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  1. #1
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    I am 100% for the advertising-nexus laws ... for two reasons:

    1. The way things are set up now, Merchants have a license to steal from publishers.
    Now that does not mean that they ALL do steal, but you would have to do some serious
    homework to find any merchant who does not violate the 'unlawful conversion' statutes.

    Most merchants have no idea there is even such a thing on the law books in every state.
    Cookie poaching and tool bar cookie stealing are illegal in every state but it that doesn't
    mean it doesn't happen.

    2. There should be NO FREE TRAFFIC for any merchant, other than SEO for their own site search engine listing. Publishers should get paid for publishing. The problem is how much and in what form to keep the publishers from doing the stealing.

    I have no problem with sales tax ... it's a voluntary contribution to the community. If you do not want to pay it, don't buy anything that is taxable.

    Now we have the problem of agency. Are affiliate agents of the merchants or not? How you interpret this situation has huge relevancy in every state and is different in each state in some manner shape or form.

    If affiliates are agents, then there is a whole set of rules and regulations that BOTH sides
    must adhere to. If not, let the best women win and anything goes.

    The NET and all it's bells, whistles and situations has bubbled up from the masses. Legislators are pretty much clueless about how it works, why it works and what you can do with it. It's hard to pass FAIR & EQUITABLE policy if you don't know what it is you are dealing with, how it works, who is whome and how do they benefit or lose.

    Some ideas to fix the problem: Merchants pay affiliates $1/per week for one or more links on the Publishers website - plus a per sale bonus. Technically the Merchants is paying for advertising and is exempt from the unwiedly attempt to tax them.

    The problem is how many affiliates do you pay and how do you determine that number?
    You can use a number of metrics ... Alexa for one. You can do trial and error. Buy a listing
    for one month for $5 ... if you make a profit, keep paying the publisher.

    There are lots of ways to skin lots of cats ... but some might work better for somethings than for other things.

    Still the problem is for merchants to maximize their return ... just like it is for any advertiser.

    Let the games begin.

  2. #2
    ABW Veteran Mr. Sal's Avatar
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    Quote Originally Posted by net4biz
    Some ideas to fix the problem: Merchants pay affiliates $1/per week for one or more links on the Publishers website - plus a per sale bonus. Technically the Merchants is paying for advertising and is exempt from the unwiedly attempt to tax them.
    That sounds like a good idea, specially when you see that some merchants don't convert as expected...

    But, there is a big problem with that idea...

    What would keep an affiliate from joining 1000 merchants, and then just try to collect $1k a week for doing nothing more than adding a merchant link to a site?

  3. #3
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    [Thanks, Haiko, for splitting this off.]

    A "hybrid" compensation model (such as $1 plus a bonus based on sales) doesn't remove the component that triggers the law: there is still compensation which is based on sales volume.

    To anticipate another suggestion, I also don't think it would be effective to create "contingent" compensation schemes (for example, we'll pay you $1CPM or $0.10 per click, provided that your traffic generates X sales (or $X in sales) per unit. (I remember this trick from the late 1990's, when some merchants promoted "$10 CPM" advertising campaigns, but then imposed contingencies and rate reductions that ultimately computed to one cent per click.)

    Mr. Sal's idea of publishers joining 1,000 programs to earn $1 per week is certainly a concern, but I certainly assume that merchants would terminate non-performing publishers much more quickly under that type of compensation scheme.

    Of course, all merchants are free to experiment with other forms of advertising (CPM, CPC), and like any advertiser, they are free to terminate unprofitable advertising arrangements. But I think the whole point of "affiliate marketing" is to shift this "measurement and decision" burden from the merchant to the publisher.

    Note: The plain language of the Advertising-Nexus tax laws is not limited to pay-per-sale compensation; it is only the narrower interpretation of the law by states that maintains this distinction.
    Last edited by markwelch; July 9th, 2009 at 12:12 PM.

  4. #4
    OPM and Moderator Chuck Hamrick's Avatar
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    1. The way things are set up now, Merchants have a license to steal from publishers.
    Now that does not mean that they ALL do steal, but you would have to do some serious
    homework to find any merchant who does not violate the 'unlawful conversion' statutes.

    Most merchants have no idea there is even such a thing on the law books in every state.
    Cookie poaching and tool bar cookie stealing are illegal in every state but it that doesn't
    mean it doesn't happen.
    net4biz, can you point us to an 'unlawful conversion' statute from one of the states?

    If affiliate programs are shut down state by state then we may see affiliates revert to advertising schemes. While researching sites to recruit I see the high travel models using CPM advertising and AdSense to make money. I would like to know how that is not treated as a tax nexus?

  5. #5
    Moderator MichaelColey's Avatar
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    Affiliate marketing is performance based. A merchant get what they pay for. If a merchant pay for links, they will get links (that don't generate many sales). If a merchant pay for clicks, they will get clicks (that don't generate many sales). If a merchant pay for impressions, they will get impressions (that don't generate many sales). If a merchant pay for loads, they will get leads (that don't generate many sales). If a merchant pay for sales, they will get sales.

    Anybody asking for a slotting fee, a minimum monthly fee, fees for putting up links, minimum EPC, etc., isn't generating sales and probably shouldn't be in affiliate marketing.
    Michael Coley
    Amazing-Bargains.com
     Affiliate Tips | Merchant Best Practices | Affiliate Friendly? | Couponing | CPA Networks? | ABW Tips | Activating Affiliates
    "Education is the most powerful weapon which you can use to change the world." Nelson Mandela

  6. #6
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    Life is based on performance, Mike ... that does not mean you get paid for everyday you
    end up breathing. And you miss the point Mike.

    If a merchant complies with the agency statutes in a state, then they can run a performance based program ... but most merchants 'performance' based programs do not do so ... they make up the rules as they go along.

    There are a ton of technically illegal things being thrown out as not so ... Just because they do not get challenged legally, does not mean they are not illegal.

  7. #7
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    Chuck,

    Here is what wiki says about it.

    Conversion is a common law tort. A conversion is a voluntary act by one person inconsistent with the ownership rights of another.[1] It is a tort of strict liability.[2] It's crime counterpart is theft. Examples are seen in cases where trees are cut down and the lumber hauled from the land by someone not having clear ownership; or removing furniture belonging to another from a cohabited dwelling, placing it in storage and not telling the owner of the whereabouts. In medieval times, a conversion would occur when bolts of cloth were bailed for safe keeping, and the bailee or a third party took them and made clothes for their own use or for sale. (See infra.) Many questions concerning joint ownership in enterprises such as a partnership belong in equity, and do not rise to the level of a conversion. Traditionally, a conversion occurs when some chattel is lost, then found by another who appropriates it to his own use without legal authority to do so. It has also applied in cases where chattels were bailed for safe keeping, then misused or misappropriated by the bailee or a third party.

    Conversion, as a purely civil wrong, is distinguishable from both theft and unjust enrichment. Theft is obviously an act inconsistent with another's rights, and theft will also be conversion. But not all conversions are thefts because conversion requires no element of dishonesty. Conversion is also different from unjust enrichment. If one claims an unjust enrichment, the person who has another's property may always raise a change of position defence, to say they have unwittingly used up the assets they were transferred. For conversion, there always must be an element of voluntarily dealing with another's property, inconsistently with their rights.

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