Traverse Internet Law: Internet Lawyers

Negative Option and Continuation Billing Programs

The online marketing industry has been hit hard recently. First, the FTC passes new requirements for disclosing economic interests. Then Google shuts down the Adwords accounts of a lot of marketers for the negative option and continuation programs, and MasterCard and Visa stop processing negative option and continuation program transactions. 

It's a tough time for everyone because a small segment of the affiliate marketing and retail industry were less than honest about the programs people were buying and how those consumers would be charged. And an entire industry, many of whom were operating legitimate and legal programs, are out of luck and out of business. Including some ad networks.  

At Traverse Internet Law we've had a lot of clients caught up in the web of self help enforcement actions being taken by key service providers like Google and the credit card companies. And sadly, it is another example of what happens when an industry does not police itself. Regulation is inevitable if self regulation fails. And it has. Private self help regulation is even jumping in. Until the retailing, lead generation and affiliate marketing industries establish an accreditation process, this type of regulatory reaction will continue on an ever-increasing basis, both in scope and frequency. 

The Advertising Network Dilemma

No one really understands the duties, responsibilities, liabilities and exposures of ad networks. With any new (relatively) business model or process comes uncertainty. The primary uncertainty in terms of success, long term viability, profitablity, and sustainability inherent in the advertising network business model and operational structure rests with relationships. 

Advertisers are often very happy with ad networks. Affiliate marketers (publishers) are likewise pleased. Ad networks are aggregators of advertising services (for advertisers with a product or service) and business generation opportunities (for publishers with sales acumen to push an advertiser's product or service). And networks are the middlemen, the opposite of the dis-intermediator, and a relatively new and additional layer in the process of doing business in the affiliate marketing industry. Ad networks deliver results by acting, at least in material part, as a venue to bring willing buyers and sellers together. The value is obvious to advertisers and publishers alike. 

Traverse Internet Law represents ad networks, advertisers and publishers, often in litigation or at least in relation to disputes. And most of the time the disputes are about money. Usually the ad network is owed money that it has already paid out, in substantial part, to publishers selling an advertiser's wares. The advertiser claims that the traffic it received was in violation of the program guidelines or fraudulent. The network, often not being privy to the information an advertiser has about potentially fraudulent transactions, is not notified early enough to stop payment to the affiliate marketers. A no-man's land ensues. The ad network has paid for services provided, the affiliate refuses to refund the money, and the advertiser has been ripped off. That is why most ad networks have very tight time requirements for advertisers to contest transactions. The problem arises, of course, when an advertiser is slow in identifying the fraud, and does not or cannot report it early enough to stop the payouts. 

Negative option deals, carrying with them hefty front loaded commissions based upon the projected customer value with a recurring revenue stream, have brought the issue to prominence. The legal issues are complex and at this point no one knows where the gavel will fall on the money disputes. The ad networks rely upon their contractual provisions, which seemingly preclude any financial adjustments after settlement. The advertisers respond that the ad networks breached the contract, acted negligently etc. and the contractually defined settlement dates do not pre-empt liability for misconduct by the ad network. It's a mess, no doubt.

If advertisers and publishers want ad networks to survive and the gravy train to continue, everyone is going to have to come together and establish standards for transaction payment processes. One big challenge will be in defining the degree of care and responsibility ad networks will assume in vetting publishers for participation (due diligence), establishing performance expectations (performance standards), and assuring compliance (compliance auditing). But the solution to the problem is wrought with risks that will potentially redefine the role and responsiblities of ad networks and invite allegedly aggrieved third parties to reach into the deep pockets of the networks when an affiliate marketer or advertiser "goes rogue". 

Here's to hoping that the industry begins to have a meaningful dialogue and engage in this issue with a view towards building a bullet proof business process. If you are an advertiser or a publisher you know that ad networks have been, for the most part, financially rewarding. 

So, what is the industry going to do about the problem?

Traverse Internet Law at Upcoming Conferences

Traverse Internet Law will be attending and participating in the following upcoming conferences:

Affiliate Summit in Vegas in January

The Social Network Conference in Miami in January 

LeadsCon in Vegas in February

We'll be doing book signings at each, so stop by and say hello. More information on my presentations coming soon. Obviously FTC regs is at the top of the list with the lead generation audience. Hope to see you there.

Traverse Internet Law: The Far Left Virtual Police State

We've been quite vocal at Traverse Internet Law about the nasty habit of the far left leaning and liberal blogosphere attacking through words (and otherwise) individuals who dare disagree with their "information yearns to be free" and "hands off the web" mantra. These interests claim that our free speech guaranteed by the First Amendment protects the right to attack with impunity anyone with whom they disagree. 

And most troublesome is that these groups and special interests maintain a virtual police state online. They develop intelligence, share information, and relentlessly attack the dissenters to their far left perspective, sometimes in the dark of night using anonymous and pseudonomous postings, riding off the "Streisand Effect" to create a mob attack of similarly minded fanatics (I call it a "mobosphere attack" in the Google Bomb Book). 

I have often said that the left wingers are all for the right to free speech, until they don't agree with it. Time and again you'll see discussions and postings about using the Streisand Effect to retaliate against someone for offering an opposing voice. It is a policy aimed at destroying dissension, particularly in Internet legal and policy areas. "First things we do, let's kill all the lawyers." Consider the context of the statement if you don't already know and it quickly becomes apparent that this effort to bully, undermine, attack and destroy lawyers is the rallying cry for the police state...a world in which dissidents are held out to public scorn and ridicule by a vicious mob (Streisand Effect) or relentlessy attacked by masked intruders (anonymous speakers). This is the world in which we live today. Honest, honorable, intelligent, well mannered, battle worn veterans of the world rarely participate in online dialogue because of the attacks their participation invites. And so you get a very one sided, jaded, biased perspective on Internet law and policy issues. The far left liberals not only control the message, but police the web for anyone not drinking their kool-aid.    

The latest dust up comes from a debate about the Anti-Counterfeiting Trade Agreement that will establish standardized laws for dealing with Intellectual Property. On the one hand, the liberals complain about a number of proposed or anticipated elements like a "three strikes" law for those infringing copyright and anti-circumvention technology restrictions, all of which is far too involved to discuss in this post. It is all very complex, and the online debate is raging. What caught my attention was not the relative merits of the debate, but comments made by Dr. Mihaly Ficsor, a renowned global copyright expert and a citizen of Hungary. It is in response to Michael Geist's far left leaning attacks on the treaty and the publication of high profile and allegedly misleading claims about the treaty that Dr. Ficsor offers a perspective that we in the US cannot possibly have. Here are his words from Budapest, Hungary:       

I have decided reluctantly to react to this, and then truly do not want to deal with this weird quarrel anymore. It is completely useless to present arguments against heated ideological discourse and sheer hatred campaigns trying to suppress any contrary views. I am immune against it, as someone who has survived a serious illness. In the decades through which we were constrained to live under a communist regime, this was so customary; everybody who did not agree with the collectivist ideology, there was no discussion about it; he simply became enemy and the agent of the “imperialist forces.” There were no blogs at that time; there were only newspapers and radio, but the style was the same as in these “digital activist” blogs; even the words and expressions are so familiar. Ask about this the many Hungarians who fled to Canada after our beautiful but failed uprising in 1956! We who have suffered a lot – I too as a child and adolescent as a member of a family which, together with many others, was a victim of serious persecution because my uncle bravely spoke out against the communist ideology – have become resistant. Nevertheless, at the same time, we are sensitive to those phenomena where some people try to settle disputes in the style of those “glorious” years, and we may be ready to say some words just in order that our social environment make use at least the wisdom of the saying: “Experience is a wonderful thing; it helps us to recognize our mistakes when we commit them again.”   

And so, as we begin a New Year, let me propose five resolutions that we should all consider embracing. I'll call them the "Ficsor" principles:

1) Oppression: I resolve not to abuse our rights in free speech. I will be vigilant in guarding the rights of others to voice their opinions and disagree, but will never hide behind protected free speech in order to punish others for voicing their opinions.

2) Suppression: I resolve to reject the use of the mobosphere attack or Streisand Effect to influence, undermine or control online dialogue from dissenters. 

3) Anonymity: I resolve to never publish anonymous and pseudonomous comments or posts that are derogatory towards someone.

4) Persecution: I resolve to voice my opinion vigorously and openly with utmost respect for the free speech rights of those with whom I disagree, and to discourage and condemn any attempts at coordinating the persecution of my online adversaries. 

5) Intellectual Integrity: I resolve to only comment upon what I know after reasonably acquiring a fair, informed and balanced understanding of the issue.