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You may have read on Revenews that Overstock was considering terminating its California affiliates and that it likely wouldn’t unless AB1625 passed (that is the bill that changes the definition of nexus, or presence in the State, to include any out-of-state store with online affiliates who are based in California).

Last year, Overstock terminated its relationship with all of us after the Governor vetoed the legislation. The Governor’s office called Overstock’s CEO and issued a statement that he would not let this bill pass. He is still governor. [Note that I think that the bill will become law if Jerry Brown wins the gubernatorial election in November but not if Meg Whitman wins.]

It happened. We just received an e-mail from Commission Junction, Overstock’s affiliate network, informing us that we have been terminated from its affiliate program (see below). Note that CJ’s policies require a one-week notice so I assume that Overstock is sending a message to state legislators that this is what will happen should they enact AB1625 into law. [Note: I cannot find any information that would show that AB1625 was passed by either house of the California Legislature.]

Dear Cashbaq,

We regret to inform you that the Commission Junction advertiser BizFilings has chosen to expire its affiliation with you effective 7-Sep-2010.

If you would like to locate another advertiser in the network to partner with, login to your Account Manager (http://www.cj.com/login.jsp) and visit the Get Links tab.

Best Regards,

Client Services
Commission Junction

It looks like Overstock is playing chicken with the California Senate:

If you are an affiliate manager, please wait until after the bill passes, the Governor vetoes it and the Legislature doesn’t have the votes to override the bill to terminate us. We’d really appreciate it.

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New Flash: Overstock Terminates Its California Affiliates

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Yesterday Overstock announced its intention to terminate California affiliates should AB 1625 pass. In a  letter to all of its affiliates, Overstock urge opposition to AB 1625 stating that:

There is a measure under consideration in California, likely to be voted on tomorrow, which, if it passes, will likely result in the termination of our business connection.

The letter goes on to urge California affiliates to oppose the passage of the legislation and specifically calls out Section 1 as being the point of contention.

In reading AB 1625 (PDF) the measure is essentially a motion by the Budget Committee to allow changes to the Budget Act of 2010. The section Overstock identifies as being problematic, Section 1, reads:

SECTION 1.  It is the intent of the Legislature to enact statutory
changes relating to the Budget Act of 2010.

In the bill itself there are no definitive statements as to the Legislature’s intentions. The only clues to what changes might be enacted are based on the political climate within California. AB 178 was only stopped by a veto from Governor Schwarzenegger. Odds are that proponents of that bill will use AB 1625 to enact measures supported in AB 178 including California’s version of the so-called Amazon Tax.

We queried Overstock as to its specific concerns over AB 1625 and received the following response from their PR department:

It is the end of the California legislative session and the budget isn’t done. We continue to learn that those who seek to impose this tax measure have some new strategy. Yesterday, we learned more new information (in regards to AB 1625) on which we acted. We don’t want to be forced to terminate our affiliates, and we are glad those most affected are responding and their voices are being heard by senators who need to understand the strong counterpoint to this unwise tax legislation.

So it would appear that Overstock is leveraging their affiliates to act as a counterpoint to a bill they see as threatening, even if the actual purpose of the bill is nebulous. Rebecca Madigan, Executive Director of the Performance Marketing Association,  posted an excellent synopsis of the politics of the situation.

Although we don’t necessarily agree with Overstock’s tactics we do feel that any enactment by California of an Affiliate Nexus Tax is a terrible decision. There is still time for California affiliates to contact their representatives. The PMA has a great resource that provides a painless guide on how to find your representative including suggested email templates for you to use.

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News Brief: Statement from Overstock Regarding California Bill AB 1625

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2.2 billion dollars in revenue and 11 percent growth seem like strong earnings. That is, unless your eBay. The strength of eBay’s Q2 earnings, driven mostly by PayPal, were undermined as eBay cut its fiscal forecast by $250 million. Such earnings adjustments are enough to make $20 million in fraudulent affiliate commissions seem like a small matter.

Due to Amazon’s growing strength and marketplace shifts, eBay’s market relevancy has slipped over the years. They just seem to be out of mind. As consumers adopt social media, eBay has become less exciting.

So how do you bring the excitement back? eBay hopes money will help.

Resorting to bribes, eBay has launched eBay Bucks a loyalty program that will offer consumers 2 percent back on items purchased on the site through PayPal. Once the Bucks are rewarded, consumers can use them towards additional eBay purchases. The program excludes all purchases from Business & Industrial Capital Equipment, Real Estate, and eBay Motors categories.

Loyalty programs are historically healthy models with companies as large of Discover using them to great success. Although the model is proven, success is often dependent on how well consumers click with the company itself. Microsoft Bing’s shuttering of their cashback program is a clear example of what happens when a program doesn’t click.

Interestingly, one of the primary methods people did use Bing’s Cashback was on eBay. How this bodes for eBay’s program remains to be seen.

As a side note, eBay implementing such a loyalty program may have an impact on affiliate relationships especially those in the loyalty space. Will consumers get to double-dip on awards from eBay and its affiliates? Will eBay count sales referred by an affiliate if the consumer was previously enrolled in eBay Bucks? It will interesting to whether eBay will play fair with its own affiliates.

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eBay Hopes Shoppers Will Cash In On eBay Bucks

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Microsoft continues to wrestle with the e-commerce side of its search engine, Bing, in an effort to more effectively compete with Google’s dominance.

The company discontinued Bing Cashback as of July 30. Bing Cashback was a novel way for shoppers to save money by earning a percentage of the price paid for an online product as “cashback” – in essence, an instant rebate. The cashback was paid out of proceeds from search advertising fees from participating stores. Consumers received cashback payments through PayPal, direct deposit, or mailed checks.

George Michie, CEO & Co-Founder of The Rimm-Kaufman Group, a search engine marketing firm, tells Internet Retailer, “Cashback was a big win for merchants and users, but I don’t know how big a win it was for Bing in terms of buying market share.” According to Microsoft, while Bing Cashback attracted over a thousand merchant partners, it “did not see the broad adoption that we had hoped for.”

Bing is trying to remove the sting from killing Cashback with the launch of Bing Shopping, which appears as a navigational link on the Bing home page. Bing Shopping is following Google’s lead in offering online retailers free clicks from the Bing Shopping page. Microsoft confirmed that a product feed service for merchants was being offered without charge, so product listings and images show up in search results as essentially free placements. Eventually, Microsoft is expected to add paid advertising to the mix.

Bing Shopping is a nicely organized shopping portal, with featured products, featured stores, and “products people are talking about.” It will offer some new search marketing features; for example, “shopping slide shows” allow consumers to click through product photos and purchase a product of interest, directly through the portal. Bottom line, however: Bing Shopping is basically similar to Google Product Search, with some added functionality.

Bing Shopping will also be similar to Google Product Search in ranking products. Rick Backus, co-founder of CPC Strategy, an online data firm, tells Internet Retailer, “Bing’s data on search clicks will be part of its overall algorithm that ranks product search results, giving popular retailers an advantage.”

But the big question about Bing Shopping is whether the search engine can drive enough traffic to build the numbers merchants want, especially in terms of sales conversions. Bing Cashback presented a pretty compelling reason to shop because of attractive rebate offers. Bing Shopping has no such built-in incentive.

Bing Shopping needs to do two things quickly: get as many merchants as possible to participate, and get as many shoppers as possible to visit. Launched last summer, Bing has seen increases in traffic, but its U.S. market share is under 10 percent, while Google’s is over 71 percent. Microsoft has also been losing money in its Online Services division.

If Bing Shopping can’t make the cash registers ring for online retailers, dumping Bing Cashback may come back to haunt Microsoft.

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Will Shoppers Click with Bing Shopping?

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The BlackBerry Torch 9800 is being introduced this week on the AT&T network. The reviews are in and they are, at best, mildly enthusiastic. Essentially, reviewers seem to agree that RIM, BlackBerry’s maker, is just keeping up with the Android and iPhone, rather than leaping ahead.

While the Torch isn’t likely to light a fire under the Android and iPhone, the phone is significant because of what it represents about our smartphone future. BlackBerry, after all, has been the market share leader in mobile phones for business use. The Torch 9800 is BlackBerry’s acknowledgment that:

1. Such “consumer” features as a touchscreen keyboard can’t be ignored, the Torch has both a touchscreen keyboard and the more traditional BlackBerry keypad.
2. Apps matter.
3. Seamless Web connectivity is essential. The Torch, says its maker RIM, features “expanded messaging capabilities with intuitive features to simplify the management of social networking and RSS feeds” and integrates access to the BlackBerry Messenger, Facebook, Twitter, and MySpace, as well as dedicated YouTube and Podcast applications.

Perhaps even more intriguing than the BlackBerry Torch introduction is this breaking news: Bloomberg is reporting that the three leading cell phone networks in the U.S., normally arch-rivals, are cooperating to potentially create a new smartphone payment system that could replace credit and debit cards.

AT&T, Verizon Wireless, and Deutsche Telekom’s T-Mobile USA are supposedly involved in a venture that “would let a consumer pay with the contactless wave of a smartphone.” The system, which may involve Discover Financial Services and Barclays bank as financial providers, is planned for testing in four U.S. cities.

Richard Crone of Crone Consulting, an industry consultant, told Bloomberg, “This is definitely a game-changer.” Mobile carriers, Crone said, “are the biggest recurring billers in every market. They are experts at processing payments.”

The implications of this venture are enormous. For one thing, the move directly threatens the decades-old domination of Visa and MasterCard as the only credit/debit games in town. Discover, always a credit card laggard behind these two companies and American Express, could have much to gain.

Such a capability would finally bring the United States closer to Europe and Asia in terms of sophisticated smartphone usage. Contactless technology using smartphones to make store purchases is already available in the U.K. and Japan. Retailers would probably be only too happy to accept a new payment competitor, since they have fought with Visa and MasterCard over transaction fees for years.

While the new technology applies primarily to the store environment, it has an impact in the online world as well, since mobile payments without relying on credit cards could streamline e-commerce even further.

Reportedly, Visa and MasterCard are working on their own mobile payment systems. Some banks are also testing new technology. According to Bloomberg, Citigroup launched “MasterCard PayPass” stickers in June that, when affixed to the back of a mobile phone, can be used to make a contactless payment at some 230,000 U.S. merchants. Alternative payment solutions are also being offered by a number of start-ups, including Bling Nation, Boku, and Zong.

Payment systems are just one area that will change with the advent of ever more sophisticated smartphones. QR codes, which I’ve discussed in a previous post, are another. QR codes (they resemble a square barcode) embed information that camera-enabled smartphones can read with a “QR scanner” app. Magazine ads or window signs with QR codes can be scanned to receive promotional information.

For the upcoming Fall television season, for example, the Fox network is using “Fox Codes” in magazine ads to offer viewers access to Internet-based information about the network’s shows, including videos and cast interviews. CBS is reportedly using QR codes for some of its shows as well.

“Geo-triggered” applications are also in vogue. The Android and iPhone run such applications in the background and can alert users to a specific event. For example, DailyCandy, an email newsletter for women, just implemented “Stylish Alerts” as an Android app. When a consumer is near a current local event, such as a designer sale, the app can send an alert to the shopper’s phone. The service is only available in New York City for now, but will likely be expanded to other cities.

With today’s smartphones, we are finally witnessing the convergence of mobile communications with the Internet. From a marketing perspective, this puts an individual consumer within reach, just when that consumer is ready to shop and make a purchase. Major new opportunities for retailers and online marketers alike to connect with consumers will now be available. In fact, the smartphone of the future is just around the corner. Are you ready to take advantage of it?

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Pondering The Future of Smartphones

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The other day, we covered how Google is testing a new paywall system for newspaper called Newspass. But given where the newspaper industry is headed, there’s a very a plausible chance that Google is coming too late to the party.

Essentially, newspapers have struggled with their online revenues because they’ve been unable to successfully implement either a paid subscription or micropayment model on a widespread level. Google is hoping to change that with Newspass, a new a paywall system that offers users one-click access to multiple sites/networks through a single Google Account (like Google Check Out). Essentially, Google seems to be testing whether paid subscriptions and micropayments become more viable revenue models if users can manage their purchases through a single, third-party account.

As good as an idea that Newspass looks like on paper, however, the product faces quote a few challenges.

1. Google’s Non-Search Track Record

Google’s track record beyond search-related products is less than stellar. Essentially, the list of Google’s failures is long and growing, with Google Wave added to it less than a week ago. So if Google hopes to keep Newspass off of this list, it will need to ensure that a strong marketing strategy is in place.

2. Marketing Challenges

Now, Google has had some success beyond search, and Google Checkout is one example that’s particularly relevant to Newspass. But just like Google Checkout has to target both merchants and consumers, Newspass must also engage the market on two fronts simultaneously: publishers and readers.

As it stands, Newspass intends to solve a problem for publishers by catering to readers. That means that the Newspass team must successfully deploy two separate marketing strategies simultaneously. Granted, this isn’t impossible, but it does double the workload for Google.

3. Growing Digital Revenues

Newspass is set to bolster digital revenues, but many newspapers are already experiencing digital revenues growth on their own. As The Wall Street Journal reports:

Several newspaper publishers have reported solid growth in digital advertising revenue for the second quarter in recent days, helping offset continuing declines in print advertising. The New York Times, for instance, reported 21% growth in digital-ad revenue against a 6% drop in print advertising, keeping total advertising “roughly flat” with the year-earlier quarter. Digital now accounts for 26% of its total ad revenue, up from 22%.

4. Newspapers are Losing Less and Less

Even though print ad revenue has continued to fall, print might be pulling out of the nosedive. As we reported last month:

Editor & Publisher reported that even though newspaper print and online revenue dropped 9.7 percent year-over-year in Q1 2010, it was the mildest drop in three years. “The 9.7% drop compares with a 28.3% year-over-year decline in the last quarter of 2009, and a 29% drop in Q3 2009.”

Part of the cause behind these changes in newspaper ad revenues, no doubt, is that there’s just less competition. Essentially, enough of the smaller guys have gone out of business, that the largest ones (such as the NYT) have been able to capture more of the market more easily than before. But this also means that newspapers are under considerably less pressure to adopt entirely new processes — such as integrating an entirely new paid content system such as Newspass.

5. Increasing Production, Lowering Costs

Newspapers are also finding cheaper, more efficient ways of sourcing their content. For instance, the San Francisco Chronicle, the Houston Chronicle, and USA Today have started using a content farms to source content for some of their sections. This is allowing them to broaden their coverage of topics without having to invest in additional editorial infrastructure.

6. News Sources of Revenue

Many major newspapers companies are developing completely new sources of revenue by either partnering with or outright acquiring online marketing agencies. Specifically, Hearst, Gannett Newspapers, and the McClatchy company have all started offering online marketing services to advertisers in the various local markets they serve.

7. New Distribution Channels

Mobile apps are offering newspapers an entirely new distribution channel for their content, and the opportunity to bolster ad sales through mobile content is clear and present. The Globe and Mail, for instance, is already serving gets 7.5 million page views / month through its iPhone app alone, and advertising is embedded throughout each of these pages.

8. Subscription Revenue is Obsolete

Subscription fees are a revenue model designed to cover the costs of distributing content on a physical piece of paper that had to be delivered to readers’ doorstep. Online content isn’t plagued by such overhead, which is probably why online readers have been reluctant to pay for content.

With newspapers adapting to the new content marketing by adopting new advertising, production, and distribution models, they might be reluctant to try and impose such outdated costs on their readers. After all, the first newspapers to do so can risk losing their readers to any competition that holds out. After all, you can’t teach a new user and old (obsolete) trick.

9. Users Habits

There’s also considerable reason to doubt that, at this point, users will be willing to start paying for content. Essentially, users have been consuming free content for quite some time. They’ve also seen paid content models fail time and time again. So it might be impossible for newspapers and/or Google to convince users to start paying for content now.

10. Bad Blood

The relationship between newspapers and Google is a strained one at best. Essentially, many newspapers feel defrauded because they’ve received no compensation for their content appearing in Google News, but Google has made revenue off of the Adwords ads that appears alongside that Google News content. So it might be unrealistic for Google to now expect newspapers to trust them with revenue and sales data.

Early in the Game

For all the challenge’s facing Newspass, it’s still very early in the game. After all, the service is still only being tested, and only in Italy. It could very well turn out that Google doesn’t take Newspass beyond Italian borders.

Similarly, it’s just as likely that Newspass will pique the interest of many newspapers. While some newspapers cut Google out altogether, others have invested considerably in SEO.

The world of news publishing is going through so many changes, that it’s hard to tell where things will end up exactly. So like all things related to newspaper publishing, we’ll just have to wait and see what happens with Newspass.

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In today’s digital world the hottest new thing often has a lifespan that is equivalent to how long buzz about it trends on Twitter. Certain movements that were once cutting edge fall to the wayside or become part of the daily routine without much fanfare.

Blogs seem to have fallen into that element of routine. Since 2002, Technorati has indexed over 133 million blogs, and over three-fourths of all Internet users read blogs, according to Technorati’s “State of the Blogosphere 2009” report. With the wide adoption of blogging, there is rarely any buzz about blog technology itself.

Recently, however, Tumblr has managed to create some buzz worthy news boasting 25,000 new accounts daily, according to The New York Times, and serving up 1.5 billion page view monthly. For those that don’t know, Tumblr is a microblogging tool that essentially allows users to send anything quickly – including audio clips, images, videos, and of course, text. Other users can instantly “reblog” anything they receive, adding an important viral component to the service.

But Tumblr’s game is more about influence than numbers. David Karp, Tumblr’s founder, tells The Times that unlike Facebook and Twitter,

“Who is following you isn’t that important. It’s not about getting to the 10,000-follower count. It’s less about broadcasting to an audience and more about communicating with a community.”

Karp says creative expression is important on Tumblr as well – it isn’t just about publishing links to other articles and blog posts. Indeed, Tumblr offers the ability to choose from hundreds of themes or create an original theme, post virtually anything with minimal effort, create “photosets” or digital photo books, use a “Bookmarklet” to share anything you’re looking at on the Web, email or text posts from any mobile phone and, of course, publish to Facebook or automatically send a tweet.

Currently, Tumblr is gaining traction with the media because it gives them a means of communicating in a novel way with Tumblr’s primarily youthful user base. According to The New York Times, media outlets that have opened Tumblr accounts include The Atlantic, The Huffington Post, National Public Radio, Newsweek, The New Yorker, and Rolling Stone.

Alexa Cassanos, PR director for The New Yorker, told The Times that the magazine used Tumblr to promote its July 5 cover concerning the Gulf Coast oil spill. “We can highlight graphic content like photo essays or slide shows to an audience that may not read the magazine,” says Cassanos. “You just couldn’t do that, visually, on Twitter or Facebook.”

Another benefit of Tumblr for publishers is relationship building. James E. Katz, professor and Chair of the Department of Communication, Rutgers University, tells The Times that the typical interaction a publication may have had with a reader years ago was limited to a letter to the editor. Now, he says, publishers are realizing “there is a lot of expertise, wisdom and ideas in their readership.”

It may be overly simplistic to think of Tumblr as “Facebook and Twitter’s new rival,” which is what the headline of The New York Times article proclaims. But Tumblr does prove one thing: If you think you’ve seen it all in social media, just wait a minute and you’re sure to see something new.

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Adoption By Media Give Tumblr High Hopes

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Wave, which was once touted as the email and social media killer by Google, has been phased out by the search giant. It will still be around, hovering on the web with its diehard users, but Google plans to let it die on the vine.

Somehow the billion-dollar bully of the Internet wasn’t able to put together a social networking success. Despite its commitment to the promotion and development of Wave, the product was always met by a collective shrug by the public. Google should be worried because its Buzz product is getting a somewhat similar reaction right now; when it’s not clogging up the GMail inboxes of curious onlookers that is.

So why was Wave, which allowed real-time email threads, playbacks and drag-and-drop sharing, such a big failure? It had the features that users were interested in, but despite coming out as social networking fervor was picking up steam, it never got any traction.

One of the biggest reasons was the exclusivity that Google used to first roll it out. Since Wave was first opened by invitation only, the initial excitement involved with getting an account was soon eclipsed by the simple fact that none of your friends were there to talk to.

And that type of exclusivity is a sign that Google still really doesn’t understand what drives social media.

For many, Google Wave was an empty room that no one had the patience to fill up. Why mess with waiting around and yelling your name into the darkness on Wave, despite its cool features, when you go log on to Facebook and talk with everyone you knew, share pictures, videos, links and — probably an overlooked key — ease of use.

Sure, when you signed up for Wave, you were given invitations to email to your friends. But if you were tepid and awkward about using the site, they would be too. Telling someone “Hey, let’s try Wave and see if we can figure it out” is a lot different than saying, “Dude, you need to get on Facebook so we can chat.” While such an invitation rollout strategy worked for Gmail it crashed for Wave.

Wave was innovative and slick, but in the end it was clunky and not-intuitive, which put it at a disadvantage when compared to Twitter, Facebook and other sites.

For its part, Google is doing what innovative companies should do: kill bad products and move on. According to TechCrunch, Eric Schmidt, CEO of Google said the company has a try, fail and keep creating mentality.

Wave may have been too ahead of its time, but most of all it was just too much of a closed system to matter to the public at large. The products Google has rolled out that have worked have been exceptional – Docs, GMail, Google Talk not to mention search. So for that, we should give Google some credit, they are smart enough to move on.

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Google Wave, We Hardly Knew You

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Google has received a lot of blame for the decline of newspapers. It looks like Google might now be poised to bail newspapers out and make them reliant on the search giant.

Google is testing a new paywall system. Called Newspass, this new system seems like it can make micropayments a viable revenue model and make Google an ecommerce behemoth.

Bad Blood

Some newspaper owners have accused Google of making a profit from scraping their content. Essentially, many newspapers feel defrauded because while they’ve received no compensation for their content appearing in Google News, Google has made revenue off of the Adwords ads that appears alongside that Google News content.

Blood is so bad between Google and some newspapers that many newspapers have ignored Google’s efforts to help them drive traffic to their restricted content. For instance, rather than using Google’s First-Click-Free service to let Google index content behind a registration wall, Rupert Murdoch’s News Corporation blocked Google from indexing its newspaper content altogether.

Google’s Paywall Solution

One model tabled to help newspapers generate online subscription income was micropayments. The model was never widely implemented, however, because of widespread doubt that a user would be willing to repeatedly charge minuscule transactions from multiple sites to their credit cards.

But Google is now working on Newspass, a paywall system that would allow users to manage subscriptions and micropayments across multiple sites/networks through one centralized account. And as Matthew Buckland wrote for Silicon Valley Watcher, Google is already piloting Newspass with Italian publishers, and it’s designed to support multiple platforms:

The search giant will apparently launch “an integrated payment system” allowing users to buy news content with just “one click”. Newspass would allow publishers to use a single infrastructure for Web, mobile and tablet computers to monetize their content.

Importantly, [...] consumers will have a single log-in across a multitude of news sites that would be flexible enough to accommodate various kinds of payments, including long-term subscriptions and one-time micropayments. It would be a one-click payment for access, not too dissimilar from Google Checkout.

The one-click access to multiple sites could potentially be a deal closer for micropayments and other paid subscriptions because it would reduce friction. Essentially, users might be more likely to pay for content if all recurring and micropayments are managed under one account that they already have through a brand that they already trust.

Just Another Brick in the Wall?

Of course, this all begs the question: is Google too late? In addition to Google having failed at many things, it might be too late to expect users to start paying for what they’ve been getting for free for so long.

For instance, there’s no guarantee that mainstream publishers will go for Newspass. They might be too uncomfortable with Google having that much access to data about both their traffic and revenue.

That being said, it’s equally likely that this kind of product and level of support could be the tipping point for news publishers to fully embrace Google’s suite of tools (such as First-Click-Free). In the meantime, we’ll just have to sit back and watch how things play out in Italy.

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Google Moves to Corral Newspapers into Newspass

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Rather than build their way into social gaming, Disney opted to acquire Playdom who is the creator of Mobsters, the #1 game on MySpace, and a lesser player on Facebook. It’s an easy move to second guess and say that Disney should have bought a larger social network game company. While that was indeed an option for Disney, that line of thinking ignores the leverage-able market positions available to them and focuses on an assumption that Disney will not be able execute.

Disney’s experiments in the micropayments market

Back in 2005, Disney was involved in a micropayments market experiment, and I was in the fortunate position of running the marketplace behind that experiment which also included Microsoft and HMV music among others. In that experiment, there were two major categories of content: branded and unbranded. I’ll focus on two components of those, music and games moving forward.

In the music category, we featured an independent music provider with a catalog of over 1 million songs alongside music provided by HMV music. Single songs were priced from $0.25 through $1.25 for indie tracks, set by the artists, while HMV music tracks were at approximately $1 or $1.50. When we measured sales across both music providers at the end of each week of the trial, branded HMV music outsold indie music some weeks by 10 to 1.  Personally I was guilty of the same bias, since I tended to favor branded artists as well.

We also had games from other indie developers and publishers alongside games published by Disney in the marketplace. Again, we saw Disney games outselling non-branded games by at least 2 to 1 and often more. What was surprising was that even the best indie games rarely beat the Disney branded titles. Even more surprising, one of most frequent complaints was that some of the branded games were ‘crap’, and when we investigated further, people reported that they just bought the game because of some Disney character name they saw on it.

Why Disney branded games will triumph

Now, how does that behavior apply today? I ask you to name any character from the games by Zynga, Crowdstar, or Playdom. Can you name any strong traits of any characters in those games?  Let me change the question up a bit. If your friends, or daughters played DisneyVille, would you play too? What about an X-men Wars game?

Wait you say, it’s about game play! To that I ask, what game play is so compelling on these social games? Do the cute characters have an impact? Is the music that important? Is cross marketing important? To that I say, you may soon play a game with Nemo and “Finding Nemo” movie related music, where you can get power-ups and virtual goods with your happy meal from McDonald’s where you also get Disney character figurine.

Is the social engineering going to be lacking? Probably not. Not even mighty Zynga could knock Playdom out of the #1 spot at MySpace, so Playdom must have been doing something right. Oh, and don’t forget that MySpace is still more about entertainment than Facebook. While many people don’t use MySpace as their primary social network, including myself, I can still find and access music and videos an order of magnitude faster and efficiently there than anywhere else. So while I might read status updates on Facebook, I find music, videos, and bands on MySpace – AND, I play games on both platforms.

So if games are supposed to be about entertainment, and Disney is about entertainment, then the Disney-Playdom deal has the potential to rock the social game world. In addition to the standard Disney stable of characters, Disney’s Marvel Studios also has the rights to 5000 Marvel characters as well.  If the Playdom team made an X-men game that played across the entire comic’s time-line, would that have draw? If you think strategically about where a well executed plan from Disney would take you – it’s not a hard stretch to see integrated marketing dominating the cross-sells of the near future.

A Disney game campaign imagined

So what could this mean? How vast would this power be? Imagine the following scenario:

Imagine Disney creates a game. Let’s call it Happy Nemo World. The game  the characters of Nemo, plus a few more personalities from the Finding Nemo movie. The following steps would come natural to a company that is versed at leveraging brand relationships to create advertising opportunities and buzz:

-As an in-game advertising deal, Disney partners with McDonald’s to launch with Nemo based happy meals w/partner McDonald’s, includes codes for special power-ups in the happy meal.
- ABC has a 2 hour holiday special featuring Happy Nemo World, adding the new characters, also offers special codes on TV.
- Disney radio also promotes the holiday special, game, and offers power up codes for special items.
- Disney stores nationwide find a new opportunity to sell Nemo plushies but this time with power-up codes.
- Disneylands and DisneyWorld introduce a new ride with characters from the game and special power-up codes on the ticket
- Disney introduces a new movie on DVD (like the nearly endless Aladdin series) – “Nemo finds a friend”, continuing the Nemo story, introducing characters from the game, and also providing power up codes.
- Disney runs a Twitter campaign where everyone who posts a link to the game also receives special gifts, with a similar one on Facebook
- Playdom games on Facebook and MySpace offer a cross-sell to the new game, and discounted movie tickets if you use play the new game.

Imagine the above scenario played out across Disney’s properties each already with their built in fanbase. Who else has that kind of marketing leverage and power to make those deals happen quickly? Certainly not Zynga. If/when Disney really wants to make an impact, they could bring to bear a tidal wave of marketing and leveraged brands that has yet to be seen in the social game space.

Disney is rapidly moving into a position where it will have the chance to dominate the entire social game industry by bringing recognizable brands and characters to new or even existing games, followed by cross-marketing in film, TV, radio, and other games. Such an endeavor is ambitious, requires massive cat-herding management skills from within Disney, but is well within the reach of the technology, business units, and existing footprint of its properties.

I say it’s Disney’s game to lose by failure to execute. It won’t be easy, but it’s usually dangerous to bet against the mouse.

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Disney To Use Playdom Acquisition To Redefine Social Games And Crush Zynga

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These days, recommendation engines are so common on larger online retail sites that you might not give them a second thought. Amazon and eBay have long been using personalization technology to create a shopping experience that’s highly customized.

The whole area of collaborative filtering, the behind-the-scenes technology used to drive customized recommendations, has advanced to the point that now, it has become easier than ever to implement without the huge investment in development. It doesn’t even have to degrade site performance like it did in the old days.

Susan Aldrich of the research firm Patricia Seybold Group believes recommendation engines will become commonplace next year. A survey Seybold and the Institute Telecom Paris conducted with 100 European and U.S. companies indicated that every one of the responding companies was planning to add a recommendation engine if it didn’t already have one.

Aldrich thinks one main reason for the new popularity of recommendation systems is advances in collaborative filtering. She says it uses modern web analytics instead of longs lists of business rules. The new systems are easier to update and more efficient.

Companies like Webtrends and MyBuys are on the forefront of collaborative filtering. Webtrends just announced full availability of its “Optimize Profile Enhanced Targeting” solution. It provides marketers with the ability to deliver a personalized web experience based on past behavior of visitors on their websites. Casey Carey, vice president at Webtrends, says profile-based onsite targeting “presents a great opportunity to maximize relevance, increase conversion rates, and ultimately see a significant return on [users’] marketing investments.”

MyBuys, which provides personalization for multi-channel retailers, has introduced “Kinetic Advertising.” According to CEO Bob Cell, this “is a format that enables our display ads to incorporate movement, that let users interact with them and see a dynamic set of products that fit their profile.” With a Kinetic ad unit, says Cell, you can “populate a custom set of products and offers based off a shopper’s interactions with a brand that are specifically tailored to that individual.”

Aldrich draws an intriguing analogy for the recommendation engine – she likens it to a global positioning system. “If a site visitor doesn’t take the recommended path,” she says, “it will come back and recommend another path.” A key strategy of the recommendation engine is to use a site visitor’s known shopping history to put “them on a shopping path that other shoppers with similar interests have taken before completing a purchase.”

Not surprisingly, says Aldrich, companies making use of or planning to implement recommendation engines see value in cross-selling and upselling. Obviously , if an online retailer can get a customer to make an additional purchase at the same time as he or she is buying a product, the incremental cost for the sale is negligible. Recommendations, says Aldrich, have “high impact on conversions and order size.”

Expect to see more recommendation engines popping up on even smaller online retailers’ sites as plug-and-play collaborative filtering technology becomes more widely available.

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The New Must Have Accessory for Online Retailers? Recommendation Engines

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There are sure signs that Amazon is worried about Apple’s iPad. Their focus on rolling out a “cheap” version of the new Kindle WiFi, scheduled to ship August 27^th with a $139 starting price point compared to the current $189 version, will undoubtedly tempt some customers to rush out and buy one.

But Amazon shouldn’t be worried about the iPad as a Kindle killer. They should be thinking about India, not Apple.

When the new Kindle is compared to India’s $35 laptop,  and its price target of $10,  it looks a lot less attractive.

In a previous piece, I wrote off the $35 laptop as a wannabe computer because it lacked a number of important features, like the ability to store the large amounts of data usually associated with a hard disk or high capacity solid state drive. I still stand by this opinion.

But when the laptop is looked at as an alternative, cheap ebook reader in comparison to the Kindle or Apple’s iPad, it easily wins hands-down. This makes it especially attractive to me since I said I’d buy an ebook reader if it was priced below $50.

In India, targeting the ebook reader market could potentially be a match made in heaven, especially if you factor in that India’s schools are moving towards using laptops as a textbook replacement.

The one-time capital expenditure incurred with purchasing these computers would be than offset by the paper savings. Schools could load textbooks in an ebook format rather than stock their printed equivalents. And there’s more than ample time to recoup the costs over the 4-year or 10-year academic cycle of the students using them.

That’s fine for India, but what about us?

A $35 ebook reader could revitalize reading for a generation weaned on the Internet, video games, and cell phones. But it’s not a perfect solution because the laptop’s Linux OS will likely need a tweak or mod to be anywhere near the usability of the Apple OS. An intuitive user interface and a suite of useful apps would make it even more attractive.

After all, what’s a platform without widgets, apps and content?  And while apps are meant to up sell a device and distract the buyer with toys in order to pay more for a phone or for a reading device they have been the bugbear of many new computing platforms, whether you’re referring to the Palm PDA, Sharp Zaurus or until recently, the iPod.

But there are practical issues before India slays the Kindle. Costs associated with marketing, importing, and distribution to other countries have a way of inflating price. And, while hip with geeks, Linux hardly has adoption among the masses.

But with a $35 price point the India laptop has an advantage in low market cost over any device.  It does face an obstacle in regards to access to a reading inventory. It’s doubtful, after all, that Amazon will hand over theirs. Fortunately, having such an inventory accessible is a small hurdle, especially when there is quality content available, like the 33,000 books found at sites like Project Gutenberg.

Combine this inventory with cross platform compatibility into other ebook stores and the $35 laptop is suddenly an attractive proposition. The point is that as an ebook reader a device such as the one India has developed has tantalizing prospects and the ability to create market shift as well as be a potential Kindle killer.

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Companies are learning a tough lesson about customer empowerment: give your customers reasons to communicate and they’ll do so willingly, sometimes in ways you can’t control.

American Express recently released findings of a customer service survey the company conducted online among a random sample of 1,000 U.S. consumers age 18 and over. The same survey methodology was used in Australia, Canada, France, Germany, India, Italy, Japan , Mexico, the Netherlands, Spain, and the U.K.

The findings indicate, not surprisingly, that nine in ten Americans consider the level of customer service important when deciding to do business with a company. But only about one-quarter of them believe companies value their business and will go the extra mile to keep it.

Good News / Bad News

The good news is that, contrary to a commonly held belief, customers will talk more about a positive experience with a company than a negative one. Three-quarters of respondents said they are very likely to speak positively about a company after a good service experience, while 59 percent said they are very likely to speak negatively about a company after poor service.

But here’s the bad news companies need to consider: nearly half (48 percent) of respondents report always or often using an online posting or blog to get others’ opinions about a company’s customer service reputation. What are they looking for? Negative opinions.

According to American Express’ survey over half of respondents (57 percent) say they believe more in negative reviews than positive ones on blogs, and 48 percent believe more in negative reviews on social networking sites. Jim Bush, Executive Vice President, World Service for American Express, explains:

“The Internet has made service quality more transparent than ever before. In the online space, positive recommendations are important, but people often give more weight to the negative. Because consumers can broadcast their views so widely online, each and every service interaction a company has with its customers becomes even more crucial.”

Even more telling is the fact that Americans are seemingly losing their patience with poor service. In fact, 81 percent of respondents have decided never to do business with a company again because of poor customer service in the past. Half of the respondents say it takes just two poor service experiences before they stop doing business with a company.

According to Brand Reputation CEO Graeme Crossley:

“A customer that has a good experience will typically tell 3 to 5 people, but a customer who has a poor experience will tell more than 20. When this is trend occurs via the web, these numbers can rapidly multiply and could spell disaster for brands that don’t have strategies in place to combat online negative chatter.”

How should consumer ratings impact your social initiatives online?

When it comes to consumer ratings for a product or company, for example, should a company stay silent in the face of a negative review? Given the implications of this survey, probably not. Maybe a company can ask satisfied customers to post positive reviews on the same site, or respond to the review if allowed.

A similar strategy might be wise when it comes to social media. Companies need to be proactive and react quickly to both negative and positive feedback with the objective of both engaging a consumer in a dialogue and deflecting any negative follow-on.

Gatorade recently set up “Mission Control” (video below), a central facility that’s being used to monitor the sports landscape, monitor online discussions, track sports trends and buzz, track brand attributes, track media performance, and do proactive social media outreach. Obviously, not every brand marketer can afford a sophisticated “Mission Control,” but this is an example of how seriously big brands take social media – and it’s a good lesson for every company.

Click here to view the embedded video.

Combine perceptions about poor service with reliance on blogs and social networks for opinions about companies and you can see a conundrum looming for marketers. It becomes ever more important to not just provide good customer service, but also to monitor online complaints and do whatever possible to resolve them quickly and to the satisfaction of the consumer.

When a consumer takes the time to complain about a company’s customer service online, that company had better pay attention – because it appears that’s what other consumers are doing.

Read the rest here:
American Express Study Finds Consumers Seek Out Negative Opinions

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The defendants in the following cases are considered innocent until proven guilty in a court of law. Additionally, the general schemes alleged in the cases are practices I have personally observed of numerous affiliates over the years.

Background

On August 28, 2008, eBay filed a civil suit against Shawn Hogan, Brian Dunning and Todd Dunning, along with their respective company entities Digital Point Solutions, Kessler’s Flying Circus, Thunderwood Holdings and BrianDunning.com. The suit alleges numerous actions including fraud, racketeering activity under RICO (Racketeer Influenced and Corrupt Organizations), wire fraud and unauthorized access of eBay’s servers. See full complaint (pdf).

The short version is that eBay alleges that the affiliates named engaged in “cookie stuffing”, specifically generating hidden forced clicks of their Ebay affiliate links. Hidden forced clicks are when an affiliate link is invoked without a physical click by the end user. Various forms of technology and/or coding are used so that the merchant’s site is not actually seen by the end user. The alleged activities in question occurred between 2003 and mid 2007.  eBay claims measures were taken to hide the activity and that the defendants denied any wrong doing when questioned by CJ, which at the time was still running  eBay’s program, regarding suspicious traffic.

While this case should be of significant interest to affiliates, networks and merchants, it is a civil matter. Currently the case is unresolved with the outcome pending before the courts.

Criminal Charges Filed

On June 24, 2010, two separate indictments were handed down by a grand jury in California against Shawn Hogan (pdf) and Brian Dunning (pdf) following an FBI investigation by the Cyber Crimes Department.. The indictments charge Hogan and Dunning with wire fraud and criminal forfeiture. Hogan was charged with ten counts of wire fraud and Dunning with five counts of wire fraud.

On July 22, 2010, Hogan and Dunning appeared before the court. Both were released under a $100,000 property bond and surrendering their passports. Both Hogan and Dunning entered not guilty pleas. Hogan’s next court date is September 9, 2010 and Dunning’s is August 19, 2010.

According to court documents, the maximum penalty in both cases is:

• Imprisonment of 20 years
• Maximum fine of $250,000 or twice the gross gain/loss (whichever is greater)
• 3 years of supervised release
• $100 special assessment (per count)

The indictments parallel the eBay civil suit, accusing the affiliates of engaging in hidden forced clicks within the eBay affiliate program.

For years cookie stuffing techniques have been discussed and debated in the affiliate marketing world. I’ve seen a rather casual attitude taken by some regarding the practice. I’ve seen long debates about what constitutes a physical click by the end user. I’ve seen black hat techniques for cookie stuffing and hiding the behavior discussed publicly. For me, one striking point with the indictments is that the FBI and a grand jury were evidently able to grasp technical aspects of affiliate marketing and tracking, and ultimately arrived at the conclusion that the tactics were criminal in nature.

Indictment Specifics

Several interesting specifics were outlined in both of the indictments:

• Between 2006 and June 2007, Shawn Hogan (Digital Point Solutions) earned approximately $15.5 million in commissions from eBay. Hogan was eBay’s number one affiliate.
• Between 2006 and June 2007, Dunning (Kessler’s Flying Circus) earned approximately $5.3 million in commissions from eBay. Dunning was eBay’s number two affiliate.
• Hogan and Dunning are accused of generating hidden forced clicks on both their own web sites as well as sites not connected with the defendants in order to increase the number of computers storing the eBay affiliate tracking cookie.
• The legal criteria for wire fraud was established not on money (commissions) being transferred over the wires, but because of transmission of the tracking cookie between states and internationally.
• The affiliates attempted to hide the activity from eBay and CJ by not engaging in the cookie stuffing on computers located in San Jose (eBay headquarters) or Santa Barbara (CJ’s headquarters). This is geo-targeting and is readily known to be used by affiliates engaging in questionable activity. Of course, not all geo-targeting activity in nefarious.
• Both Hogan (2005) and Dunning (2006) denied any cookie stuffing behavior when questioned by CJ.
• Each individual wire fraud account is related to a particular incident on an IP address outside California (location of eBay servers) where an affiliate cookie for the defendants was set.

Implications

Hogan and Dunning face serious repercussions if found guilty of the charges handed down by the grand jury. This is in addition to a pending civil suit which potentially carries stiff penalties of its own.

Regardless of the innocence or guilt of Hogan and Dunning, the fact that the U.S. Attorney deems cookie stuffing criminal should be a wake-up call for our industry.

As Linda Buquet stated when she first talked about the case, “For the blackhatters out there that say, ‘cookie stuffing isn’t illegal and all is fair in love and affiliate marketing’ – I say you better take a very close look at this case!”

The behavior outlined by the indictment is behavior, with some minor technical variation, I witnessed only yesterday by some affiliates. Nor is it difficult to find resources on how to engage in these types of activities, whether through web pages, adware, widgets, email or any other vehicle. Maybe now that the practice has been deemed illegal, the higher stakes will deter potential abusers.

Affiliates Indicted For Cookie Stuffing

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A $35 price point for a laptop generates a lot of buzz. The announcement of such a device ready to market in India, with its robust economy and a rapidly growing tech center, is a huge development. India already boasts some 81 million Internet users, but with a population of 1.1 billion that represents a paltry 7.3% Internet penetration rate. This new device could help unlock the other 92.7% of untapped potential.

The $35 question is: Will cheap accessibility mean a group of new computer users who are empowered by the device to take to the internet?

Is a $35 price point low enough?

At $35, it looks cheap by US standards. With an average gross domestic product (GDP) of $46,400, the prototype computer is barely the price of a nice steak dinner.

But given that the average India GDP is $3,100, the price of a new laptop represents about 1% of their annual income.

Is this cheap? Maybe. Is this going to be something everyone is going to rush out to buy? No.

But what if it drops in price as Kapil Sibal, India’s Minister for Human Resource Development, has predicted? Are average citizens going to take to the computer, which is eventually expected to drop to $20 or even $10 once it enters mass production?

What about the practical components?

According to the wire report the laptop, developed by India’s top Information Technology colleges, has no hard disk. It is instead using a memory card, much like a mobile phone, which can run on solar power. It is expected to run the Linux operating system.

The success of such a device relies on cloud computing services like web mail and web storage. It’s unlikely to be able to run applications, unless the device is customized to run applications off its memory a la the Apple iPhones and iPods.

Maybe it’s my bias from using personal computers, but lacking a hard disk or other form of mass storage counts as a disadvantage in my book. Would there be enough functional apps available to be tapped into to make it practical for business or productivity use?

Then there is the issue of red tape

The biggest hurdle to mass adoption has to do with red tape. The various regulations Indian government has put up has historically got in the way of industry growth.

For example, there’s discussion on sites like the PayPal blog about users having difficulty accessing the payment provider to make and receive payment. As some India bloggers have noted, withdrawing funds to a personal bank account is difficult if not outright impossible due to the Reserve Bank of India’s policy requiring some to register their businesses online.  As if to bring the point home PayPal announced today that starting July, 29 2010 users in India will no longer be able to make electronic withdrawals from their PayPal accounts. Withdrawals will only be available by check.

The reason for such an abrupt change by PayPal? Compliance with regulatory redtape. Such problems are hardly conducive to ecommerce.

The final outlook for India’s cheap laptop

Let’s look at the impact of the cheap laptop:

1) Pricing: $35 simply isn’t cheap enough for mass adoption and until it drops to the $10 price point, it will remain out of the fiscal reach of most people in India.

2) Performance: Is cloud computing reliable and scalable? Will there be enough productivity tools? Neither question is clear.

3) Red tape: No amount of tech innovation is going to solve political atrophy. If there are conditions like India’s requirement of business registration to merely buy or sell something online, these laptops might be as useful as pocket calculators or fancy MP3 players.

While the emergence of such a laptop does herald India’s continued growth in the electronics sector as well as their internal commitment to mass adoption of technology, the $35 dollar laptop still has a lot hurdles to overcome. What do you think the $35 laptop’s impact will be?

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Despite Low Price Tag, $35 Laptop Still Inaccessible to Many

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