Times, The Columbian, Vancouver Business Journal and Emerging Business magazine. She lives in Portland, Ore.

Clean Sweep

You’re thinking of working with a merchant, but you don’t want to be involved in any program that includes affiliates using questionable, if not illegal, practices. But how can you know for sure whose program is squeaky clean and whose is not?

It’s not easy to tell which merchants have clean programs. Maybe that’s because it’s not easy to pin down exactly what “clean” means.

“That’s the $64,000 question,” says Kellie Stevens, president of AffiliateFairPlay.com. “The answer varies. Clean means different things to different groups. The definition varies even among affiliates.”

The general consensus at the most basic level is that a clean program will not allow parasites of any kind to sign up and will remove offenders if they are discovered. This means that affiliates with downloadable applications that are installed without the knowledge of the consumer or that redirect affiliate links or overwrite affiliate cookies are out.

But there are those even stricter in their definition.

“For some, even if a user can opt out of the download, they consider that parasite-ware,” Stevens says. “So if a merchant partners with that affiliate, they are considered to be supporting the parasite financially and they risk being labeled as unclean.”

“As far as some affiliates think, there is no clean program,” says Shawn Collins, a consultant. “They have a very black-and-white view of anyone who uses adware. They think there are no possible [good] intentions from anyone who uses adware.”

Collins calls that “a simplistic and lazy viewpoint.” “Maybe they don’t understand the issues completely or they are taking this stand from a selfish or competitive viewpoint,” he says.

Under that stringent definition of clean, Collins says any affiliate manager that partners with any loyalty, reward or incentive program would be considered dirty. He disagrees.

“If an affiliate is using the adware for something like shopping and the application is very compliant in allowing users to uninstall the program, I think that’s okay,” Collins says. “Not all adware should be grouped together. It’s not like they are all drive-by downloads or installed or bundled without users’ consent.”

He notes that many in the online marketing community do not consider RemindU from UPromise a parasite, but notes that it uses the same technology as eBates, which is often targeted as being a parasite by affiliates.

Affiliate managers themselves seem a little more lax about what constitutes a rogue affiliate. According to a poll on AffiliateManger.net, a community message board and forum, 54 percent of affiliate managers stated that some adware affiliates are dirty and some are clean. Talk about straddling the middle ground.

But affiliates don’t always see eye to eye with program managers. Most affiliates agree that parasites typically prey on merchants that are ignorant about such nefarious practices or affiliate managers that turn a blind eye to these activities because their program is making a lot of money from rogue affiliates.

It’s a Matter of Trust

That’s why developing trust between affiliates and those managing programs is a crucial component of doing business. Both parties must feel that they’ve entered into a partnership. When you do business with partners there is an implied level of trust that the relationship needs to work for both parties.

“The trust sustained between a network and affiliate is paramount,” says Bret Grow, vice president of LinkMo Advertising Network. “Our affiliate trusts that we keep our links alive, pay a competitive price for their sales/traffic and report it honestly. Networks trust affiliates to provide credible data and lawful traffic no matter the level of volume.”

Andy Newlin, affiliate marketing supervisor for SierraTradingPost.com, knows about trust. He’s earned it. Two years ago, his program was widely criticized by very vocal affiliates. But Newlin listened to those critical affiliates and worked hard to weed out the bad affiliates. His continued clean up efforts and willingness to listen earned him a certain level of trust and respect with the online marketing community. Now if a bad apple slips in, affiliates alert Newlin and he takes care of it immediately. In other words, affiliates are now willing to cut Newlin a little slack.

“Back then I didn’t know about running a clean program and relied on affiliates to educate me,” Newlin says. “And once I had a good idea what a bad affiliate was, I took on every affiliate account and tested it myself and then made a decision on whether or not they were clean and could stay in the program. Every now and then an affiliate will alert me that a spyware or parasite-ware affiliate has snuck in. I’ll thank the affiliate for letting me know and then take the appropriate actions right away.”

Newlin says that if you take the advice of good affiliates and ask for their help, they get over the hard feelings.

Some affiliate managers are revered by the affiliate community as managers who run clean programs. Chris Sanderson of AMWSO, an affiliate marketing firm based in Bangkok, Thailand, and Andy Rodriguez of Andy Rodriguez Consulting are the most notable and mentioned the most often.

“Eighty percent of the [ABestWeb] board hates LinkShare,” says Haiko de Poel Jr., president of ABestWeb.com. “But they love Chris Sanderson. And if he says a program is clean, then come hell or high water, affiliates believe him. By definition, a trusted program is a Chris Sanderson program or an Andy Rodriguez program. There is a huge trust factor with those guys and affiliates.”

This summer Rodriguez held the first Affiliate Program Manager Certification seminar in Florida. The response was so overwhelming that Rodriguez has a second one planned for October.

“Andy is probably the most trusted affiliate manager out there, and it comes as no surprise that he’s the first to offer such a seminar,” says Greg Rice, an outsourced affiliate program manager with Commerce Management Consulting in Medina, Ohio. “As a veteran affiliate, I’m very interested in this topic.” Rice worked as an affiliate several years ago when Rodriguez managed the affiliate program for Tiger Direct.

“That’s where I got firsthand knowledge of how he inspires trust in people. If he says he’ll do something, he does it. He quickly resolves issues and he did a lot of cleaning up of that program to get the parasites out,” Rice says.

Rodriguez says it’s all about building relationships with people.

“If you respect people and are honest with them, they respond to that,” he says. “In my opinion that is what affiliate marketing is about – people and treating them with the same respect you expect to be treated [with].”

But people change jobs, so don’t confuse the merchant with the affiliate manager of that program, advises de Poel. “I know of a couple of programs that were well-managed and clean, but once the affiliate manager left, the programs went to trash. Things like that happen every day.”

Investigate, Sherlock

To get more information on a merchant, you can also talk to affiliates already in the program.

“The quickest way to find out about an affiliate program is to check in with existing affiliates,” Newlin says. “The affiliates will definitely know if the program is clean. With most other sources – such as lists on websites – you run the risk that they may not be up to date or they could be run by a competitor.”

Also check the online affiliate forums or message boards. Many have lists that are frequently, but not constantly, updated. And with thousands of active affiliates, you can always pose questions on the boards about a specific program and see what kind of response you get.

“Trust the forums. If a program is not clean, the posters on these boards won’t hesitate to chime in and tell you immediately,” Newlin says.

Rice agrees: “There’s a good chance that if someone is up to something, then someone on the boards have caught wind of it.”

And in some cases, companies that are known for using adware or parasite-ware will post a list of their partners right on their website. “Once you see who is on that list, we can avoid doing business with them,” Rice adds.

Protect Thyself

Making sure someone is running a clean program is hard work, but for most online marketers it’s something that they need to do for themselves.

Newlin says that both for affiliate managers and affiliates the only real way to be sure about anything is to do your own testing. While it takes some level of expertise to perform the testing and you have to know what to look for (such as testing applications to see if they override the affiliate tracking or the affiliate cookie), it’s worth the effort, he says.

“Before you put the links on your page, actually cut and paste the links into the browser to make a test purchase to see if it tracks,” AffiliateFairPlay.com’s Stevens suggests.

For affiliates, de Poel says there are key things to look for and specific questions to ask affiliate managers. Look for programs that offer a fair commission rate in the industry. Find out if the affiliate manager has more than one point of contact. Can you reach them by phone, email, instant messenger? Make sure the program has the tools and resources to help the affiliate (data feeds, product showcases, frequently updated creative). Is the affiliate manager active in the industry? Do they post on message boards? Are they visible at industry events? Does the affiliate manager quickly address concerns?

While Stevens is sympathetic to affiliates’ concerns, she wants to see them take more action.

“We need to put more focus on holding the affiliates’ feet to the fire,” she says. “They are right that they are losing justly earned revenue, and they are entitled to that. But they need to take a stance and do less complaining. It’s always ‘Microsoft should be detecting problems. Google should be doing this or that.’ They want everybody else to take on the issue. They need to say ‘What can I do for myself to fix these problems?’ “

Especially since affiliates are unlikely to get support from consumers on this issue.

“The average consumer has no idea what link hijacking is and that cookies are being overwritten,” Rodriquez says. “They don’t have a clue and they don’t care. The pressure has to come from the merchants and OPMs that are managing programs. This is crap and it’s hurting the industry.”

Certification or Regulation?

LinkMo’s Grow says that one of the biggest problems his company faces is a lack of affiliate identity verification. His company is inundated daily with fraudulent affiliate sign-ups. “Manually sifting through all of them to find those who are legitimate is time-consuming,” he says. “But no matter how much work it is, it’s critical to weed out crooks that would send bad data and spam across the network.”

Instead of guessing who is doing what, Grow says a possible solution to the problem is an industry-wide, third-party, affiliate verification service. LinkMo is developing a new service called Certified Affiliates to determine which affiliates are legitimate and which are fraudulent before they gain access to any network. LinkMo plans to reward affiliates who get certified through CertifiedAffiliates for the time and expense the service saves LinkMo.

Certification is not a new idea. de Poel says he tried it a few years ago. He started ATrustedMerchant.com, a program that gave out certification logos to merchants that met the predefined criteria for running a clean program.

But several companies that failed to receive certification due to the inclusion of parasitic affiliates raised a stink about their competitors being certified. Calls from the legal department at one of the companies followed, and the whole situation raised issues about the legality of compliance.

“It really become a pushing point for me,” de Poel says. “Everyone keeps on wanting me to make a list of clean merchants, but it got to a point where the list was not valid and there was inaccurate information on the site. It’s just too dangerous to certify merchants as being clean or trusted. Things change too fast to make sure that once a merchant got the certification they stayed clean.”

de Poel was also surprised at the lack of volunteers to help in his efforts, given the volume of messages on his forum devoted to voicing complaints about dirty programs.

“The community is coming out and saying they all want clean programs. Managers want this and affiliates want this, but no one is willing to do the damn work to make it happen. They all want to pass it off to someone else to do the work,” de Poel says. “I asked for help with ATrustedMerchant.com and only five people offered to pitch in. That’s not right.”

Stevens agrees there are many obstacles to certification. “It’s a huge technical challenge, and whoever undertakes such an effort is going to need a large pool of resources in terms of the time it takes, people and money,” she says. “I just don’t know if certification of affiliates is a viable financial business model.”

Consent is a huge issue in the certification process. Clean merchants will readily agree to a voluntary accreditation process, but anyone using questionable practices is not likely to submit to the necessary scrutiny, according to Stevens.

“It’s a sticky wicket,” she says. “People that want to conduct tests regardless of having the consent of the merchant or affiliate may face a lawsuit if they don’t pass.”

Instead Stevens would like to see some test-purchase protocols that could be used by affiliates.

The Networks’ Role

Some claim that the solution might not rest with affiliates, but rather with pressuring the networks to kick affiliates with parasite-ware out of their networks.

“A certification process is no good if networks continue to allow dirty affiliates in. At that point it doesn’t matter if I’m certified as clean,” Rice says. ShareASale.com is the largest network that has rigorous policies regarding adware, spyware and parasite-ware. To ensure no offenders enter its program, ShareASale does not allow any downloadable applications. Period.

“Affiliates could pressure the networks by refusing to do business with them,” Rice says. “The whole issue is driven by money, and right now the networks think that allowing parasites means more money for them. Affiliates need to show them it’s short-sighted and untrue.”

Many vocal affiliates are always informing the networks about nefarious activities. But these whistle-blowing affiliates often don’t feel that appropriate measures are taken against the offenders.

“The networks need to take action on the information from affiliates about bad practices,” Newlin says.

Collins says it’s going to be hard to satisfy all parties. “There’s just no way to placate people. If affiliates are required to provide more information about themselves to get into programs, then they consider that an invasion of privacy, but on the other hand the same affiliates are hollering that programs often let anybody in, including rogue affiliates. They want things to change but they don’t want it to impact them,” he says.

He cites LinkShare’s implementation of more restrictions with its Athena program, an enhanced affiliate registration and management system that allows merchants to verify affiliate contact information when an affiliate first registers in the network and when the affiliate changes any element of their contact information.

“People were screaming from the rooftops that this was an invasion of privacy,” Collins says.

“Project Athena is a great idea that was needed and I give kudos and credit to Steve (Messer, Linkshare CEO), but the execution of the project was chaotic and a disaster,” Rodriquez says. “When launching something of that level, you need to test in beta and retest in beta and test again and then bring it out. They had the launch before it was ready, but it was good for the industry.”

Many affiliates remain distrustful of the networks and say that despite publicly paying lip service to the issue of parasites, most networks are not doing enough and will get their comeuppance.

Rice says he believes “a day will come when this activity is illegal and affiliates will remember who did business with parasites and they will get what they deserve.”

Some encourage affiliates to vote with their wallets.

“Return on investment is key for the networks,” Rodriquez says. “And the networks don’t own affiliates, so affiliates should go where they can get the best return on their money.”

If the networks aren’t doing enough, then some would welcome government intervention.

SierraTradingPost.com’s Newlin would like to see the government step in and take over the regulation of affiliates. “I see parasites stealing hundreds of thousands of dollars, and they should be sued for it. The government should help,” he says. “I envision it like the CAN-SPAM regulation.”

But Newlin concedes that the government lacks the manpower to truly crack down on cyber-crimes. “They are probably not hitting 90 percent of the spammers,” he says.

Some affiliates say New York Attorney General Eliot Spitzer may be the one to finally exterminate parasites.

Spitzer, a candidate for governor of New York in 2006 is best known for his high-profile crusades against conflicts of interest in business. Now he’s focused on cyberspace. In April, he filed a civil lawsuit against Intermix Media of Los Angeles accusing the company of secretly installing software that delivers nuisance pop-up advertisements. He says such programs are fraudulent and threaten to discourage e-commerce.

Spitzer has publicly stated that he looks forward to a time when technology will provide a comprehensive solution to stop spammers, parasites and spyware, but until that time there needs to be a cop in cyberspace who will stop the most egregious abuses.

But any mention of the government getting involved raises heated debate. Rodriquez is opposed to the government getting involved. “The last thing we need is for the government to say this is under their control. That is the very last thing we need. Still, he admits that the industry has evolved and there are tools and companies that are taking advantage of the system.

“If some of the activities in the online world were happening in the regular brick-and-mortar space, some of these people would be in jail,” Rodriquez says.

The Clean Advantage

But just because a program is clean doesn’t mean it is well-managed, according to Newlin.

It’s a lot of work to run a clean program, but there are rewards.

“If you are clean, then legitimate affiliates will promote you harder,” Newlin says. “A lot of super-affiliates will not even touch merchants that have parasites. If the affiliate manager is not selfish in driving their own channel within their company, they will make sure the affiliate program isn’t going through the roof. It’s in their best interest to see if the parasite applications are stealing affiliate commissions in their own channel.”

AffiliateFairPlay’s Stevens expects things to change as the industry evolves and affiliate managers become more savvy about the online market, “but it’s not going to happen overnight.”

Rodriquez says that, in the end, in order for the online marketing space to grow and succeed, everybody has to win. “To become successful you need to help others be successful.”