Amazon Stops Affiliate Programs in Colorado

I haven’t done much with my reseller program with Amazon in quite a while. Back when I had illusions of grandeur (and more time), I put together links to cool products on a few of my local websites. And I’ve made some money over the years.

So today I get an e-mail from Amazon telling me they no longer are offering their affiliate program to Colorado residents because of the recently enacted HB 10-1193 (that a link to a pdf version of the bill). This new regulations intent is to increase revenue to the Colorado Department of Revenue, but it puts many who are earning a living promoting products on Amazon out of business. I’m sure other high profile companies that have similar programs will follow Amazons decision. When I say puts them out of business, it’s put them out of business promoting items on Amazon. Their is no arguing this comment.

The Colorado law basically says that if you are a company that provides an affiliate marketing program and you generate over $10,000 of income in the state, the affiliate marketer (me), is considered a legal agent for that company. So now Amazon will be required to collect sales tax and remit that to the state.

Here is the important wording to be exact:

COMMENCING MARCH 1, 2010, IF A RETAILER ENTERS INTO AN AGREEMENT WITH AN AFFILIATE UNDER WHICH THE AFFILIATE, FOR A COMMISSION OR OTHER CONSIDERATION, DIRECTLY OR INDIRECTLY REFERS POTENTIAL CUSTOMERS, WHETHER BY A LINK ON AN INTERNET WEB SITE OR OTHERWISE, TO THE RETAILER, THEN THE AFFILIATE SHALL BE PRESUMED TO HAVE SOLICITED BUSINESS ON BEHALF OF SUCH RETAILER AND SUCH RETAILER IS DEEMED TO BE DOING BUSINESS IN THIS STATE. THIS PRESUMPTION SHALL NOT APPLY UNLESS THE CUMULATIVE GROSS RECEIPTS FROM SALES BY THE RETAILER TO CUSTOMERS IN THE STATE WHO ARE REFERRED TO THE RETAILER BY ALL AFFILIATES WITH THIS TYPE OF AN AGREEMENT WITH THE RETAILER ARE IN EXCESS OF TEN THOUSAND DOLLARS DURING THE PRECEDING CALENDAR YEAR.

Here’s the quick and dirty on how affiliate marketing works, and I’ll use Amazon as the example. Amazon sells millions of products all over the world. In order for them to get free advertising of their products they offer what is called an Affiliate Program. (Here is a link to Wikipedia’s definition for more insight). This affiliate program allows me to put links on any of my sites that directs viewers of my website to Amazon in order to purchase that product. If that viewer to my website purchases that product, Amazon will share some of their profits with me. For most items it’s a very small percentage, say 5%-10%. It’s not much, but it can add up, especially if I have a website that has lots of readers and those readers act on my recommendations. For example, let’s say that I’m heavy into photography and I have a hobby website about photography. On that site, I might review or make recommendations on a particular camera that I own. If I write a review about that camera on my website, and provide a link to Amazon where you can purchase that item, and you follow that link from my website and buy that product at Amazon, I get a commission. So in essence, I am acting like a salesman for that product.

I did have plans on adding some affiliate links to books I’ve read on selling on another site I run. My thinking was that since I’ve literally read and own dozens of books on selling, I could make recommendations based on what the books target market was. Guess not.

I didn’t see this coming. I don’t pay much attention to politics anymore outside of what’s screaming at me through various media outlets. Go figure.

This really is a bad precedence for the entire Internet marketing world. I feel sorry for those individuals (many working at home moms), that are waking up today all across Colorado and finding out that a significant portion of their income was stripped away by helpless/greedy money grabbing politicians.

You may express your views of Colorado’s new law to members of the General Assembly and to Governor Ritter, who signed the bill.

Edited to add:

I found this quote from Bill Ritters office in response to his complaint on another blog. I’m sure I’ll get one with similar rhetoric. This man is out of touch. He just doesn’t understand.

Gov. Bill Ritter issued the following statement today criticizing Amazon.com’s decision to abruptly end its financial relationship with Amazon Associate businesses in Colorado:

“Amazon has taken a disappointing – and completely unjustified – step of ending its relationship with associates. While Amazon is blaming a new state law for its action, the fact is that Amazon is simply trying to avoid compliance with Colorado law and is unfairly punishing Colorado businesses in the process.

“My office worked closely with Amazon’s affiliates and associates to modify House Bill 1193 to specifically protect small businesses, avoid job losses and provide a fair, level playing field for on-line retailers and Main Street, brick-and-mortar retail shops alike.
“Amazon’s position is unfortunate, and Coloradans certainly deserve better.”

You don’t get it . Governor Schwarzenegger vetoed a similar bill in California, and a similar bill in New York is being upheld in the courts.  Once large companies (and even smaller businesses)  find out that doing business in Colorado is an unnecessary burden that no other state requires, they’ll simply wash their hands of the whole state.

Hey Mr. Bill… Coloradoans do deserve better. I’m glad you’re leaving.

Internet Marketers Biggest Loser in FTC Ruling

You seen them on Internet websites, on late night tv, in the back and sometime full page ads in magazines. You’ve wished it true but somehow you either used your better judgment or perhaps you’ve bitten the bullet once or twice and got burned and swore you’d never be taken again.

What am I talking about?

Making millions in your pajamas at the kitchen table. What else? I wasn’t talking about the miracle pill to ‘extend’ that certain part. What were you thinking, silly you.

This is a serious ruling… really… and in case you haven’t been bitten I’ll explain why now it will be much harder to get bitten. With the economy the way it is, I’m glad this consumer protection has been extended to catch up to the realities of the 21st century.

For years, I’ve had a passing fancy… mind you a closet wanna-be maybe… or perhaps a student of sales and marketing that analyses and digests all forms of marketing to see if I can pick up a thing or two that might help me in my business or help my clients in theirs. Internet marketing just happens to be something I have a little case knowledge and success at. But certainly not in the way that technology has allowed the con man at the carnival to flourish.

I’ll paint the broad strokes of the methodology of how these marketers claim to make 6 figures a month, like clockwork by only working 4 hours a week.

Here’s what happens.

XYZ Internet marketer produces a product… sometimes with video, sometimes with audio… sometimes in the form of an e-book, or any combination thereof. For illustration sake, let’s say it’s the latest greatest way to ‘slap google’ and get your website to the top of the search engines.

It could be anything imaginable from teaching your parrot to talk, to getting a herd of customers to buy into your ‘secret membership’ where only the brightest and most talented marketers congregate to cuss and discuss and reveal to each other their most treasured secrets of subject xyz.

So what happens next?

After XYZ Internet marketer creates his product he prices it from $49 to several thousand dollars. XYZ marketer announces to several websites and his identified gang of ‘highly successful internet marketers’ that he is about to ‘launch’ this product and that if any other marketer sells a copy of his product, he is entitled to a commission. Sometimes this commission can be as much as 80% of the selling price and usually never anything below a 50% split.

Now the thousands of ‘affiliate marketers’ start sending e-mails to their lists (other people that either are making money from the internet or those that want to), and start talking up how XYZ Internet marketer is going to be selling this new product in the next few weeks.

What happens in these launches is really laughable if it weren’t reality.

These internet marketers start sending emails saying …if you buy from me (the affiliate), XYZ Internet marketers product, I’ll give you a bonus of thousands of dollars of my product (which I sell everyday at ridiculously high prices and little substance to unknowing nit-wits who want to make millions in their pajamas).

The feeding frenzy begins. Can you imagine the tall tales that are being told to sell this product? Mind you most internet marketers haven’t even seen the package, so how can they talk it up?

You see every internet marketer tells you the money is in the list. So they put up a website claiming to be an expert at something. They write a 10 page book report, call it a ‘Special Report’, give it some outrageous value like $77 and give it away free. Of course if you’re interested in receiving this $77 valuable special report for free , you’ll have to leave them your name and email address and they’ll send it to via e-mail. All automated totally without intervention on their part. How cool can that be right?

Thus the ‘list’.

Over time, these internet marketers accumulate thousands of names on their ‘list’. When it comes time to launch or promote a new product, they endorse that product and start sending out e-mails to their list, priming these other wanna be marketers to buy this new product.

You can see how the lure of easy money can tempt even the most saintly of us to possibly perhaps bend or stretch the truth on xyx product. A lot of times when they really don’t even have the product in hand to truly give an honest endorsement or recommendation. (This being one of the catalysts for this new ruling).

I have studied a lot of these internet marketers over the years and I’ve noticed testimonials from the same people pop up on a good percentage of the sales pages of various products. It’s so pathetic in fact, a couple of very famous internet marketers have a testimonial on the sales pages of products that even compete with similar products of their own. After all, the more times they can get their face out there (and link back to their website), the more credibility and possible residual sales they earn for themselves.

There are other reasons that this new ruling has come into effect. There are flogs (fake blogs), where these internet marketers (or even legitimate offline real world companies) put up a site about xyx product and then place fake testimonials on them. Or some companies have even gone so far as to pay an individual(s) to post a testimonial on their site and every where else on the Internet that someone might be so it creates credibility for a product.

The list goes on. The bottom line is a lot of the fake and false testimonials and endorsements are now going to be looked at a lot closer. All you have to do is simply click on the File a Complaint button at the FTC, and over time these con men are going to leave the carnival.

Don’t get me wrong. I’m not saying that all internet marketers are liars and crooks. But most are, or at least tall story tellers. Some internet marketers really provide solid actionable, legitimate how to information.

I can help you with a simple bit of advice to help you sniff out the players from the Monday morning quarterbacks. It’s simply this. The bigger the claim, in most cases, the bigger the fraud.

If your new to internet marketing and want to get some real valuable training… and for free… you couldn’t go wrong by trying the 30 Day Challenge. Each day, for thirty days, Ed Dale, via videos will explain how to get started, what actionable items you need to do for that day. Over the course of thirty days you’ll be grounded in the fundamentals. The information that Ed passes along could also be purchased for thousands of dollars from other sites, but there is no sense in that.

Goto www.thirtdaychallenge.com and get started.

Specifically here is the cut and dry of the ruling:

Under the revised Guides, advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical” – the revised Guides no longer contain this safe harbor.

The revised Guides also add new examples to illustrate the long standing principle that “material connections” (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other “word-of-mouth” marketers. The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service. Likewise, if a company refers in an advertisement to the findings of a research organization that conducted research sponsored by the company, the advertisement must disclose the connection between the advertiser and the research organization. And a paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims.

For the full text of the press release goto http://ftc.gov/opa/2009/10/endortest.shtm

For the text of the Federal ruling (if you want to learn the specific ruling) click here for the pdf

http://ftc.gov/os/2009/10/091005endorsementguidesfnnotice.pdf

Image courtesy of: Clearly Ambiguous