This Thing Of Ours… What Do We Call It?

Last week, Missy Ward, co-founder of Affiliate Summit, reignited the age-old discussion about what we call our industry. Is it affiliate marketing or performance marketing? Are we affiliates or publishers? Are they merchants or advertisers? Either you think this is important or you are thinking What?! Who cares?!? Still I think the topic is worth a few minutes of your reading time.

What’s in a name?

In years past, I didn’t want to be called an affiliate for two reasons. I don’t really care much about one reason anymore. That one is that there are so many people who give Affiliate Marketing a bad name. There are bad actors everywhere. We’ve come a long way to marginalize these guys… yes, but we still have a long way to go. Either we clean it up or someone else will do it for us.

The more important issue then, and HUGELY important today has to do with what the term affiliate means and how it is being used against us. I am not an affiliate because affiliate links are just one way that we monetize our sites. Why focus on that reason? Of course, the last time I brought this up, Shawn Collins, co-founder of Affiliate Summit, expanded Affiliate Marketing to include just about everything that we could include for monetization. I don’t think that AdSense is an affiliate program but Shawn does (or at least did). I don’t think that we’ll ever agree and entering into a cyclical argument is pointless.

Enter the California State Legislature… and many other states as well

When we went to Sacramento to lobby against AB178 (aka the Advertising Tax) we were told by our advisers not to focus on monetization types or compensation. It seems that to create nexus under the Advertising Tax, an affiliate needs to be compensated on a percentage of sales basis (aka cost per acquisition or CPA). So if we have a link on Cashbaq to a product being sold at Overstock and Overstock pays us a percentage of sales for that product, Overstock would have nexus in California and would be required to collect California sales tax if the Advertising Tax were to pass.

If you drive two three miles down the road to Shopzilla, you would see their nice offices. They too are located in the city of Los Angeles, but they won’t create nexus for Overstock with a link to that same product at Overstock for the same price. Why? Because a link to that same product at the same store for the same price would be compensated on a Cost Per Click (CPC) basis. Shopzilla isn’t an affiliate because of the way it gets paid. That’s advertising.

Are you following this? Neither are our state legislators, such nuances are beyond them. While there is no logic to the taxation we can follow the consequences of such actions to their logical conclusion.

The Logical Conclusion

Ultimately, I don’t care what as an industry we are called. Legislators will define us in their own terms regardless of whether we call ourselves performance marketers or affiliates. The threats to our industry are more important than a debate about what shingle we hang out. Should the Advertising Tax pass and become law in California, many Web-only stores will terminate their relationships with their affiliates. Pure and simple.

The largest ones will be able to switch to a CPC compensation and keep their relationships with their advertisers (Note that loyalty sites will have great difficulty under this scenario and will have to have fewer stores, move out of state or shut down). That means smaller companies will bear the brunt of the burden of such a tax. Many will be forced to shut their doors. Of course, the irony is that small business are generally the ones that lead the economies out of recessions; and California is so heavily tech dependent.

A Personal Note on Dinner

Oh and Missy, dinner is at 7:00. Don’t be late!

About David Lewis

David Lewis is CEO and Co-founder of Prycing. He’s been around affiliate marketing for a long time.

Twitter: thedavidlewis

One Response to This Thing Of Ours… What Do We Call It?

  1. "Legislators will define us in their own terms regardless of whether we call ourselves performance marketers or affiliates." –> Precisely my thinking, David. I do not believe a change of name will change anything.

    Of course, I may be wrong (it's more of a question to lawyers and lobbyists).