As if the credit card gods needed any more power, their latest napalm like sweep of the continuity space would make even Attila the Hun blush.

Not that I am against this latest move. Actually I am all for thinning the herd when it comes to deceptive practices. I mean you would have to be pretty dense if you didn’t see the writing on the wall. First the FTC re-iterates its guidelines on online advertising, in particular weight loss and biz opp at the beginning of December. Then on the 15th they file proceed with actions against some larger players. They then proceed to cut off all Acai berry advertisers from their merchant accounts. And in a stunning move, in mid January, both Visa and MC take aim at the continuity community.

Under the banner of “brand damaging”, the credit card companies have decimated almost every well known Biz Opp continuity advertiser there is. This caused a tsunami like effect on the CPA networks, squashing massive amounts of offers under their well buffed wing tips. In what appeared to be a blanket approach rather than a pinpoint attack.

But from the ashes rises a Phoenix. There will be a new set of ground rules. Unfortunately no one knows exactly sure what will take place next. Is continuity dead, well not for some. Magazine publishers, online application providers and software providers won’t have to worry much, since they seem to deliver value in the eyes of the gods. For those who run information products delivered by web only or a Free Trial DVD mailed to their home, well it is a different story.

I spent three days at Affiliate Summit, and a fair amount of that time speaking with Transaction Processors about the situation. Their summation, be compliant and transparent, or face certain elimination. There were several companies there touting that they can get continuity campaigns back up and running as before. Some using European accounts, others utilizing other means to get advertisers back taking credit cards for continuity.

Most solutions seemed like short term stop gap measures that, in my opinion, will only end up getting shut down in another wave of whack-a-guru. I admit, that there will be some advertisers who have been able to weather the storm, and those tend to have rock solid processing relationships with their processors. But the majority have lost most of their continuity business for good.

I recently did an interview with Daegan Smith, an old friend and one of the smartest network marketers I know. We talked for over an hour on how these latest changes are reshaping our industry and how both advertisers and publishers need to be aware of the implications of running campaigns that are not compliant.

Take a listen or better yet, download it to your MP3 Player and take it with you. If you sell anything online or are thinking about it, listen to the podcast with Daegan. I am confident you will find something that applies to your business. If not, then you probably still think CPA stands for Certified Public Accountant.

Listen here:

Or download it here.

Thanks to Ruck at Convert2Media.com’s blog post for alerting the industry about Wells Fargo departing the rebills/continuity/negative option billing.

Make sure to read the entire story on Ruk’s blog on what is happening with continuity in the performance and affiliate marketing space.

There is also some chatter on WickedFire Forum, you can read that here.

Continuity, membership, subscription, auto-ship, auto-renew, call it what you like, it is something that needs disclosure.  I have suspected for some time that issuing banks would correct this option with additional disclosure, but the FTC beat them to the punch.  Last month’s update to the Guidelines for Online Sales and Blog Post/Testimonials has made it crystal clear that the performance marketing slice of the online marketing industry is under a microscope.

For those who are not aware, a number of campaigns in the CPA Networks have been gone dark, and more will be modified to either make them more transparent to the end user or modified from a free “anything”, to a more traditional direct sale approach.  Last week, Wells Fargo announced to it’s transaction processing partners that they no longer be in the business of taking transactions involving rebills, continuity, and/or a negative billing option.  Essentially this means that any card issued by Wells Fargo, and I am assuming their recent acquisition Wachovia issued cards as well, will no longer be able to be “dinged” month after month automatically by the continuity fairy.

Credit  issuing banks in the US are seeing their chargeoff rates increase monthly.  This combined with increasing costs of servicing specific types of credit card transactions, such as auto-rebilled transactions, is forcing issuing banks to reconsider which lines of business actually make it the best margins.  When you get 20 people per 1000 transactions complaining about something to a live agent, the costs become prohibitive.  When you do hundreds of 1000’s of transactions daily, well the numbers just don’t make sense to continue servicing them.  This is what I believe is at the heart of the move.

As I write this today, I believe this is just the tip of the iceberg of additional jettisoning of high risk, card not present (CNP) transaction types.  I fully expect to see Visa weigh in with additional category shutdowns as they have instituted recently on the Acai Berry products, as well as transactional type smackdowns, such as the negative options.  The nature of the Acai Berry offers smacked of an alleged scam, which included multiple subscriptions and other offenses.  (NOTE: read this Acai Berry Users Complaint board post to see how many acai berry users are fighting back against these types of predatory sites).

What publishers need to be concerned about is the ability of the networks and their advertiser partners to either have already in place alternative payment methods, or how quickly they will be able to adapt  solutions to newer payment models that do not include risk free trials or negative options.  In addition, publishers should be more vigilant than ever of the campaigns they promote simply because when something affects the advertiser’s ability to process orders, that directly affects their ability to pay the networks who will in turn pay the publisher.

It all falls downhill.  Look for advertisers (actually look for networks) who are doing their own due diligence on advertisers.  You want a network who works closely and directly with an advertiser, who can help them avoid industry issues and point them in the direction of partners they can trust, particularly for processing.  Work with your AM’s to get complimentary access to offers you want to run and then monitor how they treat their subscribers.  This is something that only you as a publisher can do and communicate to your audience. (and according to the FTC should be disclosing).

So the sky isn’t falling, just Wells Fargo’s continuity business which is impacting a few transaction processors who do quite a good amount of business in the CPA Biz Opp and Health and Beauty space.  The sky does have some clouds and it is going to rain on more than a few publishers and advertisers (and CPA networks who were too highly vested in these types of offers) for a few months until Visa and MasterCard, Discover and American Express all weigh in on their versions of continuity/rebilling, and what is and isn’t acceptable.  Once the dust settles, the winners will be the ones who test religiously and develop multi-channel targeted landing and sales funnels.

The publishers who work closely with those advertisers (and their networks) more than likely won’t be caught with their shorts down (or a smack down).

Let’s get this out of the way.

Compliance Disclaimer: Some links on this site make me money.  Go Figure.  I am writing about Affiliate Marketing. So if you choose to purchase a product or service that is linked on this site, I want to thank you for helping a working stiff like me (and probably a lot like you) make a living from his passion.  It is this site’s intention to help you make more money for yourself and your family.  (But if you aren’t OK with that arrangement , then let the FTC know, since they are the ones who so gently requested that I inform you of any monetized links, my “material relationship” in FTC speak.  Heretofore, we were both OK with me just giving away good actionable information, views and reviews (and possibly some common sense); you, the reader,  enjoying reading it and thinking it was all just the ramblings of some sophomoric f**&ing philanthropist.  Don’t misunderstand me, I truly do enjoy helping more people understand the industry I work in, but even more so, I really like having asphalt shingles over my family’s  heads instead of cardboard.)

Now I am not an attorney, although the companies I have worked with and for, have spent a small fortune making sure they hired the best compliance attorneys in the industry.  I am also not a qualified legal assistant nor have any degrees in that field or any credentials other than my own experience.   OK, now I have disclosed that I am not an expert in the field of law and that anything you read on this blog is not intended to be advice of any kind.

If you have stuck around after the disclaimers to get to the good stuff, I thank you.  But I will not be sending you any gifts to thank you, as that might appear to entice you to endorse my blog.  In fact, If I send you anything I will make sure to disclose when I am taking your address that I am not placing you on any mailing list that will be used for any future mailings you did not want to receive to your mailbox from myself or any other third party entity.  Further I will be disclosing that I will not accept any form of gifts as an enticement for writing good things about you.  If you want to send me gifts, that is nice.  My birthday is December 16th.  Just don’t expect a shining review of a piece of crap.  Because a piece of crap will always be a piece of crap no matter what color you paint it.

And that brings us to the impending Dec. 1st  deadline for compliance with the FTC’s 16 C.F.R. Part 255: Concerning the Use of Endorsements and Testimonials in Advertising: Notice Announcing Adoption of Revised Guides their Compliance Guidelines regarding endorsements and full disclosure.  According to the FTC’s David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “We wouldn’t put our orders in writing if we weren’t going to enforce them.”

If you make true statements, you can be liable under the guidelines.  If you make false statements knowingly, the guidelines are squarely aimed at you.  The problem with the truth is that while it may be a portion of your customers that experience phenomenal results, is this the case for all of your customers?  If it isn’t then you will need  to find a way to let them know this.  A simple “Individual Results May Vary” is no longer the de facto standard in for your product or services disclosure that not everyone will have the same experience.

And if you are reading this and have ever endorsed me (and you know who you are), well then I have to thank you.  But I also have to disclose that every single one of the comments on my LinkedIn profile are completely unsolicited, even though most are gratuitously verbose about what I helped them with. I would like to also solicit anyone reading this blog to post an endorsement that is mediocre as I need to present a balanced and objective image to the consumer.  I do not want to mislead them that everyone likes what I do.  Unfortunately, the people I have pissed off over the years tend not to post endorsements.  So if you have written something about me or are planning to, you will be getting an email with a form that you will need to fill out that will forever prove that you think I actually know something (or not).  Oh yes, I must also disclose the material links of my association with them.  Most of the people who have written an endorsement or testimonial about me, I have never charged a dime for my time.

The FTC is chartered to protect the consumer from fraud and deceptive practices, that is their only mission.  And from the looks of their website, they have adapted to using the Internet to get their message out.  Their has been no lack of publicity in the marketing and advertising community regarding this change and I am confident that there will be enforcements of this new standard almost immediately following the Dec. 1st 2009 deadline for compliance.  Those enforcements will serve as guideposts to where the edge of the envelope lies.

In our slice of the industry, performance marketing,  I feel the players will be particularly scrutinized, as it is the fake blogs and unabashedly biased blog posts that have irked the FTC in the first place (or at least greatly contributed to it).  Affiliates have a tendency to find the edges and exploit them, in most cases unabated by the merchants greed and unwillingness to stop the train even though they were more than likely aware it was leading consumers down a path of poor customer service or product performance.

The bottom line for all of this lies in transparency.

Oh yea, on last thing while I am disclosing.  I work for www.ClickFusion.com , which is the fusion of an online ad agency, a Cost Per Action Network and Call Center Services serving both Publishers, Advertisers and Agencies.  It is a division of www.DotComSecrets.com, which is owned by my good friend and most respected colleague, Russell Brunson.  If you want more, visit the ClickFusion website and see what our vision is for creating the next evolution of an online advertising agency.  And yes these links and endorsement are paid for.  Hell, I know where my bread is buttered.

If You Promote Non-Compliant Campaigns – You Could Be The One Hauled Into Court

Recently, a disturbing development has shaken the already unstable footing of the online Publisher (or do you say Affiliate). The Attorney General (AG) for the State of Illinois, Lisa Madigan has, “filed consumer fraud lawsuits against three suppliers and a local affiliate marketer of acai berry products charging that the companies lure customers with free trial offers – through aggressive Internet marketing techniques – and then charge customers’ credit cards prematurely, do not always supply the product and make it nearly impossible to cancel.”

This is a significant change and most surely will be the harbinger of things to come.  In the suit, the AG coordinated efforts with Harpo, Inc., producers of “The Oprah Winfrey Show” and “The Dr. Oz Show” both of whom had their likeness infringed upon by the owners of the campaign, Advanced Wellness Research.  In a separate but related action, Harpo has filed suit against AWR and almost 50 other suppliers and their associated agencies for trademark infringement for using Oprah and Dr. Oz’s name and likeness in their campaign materials.

The action of the Illinois AG sends a clear message to not only the Health sector, but to all links in the Performance Marketing chain – make sure what you are promoting is compliant and not deceiving the public in any way.  The Publisher is identified in the suit as Amirouche & Norton, LLC, who are being asked to pay a civil penalty of $50,000.00, and an additional penalty of $50,000.00 per violation of the Consumer Fraud and Deceptive Business Practices Act (where the court finds that the Defendant committed with intent to defraud), as well as an additional $50,000.00 per violation of the same Act as above, but this fine relates to only those instances when the consumer was over the age of 65. It also seeks to bar Amirouche & Norton, LLC from promoting health products ever again.

Pretty steep penalties, just for running a Risk Free Trial offer for Acai Berry.  Doesn’t seem very Risk Free to me.

The Complaint outlines very specifically what the infractions are against the Publisher, these include:

• Using Flogs like Beckysweightloss.com (removed) to mislead consumers about the product benefits.
• Use of celebrities images and names who are not spokesperson’s for the campaign, and misleading consumers into thinking these celebrities endorse the products.
• Failure to disclose the terms and conditions of a “free trial offer” in a place that is clear and conspicuous to the consumer.

The point here is simple: Think BEFORE you Promote.  If you cannot clearly understand the terms of the offer, or it seems deceptive in any way, you may want to replace that campaign with something more compliant.  If a campaign uses a celebrity image, steer clear unless it says specifically that the celebrity is a paid spokesperson and the Advertiser has the paperwork to prove it.  And lastly, the use of “fake blogs” or flogs as the Complaint calls them is never a good idea.  Even if you are selling statues of the Virgin Mary, faking testimonials or making up stories about the product and it’s benefits will only cut your career short in Online Marketing.

In a world where Subway(TM) is being made to rethink their marketing because their super weight loss spokesperson Jared is perceived as promoting submarine sandwiches as a diet plan, it is always best to take the high road.

Story Links:
- Illinois Atty General’s Press Release
- Complaint filed against Publishers, Amirouche and Norton, LLC
- Federal Trade Commission
- Tips on How To Judge if an Offer is Compliant

Subscribe to my Performance Marketing Trends Newsletter.  Weekly insights into how the CPA Performance Marketing game is played.  Networks, Publishers/Affiliates, Merchants/Advertisers, Ad Agencies and industry suppliers need this information. Fill in the info below.
Name:
Email:
Company:
Your Privacy is always our biggest concern. I do not sell, lease or in any other way release your name, email or company, or any other information that sticks to our servers.  Quite frankly I just want to send you some great info and let you sort it out.

Recently, I received a stellar letter from Azoogle Ad Network (AZN) regarding their stance on the current state of litigation occurring on our industry. Here is an excerpt:

�The Illinois State Attorney General�s Office, Oprah Winfrey, and Dr. Oz have filed a number of suits in the past day which may affect your business. The lawsuits send a clear message that using deceptive ad content, e.g., fake celebrity endorsements, not disclosing the price and re-bill terms, using fake blogs, etc., will not be tolerated. Please read the following for more information:

The Illinois State AG has filed actions against three parties for deceptive advertising practices in the marketing of acai berry products and other dietary supplements. Please keep in mind that the regulators are choosing to directly pursue affiliate marketers for their marketing practices. The full text of the press release can be found here: Illinois Attorney General – MADIGAN FILES LAWSUITS AGAINST ACAI BERRY COMPANIES.

Dr. Oz and Oprah Winfrey have also filed a lawsuit in New York for copyright and trademark infringement against approximately 50 companies, including advertisers, suppliers, ad networks, and affiliates. To put it bluntly, they are very unhappy of their celebrity status being used to market dietary supplements and cosmetics, without their permission. They have specifically listed hundreds of affiliate sites they want discontinued immediately, because the URLs use their name or the sites claim endorsements from Oprah/Dr. Oz. The full story can be found here: Oprah, Dr. Oz sue over false endorsements – Celebrities- msnbc.com�

?

I agree completely with the actions of the AG in Illinois and NY, and as former head of a network, I can also tell you that the FTC crackdown that happened on July 1st is only the first wave in a new round of compliance wars aimed squarely at the Biz Opp and Health verticals.

For too long (and I have been doing this for 12+ years) there has been a proliferation of substandard crap when it comes to offers. How can a consumer make a decision based on less than 50 words of copy and obtuse Terms & Conditions? These are the campaigns that all networks should be self policing themselves. I can tell you that there are several top networks, Azoogle and ClickBooth included, that take great pains to put campaign through compliance reviews. They are not the norm.

As much as overly aggressive affiliates are to blame, networks also need to shoulder the responsibility of not putting these offers in front of publishers. The problem is, faked endorsements, celebrity pics and patently false testimonials actually do outperform a long format sales page or even a factually based sales page. Why? The only thing I can come up with is that these are the same people who buy carloads of Sham Wow’s and Snuggie’s. They are not rocket scientists, nor even good shoppers.

Networks, if they want this segment of online advertising to survive and attract larger advertisers, need to collectively promote only compliant campaigns – no matter how much an advertiser is willing to pre-pay.

In order to be compliant, you should look for the items Azoogle (thanks Marc P.) mentioned above, for sure, but here are a few other tips affiliates can use to judge if an offer is compliant.

- Does the site explain any continuity/subscription charges above where the “action” on the page is. This could be a button, a form, or even a cart (in the case of an all-in-1 page format), whatever the “action” the end user is supposed to take on the page. If the page does not explain that after the initial Risk Free Trial, they will be charged X for whatever it is they are buying, then stay away. This is what the FTC will be looking for next. These disclosures need to be located ABOVE the action.

- Does the site have a Privacy Policy, and does it make sense?

- Does the site have an Earning Disclaimer on the page, not in a link.

- Does the site have a Terms & Conditions that has an 800# to reach Customer Service. Also, does the T & C clearly spell out how to receive a refund or how to opt out of the Risk Free Trial (beware of convoluted process� of having to obtain a pin number from one phone number and then a series if steps to receive the actual refund)? I suggest calling the number and see what happens, possibly ask the operator how many refunds they issued that day.

- If the campaign is a Risk Free Trial, does the site clearly disclose directly near the word FREE what the S/H fees are? Is it in typeface greater than 9 pica?

- If you are truly serious, order the product and see for yourself what the ordering experience is, and then attempt to return it.

- Never promote an offer that tells you that the $1 they are charging the consumer is going to be donated to charity and that this makes the offer totally free to the consumer. They are only using the transaction to get consumer’s information, as well as check to see if the card has money on it so they can rebill it.

- Never promote an offer that is using any images of celebrities unless their name is on the product itself. Oprah does not endorse any particular brand of Acai berry. And the use of News Network logo’s is also a tip off that you may want to not promote this. In addition, if you see McAfee or HackerSafe badges, click on them, if they are not linked or unclickable they are there to deceive the consumer.

- Lastly, make sure you do a search for the advertiser’s legal name and their address (should be disclosed in the T & C). Search for their name and add in the words “scam”, “fraud” or “spam”. You will also want to search the BBB to see if there are any unresolved complaints against the advertiser. NOTE: Beware of false review sites such as RipoffReport.com, they often have ulterior motives for posting negative reviews � such as charging the advertiser to remove them or worse yet, getting money to write a positive review.

These are all things networks should police, in my opinion. I know I did at Offeratti, but we had a different approach to being a network. I wish I could say that for all networks.

I applaud these actions by state’s AG’s, deceptive practices and Trademark infringement hurts everyone in our little niche of Internet Marketing. If we do not police ourselves it will be done for us and we will remain a little niche to major advertisers. And if you think the government isn’t watching, well I suggest you visit www.ftc.gov and peruse the guidelines they have for advertisers of Health products or Business Opportunity. You may think you can never promote another product again! You can, you just have to demand better from the networks who have taken these campaigns on as advertisers.

This article is a reprint of an Offeratti newsletter sent to it’s Publishers. Happy 4th and enjoy your freedom, it has a price.

Happy 4th of July for our Publisher and Network Partners!

As July 4th marks the independence of a great nation, so too does it remind us that with freedom also comes responsibility.

In our industry that comes in two flavors, responsibility of the Advertiser to provide a quality product or service to the consumer. And in turn, the responsibility that Publishers bear to promote campaigns in a non-deceptive, straightforward manner.

Wednesday, July 1st marked a new chapter in online marketing responsibility particularly for one of our core niche verticals, Work From Home Business Opportunities. If you are not aware of the recent action, please visit this article about the FTC’s recent crackdown on Con Artists and online work at home scams.

Big advertisers in this niche of online performance marketing that the FTC specifically targeted included, Jeff Paul, John Beck, John Alexander, as well as the campaign Google Money Tree and several others. The FTC is accusing these advertisers campaigns of violating federal laws related to telemarketing and consumer fraud.

At Offeratti we have to take on the responsibility from both ends of the spectrum. Our advertisers are selected based on a careful screening process that weeds out the would be online work at home scams. We specifically look at an advertiser’s track record with refunds and customer service related issues, as well as financials and several other business practice criteria, including interviewing actual buyers of their products. And while not everyone can please all the people all the time, Advertisers who make Customer Service a core mission tend to stay in business a lot longer.

The Offeratti Network is a place where we want publishers and networks to know that you can be proud to promote our FTC compliant advertiser campaigns with 100% assurance that you are not going to end up in hot water. In other words, you don’t feel like you need a shower after you put up our links. And in turn, Advertisers know that we heavily screen our publisher and network relationships in accordance with our Zero Tolerance for Fraud policy.

So on this July 4th weekend, let’s have a great time, do some barbecuing, have a few beverages and watch something amazing happen – the cleaning up of the biz opp affiliate space. The freedom to work on the Internet also comes with a fair amount of responsibility to not mislead or deceive consumers. Offeratti is proud to be part of the movement toward greater transparency and truth in online advertising.

Because if we really want growth in the performance marketing sector, we have to attract larger advertisers with monthly budgets in the 7 figure range. They will not come if they perceive this slice of the Internet Marketing pie to be fraught with the stigma of fraud and deception. They will simply pull their massive TV budgets and place them in display or search. But they won’t be spending it on lead gen or direct sales campaigns in our space.

So relax and enjoy the much deserved time off, and raise a toast to Billy Mays. Long live the infomercial king in our hearts and in our strategies.

A few related articles on the FTC Crackdown.

AP Story

http://www.sun-sentinel.com/news/nationworld/sns-ap-ftc-scams,0,969609.story

FTC Operation Short Change

http://www.ftc.gov/opa/2009/07/shortchange.shtm

Cheers,

Jim Lillig