Ad-supported software provider 180solutions allegedly violated the stated policies of two affiliate marketing networks both by soliciting commissions from merchant members, and by redirecting to
itself commissions that should have gone to other affiliates, according to research conducted by Harvard Law Student and spyware research guru Benjamin Edelman.
In interviews and in email
communication with MediaDailyNews, 180solutions said it "categorically disagrees with the report" and that it "has never attempted to collect revenue belonging to another party."
Affiliate marketing is the practice whereby merchants pay commissions to independent third party Web publishers (affiliates) who send them traffic via recommended links. Many affiliate marketing
programs are pay-for-performance, meaning merchants only pay their affiliates for recommendations that lead to direct sales.
Affiliate marketing networks, such as Commission Junction and
LinkShare, facilitate the formulation of affiliate marketing programs through their large network of affiliates and merchants. The network providers charge for inclusion in the network, and also take
a cut from the commissions paid to affiliates by their merchant partners.
In his report, "The Effect of 180solutions on Affiliate Commissions and Merchants," researcher Edelman alleges that
merchants, in some cases, ended up paying 180solutions whether a sale was the result of a user locating the merchant on their own, or whether the sale came from a link on an affiliate's website.
The research suggests that not only were affiliates losing money to 180solutions that they were entitled to, but some merchants were paying commissions for sales that weren't the result of affiliate
traffic. 180solutions was able to do this by one of two methods, "double pop-ups" and "hidden pop-ups."
"Double pop-ups" refers to 180solutions popping up a duplicate merchant Web page with a
180solutions tag whenever users would directly type in a merchant's URL, thereby surreptitiously generating revenue from the merchant.
The report also alleges that180solutions opened invisible
copies, or "hidden pop-ups" of merchants' sites, tagging the invisible site with one of 180solutions' advertisers, shifting commissions from the legitimate affiliate that originally provided the link.
According to Edelman, the second pop-up sets the tag that the network provider (Commission Junction or LinkShare) detects and awards the commission to.
180solutions spokesman Howard Barokas,
says the company "absolutely refutes and denies [Edelman's] findings. The whole notion of stealing is false," he adds. "We've never collected revenue that doesn't belong to us."
However,
180solutions doesn't dispute the veracity of Edelman's actual research. Todd Sawicki, 180Solutions' marketing director noted that it depends on how you look at it. He says, "We're not denying
technical point 'X' versus technical point 'Y,'" but emphasizes that this doesn't mean the software does anything illegal or unethical. Sawicki says that 180solutions' software is designed to award
ad inventory to the highest bidder, and the situation is no different in affiliate marketing than other online marketing platforms.
Jupiter Research analyst Gary Stein said that 180solutions'
tactics are "pretty pernicious." He compared the use of double and hidden pop-ups to the mafia muscling its way into a community and forcing local shopkeepers to pay for their protection.
"Not
only is 180solutions taking money out of the merchant's pocket, but affiliates' as well," noted Stein. "I assume [Commission Junction and LinkShare] will cut 180solutions out of their networks," he
said, adding, "I'd be surprised if they allow this to continue, because the network is way more important than any individual member-the core part of it is trust."
Edelman's report notes that at
least 300 major online merchants, including eBay, Priceline and Dell, were targeted with double and hidden pop-ups. According to Edelman, Commission Junction and LinkShare have yet to remove
180solutions from their networks "despite behavior that seems to violate the networks' rules."
However, 180solutions' Sawicki acknowledges that both LinkShare and Commission Junction are aware of
its deployment of double and hidden pop-ups through 180solutions' software, a practice that has been going on for 4-6 months. Irrespective of the actions of its members, (including 180solutions)
LinkShare and Commission Junction benefit financially from such transactions. Edelman says that he spoke with LinkShare and the company "admitted it was a problem two weeks ago," but tried to downplay
the severity.
Sawicki notes that LinkShare has embraced 180Solutions' deployment of double and hidden pop-ups, while Commission Junction "prefers a different approach." In fact, it has worked
out a deal with LinkShare where the commissions it receives from double and hidden pop-ups only go to 180solutions advertisers and LinkShare.
ValueClick subsidiary Commission Junction has taken an
entirely different view. According to Commission Junction President and CEO Jeff Pullen, "We have been actively investigating 180solutions for some time ... and they have been responsive," but Pullen
later added that the adware provider was suspended from CJ's U.K. earlier in the year.
Pullen said that CJ was aware of much of Edelman's research, but noted there are several points in the piece
that "we were not aware of." Asked if 180solutions would be deactivated from the network, Pullen said "we're not sure yet; the whole process of working with them has been a lot of back and forth," but
he suggested that if the research bears out, and 180 has "misrepresented themselves to us," then CJ would reconsider its position.
By contract, Commission Junction offers its members 30 days to
resolve unacceptable practices. Pullen says that CJ will look to work with Edelman in its investigative measures.
180solutions' Sawicki notes that the company, which recently received new
capital investment, is currently looking to hire a major auditing firm like Ernst & Young or PricewaterhouseCoopers to "get out of the 'he said, she said'" argument he acknowledges could be the
byproduct of 180Solutions' practices.
In response to Edelman's accusation that 180solutions is taking money away from merchants and affiliates, 180Solutions co-founder and CEO Keith Smith said,
"We hope [your readers] will take into consideration the negative effect these rumors could have on our business."
LinkShare did not respond to an interview request by press time.