Website publishers are up in arms about the potential threat posed by employees at companies, who have access to their crucial data that could be used to compete with them.
Insiders have nicknamed the situation “Triple Jangro,” after the catchy title of a blog post on Revenews.com by David Lewis, CEO of 77Blue. The title refers to ex-BeFree/Commission Junction product manager Scott Jangro, who left the affiliate network several months ago to become a full-time affiliate.
The crux of the recent situation revolves around the threat of perceived or potential conflict of interest. Observers claim many employees of search engine companies and affiliate networks are infringing on the data privacy rights of their clients by using data from affiliates and merchants to enhance their own affiliate sites, or to go to networks and buy traffic based on inside information these employees receive from clients.
While many say they have suspected this practice for years, news of the situation came to a head at the LinkShare Partnership Summit 2006 in January. A few former Commission Junction employees attended the event as affiliates and revealed that three CJ staffers resigned after the company recently put a policy in place prohibiting employees from also being publishers.
“In the early days of affiliate marketing and affiliate networks – especially CJ – there were a lot of entrants into the space who came to us being program managers or some were publishers and gravitated toward this space,” Jeff Pullen, COO of ValueClick, says. “Over the years they have operated websites of their own on weekends and evenings and in the past we have not discouraged that. It was a good way for people to know the business. We always had a code of conduct and we are aware of the proprietary nature of the information we handle. Because we consider ourselves a leader in networking quality, we wanted to eliminate any potential appearance of a conflict of interest.”
To that end, an email was sent to everyone at ValueClick and its subsidiaries, clarifying that publicly-held ValueClick would no longer allow any employees to be publishers and violators of that policy would be subject to disciplinary action, up to and including termination/dismissal, according to Pullen. He says the change was spelled out and included in an updated restatement of another policy related to the issue of confidentiality.
“It really is easier, from an operational stand point, rather than to have to try and implement policies to monitor the issue, to just eliminate the practice altogether and not be concerned,” says Pullen, who noted that the new policy was not prompted by any wrongdoing nor was there any evidence of any improprieties.
Still, the new policy resulted in the departure of three employees – Chad Darling, an account representative for many of search affiliates; Andy Powell, who didn’t work with publishers but was part of the search management team; and Don Batsford, a CJ employee, who joined the company when it acquired BeFree.
“The people that left took a look at two different business opportunities. These are entrepreneurially focused publishers that chose to pursue that route. We hope they continue to do well. But they can not do both things.”
It’s unclear if these ex-CJ employees were running affiliate sites or doing arbitrage. Commission Junction officials declined to provide any details.
Regardless, the situation has angered many affiliates, who claim network staffers are supposed to be helping affiliate partners, not helping themselves. Despite their outrage, many affiliates, network representatives and industry watchers say the overall issue is so politically charged, they declined to have statements attributed to them and spoke only on the condition of anonymity.
The issue also sparked a lot of heated discussion on the affiliate forums and generated plenty of fodder for bloggers, many of whom admitted to posting comments on a variety of industry blogs under pseudonyms.
“The networks have been very quiet on this issue and are reluctant to make any public comments. This lack of communication is causing an increasing concern of potential wrongdoing at the networks. When the networks have to talk to their lawyers before commenting, nobody feels comfortable,” says Adam Viener, president of IM Wave, a Virginia-based search affiliate. Darling was Viener’s account manager.
Here is a typical post. “Let me get this straight, top affiliates shared their secrets with account managers at a network only to find out those account managers were their competition and using those hard-earned secrets – I’d be fuming. So much for a trusted third party.”
One angry – and anonymous – affiliate tried to put a positive spin on things. “If they quit their day jobs at the network, they were obviously making more money as an affiliate and that certainly bodes well for the state of affiliate marketing as a very lucrative career.”
Cause for Concern
Viener says he alerted Commission junction to the potentially problematic issue.
“I had a conversation with Todd Crawford [Commission Junction’s vice president of sales] about this issue at Affiliate Summit , after talking with some top search affiliates who were concerned that CJ employees were looking at HTTP referrer data to determine exactly which keywords they were bidding on were converting to sales. They seemed to have some internal evidence that showed that when they identified new keyword niches with no competition, that almost immediately after there was a conversion on those terms, new affiliates popped up advertising on those terms,” Viener says.
Both Crawford and other CJ executives insist that calls to that specific database are tracked and protected. In some case only two to three people at the network have access to that sensitive information.
“To be an effective account manager we certainly have access to operational data. We have to do that job in a good and helpful way and that means seeing a variety of data,” Pullen says. “There is no scrutiny that we can’t withstand, and we encourage and hope others can say the same.”
One CJ super affiliate, who asked not be identified, says that on more than one occasion, within days of launching a new campaign, he would also see competition. “No one knows we are running the keywords, so in theory, no one should pick it up. That led to some speculation how it got started and I went away thinking that I should speak to the network about my concerns regarding who has information about keywords and referring URLs. I’m concerned about who has access to keyword data as well as what is converting and what is not converting.”
Vinny Lingham, founder of IncuBeta, poses a possible scenario:
“CJ has about 2,000 merchants, and it takes a lot of time and effort to evaluate, negotiate, research and run test campaigns. Say that one in every 10 campaigns we test out becomes a full-blown campaign, which is both scalable and profitable. We don’t focus on small campaigns, so typically we’re looking for merchants who can do a lot of volume and has great conversion rates.
“An average test campaign costs us anywhere from $5,000 to $25,000 before we even see a daily profit. Can you imagine our frustration when we take a program on CJ with a network earnings of 2 or 3 and turn it into a 5 overnight, only see other affiliates jumping onto the bandwagon – almost as if they had inside information.
“If I worked at CJ or any other network and I knew who the top affiliates were, I would just wait for them to test out all the merchants for conversion rates, etc, and then run only the successful campaigns – why bother running test campaigns myself? Even worse, imagine after all our testing, the network employee gains access to the keywords we’re bidding on and the conversion rates?”
Steve Denton, recently appointed president of LinkShare, says that as employers you can have policies in place but that “ultimately you’re not going to control what people do
n’t do at work.”
As for LinkShare, the company encourages its employees, especially those in customer-facing jobs, to set up to affiliate accounts as part of their training, according to Denton. “We see it as a value-add. It allows our employees to know what is going on in the space from the point of view of the affiliates as well as the merchants,” he says.
However, LinkShare has a variety of controls in place to ensure the security, confidentiality and privacy of the data related to merchants and affiliates. All LinkShare employees are required to sign a confidentiality agreement and a non-compete agreement.
“Those agreements are reflective of the fact that we deal with a lot of sensitive data and they make all employees contractually aware of what they can do with any of that data,” Denton says.
LinkShare also controls the access to data by limiting certain pieces of information only to specific jobs titles as well as by workers’ roles and responsibilities, he says.
In addition, through the company’s Athena registration and affiliate validation system, LinkShare monitors which employees have affiliate accounts and what they are earnings via their social security number, Denton says.
Like CJ, affiliate network Performics has a policy in place prohibiting employees from being affiliates.
Still, observers suggest it’s not about having a policy, but more about enforcement and direct communication to affiliates about who has access to what specific data.
Lack of Communication
Some chided Commission Junction for not addressing the “Triple Jangro” issue directly with affiliates, most of whom found out about the situation only by reading online reports with sketchy details, inflamed blog comments from other publishers or after being informed via email that their own account representative had left Commission Junction. Many complained there was no official comment from CJ on the details or any attempt to reassure or placate affiliates.
“CJ did a poor job of communicating this problem to the affiliate community,” Viener says. “By not disclosing what was happening, even if there is no evidence of wrongdoing, it makes me feel uneasy. That’s wrong. I don’t feel like I have the facts; I’m not comforted because there has been no communication from the company. I need to hear what happened. There needs to be more communication,” says Viener.
“The networks should take a hard look at these e-affiliates and communicate with the top affiliates they had contact with about what programs they are running, what sites they have, and give top affiliates a chance to determine if their business practices have been compromised,” says Steve Shubitz, who operates stopscum.com.
“I don’t know if that step was necessary. There was no evidence of wrongdoing, so it was not an issue,” Pullen says. “If an individual publisher was concerned and wanted to ask any question of their account manager, that would be fine. I don’t see these as us needing to be proactive. We manage account relationships all the time and information is held in strict confidence,” Pullen says. “It was not identified as an issue in the past five or six years. The existence of the relationship has always been positive with no controversy or issues. There were no improprieties so that would be explaining a negative. Why would we explain something that is not an issue?”
Others think Commission Junction acted appropriately in dealing with the situation.
“The issue of staffers being publishers at CJ has been simmering for a long time and it’s great to see CJ take a leadership role and be protective,” Beth Kirsch, group manager, affiliate programs at LowerMyBills.com, says. “This challenges other networks with even stickier ethical issues to address the same concern. The affiliate marketing industry is maturing and focusing on these issues is part of that process. Personally, I think this is a great step.”
Putting up Your Guard
Meanwhile, the situation has left many affiliates skittish about revealing information – even to their own account managers.
“I’ve got to be a bodyguard in the future,” Viener says. “I can’t say or have conversations in the future about my business. It’s a catch-22. Because if you are secretive, people assume you are cheating.”
Some caution against disclosing many crucial data points with account managers at the networks.
“I would tell my account manager my payout terms with merchants, what keywords are converting, referring URLs or most anything else. I have the right to privacy, confidentiality and transparency with the networks, but since I’m not 100 percent sure that’s happening, I’ll opt to just keep my mouth shut,” says one affiliate, who asked not to be named.
Shubitz offers this advice: “Webmasters and publishers should assume that every single network engaged in the CPA/CPL does in fact have current employees who are stealing their data and using it to make money.”
He encourages affiliates to “Wash/obfuscate your HTTP referral code and never disclose any details about your marketing procedures, media buys, other sites you own or your site’s demographics to your network.” He goes on to note, “Immediately complain to senior management in writing if you suspect that your procedures have been compromised and in fact are being used by current network employees to make money. Continue to be a friendly ‘partner’ but don’t disclose any data that a network employee could use to steal money from you.”
Nature of the Beast
Many claim the entrepreneurial nature of online marketing breeds this type of behavior.
“People tend to be entrepreneurial and opportunistic, and you cannot fault anyone for that – it’s human nature.” Lingham says. “The difference between this and other businesses is that traditionally you just couldn’t start a business that easily, but online marketing efforts can be started with virtually zero cost,” 77Blue’s Lewis says.
Jeff Molander, president of Molander & Associates, an affiliate marketing consultancy, is surprised that it took this long for the issue to be raised. And while Molander agrees that most employers need to have policies in place to ensure the privacy of affiliate data, he says “insights and knowledge” are gained simply by virtue of job duties, daily work experiences and continually expanding knowledge of the market space. He also claims that much of what affiliates do is plainly seen in search engines.
While other industries have laws governing use and disclosure of sensitive information (lawyer/client privilege, doctor/ patient confidentiality); there is nothing like that for performance marketing, which has sparked talk of legal intervention.
“A class-action suit would damage the industry’s reputation and create unnecessary long-term distractions in our core businesses of building a sustainable and long-term industry,” Lingham says. “We need self-regulation. The government takes too long to get things done. It should be the stakeholders making these decisions.”
Instead, Lingham suggests that super affiliates and representatives from both the networks and search engines, should have a round-table meeting to discuss the issues about enforcing both data privacy and non-competes with their staff with respect to all their clients.
Most say it’s in the best interest of the networks to nip this in the bud and take a leadership role.
“The networks are in a precarious position here. Their business model only works because of the trust established with the merchants and the affiliates. If the networks aren’t open, ethical and forthcoming about these types of issues, then their role in this industry will be diminished,” says Shubitz.