January 30, 2003, 12:00 AM

Whose customer is it, anyway?

Affiliate marketers are battling over credit for customers’ clicking and the affiliate service providers are trying to impose some order.

This is a story of what can happen when good technology does bad things-good and bad being relative terms depending on where you’re camped among the different constituencies involved in online affiliate marketing.

Affiliate marketing, the practice by which sites that host links to online retailers receive a commission when someone clicks on the link and makes a purchase, is driving about $14 billion annually in online sales, according to Forrester Research Inc., and getting bigger every day. So is the competition among affiliates for commissions. “Smaller affiliate sites that were making it two years ago are finding it a lot more difficult. It’s gotten much more competitive,” says Wayne Porter, vice president of product development for Afftrack LLC., which tracks transactions for affiliate sites.

One reason is that technology developers have come up with new and now increasingly controversial software aimed at getting those affiliates who use it a bigger piece of the pie.

Not so simple

Affiliate marketing used to be simple: A site owner who wanted to earn commissions from retailers negotiated the commission, then put up a link at his site. Every time a visitor clicked on the link and made a purchase, the site owner-or affiliate partner, as they are known-earned a commission. But then things got complex.

Today, affiliate partners can take any number of forms. They’re still primarily web sites hosting visitors. But now, many are companies that offer awards or rebates and that load shopping tools into a consumer’s desktop or browser to make it easier for that shopper to buy from retailers that give the awards or rebates. Some companies take the use of these applications one step further. They offer consumers a browser enhancement that the consumer wants, such as the ability to download shared music files, for example. Attached to the browser enhancement in some cases is ad software set to activate when it recognizes designated words on pages viewed by the user. When that happens, the software may pop up competing offers, or even overwrite competing affiliates’ links on a page.

It’s the more aggressive uses of these applications that are causing the dust-up in e-retail marketing. The software, a broadly-drawn class called browser enhancements, adware and parasiteware, depending on how it’s used and who’s describing it, can distract and in some cases, even redirect online shoppers poised to purchase from a retailer through a link they’ve clicked at an affiliate site. As the consumer is considering the purchase, the software pops up a competing offer. That offer may direct the shopper back to the retailer the shopper intended to purchase from anyway, or to another retailer offering the same or another product. The bottom line is that it’s the sponsor of the link ultimately used who gets commission on any sale that results. The other affiliate site-where the shopper started-gets nothing, though the shopper clicked a link on that site first.

A summit

Michael Coley, founder and operator of Amazing-Bargains.com, a deal-hunting site that hosts affiliate links to a wide range of retail sites, including some big players such as Overstock.com and Eddie Bauer, estimates that he has experienced a 20% loss in commissions over the past year from affiliate sites that use the software. He himself does not employ it. “Imagine if there were software that automatically redirected TV ads. Everyone would be pretty upset,” he says.

Many affiliate sites are just that, and the issue already has sparked an unprecedented meeting of the four major affiliate services providers. In November, providers LinkShare Corp., ValueClick Inc.’s BeFree, Performics Inc. and Commission Junction Inc. came together in an attempt to hammer out uniform industry standards for use of the tools. Their hope was to create a level playing field among affiliates without stifling the appropriate use of new shopping and ad applications as they develop.

The outcome of what attendees termed an “emotionally charged” meeting, in which representatives of the providers’ affiliate sites and retailers participated, was a Code of Conduct backed by Performics, BeFree and Commission Junction. LinkShare chose another route: a more aggressive stance that puts affiliates under contractual obligation not to violate LinkShare’s code of behavior in their use of the shopping applications. LinkShare is asking its affiliate members to sign its Anti-Predatory Advertising Addendum.

The diversion of commissions seems unfair: Affiliate A spends time and resources to provide content that gets visitors to its site and to nudge them toward retail partners’ links, only to have Affiliate B swoop in, divert the sale at the last minute, and scoop up the commission without sharing any of it back.

Adding to complexity

But the issue isn’t quite that simple. The shopping applications have roots in CRM programs, typically rebate and loyalty programs. Those programs direct a percentage of each qualifying sale to the consumer’s chosen charity, cash back, awards program, or college fund, such as Upromise.

To get credit for purchases, participating consumers download an application to their desktops, then click on it when searching for an item. If the shopper types in “cell phone,” for example, the application sends the query to what is essentially a custom search engine that delivers results listing retail sites where the purchase would qualify for points or rebates under the program.

Trouble is, consumers who’d registered for the programs and downloaded the application kept forgetting to use it. “The CRM issue it creates when customers don’t get their rebates is very time-consuming,” Porter says. “They contact the merchant, then the incentive site, and you have to track down the transaction. It’s a big problem.”

The marketing sites set out to solve the problem with browser plug-ins that functioned as automatic reminder services. The plug-ins, voluntarily downloaded by shoppers, are set to recognize certain keywords. When the consumer sets out to shop online, the plug-in reviews all the words on pages the shopper is viewing, then automatically pops up offers at qualifying sites that sell the item the shopper is searching for, without the shopper having to take any action

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