The Way I See It: State of Affiliate Marketing Part 2

My fellow affiliate marketers, welcome to Part 2 of the State of Affiliate Marketing Union.  I shared some of the wonderful things that affiliate marketing has going for it, including phenomenal growth despite the recession, in my post earlier this week. I feel the state of the affiliate marketing union is strong, but faces many challenges in the coming year.

And now the bad news. Surely, you knew it was coming. There are no silver lining comes without a cloud after all. First there is taxes then there is everything else…

Our Biggest Challenge

All kidding aside, there are serious challenges facing the affiliate marketing industry in the coming year. Unless you are an affiliate that’s been living under a rock, you know about the offspring of the so-called Amazon Tax which was first enacted in New York. Since that time the states of Rhode Island, and North Carolina passed similar legislation; and California and Hawaii came within a hair’s breadth of passing their own versions but thankfully the governors of those states vetoed the legislation.  Even now, though, it is still not a dead issue in those states and we face new challenges like the current one in Colorado as well as in Vermont, Virginia, Mississippi, New Mexico, Idaho, Maine, South Carolina, Florida, Maryland, Missouri, Texas, Connecticut, Illinois, Minnesota, West Virginia, and my home state of Tennessee.

Don’t see your state listed above? Consider yourself lucky, but odds are that such a tax will be proposed in your state or a bordering state very soon. Now with the aforementioned states enacting and others looking to follow, inevitable budget crises will see it occur in more states as they do whatever it takes to raise more revenue. You, Mr. or Ms. Affiliate, are the perfect target.

The time for apathy and inaction is over. The time for getting really ticked off and acting is now!

Let me put that another way: Get off your butt. Quit thinking it’s going to go away or that there is nothing you can do. Get mad and do something about it.

This is a call to arms. I don’t care if you hate politics, if you are a Democrat, Republican, or not even old enough to vote. Your jobs are at stake in some cases. Your very livelihood, if you do this full time, is on the line every time some half-witted state representative introduces legislation in a futile attempt to raise revenue through affiliates since they see Amazon as an easy target. Monkey see, monkey do.

I’ll step off the soapbox just in time and leave it at this: It’s not an exaggeration to say that the advertising tax is a serious threat to our industry so please join me and others in doing something about it!

What exactly can you do about it?

Numerous people: including Rebecca Madigan of the Performance Marketing Association, Melanie Seery of Affiliate Advocacy, to Brian Littleton of ShareASale, have made the following list of resources and ideas available.

First, get educated. Learn more about pending bills in your state. Seek out information from organizations like the Performance Marketing Association or Affiliate Advocacy. Learn what your state laws currently are and what the threat level is in your state.

The threat level is high in every state that has a sales tax. Assume the threat level is Code Red and act like it.

Second, visit the affiliate forums like ABestWeb which has an Affiliate Tax Laws category and look for the forum on tax laws in your state. If the forum does not have an active thread on your state, start something. Let others know you want to fight this! It only takes one eager and active affiliate to spark a fire in many others.

Next, get a list of state Representatives, Senators, and other important elected officials. This is easily attainable through your local state government website. Once you have the facts, be proactive, build out your network of friends, media contacts and discussions about the harmful potential of such legislation. Most importantly reach out to you’re the fellow affiliates in your state.  If your state is not a serious threat now, it could be, so the time for organizing is now.

Be vigilant; if legislation is proposed be prepared to reach out to your representative legislators. Go to their offices, get to know their staff, send them emails and letters, make phone calls, and encourage others to do the same. Tell them your story. So many of them don’t understand the details so let them know that a real person is behind this, a real person with a real job that stands to suffer greatly if such a tax is passed.

Tell them how it will cost people their jobs. Inform them that early data is showing that the states like Rhode Island that have enacted similar legislation are showing no revenue from the tax. None!

Recently, affiliates in Colorado set a great example for the rest of us with 150 affiliates very active in the fight. Unfortunately the Colorado House just passed HB 1193 and the Senate Finance Committee moved to bring to the whole Chamber. Here is an excellent article by Scott Jangro that provides a recap of what happened in Colorado.

What a wonderful example of affiliates coming together to fight this!

Apathy is the biggest enemy to beating these taxes and saving our industry. Apathy is what keeps us home on a cold day instead of driving to a boring committee meeting at the state legislature. Apathy is what makes us think that a simple email to our legislator won’t make a difference. Apathy is what leads to the tax being passed and a slew of merchant terminations (note: Many merchants like us are taking a stand and not terminating affiliates at all, or providing support in our fight).

Beyond the Advertising Tax

After the advertising tax issues, the biggest ongoing challenge for many affiliates is the seemingly fickle nature of Google. Just because Google now operates an affiliate network doesn’t mean affiliate sites don’t still get Google Slapped.

I experienced this problem first hand. Sites that had done very well for many years suddenly disappeared from both the natural listings and paid listings in Google. In about two-thirds of the cases we encountered, the sites were doing everything right, according to Google’s own best practice standards, leaving both the affiliate and me totally bewildered and wondering what to do next. In a nutshell, their demise really, really sucked.

A quick look through the various forums provides some comfort when we find that this is not some sort of attack on review site affiliates or our industry, but rather what seems to be an all-out assault on all kinds of sites combined with the fickleness of the Google algorithm. Thankfully, in December of last year and in January of this year saw many of our affiliate sites climb out of the depths and re-emerge stronger than ever, with a few tweaks that we worked out together. We are cautiously optimistic that the changes we made will work long-term.

The Launch of New Under-Prepared Affiliate Programs

On the surface that may not seem like a challenge or threat to the industry at all, but I have noticed an explosion in affiliate programs that never should have been launched in the first place. These programs end up giving good programs, and the industry as a whole, a bad name.

Now, more than ever, I am seeing programs that are run unethically, programs with horrible trained affiliate managers if they have any managers at all. These programs seem to have a general attitude towards their affiliates that borders on downright contempt and disdain. Unfortunately, they are doing a good enough job of attracting many new affiliate marketers to their programs with their offers; to only then horribly represent our industry and leaving a bad taste in everyone’s mouth.

Often times good programs never get a chance to even work with aspiring new affiliates and the advertisers who may have launched with good if misguided intentions never give the affiliate channel a chance to grow.  We all lose as a result.

In the coming year, my hope is that more and more unethical and shady programs will be brought to light and that the industry as a whole will do more to stand up to these merchants. Maybe through adopting an industry wide set of best practices. It’s in all of our best interests to put a barrier up to the bad ones, and to educate those who genuinely want to run good programs.

Thanks for reading. It’s hard to believe that there are less than eleven months left in 2010. I know for many of you, it is shaping up to be a record year.  If we stand together we can make it a great one.

About Matt McWilliams

You can find Matt on Twitter: @LegacyAffiliate.

7 Responses to The Way I See It: State of Affiliate Marketing Part 2

  1. Matt,

    "Now, more than ever, I am seeing programs that are run unethically, programs with horrible trained affiliate managers if they have any managers at all."

    I'm seeing this as well and we have decided to re instate our affiliate manager training seminars. We are planning to run the first one of the year in Chicago during the month of April. Anyone interested should get in contact with us so we can schedule them and reserved them a seat.

    Thanks buddy!

  2. Fred Waters says:

    I've already moved from North Carolina to Tennessee to get my Amazon affiliate program reinstated. I pray I don't have the same scenario here. In the process NC lost a significant amount of tax revenue from me.

    However, if enough states pass the tax companies like Amazon and Overstock are going to have to deal with the reality of a tax. The issue of taxing the Internet, which I feel is ineviable, should be on the federal level and not the state.

  3. Bill says:

    I see the biggest threat in 2010 as being Google. You say Google is finicky I say they are a threat. My hope for 2010 is Google will lose market share. They are too “finicky” to build your business model on, your livelihood on. They make marketing into Russian Roulette and with no one to talk to at Google. Who I’m almost convinced uses AI as customer service they are usually no help whatsoever.

  4. Andy, that is great news! Do you have a URL that you could send me? I know a few people who need it and know they need it and would come.

  5. Fred, welcome to the Volunteer State!

    As a former North Carolinian I am so saddened that they were among the early adopters of the legislation. NC has come a long way (for the worse) from the solid anti-tax state I grew up in…and that was only 5-10 years ago.

    I am sure I can count on you to help us fight the tax here in Tennessee right!

    Shoot me an email…I am curious where you ended up 🙂

  6. Mark Welch says:

    One important point – you wrote (in part): > "You, Mr. or Ms. Affiliate, are the perfect target" < (referring to the advertising-nexus tax bills).

    I don't think any legislator actually wants to target affiliates (web publishers). Instead, the legislators want to target ("stick it to" or "enforce fair tax collection practices by") out-of-state merchants.

    I think this is an important distinction because the two concepts (being a target or suffering unintended consequences) create two very different approaches (if you're a target, you're starting with confrontation; if you're suffering from an unintended consequence of legislation that's been proposed based on misunderstandings, you can try instead to educate and cooperate).

    Probably the worst starting point for a communication with a state legislator's office is "overt hostility." Similarly, arguments that "internet sales should not be taxed" or "out of state merchants should not be burdened with sales-tax collections" (nor "this law is unconstitutional") are NOT going to be considered seriously by state legislators.

    Instead, the focus should be on two important aspects of this law: first, states (other than New York) are not collecting and will not collect any meaningful sales taxes after enacting these laws, because merchants will simply terminate their advertising relationships with in-state web publishers; and second, in-state web publishers will lose revenue and will thus pay less state income taxes on that revenue — with the lost tax revenue far exceeding any reasonably-forseeable (nominal) sales-tax revenue increases.

    Probably the most important issue here is that the booksellers' lobbyists are continuing to LIE about the New York law, claiming that Amazon threatened to terminate affiliates there but then "backed down" after the law was passed — this simply isn't true, because Amazon was "trapped" by that law's "retroactivity" clause, which Amazon chose not to litigate. To my knowledge, no merchant has ever "backed down" on a threat to terminate affiliates in states that enact advertising-nexus sales-tax laws.

    But again, the key here is the "attitude" that is most likely to be productive. If affiliates perceive themselves as "targets," they are likely to adopt counter-productive strategies. Likewise, if affiliates align themselves with extreme "anti-tax" legislators, they're unlikely to be heard by moderate legislators who are seriously trying to solve state budget deficits.

  7. Mark,

    I think the spirit of that line stands though.

    “You, Mr. or Ms. Affiliate, are the perfect target”

    While I am not suggesting that the legislators are out to get affiliates and have some sinister plot to ruin our lives, I am suggesting that it is easier for us to be at best collateral damage than many industries.

    They won't dare do something to put their contributors and supporters at risk, but lowly affiliates who "work from home" and "can't get a real job" etc. are easy prey.