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May 2nd, 2007, 12:16 PM #1Understanding How Affiliates Use Adware (like Zango)
Affiliates and Merchants often ask me to explain adware and why it's so bad. So here you go, I'll try and make it as simple, yet comprehensive, as I possibly can. Zango is the example adware I chose, there are many others. Sears is the merchant I chose, in this case, a hypothetical example.
Zango is software that gets installed on people's computers for many reasons, some of which the FTC has penalized:
The software, since it's installed on the user's computer, can perform activities like any other installed application, like Word or Excel or your browser.
Pop-up blockers don't affect Zango because it doesn't deliver incoming ads (by "incoming", I mean from the Internet), it generates new ad windows because the software makes it happen from inside your computer - like your calendar software can open a reminder window.
Once installed, the Zango application monitors all Internet activity on the user's computer, both incoming and outgoing Internet packet activity. From what it sees going back and forth, it can trigger events, like ad windows.
Anything in the Internet communications stream can be used as a trigger - words on a web page that you load in your browser to view (called "contextual" advertising when ads are delivered), urls you visit or click on and other things too. The adware has lists of these things, stored on your computer, that it looks for. When it sees them, it communicates back to their home base (their servers) and decides what to do.
Occasionally, the adware also updates its files, on your computer, of what it looks for.
Let's refer to these things - the things that it looks for - as "keywords". Examples of "keywords" that it might look for, as triggers, are:
new balance shoes
home mortgage rates
It is critical to understand that last "keyword", the "sears.com" one. It's not a word at all, it is a piece of a url someone might visit.
How does Zango determine which "keywords" become triggers? Simple, they have advertisers sign up, enter "keywords" of interest and bid on them. With these "keywords", the advertiser also enters a webpage (their url of their page, their ad's page) of the ad they want to show.
In Zango's case, their division that sells ad space (where the advertisers go to sign up and pay to run ads) is called MetricsDirect. Zango / MetricsDirect are not the only ones doing this, there are hundreds of companies doing it, but most not as large as Zango.
In addition, Zango's bidding system tells Zango themselves which things people are bidding the highest on... the valuable "keywords". As a business, these "keyword" triggers make Zango the most money. So they've created a premium advertiser program where they provide these high value "keywords" to their biggest advertisers - and those advertisers stay busy devising ways to use these "keywords" to maximum gain.
If it sounds complicated, it's not - it's important to note the simplicity here - the sole reason they created the Zango software is to sell ads, that's why it's called adware. And to make it a success, they need to get their software onto as many computers as they can - so they can sell more "ads".
Through this system, advertisers have access to cause events to happen, events initiated by the Zango software, when certain "keywords" are encountered.
As an affiliate, if you bid on "sears.com/cart/checkout.asp" as a "keyword" at Zango / MetricsDirect, you are getting access to a consumer who is just about to buy something from Sears - they are literally one click away from making their purchase. If you bid on this "keyword", what url would you enter to make yourself money from your "ad"? How about your affiliate link to Sears. The Zango window would open, right over the top of the Sears window that's already open (where the customer is making a purchase), your link takes the Zango ad window, the second window just opened to deliver the ad, and an affiliate cookie would be set - and you get credit for that sale and are paid a sales commission.
The money flows:
Consumer (0): no direct effect.
Affiliate using Zango (+): makes commissions for sales for somebody about to buy anyhow, someone they didn't actually refer to the merchant.
Zango / MetricsDirect (+): makes money for selling the ability to deliver the ad event.
Network (+): the Sears affiliate program shows an affiliate sale, when it honestly wasn't, and the Network (aka CJ, LinkShare, ShareASale) gets their standard cut (most often, a % of the sale). These extra sales also make the Network look like they are helping the merchant "sell" more, so their reputation is helped when they allow it.
Merchant (-): the merchant pays commissions to affiliates (and a fee to the network) for sales they would have had themselves. The merchants own ppc, seo, email and branding work that brings new and repeat consumers to their website, ends up getting counted as affiliate sales (and incurring affiliate commissions). ROI is reduced for non-affiliate activities, meanwhile, the apparent ROI of the affiliate program is much higher than actual.
Merchant's Affiliate Manager / AM or Outsourced Program Manager / OPM (+): the AMs / OPMs are typically paid a mix or flat fees and a percent of sales, or at least performance bonuses - there are a lot of sales getting credited as affiliate sales in this case, that shouldn't be credited to an affiliate (the consumer was already on the site).
Affiliates that don't use Zango (-): if you referred a consumer to Sears 20 minutes ago (or 4 days ago), then right before the consumer bought the Zango-using affiliate pulled his trick, you don't get credit for this sale! The cheater becomes the "last referrer" and you lose your rightfully earned commission.
The consumer is a little confused when they see the Zango ad because they're already at Sears. Typically, they just close the Zango ad window. A sneaky affiliate might also program a webpage that's invisible (or otherwise hidden) and forces a faked click to also set the cookie, right before the sale - so the consumer would see nothing happen.
How big is this problem? Here's an impact study recently released by Kellie's AFP service detialing it:
If you're an affiliate, you should recognize the greatest harm done here (in terms of raw dollars) is to the merchant, not us, the affiliates. We are harmed collaterally and that harm is real, but it pales in scope compared to the damage done to the merchant. And since the affiliates among us who do this, are viewed with us, as fellow "affiliates" - the other damage done to us is the staining of the word "affiliates".
Claiming credit for unearned sales, no matter how clever or effective, is wrong. To remedy this widespread disease, every affiliate must understand it completely first.
I posted this to further our understanding of it all, not to talk about what we should do about it or who to blame for it or to get applause or whatever. Save all that for another thread please. They are worthy discussions, but we need to focus here on understanding and educating.
If you have questions about how this is working technically (and working to destroy our industry and reputation), please post away. Because this is so important, I will also answer all well-intentioned Private Messages (PMs) sent no matter how basic or lengthy.
May 2nd, 2007, 12:26 PM #2
- Join Date
- October 16th, 2006
- Washington D.C.
May 2nd, 2007, 01:30 PM #3
Thank you for taking the time to put this together.Kim Salvino, Client Services Director, Performance Horizon Group
Reach me at kim.salvino(at)performancehorizon.com or on (443) 617-4036
May 2nd, 2007, 01:58 PM #4
Thank you very much for posting this. I wish there was a way we could get this message out to the merchants so they could understand the harm companies like that cause.
I guess the big question is: Is there a cure? Is there a way for the merchant to detect if they are being robbed by this adware?
May 2nd, 2007, 02:03 PM #5
Wonderful, concise piece! I've added a link to it in my signature.
May 2nd, 2007, 03:35 PM #6
Thanks for this one, yet another incredible contribution to ABW.
May 2nd, 2007, 06:00 PM #7
Donuts, you rock!
Thanks for posting this brilliant piece. Maybe some clueless (meaning unaware, not stoopid)) merchants will "get it."
May 2nd, 2007, 06:43 PM #8
A few more important notes...
When an AM / OPM decides to attack this problem towards elimination, then reported affiliate sales go down - but the organization that the AM / OPM works for, benefits greatly - perhaps more so than any other party involved. The reports won't say that though. AMs / OPMs have a reputation too, they count on them heavily to get hired, get raises, get bonuses and more. To judge an AM / OPM based only on reported affiliate sales is to completely misjudge them. This is a very serious impact of the ways things currently work in our industry. Our most ethical AMs / OPMs are undervalued even when they are contributing more to their merchants than anyone else.
(these are made up numbers, I have no idea what Suluta charges!) If a merchant decides to hire an OPM, say Michael Nunez of Suluta (a GREAT CHOICE by the way!), and Suluta signs a deal with a new merchant that pays him $4000 / month plus 20% of all affiliate sales that are above the average monthly aff sales that they have had reported for the last 12 months... can you see where Michael ends up? If he tells the merchant that scumbag affiliates are stealing him blind and need to be booted, and it gets done, the reported affiliate sales move downwards. The merchant must adjust their pre-Suluta monthly averages to be fair to Michael's pay for the real growth he brings in... or otherwise renegotiate terms with Suluta. While Michael would go through all of this because he IS that kind of guy, realize it means coming into a new deal "negative", having to explain why he needs to renegotiate terms, having to explain that prior lack of oversight caused the problem (blaming the predecessor is always bad!) and that it's hurting the merchant and more. AMs / OPMs have a tough time, with certain clients or managers, explaining why it'd be a good thing to have fewer reported affiliate sales...
So yes, some AMs / OPMs choose to be blind, are ignorant or are complicit - and they benefit from that. But the ones who are unwilling to be complicit, have a tough road for them as well - just like us. It's not a simple thing to upset the status quo, with negativity and lowered projections, when you're a new AM or OPM.
I don't excuse the ignorant, lazy or bad AMs / OPMs with this look at how hard it is to take the right path, I am simply saying that given the scope and nature of this problem today...
To judge an AM / OPM based only on reported affiliate sales is to completely misjudge them.
In fact, there can be an ACTUAL inverse relationship where higher reported affiliate sales indicates the AM / OPM is causing damage to the merchant's business.
It is this upside nature of how our reporting can works, that drives me mad.
It can affect AMs / OPMs per above. It can make your best affiliates look like the small guys. And it affects networks as well.
In the case of two parallel programs for the same merchant, one at ShareASale and one at CJ - if CJ has more sales, what conclusion do people make? Indeed, clean networks like ShareASale and AvantLink pay a VERY steep price for their ethics as well. They are viewed as perpetually smaller producing networks... but understanding it, you see they are actually doing their very best to legitimately aid the merchants they work with. And I don't mean esoterically with ethics and fluffy sayings and a few kum-bay-yahs, let's be nice and make it a really cool world man - I mean the bottom line that the merchants earn. While the good networks seem smaller than they are... the other networks close their eyes, damage their merchants and let the checks come rolling right in, while their reputation shines.
May 2nd, 2007, 06:47 PM #9
Donuts, as always, your info. is worth at least 2 times more than I paid for it
Seriously though, this is awesome stuff. Some great reminders for all of us and even a few things I had never thought of before!
May 2nd, 2007, 06:56 PM #10
Originally Posted by Donuts
- Join Date
- January 18th, 2005
An AM/OPM who is complacent about cheaters and boasts large numbers is not only hurting the merchant that pays them, but they are often looking foolish in the eyes of affiliates who know better and know that the AM/OPM knows better but chooses blindness over ethics.
May 2nd, 2007, 07:09 PM #11Originally Posted by Donuts
May 2nd, 2007, 11:33 PM #12
If a merchant decides to hire an OPM, say Michael Nunez of Suluta (a GREAT CHOICE by the way!), and Suluta signs a deal with a new merchant that pays him $4000 / month plus 20% of all affiliate sales that are above the average monthly aff sales that they have had reported for the last 12 months...
- Join Date
- January 18th, 2005
We all have a general sense that structures like the above are typical. I'd like to try to understand how typical.
This is a serious structrual error in the way affiliate managers are compensated. I've long considered writing an academic article about this -- as a case study in how not to structure a compensation relationship. Such a piece might also be helpful in discouraging the kind of distortionary contracts set out above.
May 3rd, 2007, 06:29 AM #13
I don't want to disclose proposals.
I will say $1-6,000 plus 1 or 2 points is the current numbers I've seen offered.
So if the sales are say 100K for the month, 10% affiliate, 2% network, 2% AM plus the AM base monthly of say 4,000 you have 18%.
Plus other incentives
or 18-20% cost of acquisition.
But on 500K for a month it drops a bit to <15%.
May 3rd, 2007, 09:12 AM #14
- Join Date
- January 18th, 2005
- West Coast USA
>>>Does anyone have any example contracts
What is it worth to you + the $400 per hour it will take to copy paste a contract and PDF to you.
May 3rd, 2007, 12:20 PM #15
- Join Date
- January 18th, 2005
My comments here are unsolicited and intended primarily for those who are not familiar with Ben Edelman and his work. In his 20s and holding four degrees from Harvard, including a Ph.D. and a J.D., Ben has been a tremendous advocate on behalf of affiliate marketers. He's frequently quoted in the mainstream media on the subject of spyware and other unsavory marketing schemes. Google him and check out his website at www.benedelman.org.
If you can help him out with his request, I would encourage you to do so without compensation. He has provided hundreds, if not thousands, of hours of his time that has positively impacted us without compensation.
I have never met Ben but I have communicated my appreciation to him for what he does for us. So if you can help him out, please do.
May 3rd, 2007, 12:27 PM #16Originally Posted by Rexanne
Things are changing though Rexanne, and you and I are ahead of the curve and know what's really going on. :-)
May 3rd, 2007, 12:36 PM #17Originally Posted by bedelman
I completely made up the structure and details noted, as I said before. And the exact details aren't important to the points I made - any performance based AM / OPM pay structure can suffer from the malady.
AM / OPM pay will almost always be performance based - it's our industry's nature, as well as any that involves sales. No matter how you structure any AM / OPM deal that has performance clauses (and it should!), their must be an understanding that reporting doesn't reflect performance when malware is tolerated, in fact, the inverse relationship comes into play.
Structuring deals is the business of the AM / OPM - while some clauses may be smart, the situations are too broad to paint them narrowly. As indie contractors, OPMs will structure deals of many, many types. Though some may not be perfect, it will never be as straightforward say, as affiliate commissions - there's too many variables. I think the deals won't conform to an academic article - they may learn from it and lean certain ways - but it's a competitive marketplace and many merchants will rightfully ask for a % of sales or % of new sales type deals.
Look forward to reading your articles Ben, as always!
May 3rd, 2007, 03:03 PM #18
- Join Date
- January 18th, 2005
- The Swamp
Excellent posts Donuts. I was going to add a couple of things but you'd already covered them quite well.
May 3rd, 2007, 03:28 PM #19
- Join Date
- March 10th, 2006
This is an excellent reference because most of the inner workings is news to me.
Is the parasitical behavior predominantly within the product retail space or is it everywhere on the networks like insurance and financial leads?
Besides ShareaSale, where does it not happen?
Last edited by mr_jones; May 3rd, 2007 at 03:30 PM. Reason: grammar
May 3rd, 2007, 03:31 PM #20
May 3rd, 2007, 06:04 PM #21
Everybody claims they don't tolerate it, but that's simply not the case. Join Kellie's service and watch the reports and you'll see where it happens. And it will happen at ShareASale from time to time, but they police for it and they have a inked a deal to make Kellie part of their layered detection systems and they act on it. Avantlink is small and growing and isn't as good as SAS yet at detecting fraud in my opinion, but my opinion is also that they are cut from the same cloth as SAS when it comes to ethics and enforcement. SAS has a well proven track record where I feel very comfortable saying it's not just my opinion about them - they have proven themselves in this regard to too many people, too many times for it to be an opinion, it is their way.
The networks have the data needed (both in transaction techniques, referral headers, timing -and- affiliate's identity) to detect and enforce these things MUCH more easily than anyone else. They also have the power of aggregated activity - meaning if they catch it in one program, they can easily protect others. This same "group" power applies to partnerships with people like Kellie - networks can source her services and leverage them much more effectively than a single merchant can. If a network isn't interested in her data services, you've got to wonder why. If they assert they have it covered themselves, well, they're lying... again. If they have it covered, then what does Kellie's report about it's size mean? Did she make it all up. And the millions in fines that Zango is paying to the FTC right now - where does that money come from? They are still in business. Want to know who bids the highest in Zango - shopping cart poachers. If a satellite tv commission of $125 is about to be available, poachers will bid $20 a click and more to steal that sale!
We've grown intellectually as a group over the last few years and are no longer believing certain networks just because they are big. We are small, but we are smart. And we're getting smarter all the time. ABW also makes us pretty well organized. Look at the number of well-known AMs and OPMs at ShareASale... why are all these professionals taking their business to ShareASale? They get paid for sales, yet they're choosing a network known to produce "smaller" reports... why is that? Because they're professionals and they get it - they want real achievements, not faked ones. They know it can be done with integrity.
May 3rd, 2007, 07:00 PM #22Originally Posted by Donuts
May 5th, 2007, 09:02 AM #23
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- December 10th, 2005
May 5th, 2007, 10:50 AM #24
- Join Date
- April 9th, 2006
Absolutely a stunning thread in so many ways. Thanks for such clear detail, Donuts.
May 5th, 2007, 01:24 PM #25Originally Posted by ribicb
Another way to look at it... you're asking if the merchants website can somehow look out into the shopper's computer to tell what's going on... that answer is no. There are security protocols built into the internet's structure amd your computer to prevent this without the users permission. The ugly part is, since Zango is installed on the shopper's computer, it does not have the same limitations - it can listen to and watch everythingthe user does and make many changes to your computer including writing and deleting certain files.
There are ways to detect adware's use, but trying to monitor all browsing activity on a remote user's computer, for multiple browser windows, isn't one of them.
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