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Regulating Chaos, Part 2: The Affiliate Networks' Dividing Line

  |  January 24, 2003   |  Comments

Guidelinesare great, but what about enforcement?

Regulating the affiliate industry can be like herding cats. Although the two adware documents I wrote about in part one, the Publisher Code of Conduct and LinkShare's Addendum, are good first steps, clearly there's no consensus among the top affiliate networks.

Part of this divergence is built into the Code of Conduct Preamble, which reads:

Each Service Provider has committed to enforcing the Code through means consistent with its own business operations and practices, and to communicating and cooperating with its customers regarding enforcement and interpretation of the Code.

In short, each affiliate network will interpret the Code of Conduct in its own way. Ironically, LinkShare is continually positioned as an outsider, yet its Addendum actually fits in with this self-regulation part of the Preamble.

In trying to find out more about all this, I interviewed Commission Junction's CEO Jeff Pullen, Performics's Senior Vice President Chris Henger, and Be Free's founder/CTO Sam Gerace together. LinkShare's CEO, Steve Messer, was interviewed separately. When I asked the group if Messer could be included in the initial interview, the response was: "Steve Messer will not be on the call, because we want to keep this focused on Be Free's, Commission Junction's, and Performics's Code of Conduct, which LinkShare is not part of."

Clearly a dividing line has been drawn around these two documents, when the real issue isn't the words or even the affiliate networks involved. For the affiliate industry, what is most important is how all this will actively be enforced, and that's still not apparent. Read on to find out what the affiliate networks have to say.

Why is the Code of Conduct important for the affiliate industry?

Pullen: The Code of Conduct is a solid, workable document that provides good framework for the industry. Certainly it is not without critics; some want more stringent rules, some want less stringent rules. After drafting and discussing this, I think we got a document that is relevant [and] enforceable and will stand the test of time.

It was important to make sure it was flexible enough, as the technology evolves and business practices evolve. We looked to some guidelines in the context of fair business practices and prepared a good, solid, competitive foundation for everybody involved.

Gerace: I think we should underscore that this is a process, not an endpoint. We feel that we have created a vehicle and an ongoing forum for affiliates, merchants, and providers that today, and going forward, allows all to compete on a level playing field.

The three of us are focused on making sure that the outcome at which we arrived was both enforceable and flexible enough to adapt as technology changes and industry practices change. Fact is, this issue was very different in late 2000 and will be very different in late 2004. Our Code of Conduct is about how one conducts oneself in business; it is specifically designed to be flexible enough to allow technological change and adapt to it.

Messer: For over a year, LinkShare has relied on our agreement and addendum to offer protection to our affiliates. We participated in the discussions on the Code of Conduct in the hopes that an industry standard to solve this problem would result.

While I believe that the Code of Conduct produced by some of the other providers is a great first step, it is overly vague in its statements and lacks enough detail about enforcement. In addition, we felt that the code shifted the burden of deciding what behavior is acceptable from the provider to the merchant, potentially creating a larger problem.

For these reasons and others, LinkShare decided that it was better to decline adding our name and reputation to this document and continue to use our addendum, which did not have these issues. The LinkShare addendum has teeth -- it is clearly written and is contractual. Anything short of that would not protect our partners.

What do you think about LinkShare's efforts?

Henger: LinkShare was part of the Code of Conduct process, collaborated on it, and pulled out at the last minute. We encouraged them to support the Code of Conduct, set up mechanisms of enforcement, and allow for upcoming change that is about to happen.

Gerace: I can't really comment on what LinkShare is or isn't doing. I'm not LinkShare. At the New York meeting, the entire community was represented by merchants, affiliates, and plug-in providers. We heard from everybody, and we continue to have input from everybody so the Code of Conduct is a living standard.

Messer: LinkShare was the first in the market to address this issue, with our new affiliate agreement and the LinkShare Anti-Predatory Advertising Addendum, which followed shortly thereafter. We have spent over a year evaluating and understanding the impact these new technologies have had on the affiliate market. What all the participants have in common is the desire to have a simple and clear definition of what is and what is not permissible.

Even more important is a framework for how technology companies can become compliant, and what happens to them if they are noncompliant. In one sense, all the players (affiliates, merchants, and technology providers) want the same thing -- to know the rules within which they have to work and the framework within which to operate their businesses ethically. The LinkShare addendum provides this in a clear and consistent format that supports fair business practices.

Today, we have the power to protect our affiliates. Even more important is the protection that we secure against a plug-in provider reverting to noncompliance at some point in the future. You just can't do that without a contract and a clear definition of what is and what is not permissible.

Are adware companies following the rules?

Pullen: Everyone is interested and complying, being responsive, trying to understand what the rules are. We're working with all of the major players, and they are all cooperatively listening and working to improve their technologies. I think it's positive for the industry. The goal is to get them all compliant. I think they want to be compliant.

Messer: Not only have several signed the LinkShare Addendum, they have gone through compliance testing with us. For example, one company had a software version that did not follow the procedure; it was shut down and activated only when the company proved to us change had been made.

The following have signed on with LinkShare as supporting the Addendum: WURLD Media/BuyersPort (Morpheus), TopMoxie (and its nine clients, including eBates, Upromise, etc.), ShopAtHome Select, [and] FatWallet.

What Does All This Mean?

What I found when talking to all of the affiliate networks is that everyone says that everything is going well, that adware companies are becoming compliant, and that the problem has been approached at the right time, before it got too big.

It is clear that this industry is trying to establish best practices, but it seems affiliate networks are as concerned about positioning themselves as they are about making an actual impact. The three players behind the Code of Conduct provide a unified front, but the Code of Conduct currently has little muscle. It says what not to do, but leaves enforcement up to the individual affiliate networks. It's like a law that says what not to do but doesn't really tell you what will happen if you do it. Call it market economy or call it vague, but it's hard to figure out whether it will really have an impact after the issue starts to fade from the press. LinkShare's Addendum is far clearer in its rules and enforcement, but that is because it is limited to one business.

The real challenge is to the merchants and affiliates, who are being regulated by affiliate networks who can only control what happens within their own networks. Outside that little universe, it's still the Wild West. Confusing? You bet. Is it a good first step? Yes, but if regulation stops here, then all that's been accomplished is a little good publicity.

If the code continues to grow and adapt, and to affect changes, then perhaps the industry will regulate itself. Right now, the future is uncertain -- optimistic, but uncertain.

Stay tuned...

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ABOUT THE AUTHOR

Declan Dunn Declan Dunn is CEO of ADNet International, a direct marketing services provider that focuses on select projects and its own super affiliate network, including the Net Profits business training systems delivered at ActiveMarketplace.

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