While you might feel comforted that an attorney has thoroughly reviewed your site, your '2257 docs are in order and all of your paperwork is current, your taxes are being paid, and your insurance is all encompassing and up-to-date; your operation still faces a wide range of threats — some obvious, some hidden — and some from your friends.
In this latter case, the problem is not strangers, it is your partners: the affiliates that you trust to provide your website with its lifeblood — a fresh, growing and constantly renewed source of visitors.
Problematic affiliates are nothing new, with many program owners being able to share horror stories of fraudulent signups, charges of spamming, and the nefarious tactics employed to funnel traffic; which ultimately harm the sponsor's hard-earned reputation.
Today, however, a new problem is becoming more prevalent; as affiliates become direct competitors to their sponsors: Not by stealing content (or using all that free affiliate content) to build their own site, but by "stealing" brand recognition in the form of bidding on the sponsor's name and trademarks on pay-to-play keyword-based traffic sources such as Google AdWords.
For those unfamiliar with bid-based advertising, the concept is simple: you pay more per click for a better listing on the search results page, thus receiving more clicks from potential customers. If the search term you want your ad to be displayed in response to is "porn," for example, and you bid 10 cents per click, then your advertisement will be more prominent than one that has a nine cent bid.
A lot of tedious, repetitive work goes in to optimizing programs to obtain the most profitable results from this marketing approach — least of all determining how much to spend per click and still make money — and on which specific keywords and phrases.
But what happens to your hard work and investment when your affiliates come in and bid on those same terms, but pay a penny more per click, appearing higher in the listing than you? Sure, you still made a sale, but it cost you more — more in that you paid out a direct commission to the affiliate; and more, because you now need to bid higher in order to achieve a position in those top spots — all while funding your new "competitor."
Although an affiliate bidding on a term like "porn" is not a problem (except for the affiliate trying to profit that way), when it's, say, a Playboy affiliate who is bidding on the term "Playboy" — well, that can be a big problem.
So what prevents affiliates from doing this? In most cases, the answer is "nothing" — but for a growing number of operators who are grasping with the problem, steps are being taken to curtail this questionable practice.
When the issue involves registered copyrights and trademarks, the process of dealing with this problem becomes much simpler — and more effective — as certain intellectual property laws are clearly being violated. When dealing with other terms, however, including some company and program names, the legal standing of a sponsor's claim may be less clear.
In either case, the sponsor must rely on protecting himself to address the problem — through the use of enforceable language within the program's terms of service that prohibit these practices and provide for a forfeiture of payouts in case of its detection.
One such affiliate program to take this step is CraziesCash, which earlier this year announced changes to its affiliate agreement with respect to protecting its intellectual property rights.
"We have discovered that some affiliates have been purchasing AdWords or other keyword advertising containing our trademarks," the notice to affiliates stated. "We can understand your desire to maximize traffic to your websites, to therefore maximize your payouts. However, we have made a determination that this practice is not something we are willing to accept anymore."
The CraziesCash.com admin team explained the problem this way:
"If you purchase our AllOver30 trademark as a keyword, you are essentially buying traffic that our already-established trademark should garner. When you attract a customer through that keyword, and then sell that customer back to us, it is like you are earning a commission on a sale that we should have made without you."
As part of the crackdown, Crazies asked affiliates that had been doing this to report their actions to the company and to cease the keyword buys within 30 days. Affiliates that 'fess up, the company claims, will not be penalized or dropped from Crazies' program — a step that demonstrates Crazies' acknowledgement of the challenges of operating in our rapidly evolving marketplace, and that provides a blueprint for other programs to follow.
"We are offering a complete and total amnesty to any affiliates who may have mistakenly engaged in this kind of commercial behavior," the notice concluded. "We presume the best of you, and we are not seeking defendants in a lawsuit, but we want to be able to compile data on how many affiliates were doing so."
As more and more affiliate programs become aware of this threat to their revenue stream, we can expect more TOS updates. Of course, for programs not directly involved in paid search, letting affiliates pay to play may not be a bad idea — as long as you're still able to protect what's yours.