Affiliate Commission Hijacking Alert

A significant slice of the affiliate commissions paid out by the Big Three affiliate networks -- BeFree!, LinkShare, and Commission Junction -- are being subverted by software plug-ins on consumers' web browsers  that cause the affiliate commissions to be channeled to software developers and other organizations, rather than to the affiliates whose links direct the consumer to the merchant's site. Author and affiliate expert Shawn Collins told the New York Times, "I probably saw a drop-off of 30 percent in income for the past six months."

How the Diversion Works

While the problem is more than a year old, here's what's causing the uproar today. When consumers download music-swapping software, they are asked to show support for the software developer splitting the affiliate commission between the developer and the shopper. When the consumer comes to a merchant site that offers an affiliate commission, a browser plug-in (installed at the same time as the music software) indicates this to the shopper and directs the shopper to a site to pick up the software developer's affiliate cookie which overwrites a previous affiliate cookie. When the sale is made, the software developer gets the affiliate commission. Some promise the shopper a piece of that commission as a rebate, giving the shopper an incentive to cooperate. Wurld Media or TopMoxie software bundled with file-swapping programs Morpheus and LimeWire, respectively, are said to divert affiliate commissions.

Justification for Commission Swapping

The software diversionists claim that commission switching is the result of a deliberate shopper decision, that it takes an overt action on the part of the shopper to make this switch. But the shopper is not a party to the business agreements made between the affiliate, the merchant, and the affiliate network, thus the shopper has no right to cut the sending affiliate out of the commission. What if you went to buy a new car, but told the dealer you'd like the sales commission to go to your favorite charity instead of the salesman who sold you the car? Customers shouldn't have a say in denying sending affiliates their commissions.

Merchant Losses

This commission diversion affects merchants, too. If the merchant's TV advertising, for example, caused the shopper to come to the merchant's site, the merchant shouldn't have to pay an affiliate commission to a plug-in commission diversion scheme, since the plug-in developer didn't bring the shopper to the website in the first place. Nor should the merchant have to pay the affiliate program network its 30% of the affiliate commission on sales that weren't driven by affiliate links. This is akin to asking a store to honor coupons being passed out by someone standing next to the cash register.

Various Solutions

There are various approaches to solving the problem:

• This summer, LinkShare developed an Addendum to the LinkShare Affiliate Membership Agreement (www.linkshare.com/resourcecenter/addendum.pdf) designed to deal with some of the issues. It 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...." This gives LinkShare a contractual way to protect its affiliates and merchants. But such an agreement is difficult to enforce against crooks who set up 100 different affiliate accounts so their thievery isn't as easily noticed. So far, LinkShare is the only one of the Big Three to limit abuse so specifically. But the Addendum doesn't deal with all the implications of the problem.
• BeFree! has a proposal for "Affiliate Exclusions in Shopping Plug-ins" (www.befree.com/proposal.htm). They suggest that any affiliate links to major affiliate management systems be excluded from shopping plug-in diversion behavior -- specifically links that contain in their URLs the domains bfast.com, cc-dt.com, commission-junction.com, linksynergy.com, and qksrv.net. An serious oversight is the omission of myaffiliateprogram.com from this list, the fee-based affiliate management solution choice for many smaller merchants. For redirects or affiliate links that don't contain these domains, BeFree suggests including in the URL the code "afsrc=1" to alert shopping plug-ins not to divert affiliate commissions for these links. This proposal has merit, though it puts on affiliates the burden of adding code to millions of affiliate links that aren't directed through the big affiliate networks.
• The large affiliate network providers and other industry representatives will be meeting in New York City on November 7 to talk through the issue. This is being organized by Wayne Porter, VP of Product Development at AffTrack.com. LinkShare CEO Steve Messer says the issue to be hammered out is, "Where should this procedure be considered successful competition and where is it parasitic?"

I'm concerned, however, that the Big Three with their large retail merchant customers will come up with a decision that neglects the interests of millions of small business affiliates, that the voice of smaller affiliates, some of whom depend upon affiliate income for their livelihood, will be drowned out.

Admittedly, the  issues are complex. Some merchants may see the offer of customer rebates by shopping plug-ins as a way to close more sales -- and affiliate networks are sensitive to their large merchants who pay the bills. (The New York Times reported recently that Amazon and TigerDirect now refuse to pay such diverted commissions; merchants that do pay them include Overstock.com, Travelocity, and eToys.) Affiliate networks are also concerned about enforcement. If they don't provide some sort of commission to the shopping plug-ins, those diverters may go underground making them much more difficult to negotiate with or police. Right now, the major players seem to be KaZaA, Morpheus and LimeWire, but the number of such commission diversion systems seems to be mushrooming.

What Should Small Business Merchants Do?

The threat at this point seems to be to large companies with many affiliates. Amazon, with a huge number of affiliates was  targeted, for example. There is no technological reason, however, that smaller merchants and their affiliates can't be targets of such abuse. But the diverters are not as likely to target affiliate programs with a smaller number of affiliates. Nevertheless, I encourage small merchants to be proactive and consider taking these actions right away:

1. Add to your affiliate agreement a section that covers the kinds of abuse addressed in LinkShare's Addendum.
2. Add to your affiliate links the code "&afsrc=1" to exclude diversion by shopping plug-ins that conform to BeFree's proposal.
3. 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.
4. 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.

What Should Small Business Affiliates Do?

Affiliates of large retailers are most vulnerable to commission shifting schemes, but there's no method yet available that allows you to detect how much money you are losing or helps you prevent such diversions.

Your best recourse is to demand loudly and insistently that merchants and their affiliate networks refuse to pay commissions to affiliates that use commission-diverting schemes. The overriding message should be:

I encourage affiliates to contact the merchants from whom you earn the largest affiliate commissions. Also contact the larger affiliate networks. Don't just threaten or gripe. Suggest alternatives you think will help resolve the issue and insist that whatever solution is decided upon protects the interests of affiliates that send the traffic. For your convenience, here are some e-mail addresses you can use to voice your views:

LinkShare mailto:feedback@linkshare.com?subject=Commission_Hijacking
BeFree! mailto:proposalfeedback@befree.com?subject=Commission_Hijacking
Commission Junction mailto:pr@cj.com?subject=Commission_Hijacking
TradeDoubler mailto:info@tradedoubler.com?subject=Commission_Hijacking

You may also read and comment on this subject in the widely-read ABestWeb Affiliate and Webmaster Forum (www.abestweb.com).

Article updated 9/10/02, 1:30 pm PT.