Pop-up goes the commission

That's the way the money goes...

Some of you may remember N-Case. The Active X program, which automatically installed itself onto desktops through online ads and bombarded users with unrequested pop-up ads, stirred many complaints.

Apparently, N-Case is no more. US company 180Solutions, which describes itself as "one of the furthest reaching contextual search marketing companies worldwide", has replaced it with Zango, a more moderate "user-friendly" permission-based search assistant application that provides access to a wide range of websites, applications and information.

But Zango may have a few problems on its own, according to extensive research by Harvard law student Benjamin Edelman.

He says the company violated the policies of two affiliate marketing networks by soliciting commissions from merchant members, and redirecting to itself commissions that should have gone to other affiliates.

The company, Edelman says, was able to do this by deploying double and hidden pop-ups. This led merchants' tracking systems to conclude that users reached merchants' sites, thanks to 180's efforts, even when users actually reached merchants on their own, or through other affiliates.

180Solutions denies all charges. "We do not siphon, poach or seize affiliate marketing commissions," the company says in a statement.

In the fascinating world of affiliate marketing (a $200 million-a-year business) websites or merchants often pay commissions to independent third-party publishers (affiliates) who recommend and link to merchants' products. This is where the use of adware such as Zango becomes essential, because it opens advertisements that fit your preferences. When you purchase merchandise from the advertised website, the affiliate receives payment from the merchant.

According to Edelman, affiliates are losing money to 180solutions that they are entitled to. Also, some merchants are also paying commissions for sales that aren't the result of affiliate traffic, he says.

Edelman's research suggests that 180Solutions interferes with the referral of customers to websites by automatically overwriting tracking cookies. Unlike ordinary "adware" popup ads served by companies such as Claria and WhenU, Edelman says, 180solutions ads cover competitors' sites with a 180Solutions tag. Sometimes the company also uses "hidden pop-ups", which tag the invisible site with one of 180solutions' advertisers.

180Solutions categorically denies allegations of illegal business practices. It says it does not incur any revenue from its deployment of double and hidden pop-ups. Instead, these pop-ups or i-frames are used to protect clients from other competitive online advertisers.

180Solutions conducts its business through two affiliate marketing networks, Commission Junction and LinkShare, which manage thousands of commerce hyperlinks and the commission payments they generate. Although LinkShare's policies clearly state that "hidden windows are not a permissible way to set tracking codes and earn commissions", the company hasn't cut 180solutions out of its network yet.

The biggest affiliate network, Shareasale, however, did remove 180Solutions from its network and has taken steps to stop 180 advertisers from receiving Sharesale commissions. "What we did see was a software application that generated as many click thrus as it could," CEO Brian Littletold told The Register. "With this type of approach you would expect to see conversion rates that are extremely low, not worthwile for a merchant anyway."

Littletold says that earlier this year his company ran into a problem where affiliates were being approached by 180Solutions to place ads in their software. "We saw this basically as a way for 180Solutions to get around the fact that we didn't want them in our network. Although we still receive several applications per week from them, each is declined."

Meanwhile, 180Solutions says it has retained one of the top US independent audit firms to review its affiliate marketing practices and verify its contractual compliance with affiliate marketing networks. Whatever the outcome, it seems the online affiliate business is in desperate need of standards and regulations. ®

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