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Illinois passes affiliate tax law

It’s official. The state of Illinois passed legislation March 10 that requires the collection of sales tax by retailers on goods sold there, even if those retailers’ presence in the state is solely online. This is the first time since 2009 that the Affiliate Nexus Tax law has been enacted and response has been swift.
By March 11, Amazon had already decided to drop its Illinois affiliates in order to avoid the tax, a response anticipated by Sears, among others.
Sears’ attempt to capitalize on this hit to Amazon’s affected affiliates came in the form of an open letter from President of the retailer’s eCommerce Division, Imran Jooma. The offer, which assured affiliates of a place with Sears when the time came, echoed similar announcements last week by Walmart and  Barnes & Noble, in which Amazon’s threatened California affiliates were courted by the two companies.
The decision by Illinois Governor Pat Quinn, who signed the legislation, has naturally been criticized by affiliate marketing sites, which claim enforcement of the law negatively, rather than positively, affects the state’s collection of revenue.
There are currently 9,000 affiliates in Illinois.

Google allows users to block unwanted domains

A Google Chrome extension, which launched last month and which gives users the option of blocking sites they find undesirable, became an official feature following an announcement on Google’s blog March 10.
Now, when users return to Google after searching, they will be able to hide all results for the domain they’re navigating away from. The number of blocked results will be shown whenever a new search is performed, and blocked sites can be managed, or unblocked. A user just has to log in to confirm the block of a specific domain.
Google says this will help users personalize their search, though they acknowledge that the sites most likely to be blocked are “offensive, pornographic or of generally low quality.” In other words, the new feature will help Google in its recent efforts (such as last week’s algorithm update) to demote spammy sites and content farms in its search rankings, though the search giant says they won’t be using the blocked domains as a ranking signal until they can “look at the data and see whether it would be useful.”

Blekko’s new AdSpam algorithm sees 1.1 million domains banned

An algorithm update to search engine Blekko has resulted in the ban of about 1.1 million domains from its search rankings. The new algorithm, dubbed AdSpam, is designed to hone in on content farms and other sites with low quality content as well as sites using keyword-based ads alongside this type of poor content.
Like Google, Blekko has been making efforts of late to purge content farms from its search rankings, though the latter has taken more radical action than the former in entirely banning, rather than demoting, undesirable sites. Of course, Blekko, which serves only about 500,000 unique visitors monthly and processes just 1 million queries daily will have an easier time than its much larger counterpart in weeding out such sites.
Still, the jump from 20 sites banned by Blekko at the end of January to the 1.1 million banned this week is a move befitting a much larger search engine.

Patent infringement suits are word of the day: Google, Amazon, Foursquare and others hit

When it rains it pours, and, this week, lawsuits over patents seemed to be dropping out of the sky.
Software outlet Masterobjects brought suits against Amazon and Google March 10 and 11, respectively. The outfit claims the two online giants’ use of instant search, which enables search results to begin appearing even as a user types in a query, infringes on their own 2001 instant search patent. It is not yet certain whether Masterobjects will file suits against other major companies offering similar search features, such as e-Bay, Apple and Microsoft.
Foursquare was hit with its first patent infringement suit, brought by Mobile Commerce Framework, March 11. The suit concerns the fact that Foursquare’s mobile apps allow users to search by merchant type and location in order to get information about and offers from merchants. A statement from Foursquare has dismissed the suit as being “without merit.”
JDate filed suit March 11 against fellow dating sites OKCupid, Zoosk and 2RedBeans for allegedly infringing on a patent on a match-up feature that identifies mutual interest between two members and that accordingly notifies them of such.

Twitter backpedals with update to new Quick Bar feature

Response to Twitter’s introduction last week of the Quick Bar, which feeds promoted trending topics right into the Tweet stream, has been big. Moreover, it’s been ugly.
Users were almost immediately up in arms about the feature, which appeared on the iPhone app version. A poll conducted by Mashable last week showed over 81 percent of the 2173 users surveyed found the feature “intrusive” and “couldn’t stand it.” The Quick Bar’s introduction was even loathed enough to earn the feature a new moniker: the “Dickbar.”
In an act of appeasement, Twitter released an update to the app March 9, which means the Quick Bar will no longer overlay on Tweets, though the feature will not be disabled and will remain in the timeline.
Evidently, Twitter believes this will be enough to quiet irritated Tweeters but that remains to be seen. For the time being, the Quick Bar is just something users will have to deal with.

Skype launches advertising program

Skype announced on their company blog March 9 that they are beginning to introduce advertising on their site’s homepage, though the company’s Chief Marketing Officer Doug Bewsher says they may soon experiment with ads in other areas as well. Already on board are Visa, Universal Pictures, and Groupon.
Advertising is something Skype has been mulling over for some time now. In May, Josh Silverman, the company’s CEO at the time, told The Telegraph that ads might help keep the Skype-to-Skype service free and maintain its quality. Fortune surmised in an article last August that introducing ads could bring in $200 million annually in new revenues for the company. And for the past couple of months, Skype has been experimenting with test ads for the online music service Rdio.
Bewsher’s blog post promises the ads will remain unobtrusive; he says users’ Skype experience will not be interrupted, as pop-ups and banner ads will not appear during conversations.
Though Skype may use location, gender and age, among other data, to target the ads, Bewsher says users can choose not to share this non-personally identifiable data using the system’s privacy options.
For the time being, Skype is focusing on markets in the US, UK and Germany, so ads will appear in those countries first.

SCVNGR’s LevelUp makes a game out of daily deals

Location-based gaming platform SCVNGR broke into the daily deals arena March 10 with the pilot launch of a new app for iPhone and Android. LevelUp, which will be available first in Boston and Philadelphia, uses game mechanisms and location to bring relevant deals to consumers and encourage customer loyalty for merchants.
Users new to the service are considered as being at Level 1, and advance in levels as they buy into offered deals from a particular merchant. Deals get juicier as users progress in levels, encouraging return business for SCVNGR’s partners. For instance, users getting in on Boloco’s Inspired Burrito deal offered through LevelUp might get an even better discount offer from the restaurant the next time they check in with LevelUp.
A SCVNGR blog post claims the deals service is different from others in that rewards can be used immediately, simply by showing the partner merchant the deal on your phone or by making a print-out.

Changes made to Apple’s in-app purchase policy

Likely in response to concern from parents, Apple updated its in-app purchase policy for iPad and iPhone March 9, with the introduction of new device software.
The change will make it more difficult for children to make accidental or uninformed purchases on the devices, which their parents haven’t approved.
Whereas entering a password to make a purchase used to leave the buyer a 15-minute period in which to make further purchases without re-entering that password, now a password must be entered again right after a purchase has been downloaded.
Angry parents aside, the update may also cater to the FTC which has recently voiced concern about the misuse of in-app purchases by children. The organization’s chairman, Jon Leibowitz, wrote in a February letter that the FTC would “look closely at the current industry practice with respect to the marketing and delivery of these types of applications.”

UPDATE (9/1): Commission Junction posted on its website that AB 1625 will be heard today. Last year the Governor vetoed a similar measure, and we are told that the Governor has not altered his position on this new tax; however, despite this, we are concerned about last minute political compromises. If you are in California, we urge you contact your State Senator and Assembly member!

You may have read on ReveNews that Overstock was considering terminating its California affiliates and that it likely wouldn’t unless AB 1625 passed. AB 1625 is a bill that authorizes the legislature to enact statutory changes to the Budget Act of 2010. It is assumed that proponents of the bill will include changes to the definition of nexus, or presence in the State, to encapsulate any out-of-state store with online affiliates who are based in California.

Last year, Overstock terminated its relationship with California affiliates after the prior nexus tax bill AB 178 passed. Governor Arnold Schwarzenegger vetoed the legislation. At that time the Governor’s office called Overstock’s President Jonathan E. Johnson III and issued a statement that Governor Schwarzenegger would not let such a bill pass. He is still governor. [Author's Note: I think that the bill will become law if Jerry Brown wins the gubernatorial election in November but not if Meg Whitman wins.]

Déjà vu

Well today it happened again. We just received an e-mail from Commission Junction, Overstock’s affiliate network, informing us that we have been terminated from its affiliate program (see below). Technically CJ’s policies require a one-week notice so I assume that Overstock is sending a message to state legislators that this is what will happen should they enact AB 1625 into law. [Author's Note: I cannot find any information that would show that AB 1625 was passed by either house of the California Legislature.]

Dear Cashbaq,

We regret to inform you that the Commission Junction advertiser Overstock has chosen to expire its affiliation with you effective 7-Sep-2010.

If you would like to locate another advertiser in the network to partner with, login to your Account Manager (http://www.cj.com/login.jsp) and visit the Get Links tab.

Best Regards,

Client Services
Commission Junction

It looks like Overstock is playing chicken with the California Senate again:

If you are an affiliate manager, please wait until after the bill passes, the Governor vetoes it and the Legislature doesn’t have the votes to override the bill to terminate us. We’d really appreciate it.

Yesterday Overstock announced its intention to terminate California affiliates should AB 1625 pass. In a  letter to all of its affiliates, Overstock urge opposition to AB 1625 stating that:

There is a measure under consideration in California, likely to be voted on tomorrow, which, if it passes, will likely result in the termination of our business connection.

The letter goes on to urge California affiliates to oppose the passage of the legislation and specifically calls out Section 1 as being the point of contention.

In reading AB 1625 (PDF) the measure is essentially a motion by the Budget Committee to allow changes to the Budget Act of 2010. The section Overstock identifies as being problematic, Section 1, reads:

SECTION 1.  It is the intent of the Legislature to enact statutory
changes relating to the Budget Act of 2010.

In the bill itself there are no definitive statements as to the Legislature’s intentions. The only clues to what changes might be enacted are based on the political climate within California. AB 178 was only stopped by a veto from Governor Schwarzenegger. Odds are that proponents of that bill will use AB 1625 to enact measures supported in AB 178 including California’s version of the so-called Amazon Tax.

We queried Overstock as to its specific concerns over AB 1625 and received the following response from their PR department:

It is the end of the California legislative session and the budget isn’t done. We continue to learn that those who seek to impose this tax measure have some new strategy. Yesterday, we learned more new information (in regards to AB 1625) on which we acted. We don’t want to be forced to terminate our affiliates, and we are glad those most affected are responding and their voices are being heard by senators who need to understand the strong counterpoint to this unwise tax legislation.

So it would appear that Overstock is leveraging their affiliates to act as a counterpoint to a bill they see as threatening, even if the actual purpose of the bill is nebulous. Rebecca Madigan, Executive Director of the Performance Marketing Association,  posted an excellent synopsis of the politics of the situation.

Although we don’t necessarily agree with Overstock’s tactics we do feel that any enactment by California of an Affiliate Nexus Tax is a terrible decision. There is still time for California affiliates to contact their representatives. The PMA has a great resource that provides a painless guide on how to find your representative including suggested email templates for you to use.

Now that I have your attention, Overstock may terminate its California affiliates tomorrow. The State Legislature is once again considering a bill that would make the Affiliate Nexus Tax law in California. If you are not familiar with this legislation, it defines affiliates as salespeople in order to establish nexus (the legal word for presence in the state) to out of state retailers (namely Amazon and Overstock).

We’ve been through this before. It started out as AB178 a couple of years ago. Kerri Pollard, General Manager of Commission Junction, and I went to Sacramento to testify before the Budget and Finance sub-committee. As my cab pulled up at the State Capitol, I received an e-mail that the bill was pulled by its sponsor. It turns out that there weren’t enough votes to get it out of even the sub-committee.

Now its here… again. Last year it was passed under the cover of darkness and the Governor vetoed it. Overstock terminated us last year as part of the process. Only after the Governor vetoed the bill and issued a statement that he would not allow the Affiliate Nexus Tax to become law did Overstock reinstate all of us. Fortunately, CJ’s policies give us all a week before the termination takes effect so we would have time for the Governor to use his veto stamp (can’t you just picture it in slow motion… the stamp dropping onto parchment on the Governator’s desk…. cigar in his mouth (yes, it would be in the tent outside the Capitol)).

If you are a California publisher in the Overstock program, contact your state senator… NOW. Forward Overstock’s letter and explain how AB1625 (the current form of the Affiliate Nexus Tax) will hurt small businesses in your senator’s district. If you need more information or drafts of similar letters, take a look at the Performance Marketing Association’s website.

Also, there was a good op-ed piece by Loren Bendele in today’s LA Business Journal.

If you didn’t get Overstock’s letter, here it is. Remember not to beat up Overstock for this. This is a bad law that will hurt California’s small businesses and will not generate any revenue.

OVERSTOCK.COM, INC.
6350 SOUTH 3000 EAST
SALT LAKE CITY, UT 84121
PHONE: (801) 947-3100
FACSIMILE: (801) 947-3144

August 30, 2010

Dear Cashbaq:

Overstock.com values your advertising efforts, and hopes to be in a position to continue our business connection for years to come. However, as we notified you in February, there is a measure under consideration in California, likely to be voted on tomorrow, which, if it passes, will likely result in the termination of our business connection. We are urging you to contact your Senator in the California Legislature immediately to oppose the affiliate nexus tax.

By tomorrow the California Senate will have to consider the new tax, which appeared in the Assembly’s final budget proposal as AB 1625 (Section 1), or it will die for this year. In order to pass, AB 1625 needs a 2/3 majority vote. Its chances of passage are unclear; consequently, your efforts in opposition will be highly effective.

Last year the Governor vetoed a similar measure, and we are told that the Governor has not altered his position on this new tax; however, despite this, we are concerned about last minute political compromises.

You will find information on how to contact your State Senator at this location on the Performance Marketing Association’s website.

Please waste no time in contacting your Senator today to oppose the affiliate nexus tax.

Respectfully,

Jonathan E. Johnson III
President Overstock.com, Inc.