I am amazed how fast you reply through your blog. I hope I have the same dedication towards my blog.

Thanks for making it clear for me.

God bless and congratulations for being voted as the best OPM for 2008!

Thank you for your question.

Your question is somewhat confusing. You’re asking about “the fault in the incentive program”. Incentive programs (if we are using the term in the same way, implying programs run by incentive affiliates), as I have mentioned in my initial blog post, all follow the same idea — that of encouraging a sale (or a subscription) by offering the end-user an incentive. Incentives normally come in form of cashback or donations.

If (as in our scenario 1) a merchant that pays $25 per subscription, starts working with an incentive affiliate, and this affiliate offers cashback greater than the minimum order value, then the merchant is loosing money. They are paying $25 to the affiliate, the affiliate is paying $15 back to the customer, while the customer can simply use two months of hosting at $6.95 each and then leave not spending a penny on the merchant’s service (as $15 – $6.95*2 = $1.1 of the cashback they’ll still get to retain).

In the scenario 2, where the merchant pays cash for every free trial ordered, the problem with the incentive affiliate sharing a portion of this cash with the end user is obvious: the end user gets both cash and the free product (they may not be interested in the product at all, but solely motivated by the cash). It is not necessarily a “problem with payout”. If cash weren’t involved, the free trial would have been ordered mostly by those genuinely interested in trying the product out.

I might be missing something here. Would you possible shed some light on my ignorance?

Scenario 1:

Merchant B (hosting company) pays 50% or $25 (whichever is greater)
Incentive affiliate offers $15 cashback on all orders
Problem: customer signs up for 1 month of hosting at $6.95

—> why is the fault here in the incentive program? I mean regardless of the cashback (or lack of it), the merchant is still in the losing end, is it not? I think (again, I might be missing something since I am not so familiar with incentive sites), the main fault in this scenario is the commission structure of the merchant.

Scenario 2:

Merchant C (diet supplements merchant) pays $35/sale (including orders for free trials)
Incentive affiliate offers $20 cashback on all order (including free trials)
Problem: customer orders a free trial

—> again, I think the problem is with payout including free trial. How would it be different if the order is not referred by an incentive affiliate?

Thanks in advance.

Some adware application do self-install on the consumer’s computer without their consent, and many merchants and affiliates really have no clue about what’s going it. Consumers, as you have mentioned above, often don’t care about cookie stuffing and cookie overwriting. However, this doesn’t mean that there is not problem. There is one, and both merchants and affiliates need to be better educated about it.

I am glad you’ve enjoyed our discussion, and thank you for your questions. As you already know, I’m now following you on Twitter, and I thank you for following me back.

Re Merchant TOS: I agree. Merchants should write it into their policies, and enforce it. But unless we tell them about it, they may never find out that they are being cheated.

Re Coupon Sites: Merchants that do not want to be promoted by coupon affiliates can also write it into their TOS. In fact, one of the programs that I manage actually has a clause like this in their affiliate agreement. So, at the end of the day, the choice of whether to work with coupon affiliates or not, is in the hands of the merchant.

I am fairly sure that Komen actually partnered with Freecause and promoted the toolbar download – the Time article is a different issue and toolbars are not mentioned. Facts matter, Nancy.

Coupon affiliates do something very similar to what you object to with toolbars. They get people to go to their sites to find coupons to save money on their purchases, and earn a commission. They market to people to “come here to get your coupons” even if the merchant created the demand through a paid search, online ad or even printed catalog. I have done this. At Christmas I used lots of coupons from sites like Coupon Mom for purchases I fully intended to make with or without a coupon. Sometimes I got to the merchant through another affiliate link or google PPC ad, left the site to get the coupon, and came back to the site on the coupon affiliate’s cookie. Good for me, not so good for the merchant.

So not only are coupon site affiliates getting a commission, but they are corrupting the purpose of coupons by making them a part of the purchase process 100% of the time.

Theft? If toolbars are legally stealing or committing fraud, then you and other affiliates may have a case to sue for damages on the principal of interference with a contract or some other theory. If you cannot prove in court that you are owed damages, then it’s not theft or fraud or some other actionable tort. Ethical, well that’s more a matter of grays than black & white. Frustrating – absolutely.

You say the charities don’t win? Why are they promoting services like OneCause, iGive, GoodSearch and others then? They get money – they win!

Deceptive? It’s not deceptive to the consumer if they install the toolbar to GUARANTEE that their purchases generate donations. It’s not deceptive to the charity who pushes this to their supporters for the same purpose. It is not deceptive to the merchants who provide programs through their affiliate networks that allow commissions on each and every sale. It is not deceptive to other affiliates – you’re not being deceived by anybody. You know exactly how you’re losing…

As long as merchants are willing to pay something to somebody for each and every sale — coupon sites, SEO affiliates, Upromise, OneCause, etc. do this — and as long as the affiliate networks don’t stop it, then it’s just a competition (as long as it’s legal). The best channel to the customer wins!

Side note: Upromise’s toolbar does not redirect traffic for merchants who prohibit toolbars in their terms of service (eBay, Zappos, etc.). Any merchant can set that policy and any toolbar affiliate who does not comply can be removed from the merchant’s program.

The end user has been enticed by the toolbar ‘affiliate’ to download and use the toolbar to receive a kickback of the commission of another person. I’m sure the end user isn’t going to see anything wrong or evil with what they are doing, but they are actively enabling the theft of commissions from people who spend their time and money to promote merchants for the purpose of generating income. It’s their job. As returns diminish affiliates will stop promoting those toolbar partnered merchants, they have been dropping them like poison for a few months now that they are more aware. How is this helping the merchants?

Affiliate marketing is an arrangement that merchants enter into to increase their branding and visibility. A new customer is like gold to most merchants. Return customers are valuable as well, but a new customer, trying out a merchant’s products for the first time is worth far more. They will potentially (hopefully) refer friends and family to the merchant’s site. If every shopper brings along a toolbar that costs the merchant a commission, the merchant’s profits are eroded.

The worst aspect about toolbar affiliates is not that they steal from other hardworking affiliates, it is that they turn non-commissionable sales into commissionable (cookied) sales without bringing any value to the consumer. The few pennies that are donated (if any) to the causes these people claim to benefit are a source of aggravation to the recipients. John mentioned the Susan G. Komen Foundation, ironic since that is one of the foundations that has complained about these so-called donation tools. Read Pink Ribbon Promises in Time Magazine to see what damages the toolbar affiliates are doing to honest charities. They let people think they are doing their part and not looking any further into the real Komen Foundation issues because, “Oh, I donate to that through my toolbar”. Wrong, so wrong.

If the toolbar affiliate requires you to shop on their own site where they have paid for the site building and hosting and put up informative pages for you to shop through – IF they have done this work for you then it is a win-win situation for all concerned, well, except for the charities. Promoting theft by deception is not a nice way of saying what toolbars do, but that’s what they do.

Toolbars set a cookie, even when no affiliate link is involved. Say for example that your brother got a great deal on video games from Walmart and tells you about the special deal that Walmart has right now. You go visit the Walmart site, whether finding it through a search or just typing in the URL. Because you have a toolbar installed, they collect commissions for a sale that they did nothing to generate. No affiliate link anywhere, but they pop in the merchant’s shopping cart and claim (fraudulently) a commission. This activity skews the merchant’s information stream as well and can cause the merchant to make bad decisions because the information is not correct.

If the merchant looks only at the number of sales produced by toolbar affiliates they can only think that these are valuable affiliates. The fact that some of those sales figures actually belong to the merchant and the rest to other victims of theft is not apparent. So the merchants embrace their parasite affiliates until they have been consumed – or informed.