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?
