Marketing Pilgrim

By Trisha Lyn Fawver

If ever a cause was near & dear to me, this is definitely one of them. As an affiliate manager, affiliate marketing is my livelihood.  Over the last year, several states have introduced legislation defining affiliates as tax nexus for businesses.  This means that if a merchant has affiliates in a state with this kind of law, they are required to charge sales tax for all online orders made to customers in that state. 

This started in May 2008 with New York, and quickly spread to California, Minnesota, Rhode Island, North Carolina, Hawaii, and other states.  Affiliate marketing advocates were successful in stopping the laws from passing in most states, however Rhode Island and North Carolina have passed similar laws to New York. 

It’s somewhat hard to keep up with which state is passing the so called "Amazon Tax," which have vetoed it, and which retailers have pulled the plug on their program–just in anticipation of it.

Let’s start with the good news. Both California and Hawaii look set eject the planned affiliate nexus, with vetoes from their respective governors.

CA’s Arnold Schwarzenegger stated:

"After passing the largest tax increase in California history, it makes absolutely no sense to go back to the taxpayers to solve the current shortfall – that’s why yesterday I vetoed the majority vote tax increase passed by the legislature."

Meanwhile HI’s Governor Linda Lingle says:

It appears as though Amazon’s email to affiliates regarding North Carolina’s pending taxes was not a bluff. I just received a follow-up email from the company saying it has decided to shut down its affiliate program in the state, as of today.

We are writing from the Amazon Associates Program to notify you that your Associates account has been closed as of June 26, 2009. This is a direct result of the unconstitutional tax collection scheme expected to be passed any day now by the North Carolina state legislature (the General Assembly) and signed by the governor. As a result, we will no longer pay any referral fees for customers referred to Amazon.com or Endless.com after June 26. We were forced to take this unfortunate action in anticipation of actual enactment because of uncertainties surrounding the legislation’s effective date.

It appears the Federal Trade Commission is continuing its sloth-like race to enact new standards for bloggers that don’t currently disclose compensated endorsements.

The AP does its best to make bloggers out to be "quite different" from the "journalists" that work for mainstream media–and therefore must all be on the up-and-up, right? So, I’ll spare you the fluff and cut to the chase:

New guidelines, expected to be approved late this summer with possible modifications, would clarify that the agency can go after bloggers — as well as the companies that compensate them — for any false claims or failure to disclose conflicts of interest.

It appears that North Carolina is about to follow New York’s lead and implement a tax collection scheme that will see Amazon.com shut down its Associates affiliate program in the state. Today, all Amazon Associates in NC received this gloomy email from the online retailer:

We regret to inform you that the North Carolina state legislature (the General Assembly) appears ready to enact an unconstitutional tax collection scheme that would leave Amazon.com little choice but to end its relationships with North Carolina-based Associates. You are receiving this e-mail because our records indicate that you are an Amazon Associate and resident of North Carolina.

Please note that this is not an immediate termination notice and you are still a valued participant in the Associates Program. All referral fees earned on qualified traffic will continue to be paid as planned.

Maybe I’m not the best qualified to make assumptions about why Amazon Associates–the online retailers affiliate program–just pulled the plug on allowing affiliates to send referrals via paid search, but that doesn’t stop me from making an educated guess.

PPC Arbitrage.

I suspect that Amazon finally realized that it could do its own keyword bidding and cut out the middle-man–those bidding pennies on long-tail keywords and making dollars in affiliate commissions. Here’s the email that Amazon just sent out to its affiliates:

Dear Amazon Associate:

We’re writing to let you know about a change to the Amazon Associates Program. After careful review of how we are investing our advertising resources, we have made the decision to no longer pay referral fees to Associates who send users to www.amazon.com, www.amazon.ca, or www.endless.com through keyword bidding and other paid search on Google, Yahoo, MSN, and other search engines, and their extended search networks. If you’re not sure if this change affects you, please visit this page for FAQs.

Amazon had a great fourth quarter as reported today in the WSJ. Sales were up 18% and profits rose 9%. Those numbers are pretty strong when things are going well but in today’s economy these are outrageous results.

Here’s a few more numbers to drool over. Earnings of $225 million for the quarter ended Dec 31st. This is compared to earnings of $207 million for the same period a year earlier. What’s that you ask a company that’s experiencing growth year over year in this environment? Yup, that’s right. Oh and the $6.7 billion (with a “b”) revenue number for the quarter is very impressive indeed.