Wednesday afternoon good news came from both Hawaii, and California:
Good News from Hawaii:
Governor Linda Lingle “vetoed HB 1405 because this legislation has immediate and adverse consequences for residents and businesses of Hawai’i. This legislation would place Hawai’i companies at a competitive disadvantage. As a consequence of this bill, Hawai’i businesses would no longer be able to receive commissions for advertisements on their website that link to numerous national and international firms that offer goods and services to Hawai’i residents” [more here | underlining mine].
Good News from California:
Governor Schwarzenegger believes that introducing such taxes to solve our state’s budget deficit is unacceptable. He announced: “After passing the largest tax increase in California history, it makes absolutely no sense to go back to the taxpayers to solve the current shortfall — that’s why yesterday I vetoed the majority vote tax increase passed by the legislature. With unemployment at an all time high, we should be doing everything we can to — keep jobs and create jobs — in California” [source | underlining mine]
Congratulations to Hawaii and California affiliates!!
Tags: advertising tax, affiliate sales tax, amazon tax, california affiliates, california bill 178, california sales tax, hawaii affiliates, hawaii bill hb 1405, hawaii sales tax
“Overstock is joining Amazon and Blue Nile in the parade of e-commerce companies dumping affiliates” [source]. Gov. of Hawaii, Linda Lingle, “notified the Legislature the [affiliate tax] bill was among 65 she may veto” after Amazon.com and its “sister-site Endless” have notified all HI affiliates that they are no longer on board [source].
There is no doubt that the question of the affiliate tax is by far the most burning one in the affiliate marketing circles these days. Part of the reason is, of course, the fact that merchants have already started to drop affiliates. But a bigger part of the reason is something that Lisa Picarille and Scott Jangro have touched upon in this week’s Affiliate Thing podcast. I am referring to the selective nexus formation.
Jangro mentioned that the problem is not that affiliates do not want to pay an “Internet tax”. In fact, many would be happy to. The problem, as Picarille put it, is that affiliates are being singled out to form a nexus, while other similar methods of online advertising (a banner on the website of a regional paper, for example) are not included. I encourage you to listen to the latest podcast of the “Affiliate Thing”, and stand up for our industry in your own state, as well as support those that are fighting it in NC, HI, CA, RI, and other states. If the issue isn’t yet knocking on your door, it’s just a matter of time. Your better start preparing (and acting) now.
Between Amazon notifying and then terminating North Carolina affiliates [see also this Wall Stree Journal article], California reviving the anti-affiliate tax, Hawaii lawmakers sending a similar bill to the governor [more here], and Rhode Island considering going the same route [see this comment], we read and hear that taxes like these are “unconstitutional” (Amazon uses the word in every e-mail they send on the topic, Overstock wrote about it back in May 2008, numerous affiliate marketing blogs and forums are agreeing too). But what exactly makes such a law unconstitutional?
Short Answer: The Supreme Court once ruled that “you cannot hold a catalog company responsible for collecting out-of-state sales tax” [source].
Long Answer: Looking back at the 1992 Quil Corporation versus North Dakota case we see that back then the Supreme Court held that taxing an out-of-state business violates the “Due Process and Commerce Clauses of the Constitution” which “prohibit a State from imposing the duty of use tax collection and payment upon a seller whose only connection with the State is through common carrier or the United States mail”. Therefore, it is being said that an e-tailer must have a physical presence in the state to be required to collect a sales tax; and since the decision that set a precedent was made by the Supreme Court, it is also being held “that only Congress, through legislation, could delegate broader powers to the states” [source].
Does the above-quoted precedent apply in case with merchant-affiliate relationship? Reading through the North Carolina “Nexus Clarification and Click-Throughs” posted here the answer may very well end up being negative. Will it help states raise the money that they are looking to raise? The answer is definitely negative [more here].
Maryland, Minnesota, and Tennessee voted against pursuing such legislation.
You may read more about this tax by following the “affiliate sales tax” tag in my blog.
Tags: affiliate sales tax, amazon tax
Today I have decided to put together a list of posts, articles and discussions I have enjoyed in the course of the past week. Some of them are related to affiliate marketing and affiliate program management, while others address the areas of marketing and advertising that I am personally fascinated with. I hope you will find a few gems in the below list as well:
► Affiliate Marketing with Twitter [affiliate program management]
► Looking into the Future of Digital Marketing [online marketing]
► 10 Ways to Make More Sales [marketing & sales]
► How Not to Use Twitter: Case Study [marketing with Twitter]
► Marketers: More Hockey, Less Figure Skating [online marketing vs traditional]
► 27 Must-Have Starter Kits for Web Designers [graphics & web design]
► E-commerce Calls to Action: Design Tips [usability, web design]
► Hidden Meanings in Popular Logos [logo design]
► 192 Creative, Smart & Clever Advertisements [advertising]
► Great Wall of Facebook: The Social Network’s Plan to Dominate the Internet — and Keep Google Out
Tags: advertising, Affiliate Program Management, marketing, marketing on twitter, twitter, web design
Every time I launch a new affiliate program for a client, and affiliate-referred sales start rolling in, the client gets happy. Then a few weeks into the process, clients start getting impatient. “So when, when will we get the real super affiliates to start pushing us?” — they ask.
I believe that a little fishing analogy explains how things really work. But before I get to it, let me mention a few things as an introduction. Unless at the time of starting your affiliate program your company is already one of the major brands (either per the Internet Retailer’s Top 500 Retail Websites list, or per the Fortune 500 lists, or any other widely recognized rankings), you will have to do some convincing to get those super affiliates on board. In this particular context your most convincing argument is your affiliate program’s statistics. On Commission Junction, for example, prior to joining your affiliate program, affiliates are able to review your 3-month and 7-day EPC [definition here], as well as your program’s ranking on a 5-bar scale which reflects the program’s performance as compared with the other affiliate programs on CJ. On ShareASale affiliates can see your EPC, reversal rate (a very important metric that many other affiliate networks do not disclose), average sale amount, and average commission amount — all in the course of 7 and 30 day periods.
If your brand is not as big as the ones on the above-quoted lists, and you do not have a proven track record in the affiliate marketing industry, you’ll have to start from scratch. You will have to first hook the “smaller fish” to use the performance that they will show in your program as bait for the “bigger fish”. Of course, this is only an illustration, and I hope it does not offend anyone. I want to emphasize the importance of smaller affiliates here. First of all, they will help you build your new program up to make it more attractive to bigger affiliates; and secondly, you never know which one of them will be the next super affiliate. So, be patient, persistent, and attentive to the needs of all affiliates who have chosen to join your affiliate program, and the success will follow.
Tags: affiliate management, affiliate network, Affiliate Program Management, affiliate recruitment, commission junction, shareasale, super affiliate, super affiliates
An affiliate I know tweeted a phrase that underscores something that you will not hear mentioned in evangelistic presentations on affiliate marketing. Here’s his tweet:
As an affiliate program manager, this statement makes me ask myself: what have I personally done to make it less frustrating for my affiliates? While there is very little that I can do about “the punches from search engines”, there is a lot that can be done about merchants (ongoing education can help change a lot of things) and even governments (opposing and uniting affiliate marketers in our fight against things like the anti-affiliate tax is just one example).
Will affiliate marketing ever become a “no-risk channel” that Matt Bailey talked about yesterday in London? I personally do not believe that any sales channel can enjoy a 100% risk-free environment. However, we — as affiliate program managers, affiliate networks, and affiliate marketers — can help it become a less-risk channel for affiliates like Rehan and millions of others.
Yesterday evening @MattEnders, a North Carolina based colleague of mine, tweeted:
Having been one of the people to blog about the problem a week ago, I have gone online this moring to try to find the interview. Couldn’t find the recording itself, but got to this page on MSNBC.com:
The page links this this article on MyNC.com. where Enders’ anti-tax points are juxtaposed to those of Senator Hoyle, co-chair of the Senate Finance Committee and proponent of the North Carolina affiliate tax. The article says that the “sales tax from Amazon.com alone could run as much as $13 million a year”. It could but will it? The answer is negative. So Amazon will pull out. What about Overstock.com that the article also mentions? Based on the New York precedent, the answer is also negative.
The article ends with this paragraph:
Senator Hoyle said while he sympathizes with small business owners, he believes on-line retailers aren’t willing to give up the revenue, even if it means paying tax.
Recalling the New York State experience, hundreds of online retailers will “give up the revenue”, and in addition to Amazon and Overstock we’re also talking such major brands from the Internet Retailer’s Top 500 List as CaféPress.com, CSN Stores, Gaiam, Home Shopping Network, Jewelry Television, Karmaloop, Lamps Plus, Musician’s Friend, NetShops, Northern Tool + Equipment Co., OnlineShoes.com, Oriental Trading, ReStockIt.com, ShopNBC.com, ShoppersChoice.com; and this is only to mention the larger brands. See this thread for a fuller list of merchants that dropped affiliates after a similar law passed in the state of New York.
As someone has commented under the above-quoted article “7% of zero” is “still zero” and “that’s what NC will get in taxes”. I believe, the actual number is 4.5%, but that doesn’t change the main point of this statement. Such a law will not yield the desired results, but what it will definitely do is destroy thousands of smaller businesses along the way.
Tags: affiliate sales tax, nc bill AB 178 / H 558, north carolina affiliates
In continuation of my earlier posted thoughts on the effectiveness of blog reviews, it seems appropriate to now turn to the Federal Trade Commission’s plans to monitor blogs for paid/biased reviews.
On Sunday, the Associated Press wrote that blogging, which continues blooming, “has taken on characteristics of community journalism — but without consensus on the types of ethical practices typically found in traditional media”. Journalists who work for newspaper and broadcasting companies “are held accountable by their employers, and they generally cannot receive payments from marketers and must return free products after they finish reviewing them”. Up until now the blogosphere has not been regulated by any such rules. FTC is about to change this, and the new regulation may come into force by the end of Summer 2009.
CNET News commented that for the first time ever, FTC will seek to enforce guidelines that would “ban deceptive or unfair business practices”. CNET continues:
The rules could be quite strict, even extending to the practice of affiliate links — for example, a music blogger who links to a song on Amazon MP3 or iTunes that earns an affiliate commission in the process.
Izea.com’s sponsored conversations are brought up as an example of a website that offers its contributors incentives — such as “free trips, products, gift certificates, or outright payments” — for coverage (see Ted Murphy’s reply here).
We are once again back to two questions: (i) that of disclosure, and (ii) that of authenticity. The question of disclosure was touched upon in earlier discussions about dropping affiliate links on Twitter (see “Damn Marketers. Affiliate Links in Twitter” post by Scott Jangro, and Shawn Collins’ “Affiliate Link Disclosure Manifesto” post, and comments under both of them too). I blogged a bit about authenticity (and how it’s connected with trustworthiness) earlier today. While there will be a need for policing, it seems that the end users are already doing a great job deciding who to trust.
Is the disclosure necessary, and will it help? Richard Koman, a lawyer and technology writer for ZDNet.com, believes it is and it will. He writes that, in reality, “the solution is simple enough: ‘If you buy this book through my site, Amazon pays me a few cents.’”
I do not view this FTC’s move as a potential cause of any major trouble for decent affiliates. There is nothing to be unhappy about. After all, the aim is “to crack down on false claims from bloggers” (italics mine). The subjects of (a) how exactly to word the guidelines, and (b) how to implement the effective policing do leave room for discussions, but overall, the FTC’s concerns are proper and this is a good move.
Other interesting discussions and articles on the subject may be found below:
- FTC Going After Bloggers = Epic Fail (SEOBook.com)
- FTC Is Ready to Pounce on Dishonest Bloggers (PC Magazine)
- Are Paid Bloggers Guilty of Ad Fraud? (ibid)
- FTC Eyes Blogs for Conflicts of Interest (PC World)
- FTC to go after product reviews bloggers who accept freebies (ZDNet)
- Adding an Amazon or Apple Affiliate Link to Your Blog? The Feds Want to Know (All Things Digital)
Tags: affiliate blog, affiliate blogging, affiliate links, affiliate reviews, Federal Trade Commission, paid blogging
Recent Comments