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Standards urged for e-tail commissions

A dispute over software that diverts sales commissions for online merchants leads to calls for an industry standard for "parasiteware."

    Online merchants want new standards to help fight "parasiteware," an increasingly visible breed of software that seeks to pocket commissions doled out through the Web's ubiquitous affiliate marketing programs.

    Shawn Schwegman, the director of affiliate marketing at Web store has proposed a meeting among representatives of online merchants, affiliates and affiliate networks to develop the standard. The goal is to be able to quickly identify and act against software that credits the wrong party when online stores tally commissions for Web referrals.

    Additionally, a network of affiliates called Be Free has issued a proposal for how such networks should handle commission diversion software.

    "People are exploiting technology to make a buck, typically at the cost of someone else's commission," Schwegman said. "The root of the problem is that there's no industry standard that defines how to conduct business in the affiliates world."

    Online merchants such as and Overstock have networks of thousands of affiliated Web sites. Affiliates receive commissions for directing customers to the retailers' sites, an arrangement that has proven to be an inexpensive way for online merchants to attract customers and for Web site operators to make some money.

    However, during the past year, a number of companies associated with some popular file-swapping programs have tried to tap into this revenue stream as part of a broader and increasingly aggressive marketing effort.

    At the center of the controversy is marketing software produced by Wurld Media and TopMoxie, which come bundled with downloads for file-swapping programs Morpheus and LimeWire, respectively. Critics have charged that the adware produced by the companies purposefully redirects commissions from other affiliates. Additionally, critics have charged that once the adware redirects a commission on a particular sale, it will continue to redirect commissions on all subsequent sales.

    In typical affiliate transactions, consumers click on a link from a Web site such as Lance Armstrong Online that points to a product on a merchant site such as Amazon. If a customer buys the product, Amazon pays its affiliated Web site operator a commission for the sale, typically 5 percent to 15 percent of the purchase price.

    Stealth sales
    But that scenario changes if the consumer is running the initial versions of Wurld Media or TopMoxie's programs--or similar products. If the consumer is running one of the programs and clicks on the link from Lance Armstrong Online, the programs would rewrite the code to make it look as if the sale had come from their sites. As a result, Amazon would pay a commission to Wurld Media or TopMoxie's partners rather than to the independent Web site operator.

    "It's not fair that (the small Web site operators) get taken advantage of. It's not fair that some company comes in and creates a skewing of the entire affiliates industry," said Haiko de Poel Jr., chief executive officer of, an online discussion service for affiliate marketers.

    Representatives for both Wurld Media and TopMoxie said they never intended to have their software divert commissions paid by Web sites such as or Additionally, the fixes they put in place have now been released to most if not all of their users, they said.

    "From my perspective, the problem's been solved," said Patrick Toland, vice president of sales and marketing at TopMoxie.

    TopMoxie became aware that its software was overwriting affiliate links about eight weeks ago, Toland said. The company updated its software in recent weeks and pushed the fix out to all of its users, he said.

    TopMoxie worked with affiliate networks LinkShare and BeFree to address the concerns of other affiliate sites. But the other Web site operators were making a bigger deal out of the issue than was warranted, Toland said. LimeWire and other companies using the TopMoxie software made little money by diverting commissions, he said.

    "Why would I build a software application that captures 1 percent or less of transactions?" Toland said. "This is an emotional issue. In real dollars and cents, it's nonexistent."

    The software that Wurld Media bundled with Morpheus beginning in April inadvertently diverted commissions from other affiliates, said Kirk Feathers, Wurld Media's chief technology officer. But the company updated the software in May, and the fix has been included in each version of Morpheus that has been downloaded since then, Feathers said. Fewer than 1,000 Morpheus users out of the millions of people who have downloaded the software still have the old version of Wurld Media's adware, Feathers said.

    But the companies have not yet fully addressed other issues, critics say. For instance, consumers running the ad-supported version of LiveWire who visit Amazon receive a pop-up advertisement urging them to "support LimeWire" even if they reached Amazon through an affiliate link on another site. Consumers can tweak the software so that they "always support LimeWire," or they can click on a button that will overwrite the affiliate links from other Web sites.

    Share the wealth
    The software from Wurld Media acts in a similar fashion. Wurld Media's software allows Morpheus users to get cash back from the purchases they make, essentially allowing them to share in the commissions earned by Wurld Media. Morpheus users can configure the service to warn them if they are not going to earn a commission from a Web site that normally pays commissions. A typical warning message notifies users that the commission will be paid to another site.

    "You have navigated to a Web site of a Morpheus Shopping Community participating merchant by way of another Web site's advertisement," the service warns users. "In order to support the service you used to navigate to this merchant, we encourage you to continue with any intended purchases. If you are concerned about not receiving cash rewards, you must navigate to these merchants using links provided for you at the Morpheus Shopping Community Web site."

    Feathers believes that the warning addresses the concerns raised by adware critics. Additionally, in the latest version of its software, Wurld Media has removed its pop-up ad, only notifying customers of whether they are earning rewards via an icon in customers' toolbars. And the company has set the default for receiving rewards to "off," so customers have to turn the feature on, Feathers said.

    "We've bent over backwards to make sure that we're doing everything aboveboard so that we are not stealing affiliates money from small publishers," said Steve Griffin, chief executive officer of StreamCast Networks.

    But de Poel said Wurld Media and StreamCast haven't gone far enough. By using rewards to enticing customers to ditch affiliate sites, Morpheus was still stealing money away from other Web site owners.

    "That's absolutely parasitic," he said.

    Amazon spokeswoman Patty Smith said the company prohibits members of its associates program from diverting commissions earned by other associates.

    "It's a clear violation of our guidelines. We don't want those types of sites in our program, and we will remove them," Smith said.

    But the continuing debate over Wurld Media's practices and those of other companies illustrates the need for standards, said Overstock's Schwegman. Right now, the burden is on merchants, many of whom have had to deal with upset affiliates and threats of boycotts when they deal with companies such as Wurld Media that push the boundaries, he said.

    "Merchants are constantly fighting issues like this," Schwegman said. "The water is becoming muddy, and new programs are popping up left and right."