What Merchants Should Do about Affiliate Commission Hijacking

In a recent article in Web Marketing Today, "Affiliate Commission Hijacking," 10/9/02 (www.wilsonweb.com/wmt7/affil_hijack.htm) I explained in some detail a serious problem. Please read that article first, if you haven't already. The present article is focused on what merchants in particular should be aware of.

In a nutshell, when music trading software (such as Morpheus and LimeWire) are downloaded and installed on a computer, users are given the option of getting discounts on products (by Wurld Media or TopMoxie, respectively). When the shopper comes to a sales site with an affiliate program that the installed software recognizes, the shopper is offered a discount -- but that discount comes from a portion of the affiliate commission. If an affiliate link brought the shopper to the site, the affiliate loses his commission. If the merchant's advertising brought the shopper to the site, the merchant now pays an affiliate commission in addition to advertising costs.

Some merchants like the discount feature, since they think it gives the shopper an additional incentive to purchase and helps them close some sales that would otherwise be lost. However, the cost is significant:

1. The merchant pays an affiliate fee for each of these sales -- more than would be owed by traffic-driving affiliates, and
2. Affiliates, whose links drive traffic to the merchant's site, are robbed of their rightful commission on the sale. This will eventually result in less loyal super affiliates, and undermining the merchant's affiliate network.

Various solutions have been proposed that have been detailed in my article. Though this may not affect some smaller merchants that don't use the Big Four affiliate management software (BeFree!, LinkShare, Commission Junction, and Trade Doubler), it's quite possible that the commission hijacking software companies will join your affiliate program and program their software to substitute affiliate links in the common small business affiliate management software links -- MyAffiliateProgram, AssocTRAK, and others. I recommend five steps for merchants to consider so they're prepared if this begins to affect them and their merchants:

1. Add to your affiliate agreement a section that covers the kinds of abuse addressed in LinkShare's Addendum (www.linkshare.com/resourcecenter/addendum.pdf). Their wording prohibits anything that alters, redirects, or substitutes affiliate click-throughs "with the result of reducing any compensation or other payment earned by or owing to a third party Network Affiliate or increasing any payment obligation of any Network Merchant with respect to any individual transaction...." Don't copy their exact words, but including this idea in your affiliate agreement is wise legal protection for the future.
2. Add to your affiliate links the code "&afsrc=1" to exclude diversion by shopping plug-ins that conform to BeFree's Proposal for "Affiliate Exclusions in Shopping Plug-ins" (www.befree.com/proposal.htm). We don't know how widely BeFree's proposal will be adopted by hijacking software, but it has been adopted by some of the developers.
3. Lobby BeFree! to include your affiliate software in the list of domain names to be excluded from hijacking software, unless the affiliate link points to your own domain name. Currently only the Big Four's domain names are in the list -- it's as if BeFree! doesn't realize that small business friendly affiliate management software even exists. E-mail your requests to BeFree! mailto:proposalfeedback@befree.com?subject=Commission_Hijacking
4. Contact your affiliates and assure them that you will not pay commissions to organizations known to be benefiting from commission diversions. Let your affiliates know that you appreciate their efforts and want to protect their commissions.
5. Carefully monitor your more successful affiliates. If you suddenly find new affiliates earning sizeable commissions, check their websites for affiliate links. If you can't account for their sales, delay writing commission checks until you verify that they are legitimate affiliates. 

Of course, this isn't meant to be specific legal advice. In any legal matter you need to consult an Internet-savvy attorney. For the present, commission diversion schemes are in the open and mainly affect the larger players. But I expect to see more stealth systems trying to pass as legitimate affiliates. Crooks follow what they perceive to be easy money. Be on guard.

Here's the principle we're trying to protect.

But realize that business models morph over time -- and the Internet is still young. Merchants may want a discount system to help close the sale. Just so long as this system doesn't rob commissions from conscientious affiliates.

The Big Four affiliate networks will be meeting in New York on November 7 with representatives of other groups. We'll know more then about what direction things are taking.