Sales Tax & Affiliates
Sales Taxes are local and collected by each state from the companies that sell products to residents of that state. With sales tax in some states as high as 9% or 10%, this is a significant income to the states. However, the internet has changed all that. Unlike their brick and mortar counterparts who have to physically reside in a state to sell products, the pure internet players like Amazon can just operate from a single state and sell products to anyone in any state. As these pure internet players don’t register with the individual states, there is no need to pay the sales tax to those states. Of course, a decade back, internet retailing was in it’s infancy and the revenue loss wasn’t much. But as the ecommerce increased leaps and bounds, the amount of sales tax that can be lost is significant. States like California have introduced what’s called a Use Tax and shifted the burden of paying the sales tax from the companies to the tax payers.
Use Tax essentially tells a tax payer to figure out all the products they bought without paying sales tax and pay it at the end of the year, typically along with the income tax filings. It is unclear on how effective the use tax is. There is no easy way to enforce it and I don’t think it the collections would be as good as taxing at the time of the sale.
So, what can be done to make internet retailers to collect and pay the sales tax? One way is to change the definition of who affiliates are. Affiliates are actually not employed by the retailers. Anyone with a website can participate as an affiliate and earn a small amount of side income. Internet retailers rely on affiliates to increase traffic to their websites and improve their sales. Obviously, a person who is an expert in a specific subject area can act as a better faceless sales person to sell a line of products than the retailer itself could ever do. Realizing the fact that internet retailers rely on affiliates and that the affiliates are from all around the country, some states came up with the idea that because the internet retailer has affiliates residing in their states, they have operations within the state and hence should pay the sales tax. New York and North Carolina are a few examples of these states.
Recently Amazon has sent emails to their North Carolina affiliates that they would be terminating it’s relationship with them because North Carolina is going to enforce sales tax on retailers with affiliates in their state. What the people coming up with this type of tax collection schemes don’t realize is, on the internet, anyone can promote a product or a website. In fact, many of the 2 million+ affiliates of Amazon are from outside the US. People from India, Australia, Thailand, Canada and else where are participating in Amazon’s US affiliate program and getting referral fee. If every state in the US starts enforcing sales tax due to affiliates, the end result would be that there will be no affiliates left in the country. We already see so many jobs being outsourced to other countries. Now, affiliates are getting outsourced due to the stupidity of states trying to collect sales tax in a wrong way.
Like Like.com?
Today I saw a job post on craigslist by Amazon and immediately I realized that I am familiar with the technology they are interested in. I know of a company called Like.com which provides the ability to do shopping visually. What I mean by this is, say some likes a particular type of watch or a shoe or a handbag but is interested in a small variation of the one they are looking, then how would one do a regular keyword based search? That’s not possible. Rather, if there is an option to “show me all other items that look like this” then that would be cool. Isn’t it? That’s exactly what like.com does. Given that they are quite popular for a certain type of products, looks like Amazon is interested in a similar technology. Here is Amazon’s job posting
“Software Development Engineer, Image Processing for Catalog Quality (Seattle, WA)
Reply to: see below
Date: 2009-04-08, 10:38AM PDT
Amazon.com’s Product Catalog and Merchandising group has an immediate opening for a Software Development Engineer in Content Based Image Retrieval.
The candidate must have a M.S. or Ph.D. in Computer Vision, Image Processing or a related field. Experience in object recognition techniques, image similarity and retrieval algorithms and information retrieval is a plus. In this position, the candidate will be working with other engineers to develop and maintain product matching algorithms and systems that use both visual and textual information to find not just identical products but also visually similar products of interest to customers as they browse the Amazon.com website.
This is a great opportunity to get access to vast amounts of product image data and put your algorithmic prowess to the test as you develop production systems that greatly enhance the shopping experience on the Amazon.com website. We are a highly-motivated, co-operative and fun loving team who thrive on solving challenging problems with innovation. As part of this team you will be analyzing data (both image and text), developing new algorithms and building large-scale distributed software systems using various Amazon.com proprietary and open source technologies.”
What Google Can Learn From Amazon.com?
The do-no-evil Google seem to be doing nothing but evil these days, or at least that’s what you would feel reading posts like this one which warns about Google Checkout and another where a guy sued and won against Google.
This type of behavior from Google makes you think on one hand that they don’t care about the smaller players. But then, you see a news like how Google is making it easier for new website owners to get on to Google Adsense through their hosting providers.
The truth is that most websites that have an alexa rank below 100K can hardly make any money through advertising. Websites which are powerful enough would look at not just Google Adsense but various other advertising channels as well. If Google is desperate to expand it’s AdSense program, what it could have done is to figure out a way to filter out invalid clicks and let their existing customers simply continue with their AdSense accounts rather than suspending them. There are various reasons why invalid clicks happen some not in the control of the website owners and others potentially due to ignorance and a few trying to deliberately beat the system.
So, what has this got to do with Google having to learn from Amazon? Well, Amazon’s affiliate terms & conditions state that one can’t get affiliate fee on personal orders. In the past, Amazon used to show personal orders in their orders report and sometimes even given the commission but later deduct it if they found it out. Perhaps some human auditing that caught these type of issues. But from the last year or so, Amazon has gotten smarter that it filtered the personal orders from the Orders report itself.
If Amazon behaved like Google, every time an affiliate made a personal order using his affiliate link knowingly or unknowingly, his account would have got suspended. Instead, Amazon simply ignores such personal orders and moves on.
Google on the other hand takes an approach for which their smarty pants paralegal had to say
“But it’s not fair!” Google’s paralegal protested. “What if everyone whose account was canceled sued Google?”
Today Amazon boasts more than 2 million affiliates. Some make a lot of money, some make little and perhaps many make nothing. None of them had any issue if their personal orders don’t end up paying them affiliate fee. They just move on. They have their affiliate account and they constantly try out new ways to refer people.
Interesting Experience With Target.com Affiliate Application
As someone who has been a webmaster registered with multiple Affiliate programs, I thought I know how they work. That is until I got rejected for Target.com’s affiliate program. I have seen some success with both Amazon and Overstock.com. We all know Amazon runs it’s own internal affiliate program and perhaps they are the only retailers doing so. They are even taking a chunck of ad revenue from Google by making Amazon.com more of an information portal than a mere online shopping site. However, most other retails don’t have that vision or the resources to do all that Amazon is able to do.
Some of us may have noticed that Amazon actually sells Target’s products. If you are even more careful, you would notice that Target’s website structure such as the URLs match those of Amazon’s. It’s not coincidental and there is no secret about it, Target.com openly says that they make use of Amazon’s technology.
In addition to outsourcing their website infrastructure, they obviously outsourced their affiliate program management as well. From old archives, it appears that Linkshare used to be their affiliate network. However, at present they use ConnectCommerce. Connect Commerce seems to belong to Performics which got acquired by DoubleClick which got acquired by Google and now named as Google Affiliate Network.
So, after following the link on Target which points to ConnectCommerce.com that redirects to Google Affilaite Network, I filled in the details and waited for a few days. Finally got the rejection. Here is what I found strange with this process. When I sign up for any affiliate program on any affiliate network, it’s the company offering that program and not the network that reviewed my site to decide whether to accept me or not. But with Google Affiliate Network, it appears it was Google which rejected. I know this from my website log. I don’t know if Google Affiliate Network first accepts and then there is a second level of approval by the retailer, in this case Target.com, but this rings bad bells to me about Google’s practice.
If you want to do business with someone, if the middle man objects to it, do you like it? I understand Google’s concern about whom and what kind of websites to accept for their AdSense program with what all click fraud, arbitrage and other issues. But with affiliate program where you get paid only if you refer someone and that person completes the transaction, what’s Google Affiliate Network’s problem?
Actually, it’s Target.com’s problem. Target.com would be losing out several affiliates like me while Amazon.com can boast more than 2 million affiliates.
Now regarding the policies of Google. Everyone knows that it’s hard to earn money on the web using CPA (cost per action) as compared to CPC (cost per click). If more and more people are able to sign up for CPA and promote retailers products on their websites, the value of CPC is likely to diminish (after all, it’s a supply/demand thing). So, what if Google has policies in place that reduces the proliferation (I am not saying I have a great website whose affiliate interest is secondary) of affiliate websites? I have no way to tell, but I seriously think Google Affiliate Program shouldn’t be messing with approving affiliate applications. In my case, let Target.com decide whether to accept my site or not.
Are Personal Orders Eligible For Amazon Affiliate Referral Fee?
A lot of new Amazon affiliates ask this question. The simple answer is, no, Amazon does not give referral fee for personal orders. There are some veteran Amazon affiliates who feel that Amazon should have given referral fee for affiliates who work hard and reach the top tiers. But I don’t think that will work.
There are two reasons why personal referrals should not be credited.
1. If this is the case, every customer would first become an affiliate and whenever shopping online, will use their affiliate links. This is actually bad for the affiliate program itself. What this means is, no affiliate who is seriously in the business of affiliate programs will be able to make money. As a result, the affiliate program will not have any true return on investment.
2. Another important reason is, it makes it possible for anyone to start being a special type of retailers. Sort of dropship programs. But here is the thing. Say, a product on Amazon sells for $100 and it’s an electronic item. The referral fee for this is a flat $4. Now, an affiliate can choose to set up a website, list the same product for $99 and attract all the bargain hunters and take the orders, then go to Amazon through their affiliate link and order it for $100 shipped to their customers. In 2 months, they are getting their $4 commission. So, for investing $1 extra dollar upfront, they are making $3. Imagine how much money affiliates can start making with this type of a scheme!
So, now you get it? Personal Orders shouldn’t get referral credit at all. Only then the affiliate programs will be effective and attract the true affiliates.
Why Are There So Many Clicks?
There are several reasons why your website statistics and what you see in Amazon affiliate reports or other affiliate reports for that matter don’t match. I recently encountered a less obvious reason.
I have been using an internal link to redirect to the retailer’s website. In addition, I have used the rel=”nofollow” so that I won’t be passing the page rank.
I have received lots of clicks in the reports from the retailer but I know I didn’t have so much traffic. The only reason I can think of for the extra and lots of those clicks is that some bot is crawling through the internal link redirecting to the retailer. Note that rel=”nofollow” only indicates not to pass the vote to the target page, it doesn’t indicate to the crawler that it should not crawl that page. To prevent a bot from crawling links that you don’t want it to, you should specify the robots.txt file. So, just added a robots.txt file with the following
User-Agent: *
Disallow: /redirect
which now will stop crawling any link that starts with /redirect
I just implemented this and will monitor for a few weeks to see if I am still seeing thousands of clicks for a website that gets less than 25 real visitors a day.
Affiliate Program Diversification
Two years back I didn’t know anything about affiliate programs. And in 2008, I made more than $3000 from Amazon affiliate program. It’s quite an interesting journey. Initially I thought that if I keep working at it, I can make a pretty good website that would be a cash-cow for life. Ha ha ha. But it doesn’t work that way. If I take the amount of time I spent on my affiliate website(s) and multiply that with my day job hourly rate, I would have made much more. However, working on my website and making the affiliate money gives me a couple of things a) experience of affiliate programs b) knowledge of SEO and other relevant techniques c) pride of doing it on my own rather than working for someone d) zeal to do better.
Along the way I started researching other affiliate programs and signed up for Overstock.com. Signing up with Overstock is a little different experience than signing up with Amazon. Amazon doesn’t seem to care much about what kind of website you have. But Overstock seems to. With amazon, I could just indicate that it’s a blog and sign up but with Overstock, even with a proper website I couldn’t initially manage to get accepted. Then I had to invest time and effort to make a good website, without knowing if I would get accepted and then resubmit. Luckily I got admitted.
While I managed to make about $300 on average with Amazon last year, things tapered off towards the end along with the economy (even though Amazon seems to have a stellar Q4 performance). But January turned out to be the worse. I didn’t even get to 3 digit income while every month of last year I managed to do it.
Interestingly in January, with my poor performance with Amazon, I managed to make double that with Overstock. And February turned out to be already good with Overstock.
Anyway, the lesson to new comers into the affiliate world is make sure to diversify. Use multiple affiliate programs and multiple websites to promote. Ofcourse, you got to first succeed at one to get enough confidence and know that you can make more, else you will end up spending money hosting multiple websites.
A Few Good Keywords
I like the movie A Few Good Men and so used a similar title.
Some of the people venturing into the affiliate world try to be too generic and provide every product from every category on their website. Some of them are much more specific, but they are still a wide range since Amazon’s top level category each has hundreds of sub categories. I think, this happens with people who rely either on astore or build their website using Amazon Associate Web Services. In each of these cases, it’s easy to stuff in as many products as one wants on the website.
But doing this is not a good idea for multiple reasons. The most obvious, obviously, is why would someone wants to come to your website to search for a product rather than directly go to Amazon?
But the less obvious one is that search engines, definitely so Google, track a few metrics that over a period give them clues on what your website really is. That is, you can’t take a grocery store website and pretend to be an electronics store. Or, you can’t pretend to sell everything (ofcourse, you can and that’s what the likes of Amazon, Walmart and a handful of big players do, but that’s not what we are talking here).
The way Google establishes a website’s identity is by measuring two metrics with respect to keywords.
1) Impressions. This gives the percent and position of your website for a given keyword.
2) Traffic. This gives the percent and the position of your website for a given keyword for which the users clicked and visited your website.
The idea is that, irrespective of whatever pagerank or other algorithm a website uses, bottomline is to measure whether people are clicking a website for a given keyword or not. If not many people visit your website for electronics but visit for apparel, then that means, even if you try to manipulate a search engine by buying links or whatever, they can figure out that your website is not really about what you are manipulating for since not many or none is visiting it for that topic.
In this internet age of millions of websites, if a website manages to get one main keyword (with only one word in it or atmost two), that’s pretty good. It will eventually manage to get good for all related keywords (synonyms, phrases containing that main keyword/s and additional keywords).
Depending on how powerful your main keyword is, your traffic from the search varies. At the same time, note that if the keyword is very popular, then thousands of people like you would also be trying hard to optimize their website for that keyword (even some big corporations burnt their fingers doing that in an unacceptable manner).
So, now that you know that a few good keywords are all that’s required to make things work, start identifying what those keywords are for your website and start building your original and own content and Amazon’s product information.
Good luck with your affiliate trials for 2009!
Amazon’s Display Advertising Team
Amazon used to spend money advertising it’s website and also spend money paying it’s affiliates. But over time, perhaps with the acquisition of companies like Alexa and A9, it became smart and figured out that advertising on it’s website, contrary to the conventional wisdom, is actually profitable. Ofcourse, it has to strike a balance such that the users, instead of buying on it’s website, go some where else. I am sure this can be achieved by using clever algorithms that pick the non-competing opportunities.
One of the complaints of the amazon affiliates is that they get paid only for the products and not the ad clicks. Hopefully Amazon will start tracking their ads also by affiliate ids and start rewarding it. But till that happens, Amazon can actually offset some of it’s affiliate expense through the ad revenue generated through the affiliate traffic.
Earlier I mentioned about Amazon’s Organic/Free Search Team and also Amazon Associate program team (the later is no surprise if you are an affiliate. May be it is, because sometimes you wonder what’s happening and if there are people behind the program or just left on auto-pilot 
). Now, there is a 3rd and related department of Amazon that I want to bring to your attention.
They advertised recently on Craigslist for “Software Development Engineer, Display Advertising”. Here is the job post description
“Amazon.com’s Display Advertising team is looking for a talented and enthusiastic Software Engineer to develop and deliver the next level of features for the display advertising platform. You will be responsible for designing and implementing systems that will allow us to improve our targeting systems and scale our ad serving capabilities to millions of customers. Passion for the customer and their user experience is a key requirement.
Successful candidates are enthusiastic about translating high-level, ambiguous business goals to working software solutions. You are comfortable taking initiative and working across teams in a relatively unstructured environment. Our engineers are top-notch software developers who love working as a team and proactively take the lead whenever necessary. Amazon offers one of the coolest work environments around, in which customer experience, ownership and results are the key values.
Primary responsibilities:
* Define, design and implement multi-tier distributed applications
* Participate in agile scrum development process
* Must be able to independently design code and test major features, as well as work jointly with other team members to deliver complex changes
* Proactively detect and resolve system issues
QUALIFICATIONS:
* Candidates must be self-directed, demonstrate leadership potential and be team players.
* Experience with scalable distributed systems is preferred.
* A bachelor’s degree in Computer Science or a related field is required.
* Proven coding skills in Java or C++ is a must.
* Experience with MySQL or Oracle databases a plus.
* Linux experience preferred.”
