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The balance between security and privacy is again being tested as Google has recently requested the help of the US National Security Agency (NSA) to better secure themselves, and their users’ data, from future cyberattacks.

The request comes on the heels of a recent discovery that two Chinese schools, Shanghai Jiao Tong University and the Lanxiang Vocational School, an academic institution in China’s Shandong Province with apparent ties to the country’s military, were discovered to be the source of recent attacks against Google and 20 other large corporations. The attacks against Google were aimed at the Gmail accounts of Chinese and Western human rights activists.

The NSA’s Involvement

While both the NSA and Google at first would not confirm their new partnership, as details were being worked out, an NSA spokesperson has claimed they are working on an “information assurance mission,” that involves a broad range of commercial partners and research associates. However, when the Washington Post looked into this partnership, reporters were assured that working with the NSA does not mean that the government agency will have access to users’ searches or e-mail communications and accounts. Google will not share proprietary data either.

The Nature of the Attack

While the NSA certainly has the ability to help Google, or any company, protect themselves against a cyberattack, it is odd that a corporation with some of the top engineers and most brilliant minds would fail to take the necessary measures to prevent the type of breach that would warrant bringing in the NSA to clean up.

Even with the help of the NSA, attacks like these are nearly impossible to stop. In the case of the Google attack, users at Google, and the other targeted companies, visited malicious sites, that exploited a zero-day vulnerability in the Internet Explorer browser. The exploit downloaded an array of malware to the victim’s computer automatically and transparently. These programs then unfurled themselves into the network using sophisticated encryption to prevent detection.

Reactions

Upon learning of the proposed partnership, Marc Rotenberg, executive director of the Washington-based Electronic Privacy Information Center (EPIC), was quoted as stating that any relationship between the two would be “very problematic.”

“We would like to see Google develop stronger security standards and safeguards for protecting themselves,” he said. “But everyone knows the NSA has two missions: One is to ensure security, and the other is to enable surveillance.”

In a counter move, EPIC has filed a Freedom of Information Act request seeking NSA communications with Google regarding Google’s failure to encrypt Gmail and cloud computing services. The purpose of this, according to Rotenberg, is to find out what role the NSA has played in shaping privacy and security standards for Google’s services. This request was followed up by a lawsuit against the National Security Agency and the National Security Council, seeking a key document governing national cybersecurity policy.

In addition to concerns raised by EPIC and other privacy rights groups, the move calls into question Google’s promises made when joining the Global Network Initiative. As a member of the GNI, along with Microsoft and Yahoo!, Google has pledged to protect and advance freedom of expression and privacy despite increasing government pressure to comply with domestic laws and policies in ways that may conflict with these ideals.

Not all experts are concerned. James Lewis, director and senior fellow at the Center for Strategic and International Studies (CSIS), believes that it is unlikely this potential partnership will involve the sharing of personal data. Claiming that Google is more likely to only be interested in having the NSA take a look at its networks and help it identify potential weaknesses, “It has nothing to do with intelligence. That point appears to have been missed,” Lewis said, “I don’t have any direct knowledge, but that is my assumption in this case.”

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Google, NSA Partnership Brings New Privacy Concerns

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Politicians are slow to learn but quick to look for money. As SB660 clearly shows, Virginia is no exception to this rule. Made from the mold of other so-called Amazon Tax bills, SB660 passed a vote on the Senate floor 28-12. Its potential passage has dire consequences for Virginia affiliates.

What’s most frustrating about the seemingly never ending folly of such bills is that even their authors, Senator Emmett Hanger, Jr. in Virginia’s case, seem to know they are bad bills. Just take a look at the fiscal impact statement (pdf) published by the Senate Finance Committee of SB660:

When similar legislation was enacted in Rhode Island and North Carolina, large online retailers ended their affiliate programs. If this were to happen in Virginia as a result of this bill, there would be no additional revenue collected from the enactment of this bill. In fact, by ending affiliate programs Virginia vendors  would likely lose business and remit less Retail Sales and Use Tax to the state.

The knowledge of what happened in Rhode Island is telling since despite the fact Rhode Island collected no revenue from the tax the Virginia Senate Finance Committee went on to approve the bill to the Senate floor.

SB660 now moves to the Virginia House where it will have slightly stiffer opposition than the Senate. Affiliates still have a chance to rally in opposition. One good pressure point, as Adam Viener of Imwave pointed out, is Governor Bob McDonald who delivered the GOP response to President Barrack Obama’s State of the Union address in which he said:

“We must enact policies that promote entrepreneurship and innovation so America can better compete with the world. What government should not do is pile on more taxation, regulation, and litigation that kills jobs and hurt the middle class.”

The fight against HB1193 in Colorado serves as a great example of what a grassroots effort can do. Although the bill was not defeated it was changed significantly by the efforts of a group of around 150 affiliates. Recently Lisa Picarille, Content Strategist for the Performance Marketing Association, wrote an inspiring article covering those efforts. In the article Lisa quotes Nicki Hayes, a director at Adperio, as saying,

“Personal, specific communication also seemed to help. While organized efforts are great, the biggest response I received was by physically going to the Capitol to visit Senators (with other crusaders) face-to-face, and following up with those Senators via email. If they see you putting the time and effort into fighting the bill, they will give you the time and attention to at least argue it.”

Many people in the affiliate marketing industry consider the battle against HB1193 as a victory in that affiliates were removed as the target of the bill. It should be noted that the exact impact of the legislation if enacted is still unknown. There is some debate as to how the new changes will impact ecommerce in Colorado. Since retailers are risk adverse and Colorado did leave the ludicrous subpoena clause in the bill, those concerns are not without warrant.

That being said there is no doubt that it was the efforts of Colorado affiliates that changed the course of HB1193. They did so despite facing a one-party controlled legislature and a bill essentially introduced by Governor Bill Ritter as part of what has become  known as Ritter’s Dirty Dozen. Those are some incredible odds to overcome.

Affiliates in Virginia, and other states facing similar legislation, still have a chance to stop such bills.

For resources on how to contact and educate your local representative visit either the Performance Marketing Association here, or Affiliate Advocacy here. Both are great resources.

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Battle Heats Up as Virginia Senate Passes SB660, Colorado Reminder of the Power of Grassroots Efforts

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With the first round of the battle against the so-called Amazon Tax in Colorado over, Rebecca Madigan, Executive Director of the Performance Marketing Association contacted ReveNews in an effort to update readers on measures the PMA is taking in preparation as the focus switches to the Colorado Senate. The PMA is just one of many excellent groups, like Affiliate Advocacy, that is involved in the fight. We urge affiliates in every state to get involved with their industry groups and familiarize themselves with their local representatives.

What makes Colorado different than other states when it comes to the so called Amazon Tax?

So my background is not politics, but with all the grassroots battles we have fought in 2009 I’ve certainly learned a lot. The thing about Colorado that I haven’t seen in any other state is the political nature of this battle. Usually the thing that hits home and reaches state legislators is that these type of advertising tax bills will cost the state jobs. They will put small business out of business. And at the end of the day the State will still not collect any revenue from the tax. That message usually hits home.

They don’t seem to hear that in Colorado. In the House they kept saying over and over, “We have a budget shortfall and we need the money”. And they just don’t seem to hear the fact that there just won’t be any money. All they have to do is look at what happened in Rhode Island. Advertisers have control over their own business decisions and we saw almost 200 terminate relationships in other states. There is no reason why they won’t terminate in Colorado.

But what we’re seeing is this very coordinated effort by the Democrats, who happen to have control, in trying to push through all their tax bills regardless of whether the tax is sustainable, enforceable, or who it will hurt. Each individual bill doesn’t really matter to them I think. That’s my entire perspective from here, after getting beat down pretty hard yesterday (laughs).

The thing that we have to remember with politicians, the thing that I’ve learned, is that they always have some sort of higher purpose beyond the bill itself that they’re trying to achieve. In Colorado’s case the fight seems very partisan. Democrats have control of the House, the Senate, and they also have control of the Governor’s office. Bill Ritter, the current Governor, announced a couple of weeks ago that he’s not going to run for re-election. Essentially he is a lame duck governor. I think what we are seeing in Colorado is a very one sided push on legislation, sort of a rush to ram every bill through just in case the Democrats lose their majority.

On top of that, for a number of the House of Representatives in both parties this will be their last session. They are hitting up against term limits so we have a lot of lame ducks on top of the Governor. Because of that there was very little negotiation in the House from either Republicans or Democrats. Unfortunately as an industry we’re just getting dinged-up in the process.

How was the affiliate turn out during the House portion of the fight against bill 1193?

We had this amazing grassroots turnout against HB 1193 (pdf). We’ve had about 150 people actively writing letters, calling their legislators, and going to visit them at their office. We had 110 people show up at the Finance Committee Hearing last week. It’s been a tremendous show of force. I believe that’s going to make a difference. That’s the main tool that we have this tremendous grassroots participation and the citizens of Colorado showing up and expressing their dissatisfaction with this bill.

I have heard some express a little bit of frustration over lack of resources and coordination right now. Can you talk to that a little bit?

Yes, well…the PMA, as an organization, is trying to manage this, and it is taking up all of our resources, so yeah, we are a bit stretched. The issue that we face is there is a lot of activity going on in the background but we’re not necessarily telling the industry about it. That decision stems from counter-efforts we’ve been seeing from the American Booksellers Association (ABA) who are pushing heavily for this bill. For example, last week during the House hearing we heard testimony from a woman, the owner of a small bookstore, who testified she was advised by the ABA.

We had a similar problem in California. There we had a bunch of affiliates reach out to the blogosphere to say,  “We need as many people as we can to show up in Sacramento.” We used the affiliate community and all the blogs in associated industries to coordinate our presence there. Sure enough, in Sacramento ABA representatives showed up (laughs). We had announced positioning in our statements on the blogs, that we’re small business, that we are not establishing nexus; we had all these very logical arguments why this law is a bad idea. The ABA went up after us with point by point counter arguments. Like they had prepped from our announcements.

So when I heard this woman mention them, I thought, “Oh no, here we are again.  They’re already watching what we’re doing.” To counter that we’ve setup a registration form on the PMA site and we’ve asked people from Colorado to register with us so we can keep in communication with everybody via email only.

It is one thing to talk to the industry, to those involved on the ground, about the status of things; but what we don’t want to do is give the opposition the tools to out-maneuver us.

How will the House amendment attempting to “exempt” electronic affiliates impact matters?

It is a unique clause (pdf) that was negotiated at the House Finance Committee hearing. On the surface it looks like it is good for affiliates but in reality that’s just not the case. Based on the amendment, the House defines an affiliate as someone who makes a public referral to an online site or a face to face referral to an online site; specifically excluding an electronic solicitation of business.

Strangely that language essentially targets groups like the Boy Scouts, PTAs organizations, and churches who have web sites that have affiliate links as a way to raise money. I’m not at all sure about the political “logic” behind that (laughs).

But here’s the reality. By the nature of the industry model an advertiser does not know if an affiliate is physically directing traffic to their web site. They have no idea if they are referring business through online advertising or via face to face interaction. Rather than take the risk, advertisers will terminate if the bill passes.

This is particularly true in Colorado because of a particular clause in HB 1193 which is very unique. It essentially says the State has the ability to subpoena out-of-state advertisers believed to have nexus, and actually says that if they fail to comply those advertisers can be arrested. Now, there is plenty question as to the constitutionality and enforceability of that clause but ultimately advertisers are risk adverse. They will not take any chance at all and will likely terminate their affiliate relationships.

The “electronic” clause does not solve anything at all. It was a political move to pacify everyone in the room.

What is the next step in the upcoming fight in the Senate? What are some of the take-aways that we can learn from the loss in the House?

For each state that this comes up in we really need to understand what the political situation is and we need to make sure that our messaging reflects what we think might be successful with the political situation. We hope that other states aren’t quite as bad as Colorado because they’re in a real political battle that has, like I mentioned, nothing to do with the reality of the bills.

The fight in the Senate might be a little easier to manage. First of all there are fewer of them, which is helpful (laughs).  Unlike the House, in the Colorado Senate there is a much lower percentage of Senators dealing with term limits, so they have re-election on their mind which is something we can leverage.

We don’t quite know what the Colorado Senate is going to do, what their next moves are, who the decision makers are going to be, or when they’re going to have testimony. So we’re in this waiting period right now. In the meantime we are leveraging the political advisors we have access to in order to determine how to approach individual legislators.

What groups is the PMA coordinating with in Colorado?

We’re working with this group of political advisors which includes a dozen or so political experts from a lot of different companies, some very large companies like Google, Yahoo, Amazon, AOL, Microsoft, and Apple. We’ve been able to work with them and synchronize lobbying efforts. And there are other associations that have to do with internet legislation that we have been working with, organizations like Internet Alliance, Tech America, and Net Choice. We are all trying to fight these bills, maybe for different reasons, but sharing our information is the most effective route.

What would you like to see from the grassroots groups that are trying to self-organize in Colorado?

The local groups are fantastic because, of course, they know who their peers are and how to reach them. It was the grassroots groups that actually found the 150 people who have been consistently participating. We’re trying to work closely with them to create tight coordination of our efforts. There are a couple of critical reasons why we need tight coordination. One is effectiveness. The more people we can get to be on message at the same time  allows us to generate the more attention. It is very easy then to get the legislators to understand what we are talking about.

The danger is that if we don’t coordinate we risk the legislators getting confused, hearing different things that are not central to our argument, and causing them to fixate on things the opposition is saying.

For example, take North Carolina. That was a state where a similar law was passed. What we saw happen was that all of the legislators on both sides of the aisle, Representative and Democrat alike, became completely fixated on Amazon. The bill became all about “get Amazon, get Amazon, get Amazon”, and there was nothing we could do to convince them that there were small businesses that were being devastated in the process.

I am concerned the same thing might happen in Colorado if we don’t stay on point, if we don’t stay with really simple messages. There are probably a hundred reasons why this law is a bad thing, but we need to stick with 2 or 3 that we think will be meaningful and will change the minds of the legislators.

OK, so what are those 2 or 3 points?

Collectively with our lobbyists we are working to figure out what the vulnerable pieces are; where the opening in the armor is, if you will. In the House we thought small business and job loss should be enough but it wasn’t. What was really frustrating was that it wasn’t even raised by the Representatives who are supposed to be against this bill. So with this next round we are trying to figure out what is the right position.

It is something we will disseminate to the group soon. If local affiliates want to be informed we encourage them to get on our email list.

What can the local small affiliate who is worried about losing their commission, their business, and maybe their livelihood do to feel that they’re not just sitting and waiting for the other shoe to drop?

With this kind of a grassroots campaign where there’s already been a big push initially, it is common for participation to diminish quickly. It’s really hard to rally people. But here we have a core group that’s really excited, that wants to keep pushing and that core group is much larger than we’ve seen in other states.

Just to give you an example, in California there are 25,000 affiliates in the state and we got about 15 people to consistently help in terms of showing up in Sacramento (laughs).  Thankfully they were a very efficient 15 folks. There are 4,200 affiliates in Colorado and we have 150 that keep pushing really hard. It’s great to see that kind of turn out.

Obviously they can write letters to the representative in their district (here is a list of Colorado Senate districts). We will be distributing letters specifically for Colorado that LinkShare helped put together.

Beyond that it is really important to coordinate the push. Our lobbyists have been speaking with Colorado Senators since Friday. They’ve worked all weekend gathering information. We will be coordinating a campaign this week specific to the Senate.

The upcoming hearing of the Senate version of HB 1193, sponsored by Senator Rollie Heath, is scheduled for Thursday, February 4th with the Senate Finance Committee which will start consideration around 9:30 a.m.  It is vital that at this hearing we have a strong turnout.

What would you like to see advertisers do in terms of supporting Colorado affiliates in this fight?

I would like to see advertisers get involved and communicate with their affiliates as well as communicate with the Colorado State legislators. Advertisers can contact Senators directly or even better, have them work through me at the PMA and we can make sure information gets to the ears of the decision makers.

Is there anything else you want to cover in terms of messaging?

We need people to hang in there and keep fighting even if they are frustrated. This is definitely one of those marathon situations. There are so many analogies: this is a football game and we are only in the third quarter (laughs). If you live in Colorado and you haven’t heard what is going on you can register on the PMA website to get on our email list so you can hear blow-by-blow what we are doing to win the fight. We just have to keep working together and leverage the tremendous grassroots participation because I think that is going to be the most effective tool we have.

I want to thank Rebecca Madigan for taking time for today’s interview.

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PMA Urges Patience and Coordination in Colorado Tax Fight

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Despite Overstock’s maneuvering and the local efforts of Colorado affiliates organized by Brian Fox, Senior Director of Business Development at  Adperio, the Colorado House Finance Committee has passed HB 1193 (pdf). The motion passed with a 6-5 vote and with only a slight amendment, mostly in reference to appropriation.

The bill was introduced on January 22nd, 2010, by Colorado State Representative John “Jack” Pommer, who is also Chair of the Appropriations Committee, and Senator Rollie Heath. If fully ratified the bill is expected to commence on March 1, 2010.

To find out more about HB 1193 visit either the Performance Marketing Association here, or Affiliate Advocacy here. Both are great resources. There is still time to impact the outcome of this legislation.

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Breaking News: Colorado Finance Committee Passes HB 1193

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In a high stakes game of chicken with state legislators, Overstock is once again using the threat of affiliate terminations as leverage in a preemptive move, this time with Colorado state bill HB 1193 (pdf), as the target. The bill, introduced on January 22nd, 2010, attempts to establish responsibility for collection of sales tax for out‐of‐state retailers if those out‐of‐state retailers use Colorado‐based affiliate relationships as a method of advertising. The bill is set for a hearing in front of the House Appropriations Committee for on Wednesday, January 27, 2010 at 8:30AM.

Sponsored by Colorado State Representative John “Jack” Pommer, who is also Chair of the Appropriations Committee, and Senator Rollie Heath, HB 1193 is comprised of the same DNA as the so-called Amazon Tax that was passed by New York State in 2008 and which is currently making its way through a series of legal challenges lead by Amazon. In its’ current incarnation Colorado’s version of the bill does not stipulate a minimum amount of revenue for nexus and  mistakenly treats affiliates as a sales force rather than as publishers  engaging in a method of advertising.

While I don’t condone the way Overstock President Jonathan E. Johnson III callously uses affiliates as bargaining chips, this type of tactic worked quite effectively in California with AB 178 which was ultimately led to a veto by California Governor Arnold  Schwarzenegger. Schwarzenegger even mentioned and appealed to Overstock directly in his reasoning prior to the veto.

In an effort to display small business solidarity and put a face to those in the affiliate industry who would be hurt by Colorado HB 1193, Brian Fox, Senior Director of Business Development at  Adperio, has organized a  meeting at the Legislative Service Building, located on corner of East 14th Avenue and Sherman St., which is directly across the street from the Capital Building. You can find more about the group on Facebook here.

To find out more about HB 1193 visit either the Performance Marketing Association here, or Affiliate Advocacy here. Both are great resources.

If you wish to contact Rep. Jack Pommer you may do so through the following: email:  jack.pommer.house@state.co.us; phone: 303-866‐2780.

If you wish to contact Senator Rollie Heath you may do so through the following: email: rollie.heath.senate@state.co.us; phone: 303-866-4872.

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Overstock Threatens to Terminate Colorado Affiliates Over Pending Legislation

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According to a recent report from the US Computer Emergency Readiness Team (CERT), spammers have exploited the recent H1N1 epidemic with a series of spam emails tricking unsuspecting users to visit a bogus site that mimics the Center for Disease Control’s (CDC) homepage. Clicking the link downloads a Trojan horse by the name of Zbot, or Zeus. This bot Trojan then hijacks the infected Windows computer and uses it to attack others by sending out more spam.

Even those who don’t click on the link are subject to infection. According to AppRiver security researcher Troy Gill, the site also includes an IFRAME element that exploits known vulnerabilities in Adobe Software. This hidden element contains the attack code that can exploit Adobe Reader and Flash Player vulnerabilities to infect the target computer.

The reach of the outbreak

When computers began flooding email inboxes with the spam on December 2nd, the messages were being sent at an average of 18,000 per minute. This comes to a little over 1 million messages being sent over a one hour period. Since then it has slowed to about 9,500 messages sent per minute, but it remains the predominant campaign being run right now.

Protecting yourself

It was only a matter of time before someone capitalized on the recent scare surrounding H1N1 and the lack of vaccinations available. To protect your computer, avoid any email with the subject line that reads, “State Vaccination H1N1 Program,” “Government registration program on the H1N1 vaccination,” or “Create your Personal Vaccination Profile.” Over time, the chances that these subject headings will change are certain, just remember that the CDC does not require registration for the H1N1 vaccine, nor will registration with the CDC help you receive the vaccine any quicker.  Note: for more information on the H1N1 flu virus and the vaccinations provided by the CDC, go here.

Zbot profile

Also called Zeus by some security vendors, the Zbot Trojan compromises computers running the Windows operating system and joins them to the Zbot botnet. At over 3.5 million computers, it is currently the number one botnet for malicious activity. Crafted from a toolkit designed to create malware, Zbot is the same malware that was used by a British couple accused of stealing banking information and passwords.

If you suspect your computer has been infected, Zbot can be removed by most anti-malware programs with updated definitions and/or signature files. For more information about malware removal, go here.

Source:
H1N1 Infects with More Than a Virus

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What exactly does Facebook have up its sleeve?

If you have been on the social media site lately you have surely noticed founder Mark Zuckerberg’s open letter to the members of Facebook about the forthcoming removal of regional networks from the site and plans to implement changes to their privacy policies.

Here’s the full text of Zuckerberg’s post: http://blog.facebook.com/blog.php?post=190423927130

Once changes are made to how a user sets up their Facebook privacy settings we will have a better picture of Facebook’s intentions in regards to the treatment of members’ information. Unlike Google, Facebook has never pledged to “do no evil,” and now has the vital information of 350 million people at its fingertips.

Looking at the impact of privacy concerns on Facebook, Brennon Slattery of PC World wrote,

“The underlying privacy concerns are justified. Now that Facebook has 350 million users, regional networks have expanded into the millions. Many people either aren’t sure how to change their privacy settings or they do not care, because, as I mentioned earlier, limiting the network of people able to view your profile is just a click away. So instead of schooling its users on how to protect their privacy, and maintaining its credo, Facebook deleted regional networks altogether, a symbolic gesture of closing the gates.”

For a company already looking at a market capitalization of $9.5 billion and an IPO which may be right around the corner, leveraging all of its users’ information would have great financial benefit. Google made its billions by selling ads targeted at searches, but also at Gmail messages. Facebook has a solid targeted advertising campaign already, but the real power for them would come from product and service questions that come up in idle wall conversations.

That’s not to say that Facebook will make it extraordinarily hard for users to clamp down on the messages that they want to keep out of the stream, but like Google and Twitter they have found out keeping that stream open has the most potential for profit.

Where Facebook goes from this point forward will be interesting and not just the growing and growing list of users on its site, but the growing list of potential investors will be waiting to see how practices and profits evolve.

Despite their nearly half-a-billion users, Facebook still has skeptics in the financial world – according to an article from December 2nd’s  BusinessWeek. “We don’t know quite what their profit picture is,” Ryan Jacob, chairman and chief investing officer of Los Angeles-based Jacob Internet Fund, which oversees roughly $36 million in assets and investments, told the magazine.

Privacy, given or not, may open the door a little wider to that profit picture.

Credit:
Facebook: Ready for privacy or profits

Search Engine Keywords:

• How does Facebook make profit

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The 2009 Cone Consumer New Media Study, results of which were released on October 20, shows the continuing growth of consumer empowerment.

Cone, a strategy and communications agency that specializes in cause branding, looked only at users of “new media,” defined as “dialogue among individuals or groups by way of technology-facilitated channels” – social networks, blogs, games, message boards, and the like. Over one-third of the respondents use new media two or more times a week.

Highlights of the study include the following:

1.    Consumers are increasing their interaction with companies and brands online. Almost 80 percent of new media users interact with companies or brands via new media sites and tools. This is an increase of 32 percent from the 2008 study. More than one-third of users (37 percent) interact via new media at least once per week, up from about 25 percent last year. New media users “overwhelmingly believe companies or brands should not only have a presence in new media, but also interact with their consumers in this space,” says Cone. In addition, consumers “think more highly of companies or brands when they or their friends can interact with them in a new media environment.”

2.    Consumers believe they can influence businesses by voicing opinions online. Sixty-two percent of respondents believe they can influence business decisions by voicing opinions via new media channels. About one-quarter have offered their opinion on an issue or contacted a company directly. Consumers are also interested in and influenced by information they get online. A large majority of respondents (85 percent) want companies to tell them what is in products and how they are made. Three-quarters of new media users say new media channels are an effective way to learn about Corporate Responsibility efforts.

3.    Supporting causes is important to new media users. Seventy-nine percent of respondents believe companies and nonprofit organizations should use new media channels to raise money and awareness for causes. Eighty-five percent of respondents say new media provides them with an opportunity to learn about new issues. Eighty percent say new media provides another way to support their favorite causes. Sixty percent have used some form of online or new media to support a cause. However, only 18 percent of users have made a cash donation through new media. Why? Nearly 39 percent said they didn’t trust that their efforts would actually help the cause, and 31 percent said they’d rather support causes offline. While no single cause had a majority of attention, leading causes supported via new media include animal welfare (29 percent), health and disease (28 percent), education (23 percent), the environment (22 percent) and human rights/equal rights (21 percent).

New media users appear to be active, interested and engaged. They are influenced by information they get online – and they believe they can influence businesses by communicating with them online.

It is clear that Internet-savvy consumers have high expectations. They want businesses to use new media. This is good news for online marketers, but there is this cautionary note as well: Businesses need to be ever-vigilant about using new media appropriately, and they must be responsive to consumer inquiries and comments.

Read the rest here:
New Media Study Shows Increasing Consumer Empowerment

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The Federal Trade Commission (FTC) is regulating the use of blogs and other consumer-generated new media content in marketing. Revised advertising rules issued by the agency broadly extend the concept of endorsements and testimonials to include as sponsored advertising all sorts of loose new media relationships that are increasingly used in place of traditional radio and television advertising and paid endorsements.  These rules fundamentally change the legal and regulatory landscape for Web 2.0 marketing and should be studied carefully by bloggers, marketers and online advertising agencies, all of whom will now have to contend with new compliance obligations.

On October 5, the FTC issued its final revised Guides Concerning the Use of Endorsements and Testimonials in Advertising, the first rewrite of the Guides since 1980.  Under the revised rules, which go into effect on December 1, companies that make payments or give free products to bloggers and other online commentators in order to generate positive buzz or favorable reviews for their products will now have to monitor closely the statements and claims made about the products and ensure that these relationships, if material, are clearly and conspicuously disclosed.  Otherwise, they will face liability for unfair or deceptive advertising practices under Section 5 of the FTC Act, even if they do not control what the bloggers say (or, indeed, whether they say anything).  The bloggers themselves will face similar liability for false or misleading statements and non-disclosure of material connections.  Marketers are also responsible for advising bloggers of their responsibilities.

While not actually binding law, the Guides serve as administrative interpretations of the law, issued to provide guidance on what the FTC considers to be deceptive behavior.  However, this does not mean compliance is optional.  Violations are punishable by civil penalties of up to $11,000 per violation. In addition to the regulation of Web 2.0 marketing which is the focus of this article, the Guides also include other significant changes, such as a new requirement that testimonials which do not describe typical consumer experiences must include clear and conspicuous disclosures of the results consumers can generally expect to achieve by using an advertised product.

By its very nature Web 2.0 marketing encompasses a variety of informal and fuzzy relationships which fall within the purview of the FTC’s new rules even though they are qualitatively different from traditional uses of endorsements in advertising.  For example, a marketer may provide unsolicited samples of its products to members of a blogger network who sign up for the network so that they can review the products on their sites.  Or a marketer may supply a product, such as a video game, to one particularly well-read blogger known as an expert or authority in his area in the hope of gaining a positive review.  Or the marketer may institute a word-of-mouth or viral marketing scheme where participants receive something of value (such as a payment or an entry in a sweepstakes) to e-mail their friends or send out tweets about the marketer’s product.  All of these relationships may now be characterized by the FTC as endorser-advertiser relationships, wherein both the “endorser” (i.e., the person generating the content about the product) and the “advertiser” (the marketer) must ensure the absence of false or misleading statements and the “clear and conspicuous” disclosure of connections that are not reasonably expected by the target audience and are likely to influence purchasers’ assessment of the credibility of the statements.

When is a Favorable Post an “Endorsement”?

The Guides define an “endorsement” as an advertising message that consumers will likely believe reflects the opinions, beliefs, findings or experience of a party other than the sponsoring advertiser, whether the endorser’s statements are the same as or different from the sponsoring advertiser’s.  Knowing the level of incentive that turns blogger commentary into a compensated “endorsement,” thereby rendering both the blogger and the advertiser potentially liable for failure to disclose material connections and for deceptive statements, is critical.  The FTC notes on page 10:

“[A] blogger could receive merchandise from a marketer with a request to review it, but with no compensation paid other than the value of the product itself. In this situation, whether or not any positive statement the blogger posts would be deemed an “endorsement” within the meaning of the Guides would depend on, among other things, the value of that product, and on whether the blogger routinely receives such requests. If that blogger frequently receives products from manufacturers because he or she is known to have wide readership within a particular demographic group that is the manufacturers’ target market, the blogger’s statements are likely to be deemed to be “endorsements,” as are postings by participants in network marketing programs. Similarly, consumers who join word of mouth marketing programs that periodically provide them products to review publicly (as opposed to simply giving feedback to the advertiser) will also likely be viewed as giving sponsored messages.”

The Guides cite as an example a consumer who purchases a new brand of dog food and reviews its favorably on her personal blog.  If she purchases the dog food with her own money or gets it for free because the store routinely tracks her purchases and generates a coupon for a free trial bag of the new dog food, there is no endorsement.  However, if the consumer gets the dog food as a result of joining a network marketing program under which she periodically receives various products about which she can write reviews if she wants to, her positive review will be considered an endorsement.  As another example, a college student who has earned a reputation as a video game expert receives (as he has in the past) a copy of a newly released video gaming system along with a request from the manufacturer to write about it on his blog.   He tests it out and gives it a favorable review.  This is also an endorsement, and the FTC comments that because the review is disseminated via a form of consumer-generated media in which his relationship to the advertiser is not inherently obvious, and given the value of the gaming system, the blogger should clearly and conspicuously disclose that he received it free of charge.  Furthermore, “[t]he manufacturer should advise him at the time it provides the gaming system that this connection should be disclosed, and it should have procedures in place to try to monitor his postings for compliance.”  (Here the blogger would also have to comply with the FTC’s rules on the use of expert statements in advertising.)

In one of the Guides’ most controversial examples, a skin care product manufacturer participates in a blog advertising service that matches up advertisers with reviewers.  The marketer requests that the blogger try out its new body lotion and write a review.  The blogger, totally on her own initiative and without any direction from the manufacturer, makes an unsubstantiated recommendation that the product cures eczema.  Both the manufacturer and the blogger will be liable for the unsubstantiated claim and any failure to disclose that the blogger is being paid.

The FTC has explained that the purpose of the new rules is to treat new media in the same manner as traditional journalistic and advertising outlets.  However, as a practical matter, many businesses treat these channels differently and will have to scramble to implement the necessary monitoring and enforcement mechanisms.  When a business buys a conference sponsorship, for example, in the hope of generating some positive online buzz, is anyone at the sponsor giving the conference organizer’s blog and Twitter emissions at compliance review?  Indeed, the whole point of marketing to bloggers and through social media is to support a spontaneous and unforced style of commentary that has greater authenticity for cynical, tech-savvy consumers.   Of course, in response to such comments the FTC has countered that its rules are designed precisely to protect consumers’ ability to rely on this quality of the blogosphere in making purchasing decisions.   Controlling what bloggers say is not relevant; what matters for liability purposes is whether “the advertiser initiated the process that led to [the] endorsements being made – e.g., by providing products to well-known bloggers or to endorsers enrolled in word of mouth marketing programs ….”

Playing the Compliance Game

Unfortunately, corporate legal departments will now have to extend the long arm of compliance over a whole host of Web 2.0 marketing activities that until now may have been loosely policed, if at all.   “In employing this means of marketing,” the FTC dryly observes, “the advertiser has assumed the risk that an endorser may fail to disclose a material connection or misrepresent a product, and the potential liability that accompanies that risk.”  However, it also states that in the exercise of prosecutorial discretion it will consider “the advertiser’s efforts to advise these endorsers of their responsibilities and to monitor their online behavior ….”

What this means for companies is that they will have to design a compliance and monitoring program.  What it means for online advertising agencies is that they can expect new restrictions and levels of review from clients over their Web 2.0 marketing activities and should also expect to assume a role in their clients’ compliance and monitoring programs.  Companies will want to get a handle on what their marketing departments are doing to curry favor with bloggers and create buzz through viral online marketing and will be especially anxious to herd advertising and PR agencies into the corral, since the companies are legally responsible for the actions of these third-party agents.

If compensation, free products or other valuable incentives (such as sponsorships) are being offered in the hope of stimulating positive reviews, then the company will need to institute and document a process of advising bloggers and other new media commenters about their duty to disclose material connections and the limits on the factual claims they can make about a products and its beneficial effects.   There should also be periodic monitoring of the resulting posts, with documented follow-up action if necessary, to make sure they comply with the FTC’s endorsement guidelines.
If blogger relationships are managed through an advertising or PR agency, then the agency will likely have to provide detailed information for each campaign about its contacts with bloggers and will have to share in the responsibility of conveying the advertiser’s guidelines to them and monitoring their compliance.   Companies should include a specific allocation of responsibilities with respect to these issues in written contracts with their agencies.  At the very least, a company should reserve the right to audit and pre-approve an agency’s solicitation of bloggers so that the company knows which bloggers the agency is dealing with and whether the relationships are of a type that could lead to advertiser-endorser liability and can monitor the bloggers’ posts about the company’s products.

If this compliance burden is too onerous for companies and their online advertising agencies, the alternative is to implement policies that prohibit the payment of compensation or giving away of valuable products in the hope of generating positive online buzz.   Favorable reviews are not “endorsements” within the meaning of the Guides unless they have been incentivized in some way.

Tips for Bloggers

As for bloggers and other online commenters, they should be sure to disclose any compensation or benefits they receive to comment on products and, if they do have such a connection to an advertiser, should be very careful to follow the guidelines furnished by the advertiser or its advertising agency (which the advertiser is required to provide) and not make general or sweeping factual claims about the product or any claim that can’t be easily substantiated.  If a blogger chafes at submitting to this degree of oversight and control, he always has the option of buying the product himself, for example, rather than receiving it as a freebie.  The FTC has indicated that advertisers and not bloggers will be its main enforcement target.  However, a blogger who runs a “substantial operation” that violates the rules and who receives a warning will still be at risk.  Moreover, the FTC can adopt a more aggressive enforcement stance at any time.

The FTC’s rulemaking will heavily influence the way marketers generate buzz on the Internet and warrants close scrutiny of participation in blogger and viral incentive programs by all parties involved.

Credit:
FTC Regulates Blogger, Viral Marketing Relationships

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The Federal Trade Commission (FTC) is regulating the use of blogs and other consumer-generated new media content in marketing. Revised advertising rules issued by the agency broadly extend the concept of endorsements and testimonials to include as sponsored advertising all sorts of loose new media relationships that are increasingly used in place of traditional radio and television advertising and paid endorsements.  These rules fundamentally change the legal and regulatory landscape for Web 2.0 marketing and should be studied carefully by bloggers, marketers and online advertising agencies, all of whom will now have to contend with new compliance obligations.

On October 5, the FTC issued its final revised Guides Concerning the Use of Endorsements and Testimonials in Advertising, the first rewrite of the Guides since 1980.  Under the revised rules, which go into effect on December 1, companies that make payments or give free products to bloggers and other online commentators in order to generate positive buzz or favorable reviews for their products will now have to monitor closely the statements and claims made about the products and ensure that these relationships, if material, are clearly and conspicuously disclosed.  Otherwise, they will face liability for unfair or deceptive advertising practices under Section 5 of the FTC Act, even if they do not control what the bloggers say (or, indeed, whether they say anything).  The bloggers themselves will face similar liability for false or misleading statements and non-disclosure of material connections.  Marketers are also responsible for advising bloggers of their responsibilities.

While not actually binding law, the Guides serve as administrative interpretations of the law, issued to provide guidance on what the FTC considers to be deceptive behavior.  However, this does not mean compliance is optional.  Violations are punishable by civil penalties of up to $11,000 per violation. In addition to the regulation of Web 2.0 marketing which is the focus of this article, the Guides also include other significant changes, such as a new requirement that testimonials which do not describe typical consumer experiences must include clear and conspicuous disclosures of the results consumers can generally expect to achieve by using an advertised product.

By its very nature Web 2.0 marketing encompasses a variety of informal and fuzzy relationships which fall within the purview of the FTC’s new rules even though they are qualitatively different from traditional uses of endorsements in advertising.  For example, a marketer may provide unsolicited samples of its products to members of a blogger network who sign up for the network so that they can review the products on their sites.  Or a marketer may supply a product, such as a video game, to one particularly well-read blogger known as an expert or authority in his area in the hope of gaining a positive review.  Or the marketer may institute a word-of-mouth or viral marketing scheme where participants receive something of value (such as a payment or an entry in a sweepstakes) to e-mail their friends or send out tweets about the marketer’s product.  All of these relationships may now be characterized by the FTC as endorser-advertiser relationships, wherein both the “endorser” (i.e., the person generating the content about the product) and the “advertiser” (the marketer) must ensure the absence of false or misleading statements and the “clear and conspicuous” disclosure of connections that are not reasonably expected by the target audience and are likely to influence purchasers’ assessment of the credibility of the statements.

When is a Favorable Post an “Endorsement”?

The Guides define an “endorsement” as an advertising message that consumers will likely believe reflects the opinions, beliefs, findings or experience of a party other than the sponsoring advertiser, whether the endorser’s statements are the same as or different from the sponsoring advertiser’s.  Knowing the level of incentive that turns blogger commentary into a compensated “endorsement,” thereby rendering both the blogger and the advertiser potentially liable for failure to disclose material connections and for deceptive statements, is critical.  The FTC notes on page 10:

“[A] blogger could receive merchandise from a marketer with a request to review it, but with no compensation paid other than the value of the product itself. In this situation, whether or not any positive statement the blogger posts would be deemed an “endorsement” within the meaning of the Guides would depend on, among other things, the value of that product, and on whether the blogger routinely receives such requests. If that blogger frequently receives products from manufacturers because he or she is known to have wide readership within a particular demographic group that is the manufacturers’ target market, the blogger’s statements are likely to be deemed to be “endorsements,” as are postings by participants in network marketing programs. Similarly, consumers who join word of mouth marketing programs that periodically provide them products to review publicly (as opposed to simply giving feedback to the advertiser) will also likely be viewed as giving sponsored messages.”

The Guides cite as an example a consumer who purchases a new brand of dog food and reviews its favorably on her personal blog.  If she purchases the dog food with her own money or gets it for free because the store routinely tracks her purchases and generates a coupon for a free trial bag of the new dog food, there is no endorsement.  However, if the consumer gets the dog food as a result of joining a network marketing program under which she periodically receives various products about which she can write reviews if she wants to, her positive review will be considered an endorsement.  As another example, a college student who has earned a reputation as a video game expert receives (as he has in the past) a copy of a newly released video gaming system along with a request from the manufacturer to write about it on his blog.   He tests it out and gives it a favorable review.  This is also an endorsement, and the FTC comments that because the review is disseminated via a form of consumer-generated media in which his relationship to the advertiser is not inherently obvious, and given the value of the gaming system, the blogger should clearly and conspicuously disclose that he received it free of charge.  Furthermore, “[t]he manufacturer should advise him at the time it provides the gaming system that this connection should be disclosed, and it should have procedures in place to try to monitor his postings for compliance.”  (Here the blogger would also have to comply with the FTC’s rules on the use of expert statements in advertising.)

In one of the Guides’ most controversial examples, a skin care product manufacturer participates in a blog advertising service that matches up advertisers with reviewers.  The marketer requests that the blogger try out its new body lotion and write a review.  The blogger, totally on her own initiative and without any direction from the manufacturer, makes an unsubstantiated recommendation that the product cures eczema.  Both the manufacturer and the blogger will be liable for the unsubstantiated claim and any failure to disclose that the blogger is being paid.

The FTC has explained that the purpose of the new rules is to treat new media in the same manner as traditional journalistic and advertising outlets.  However, as a practical matter, many businesses treat these channels differently and will have to scramble to implement the necessary monitoring and enforcement mechanisms.  When a business buys a conference sponsorship, for example, in the hope of generating some positive online buzz, is anyone at the sponsor giving the conference organizer’s blog and Twitter emissions at compliance review?  Indeed, the whole point of marketing to bloggers and through social media is to support a spontaneous and unforced style of commentary that has greater authenticity for cynical, tech-savvy consumers.   Of course, in response to such comments the FTC has countered that its rules are designed precisely to protect consumers’ ability to rely on this quality of the blogosphere in making purchasing decisions.   Controlling what bloggers say is not relevant; what matters for liability purposes is whether “the advertiser initiated the process that led to [the] endorsements being made – e.g., by providing products to well-known bloggers or to endorsers enrolled in word of mouth marketing programs ….”

Playing the Compliance Game

Unfortunately, corporate legal departments will now have to extend the long arm of compliance over a whole host of Web 2.0 marketing activities that until now may have been loosely policed, if at all.   “In employing this means of marketing,” the FTC dryly observes, “the advertiser has assumed the risk that an endorser may fail to disclose a material connection or misrepresent a product, and the potential liability that accompanies that risk.”  However, it also states that in the exercise of prosecutorial discretion it will consider “the advertiser’s efforts to advise these endorsers of their responsibilities and to monitor their online behavior ….”

What this means for companies is that they will have to design a compliance and monitoring program.  What it means for online advertising agencies is that they can expect new restrictions and levels of review from clients over their Web 2.0 marketing activities and should also expect to assume a role in their clients’ compliance and monitoring programs.  Companies will want to get a handle on what their marketing departments are doing to curry favor with bloggers and create buzz through viral online marketing and will be especially anxious to herd advertising and PR agencies into the corral, since the companies are legally responsible for the actions of these third-party agents.

If compensation, free products or other valuable incentives (such as sponsorships) are being offered in the hope of stimulating positive reviews, then the company will need to institute and document a process of advising bloggers and other new media commenters about their duty to disclose material connections and the limits on the factual claims they can make about a products and its beneficial effects.   There should also be periodic monitoring of the resulting posts, with documented follow-up action if necessary, to make sure they comply with the FTC’s endorsement guidelines.
If blogger relationships are managed through an advertising or PR agency, then the agency will likely have to provide detailed information for each campaign about its contacts with bloggers and will have to share in the responsibility of conveying the advertiser’s guidelines to them and monitoring their compliance.   Companies should include a specific allocation of responsibilities with respect to these issues in written contracts with their agencies.  At the very least, a company should reserve the right to audit and pre-approve an agency’s solicitation of bloggers so that the company knows which bloggers the agency is dealing with and whether the relationships are of a type that could lead to advertiser-endorser liability and can monitor the bloggers’ posts about the company’s products.

If this compliance burden is too onerous for companies and their online advertising agencies, the alternative is to implement policies that prohibit the payment of compensation or giving away of valuable products in the hope of generating positive online buzz.   Favorable reviews are not “endorsements” within the meaning of the Guides unless they have been incentivized in some way.

Tips for Bloggers

As for bloggers and other online commenters, they should be sure to disclose any compensation or benefits they receive to comment on products and, if they do have such a connection to an advertiser, should be very careful to follow the guidelines furnished by the advertiser or its advertising agency (which the advertiser is required to provide) and not make general or sweeping factual claims about the product or any claim that can’t be easily substantiated.  If a blogger chafes at submitting to this degree of oversight and control, he always has the option of buying the product himself, for example, rather than receiving it as a freebie.  The FTC has indicated that advertisers and not bloggers will be its main enforcement target.  However, a blogger who runs a “substantial operation” that violates the rules and who receives a warning will still be at risk.  Moreover, the FTC can adopt a more aggressive enforcement stance at any time.

The FTC’s rulemaking will heavily influence the way marketers generate buzz on the Internet and warrants close scrutiny of participation in blogger and viral incentive programs by all parties involved.

Credit:
FTC Regulates Blogger, Viral Marketing Relationships: Analysis and compliance tips

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This is a tale of two types of internet celebrities: those that fight hard to give back to their community and those that sit on the sidelines.

First, I want to give accolades to the Affiliate Marketers Give Back team who in their third straight year participated in the Avon Walk for Breast Cancer raising over $50,000 in the fight against the disease. Having taken part in the walk last year I had the pleasure of seeing firsthand the type of work team leader Missy Ward, Co-Founder of Affiliate Summit, puts in not only to raise awareness of breast cancer and fundraise for the cause  but to help the AMGB team get through the long miles of the walk.

The media is full of talk on how some celebrities use their high profiles to serve as role models. Well Missy, despite her high profile in our community, has always made time for such causes as Big Brother/Big Sisters and the Susan G Komen Foundation. This year the AMGB team Missy assembled consisted of Brook Schaaf of Schaaf Consulting, Chris Pearson of DIYThemes, Melissa Salas of Buy.com, Kevin Strawbridge of DealTaker.com, and Lynette LaPlante a 1-year survivor (all of whom are celebrities in my book!).

Also pledged to the team was Brian Clark, aka Copyblogger. Brian has also become a bit of an online celebrity. But apparently he’s now so famous that he couldn’t even be bothered to show up for the Walk on September the 12th and 13th.

Now, it’s understandable to get cold feet at such an event: walking 40 miles in the LA sun is not pleasant. It’s also understandable if some personal or health condition came into play that prevented his participation. But Brian did not only fail to show up to the event, cheer from the sidelines, or provide support during lunch or at dinner; he didn’t even issue one tweet about the event.

Brian Clark is someone who makes his living tweeting and blogging. One tweet from him is valuable; after all he has 35,000 followers. A tweet is the easiest way he could have used to provide support and awareness for everyone involved in the Avon Walk. But apparently even 140 characters was too much to ask.

Instead, Brian occupied himself on Sept 12-13th making inane “not really” tweets with @gapingvoid and quoting George Bernard Shaw. Apparently ‘Man and Superman’ is a concept that Brian is unfamiliar with. Even the strength of the women on his team couldn’t force him to follow through on his commitments.  Maybe someone should send his Kindle the Cliff Notes version.

He didn’t even take the time to respond when AMGB team members teasingly thanked him for providing nonexistent dinner and backrubs at the event. He was a no show in every sense of the term.

Well at least if Brian Clark doesn’t know how to be a team member or role model for his community he can take solace in the fact he’s learned how to handle critisims from drunk Swiss guys. Now that’s insight that’s valuable to everyone.

See the rest here:
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The formation of an industry requires the development of a group identity. Often that development is neglected because group members are focused on growing their business. Over the last year the affiliate industry has been experiencing growing pains in the form of legal challenges brought about by such things as the so-called New York Amazon Tax. In the aftermath of that tax being ratified a group of New York affiliates pulled together to provide guidelines to those impacted by the tax. Melanie Seery was part of that group and found herself drawn into the role of advocate on behalf of the affiliate industry. As part of that advocacy effort she recently launched new industry organization Affiliate Voice.

Almost a year after the New York Amazon Tax was passed I sat down with Melanie Seery to discuss her involvement in the affiliate industry, her quick learning curve with political advocacy, and how she sees the tax issues evolving.

How did you get started in affiliate marketing?

I got involved in affiliate marketing about five years ago. Before affiliate marketing I had a business writing employee how-to manuals, which is really, really boring work. I would go into a business, take each and every position and write down step by step everything that employee had to do in the course of the day. Not fascinating and not interesting from a creative perspective. After that I got into multilevel marketing. What I liked about MLM was that I was selling vitamins and health food products. I really enjoyed that aspect of helping people be healthy. But when I started I didn’t realize how big a component recruitment was to MLM. Ultimately it kind of discouraged me. That’s when someone told me about affiliate marketing and sent me off to Commission Junction. After some exploring I found an interesting coffee merchant and that was the beginning of it.

Why is being self-employed and working at home important to you?

I am independent by nature and have been self-employed for the past 12 years. It’s real important for me to be home with my children and my family. My children have neurofibromatosis, so do I. Neurofibromatosis is a neurological disorder that can cause tumors to grow on nerve endings. There are lots of challenges to maintaining health with such a disorder, as you can imagine. I have to keep constantly on top of it with my family. Being self-employed allows me to maintain that balance.

At what point did you feel affiliate marketing was the right business for you?

It was two or three months down the line and all of a sudden I started getting some really good sales. I created sites around my interests. It wasn’t just things I liked to drink like coffee, tea and accessories. After the birth of my children I began reaching out to parents whose children had similar disorders. I would post topics like, “How do I get my child to sleep all the way through the night?” I found myself connecting with other parents and sharing information. The process of creating a support group of sorts became another website.  Before you know it I had several websites going and 10 more ideas.

Affiliate marketing seemed to pull the best of all worlds together for me because I could use my writing to educate while sharing my creativity and connecting to other people. It was like talking with my friends and community; only in this case I’m being creative and making a website. It’s amazing being able to grow a business out of that sharing. It’s very exciting for me.

Everybody seems to start with Commission Junction. At what point did you realize that there were other networks?
Through places like ABestWeb I found networks like ShareASale. The discovery of ShareASale was a major point turning point for me. It was a combination of finding a network that had smaller niche merchants and allowed for real personal contact with the network and with the merchants in the network.

I sort of came out of my shell and found myself becoming part of the industry when I received my first invitation to a ShareASale Think Tank. It was funny but I thought to myself, “They must have me confused with somebody else”. Because even though I was doing well I still didn’t think I was doing as well as everybody else out there. I had never met anyone in the industry prior to that or even spoken with anyone on the phone. The Think Tank showed me the importance of being an affiliate in direct touch with the merchant. It’s all about relationships in this industry.

When did you first hear about the Amazon Tax and how did it affect you?

We had heard rumblings prior to April. But we also heard from New York lawmakers that it would never pass. Suddenly when April came around we learned that Governor Patterson had signed it into law. It took us by surprise because of our “it could never happen here” attitude. I don’t think we ever truly realized how much it would impact our businesses.

Now I see the same process happening in other states like California, Minnesota and, Connecticut. It’s phenomenal how quickly things change.  It’s great to see the industry is actually being proactive and stepping forward to fight these bills before they become law. It’s a lot easier to fix things before they’re broken.

When the New York law took effect many merchants removed affiliates from their programs. This destroyed a lot of businesses.  But what was worse was the lack of communication between merchants, networks and affiliates. There were a lot of behind the scenes activities with program managers and their CEOs about that never brought the affiliates into the loop. That did a lot of damage. We would get terminations with little or no notice. Once they passed the law we started to receive sudden terminations in the mail.  Even retroactive terminations-it would be June 15 and you’d get this email from a merchant that told you were deactivated as of May 30.

Affiliates were kind of steamrolled and quickly our incomes and businesses were gone.

A group of us got together and said this isn’t right. We felt there had to be a solution we could work out. That’s when Kevin Webster and I started talking about holding a meeting among New York affiliates. When we announced it a lot of people stepped up to help, providing us resources so we could find a good corporate lawyer.

At the time I had set up a personal blog that I put together to help keep people up to date about what was going on. It was called New York Affiliate Voice, which is what many people think the name of the group is, but it’s really the Albany Group because that’s where we first  met. We managed to set a course of action and put together a plan for how New York affiliates and any remaining merchants who wanted to work with us could go from here. In many cases it still wasn’t enough because merchants were still terminating affiliates rather than attempting to comply with the new law.

My income was down 72% last year because of the knee jerk reaction of many businesses. From the affiliates I talk to that’s pretty average.

Were you frustrated with the fact that the industry was slow to respond to this threat?

At the time we were all frustrated because all we saw was a lack of action for New York affiliates. There was a sense of hopelessness or resignation in everybody. At the time when we were going through the horrible effects of this law upon our businesses, I kept thinking why doesn’t anybody care about us?

I think the whole industry was in a state of disbelief. I remember two things were said to me after the New York Affiliate session at Affiliate Summit. They were: 1) We didn’t understand how deeply this would impact your, meaning affiliates, business and livelihoods. People sometimes forget that for many of us this isn’t just a hobby. It is the income that we rely on to pay a mortgage, to pay our bills, to take care of our children and our families and, 2)  everybody felt they “didn’t know what to do”.

I think it had to be the affiliates who took control the situation in New York because that was the group directly affected. It empowered affiliates to take a course of action and pull together. It let everyone know this was a serious challenge to our industry. I am proud of the things the Albany Group put together.

Was that your first involvement with political advocacy?

Yes. (laugh) I learned a lot over this last year. I learned an incredible amount about the legislative process, not only in New York but in other states as well. I found myself thinking, I don’t remember learning the ins and outs of how this works back in school. I think people take so many things for granted, including how their local government works.

At the beginning of this year you won several awards including the Affiliate Summit Pinnacle Award for Affiliate Advocate of the Year. How did that impact you?

One thing it showed me was that we made a difference last year. And by “we”, I mean there wasn’t just me, there was a whole group of us that pulled this together. What the recognition also did was start me thinking about advocacy in general because I knew it was important. Basically, the work on the New York Tax Law took over the whole last 10 or 11 months of my life. Over time it became a larger part of my day whether it was answering emails from affiliates or phone call questions from a merchant. I realized that I had to make a choice of whether I wanted to be an advocate or an  affiliate. I came to the conclusion that the advocacy needed to continue and I couldn’t give it up.

How did Affiliate Voice come about?

When I made the choice to focus on advocacy I was simply going to change New York Affiliate Voice into a type of advocacy group. When people found out about my idea they kept asking why just New York? I ended up speaking to Haiko de Poel Jr. and Rhea Tannenbaum and they encouraged me to form a larger organization and call it Affiliate Voice to open it up to everybody. So I took the ball and ran with it so to speak.

After the beginning of the year there seemed to be a lull then suddenly there was a domino effect of new legislation that came out.   How have you perceived the recent changes?

Well, that’s a good way to describe it. There was that little lull and I was just beginning to think that I could go back to focusing on my business. Then legislators in my area that I had gotten close to working with the Albany Group, pointed me towards pending legislation in several states, including California. It seemed to spring up one after another. Equally scary is legislation on the books in some states that includes sales representatives, solicitors and other representatives in the definition of “nexus”. It is so open to interpretation and in my mind it could easily encompass affiliates as well.

What’s the biggest misunderstanding that legislators have about the affiliate industry?

I think it is important to understand both sides of the issue. See the states are faced with incredible economic challenges right now. They have to find new revenue resources. In the Quill Corp. v. North Dakota case it was ruled that in order for an interstate transaction to have sales tax applied to it, as opposed to a use tax, there has to be a substantial presence on behalf of the business providing the goods.

What’s happening is these tax bills you are seeing are not new taxes. The only thing that is changing is the method which the states are using to collecting the tax. That’s a not just something legislators are saying to make it sound better to consumers. That is in fact what is going on.

If you look at how quickly internet shopping and affiliate marketing have grown over the last couple of years it is easy to see why states want to collect this tax. It’s an incredible amount of revenue they’re losing out on.

But by the same token those states that are trying to enact these anti-affiliate laws have to understand how uneven this makes the playing field for affiliates and publishers in their state. In their current form these laws will prompt many merchants to simply avoid paying the tax by cutting loose all their affiliates or moving to a different advertising model. For those reasons it won’t bring the kind of revenues states are hoping for.

Also legislators have to understand the complexity involved for a merchant trying to deal with the more than 7,500 different US tax jurisdictions regarding interstate transactions. It’s not just a matter of installing some software and remitting sales-tax. Each of these 7,500 different tax jurisdictions has a different set of guidelines a merchant must comply with.  Can you imagine 7,500 different filings every quarter?  What business has those resources?

How do you see this playing out long-term?

I believe it will come down to some kind of federal involvement, maybe through the Streamlined Sales Tax Project, which is still gaining momentum. The Streamlined Sales Tax Project is a destination-based sales-tax which allows each state to designate one flat rate. All states that have sales and use tax will have to charge tax on the same items. Because right now items that are taxable in New York may not be taxable in California or vice versa. So the Streamlined Sales Tax Project wants to unify and streamline the process by designating which items are taxable in every state and allow each state to have one flat rate with the tax being paid by the receiving State. That’s the ideal situation. The governors in general are pressing for such a process but to enact it nationwide will be a slow process and require changes to multiple state laws.

Recently Scott Jangro wrote an excellent article posing the question of whether the affiliate industry needs two associations? Are you worried about an us-versus-them mentality creating a split in the industry?

I think having two organizations actually strengthens the industry. I don’t look at the Performance Marketing Alliance and Affiliate Voice as competing. I look at us as two slightly different entities but with the same relative goal which is to help change the direction of our industry, to help spur new growth, and not leave our destinies in the hands of legislators who have no clue what we are all about as a professional industry.

Prior to launching Affiliate Voice I reached out to the PMA to let them know we wanted to work together and complement one another’s strengths. I think Affiliate Voice is well suited to advocate for an Affiliate Bill of Rights and help affiliates maintain their business should these anti-affiliate taxes or other similar legislations be ratified. The PMA can do more with lobbying and organizing challenges to legislation.  They are very well equipped to do this.

I have no interest in wasting energy or time in petty politics or some kind of nonproductive competition.  Every industry has multiple organizations and the affiliate industry shouldn’t be any different.

What are the goals for Affiliate Voice in 2009?

We are working on establishing an industry Code of Ethics. We also want to formulate and ratify an Affiliate Bill of Rights to help improve relationships between all parties in the affiliate industry. In terms of keeping up with all the legislative efforts in various states, well, that will be an ongoing challenge throughout the whole year.

Since affiliates by nature seem to be fiercely independent and private.  Do you feel they will join an organization, any organization?

As people get used to the idea that you can be part of an organization without having to open your business model to scrutiny attitudes will change. Especially if we can demonstrate how organizations can achieve good things. Perceptions won’t change overnight but I think people will come to realize that they need organization.

Right now I feel the affiliate industry is a bit demoralized but, as people see two groups out there fighting for change they will become more encouraged at the efforts being taken. Personally I am encouraged with all the effort I’ve seen over the last couple of months with people rallying and stepping up, including the networks, to take a public stance against this type of legislation. I have seen merchants reaching out to their affiliates to help provide advice. All this effort is such a fabulous change compared to what happened in New York. It shows we have learned as an industry. I think this could be a rough year while we battle this legislation but ultimately we’re going to be able to adjust this industry and be all right.

More here:
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As you might have heard, affiliate marketing is under attack in CA by bad legislation. AB 178 is a California version of New York’s “Amazon Tax”Plain and simple it an ugly situation.

This post is a summary of the situation and how you can help.

The situation
AB 178 – you can read the bill here - would establish that California nexus is created when any out of state retailer enters into any marketing agreement with a California resident or business in exchange for compensation or commission, such as by a link, website, or otherwise, which generates referrals in excess of $10,000 in sales. Once nexus is established, AB 178 would require retailers that advertise and receive direct or indirect referrals from online advertising on websites to collect sales tax in California.

When New York State enacted such a bill, 100s of retailers immediately severed their relationships with affiliates residing in New York State including Overstock.com and the Home Shopping Network.

Bills like this will have a chilling effect on the affiliate marketing industry.

We need to stop this legislation and we can! With the support of CalChamber and CalTax, California affiliate marketers and the PMA is launching a coordinated grass-roots campaign that targets congressional representatives. And this bill was killed last year by the CalChamber coalition, so this can be done.

How you can help
We have attack plan that includes sample letters, fact sheets, congressional contacts by zip code, and a “Visit Sacramento” day, to put faces in front of decision makers. We have two weeks to make a difference.  Time is critical here.

Everything you need to make a difference is on this blog.

• Sign our group letter – we want over 200 businesses to sign this letter. Click here to see the letter and sign up (It’s important we gather as many names, company names, as possible. We have made it easy, if you do nothing else do this!!! You just need to fill out a form.)

• Write a letter to your State Assembly Member – this really does make a difference.

• Sample letter to write your State Assembly Member here – make sure to personalize it.

• Find your State Assembly Member here by zip code

• Assembly member’s address here – click on the Assembly Member’s name, then find their contact info on their web page. Please sent your fax to their local office (not Sacramento). It’s best to fax AND email.

• Join our lobby day in Sacramento on March 31. We need to put a human face to this story and the best way to do that is to meet with your Assembly members face-to-face. Brook Schaaf and Karen Garcia are organizing this. You can get in touch with them here: lobby_day (at) performancemarketingalliance.com

• Visit your State Assembly member and tell them to stop this bad bill.  This will have a huge impact!   To find out more email caaffiliates (at) gmail.com

• Editorial board visits – you can email caaffiliates (at) gmail.com to participate.

Please note, we will have more on district vists and ed board visits in the next few days and I’ll post it on ReveNews too.

The greatest strength of affiliate marketing has always been our amazing entrepreneurial spirit.  We need to put that spirit to work to fight against this bill.   If we work together we can win.

PLEASE REPOST AND SPREAD THE WORD!

Read more:
Affiliate marketing under attack in CA and what you can do.

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The following is a message from the Performance Marketing Alliance which lays out the alliance’s plan and argument against California Assembly Bill 178.

As you might have heard, affiliate marketing is under attack in California. Assembly Bill 178 is a California version of New York’s “Amazon Tax”. Plain and simple it is an ugly situation. This post is a summary of the situation and how you can help.

The situation
AB 178 – you can read the bill here - would establish that a nexus is created in California when any out of state retailer enters into any marketing agreement with a California resident or business in exchange for compensation or commission, such as by a link, website, or other form of advertising which generates referrals in excess of $10,000 in sales. Once a nexus is established, AB 178 would require retailers that receive direct or indirect referrals from online advertising on websites to collect sales tax in California.

When New York State enacted such a bill, 100s of retailers immediately severed their relationships with affiliates residing in New York State including Overstock.com and the Home Shopping Network.

Bills like this will have a chilling effect on the affiliate marketing industry.

We need to stop this legislation and we can! With the support of CalChamber and CalTax, California affiliate marketers and the Performance Marketing Alliance is launching a coordinated grass-roots campaign that targets congressional representatives. A similar bill was killed last year by the CalChamber coalition, so we can get this done.

How you can help
We have an attack plan that includes sample letters, fact sheets, congressional contacts by zip code, and a “Visit Sacramento” day, to put faces in front of decision makers. We have two weeks to make a difference.  Time is critical here.

Everything you need to make a difference is itemized below:

• Sign our group letter – we want over 200 California businesses to sign this letter. Click here to see the letter and sign up. It’s important we gather as many names, company names, as possible. We have made it easy, if you do nothing else do this! You just need to fill out a form.

• Write a letter to your State Assembly Member – this really does make a difference.

• Sample letter to write your State Assembly Member here - make sure to personalize it.

• Find your State Assembly Member here by zip code.

• Assembly member’s address here – click on the Assembly Member’s name, then find their contact info on their web page. Please sent your fax to their local office (not Sacramento). It’s best to fax AND email.

• Join our lobby day in Sacramento on March 31. We need to put a human face to this story and the best way to do that is to meet with your Assembly members face-to-face. Brook Schaaf and Karen Garcia are organizing this. You can get in touch with them via email here: lobby_day (at) performancemarketingalliance.com

• Visit your State Assembly member and tell them to stop this bad bill.  This will have a huge impact!   To find out more email caaffiliates (at) gmail.com

• Editorial board visits – you can email caaffiliates (at) gmail.com to participate.

Please note, we will have more on district visits and ed board visits in the next few days and I’ll post those on ReveNews too.

The greatest strength of affiliate marketing has always been our amazing entrepreneurial spirit.  We need to put that spirit to work to fight against this bill. If we work together we can win.

Here is the original post:
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Unless you have been living under a rock, you are aware of California (and other) states efforts to copy New York and collect sales tax on affiliate initiated transactions. Collection of sales tax is important, and states are right to be concerned about taxes that are owed to them and not being collected.  But this is the wrong way to go about collecting this money and can easily cause more harm than good.

The California bill is Assembly Bill 178 sponsored by Assembly Member Nancy Skinner. The hearing date on Bill 178 has been scheduled for April 13, 2009.

We all learned a hard lesson in New York.  Luckily that lesson is being applied right now in California.  Action needs to be taken now while the bill is still in committee.

The PMA’s Stance

The Performance Marketing Alliance has formed a committee led by the experienced Beth Kirsch who has done lobbying at the federal level.  She has been working with a coalition led by the Chamber of Commence and the California Taxpayer’s Association that includes the big players in the Tech space. This coalition has had success with similar bills in the past. With companies like Google, Yahoo, eBay, and CJ all based here, there are a lot of big companies with vested interests that are taking actions either as part of this coalition or on their own.

The PMA is a valuable addition to this coalition because we can put a face on the issue.  We can get real people with real stories to talk about what this bill can do to them.  As such, the PMA is leading a grass-roots effort to spread the word about this to as many people in this industry as possible.  They have more in the works as well, with details coming out as they develop.  There are some more meetings today, and strategizing over the weekend.  After that, I expect to see plan laid out.

Likely there will be a need for people who can go to Sacramento, people to make appointments for in-person visits with their own representative, letter writers, and press outreach. If you can help with any of that, please contact the PMA to see how you can help.

Other Resources to Help Combat the Bill

There are other resources to check out as well. CAaffiliates.com is an ABestWeb forum for the discussion of the bill. Both Mark Welch and Scott Jangro have written excellent letter’s on the matter (Mark’s letter (pdf) and Scott’s letter) which I encourage you to read.

How Can You Help?

Discuss the bill with people. Let them know why it’s a bad idea, inform them. If you have a blog, make a post.  If you are on Twitter, Facebook, LinkedIn, etc. use them to spread the word and link to places where this is being talked about. Create discussion and make your voice be heard.

Read the original:
Affiliate Taxation – Time to Fight Back

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