AffiliatesNeeded.Com What's New In Affiliate Marketing

I woke up this morning to the press release sitting there in my inbox announcing that Schaaf Consulting had acquired PartnerCentric. Of course, I read it backwards in my bleary-eyed, pre-coffee state. Then it hit me: Linda Woods, often credited as the first OPM in affiliate marketing, had sold to the Brothers Schaaf.

As we watch the expansion of OPMs (that’s Outsourced Program Management, not Other People’s Money), we also can see the consolidation of top OPM firms. Schaaf Consulting acquired Stephanie Agresta’s firm a couple of years ago before Ms. Agresta made the leap to PR.

The newly formed company Schaaf-Parntercenteric will have over 40 clients including eBay Partner Network, 21st Century Auto Insurance, Constant Contact, Moosejaw Mountaineering and Quicken Loans.

Below along with a clip that came to mind when I read the story:

Click here to view the embedded video.

We talked to Brook Schaaf about the acquisition and his plans for world domination:

How did the acquisition come about?

We’ve been talking to Linda for a while and we’ve enjoyed a friendly relationship on a business and personal level for years. She expressed interest in moving on from the OPM space and we  realized that it was a pretty good opportunity for her to make a nice exit while ensuring her clients were in good hands while allowing us to take advantage of what she had built and the opportunity in the marketplace.

What will happen to the PartnerCentric Team?

We obviously have people on our side who are experienced and talented but we couldn’t move one inch on this deal without her team. We’re pleased to be working with the core group Linda has put together at PartnerCentric. The teams on both sides understand the impact of the merger and are ready to make sure the clients get the services they need.

Over time we will share information, including tactics and best practices. I think there is going to be some really good things we can learn that will strengthen the whole team.

How do you keep two teams in sync with so many clients?

That’s a great question. We’re based in Los Angeles but everyone we are working with is virtual. Allowing for a virtual workforce is a really nice thing from an employee standpoint. It allows you to work with talented folks who are maybe not able to move from an area. A virtual outsource model doesn’t work, of course, if someone doesn’t have a good work ethic, but it’s the type of problem you would encounter in an office environment as well. We trust our team and make sure they have access to a very good internal communication structure.

Not to downplay the other clients involved in the acquisition but obviously the crown jewel is Ebay’s Partner Network. With such a big client involved was there some type of oversight or query with them before this type of merger?

We talked to Ebay before completing the deal to make sure that everything was okay with their team. We were actually involved in the R&D process with PartnerCentric for the Ebay program. So they were very good on their side in helping us work through matters, which we appreciated.

If we look at past examples, Pepperjam being one of them, the next logical phase in such growth is the temptation to become a network. What is Schaaf’s ultimate goal here?

I think our ultimate goal is to provide the highest level of affiliate marketing service. That is really my primary interest in building the business. Schaaf Consulting only provides affiliate marketing management. No SEO, no PPC, no WOM, no Social Media, we are focused on affiliate.  In terms of becoming a network I think it is a logical progression for many people but I don’t think it is a logical progression for us at all. I don’t see becoming a network as advantageous in any way. The space is very compacted and I don’t think we could build any new technology that could create new value in it. Whereas with affiliate marketing management I think we really can create value for our clients.

Obviously there are a lot of affiliates impacted by this and there is concern when a new team steps into a program. Is there anything you’d like to communicate to those affiliates?

We definitely want to give everyone a sense of confidence and continuity with the combined entity. We want that sense to extend to our clients and to the combined relationships like the networks. The same people will manage the same accounts. But what will improve is our ability to aggregate and distribute certain types of information, like coupons. So this should only be a plus for everyone currently involved. That’s something we understand about the nature of the affiliate model. We are committed to doing what needs to be done to make sure our clients receive the level of service they need to succeed with their programs.

You read that right. Today Drs. Foster & Smith, a pet medicine retailer our of Wisconsin, has shut down its entire affiliate program due to the Advertising Tax that has passed in 3 states and is being considered in many more. Oh, and it is effective immediately!

The reason stated was not that Drs. Foster & Smith didn’t want to collect sales and use tax for these states, as onerous as that may be.  Rather the reason was that Drs. Foster & Smith has been advised that it may be subject to state income tax. So rather than attempt to comply with a moving and often nebulous target they have simply decided to shut down their affiliate program.

The e-mail we received is below. I wrote more detail of the implications of this and suggestions for state legislators on my blog (italics and bold added by me for emphasis).

It is with great regret that we have to inform you that we are shutting down affiliate marketing at Drs. Foster and Smith effective immediately  February 22, 2010.  This closure is across the board in all states with all affiliates and is not related to you only as one of our affiliates.

We regret having to do this for a variety of reasons, not the least of which is that so many of you have done a great job for Drs. Foster and Smith and will be adversely affected by the loss of revenue from Drs. Foster and Smith sales.  Thank you for all you have done to promote our company on your web sites.  We apologize for the hardship and inconvenience that this creates for you.

The single reason for the decision at this time is the moving target of the ever-growing patchwork quilt of state legislatures that are considering nexus legislation relative to affiliate marketing and sales tax. It has become increasingly difficult to determine who is considering such laws, where they are in the process and what the ramifications are in each state.  What affiliates may not be aware of is that such nexus situations do not only relate to sales tax collection, but potentially state income tax for a corporation as well.

We wish there was clarity on this issue from state to state and nationally, but there isn’t.  So until this matter is cleared up nationally, we are shutting down all affiliate marketing.  We apologize for any hardships this brings to you and your team.  We have greatly appreciated the work that you have done on our behalf.  The sudden nature of the move by California to reintroduce legislation late last week and to push for a quick vote, emphasized the ever-changing nature of this issue and our need to be ahead of such votes and decisions.

With our appreciation for your contribution to our company,

Sincerely,

Drs. Foster and Smith Affiliate Marketing Team

The company raises a legitimate concern. Even as a retired certified public accountant I hadn’t thought of the impact of nexus on filing corporate state tax returns. I can see how that would be a concern to any CFO. Killing the entire program seems a bit extreme. Why not leave it in the 3 states that don’t have sales tax and as an international program?

What do you think is going to happen to affiliate marketing this year?

Last month Affiliate Convention came to my neighborhood. I took advantage of the opportunity to walk the exhibit hall with one of our team members who had never been to a conference.

As we wrapped up I told him that while it was a good education, he might not want to be quite as direct as I am.

You see, I don’t like dealing with bad sales people. I’ve done sales. Of course, I think that just about everything includes sales. Are you applying for a job? Then you’re selling yourself as the product. Do you think your company should release a new product or service? Then you are selling that internally. So we all need to be good at sales.

What makes a good salesperson

First, know your business and the product you are selling. If you don’t know it better than the person you are selling to, your sale will be based on luck, not skill. I hate when I know more about the product than someone who cold called me to get me to buy something I already know I don’t need.

Second, know your prospect’s business. If you can, know it better than they do. If you have too broad of a target market, focus where you can and then ask questions for those whose businesses you don’t know. Don’t try to sound like you are an expert at something you are not. I hate when I know more about the product than someone who cold called me to get me to buy something I already know I don’t need. [Yes, I know I repeated that.]

Next, don’t be scared to tell your prospect about your business and be honest. “Sign up at our website” is not a sales pitch. That’s a trick to get e-mail addresses to impress an executive who doesn’t understand the difference between hot and cold prospects.

Finally, don’t use buzzwords and, if you are required to, be able to explain what you company does without them. Jargon often means nothing. Sometimes it means different things to different people. If you can’t use simple words to describe what your company does, I’ll figure you have no clue.

Walking the floor

Affiliate conferences have a few types of exhibitors (forgive me if I miss any and just add a comment below):

• Affiliate networks
• Service providers
• Stores / Merchants
• Publishers / Affiliates
• Outsourced Program Management firms

The inspiration for this article was affiliate networks. I’m not talking about the majors. I’m talking about all of the CPA networks. We typically add one network per year. I used to ask about URL structure (buy.at failed that one recently so miserably we probably will never work with that network), automated feeds on at least a daily basis and product feeds. Now I found I have a new set of questions.

Sign up at our website

Name 3 stores or services in your network we need to have on our site.That sounds like a simple, basic question that anyone should be able to answer.

Some networks either can’t or won’t answer it. #SRSLY?!?

Either they don’t know the stores or services I should want or they just want me to sign up for their network. If they think having another inactive affiliate will do them good, they should just make up fake accounts. What’s the difference?

Simply put, if you can’t rattle off 3 stores that we need to have on our site, we assume you don’t have at least 3. If you tell us stores that are on numerous networks (including CJ, GAN and/or Linkshare), we don’t need you.

We work with thousands of stores and you want me to add yours? OK, tell me what they are. You can’t? OK, no soup for you! NEXT!

What types of stores do you have?

This seems to be another tough question. This is where the buzzwords really start to jump out. This is where I start asking the questions that I don’t recommend to Casey. In most cases, I found that the offers were the type where a user signs up for an incentivized offer and gets charged $9.95 to their cellphone every month and has trouble unsubscribing. Uh, we won’t put those on our site. We like having long-term value to our members.

If you have to hide what you do, there is a problem.

Why the networks won’t talk to me at Affiliate Summit

There you have it. I think CPA networks will throw their swag at me to keep me away. I gave away the secrets on how to make them say what they really do. Try asking. It’s a lot of fun when you get into it. My greatest hope on this topic is that CPA networks can and will answer these questions for you and that you find lasting, profitable relationships. Short of that, I hope you have fun!

I got a new computer last week. I burned out yet another laptop. I seem to ride the curve of Moore’s Law.

In setting up my computer, I took the easy way to speed it up and downloaded the Google Pack for Windows 7. It includes Spyware Doctor with Anti-Virus by PC Tools. Cool. We all need protection from spyware.

I was sitting here working when my computer made the sound of an alarm. Uh oh, what’s wrong?!? Spyware Doctor with Anti-Virus is warning me about some serious threats on my computer. There are 22 infections categorized as Application, Tracking Cookies,  and one far worse Spyware, as well as Known_Bad_Sites. Are you ready for a chuckle? The bad site was cc-dt.com. Yep, Google had me download software that blocks the cookies from Google’s own Google Affiliate Network.

Stop the Madness

I know that some of the affiliate networks have tried to get their tracking cookies taken out of spyware. I certainly hope that Google will jump on the bandwagon and get PC Tools to remove the domains not only for its own network but also for other affiliate networks.

Foursquare keeps popping up. It is getting to a point that it might be popular. That’s not why it caught my interest. It has something that I find magical as a marketer.

People tell Foursquare where they are. Not latitude and longitude but restaurants and stores. They give that info away for free. For a game that has no real reward (except badges and points that evaporate every week).

There’s no need to use GPS and a special coupon app. Foursquare will (if they get it) be able to deliver coupons and deals to you for something that you are interested in either while you are nearby or when it thinks you will be going there. Do you go out for sushi every Thursday for lunch? Foursquare should be able to suggest a new sushi bar (for a nominal fee to the sushi bar). You want to talk about local search and local advertising?

There are also some serious weaknesses to Foursquare that may stop its success, not least of which is that local has been the brass ring since the late 1990’s. As early as 1999 GoTo.com had a Director of Local.

For now, it’s a fun game. The data needs more depth, not just in the number of places but the data that users provide. Yelp could launch a mobile app that would crush this. Twitter could easily add this. Facebook just might. Google has the basics of it already in place with GPS (and the traffic reporting on Google Maps is amazing). Zagat and Lastminute teamed up for NRU (NearYou) which is way cool but not all that useful.

It’s an interesting space with a lot of promise if people are willing to give away this data. It’s worth keeping an eye on it. Expect to see Foursquare and its competitors gobbled up in 2010.

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What follows is the silly part. If you don’t like it, stop reading and have a serious discussion below about whether Foursquare has a chance of survival or if it is going to be gobbled up by a bigger player.

Tell me how did I get here

Foursquare had an iPhone app but no Android app. So it was just one of those things I saw my iPhone friends playing with.

Then there was this really lame tweet I kept seeing (yes, I’m 1,000+ tweets in but still relatively new to Twitter). I kept seeing people tweeting I am at Mahalo followed by the address. Odd. Why would they do that and why should I care?

Foursquare launches an Android app

It turns out they had the auto-tweet function turned on for their Foursquare app. OK, I’ve been tucked away in my own happy place for the last year or so but I’m ready to come out and play.

I downloaded the Foursquare Android app and started checking in. What was cool was that I did it on a weekend.

Here’s how it works. When you go to a place (usually a restaurant or store but you can put anything you want), you check in. Then you get points for it. You get more points if you check in to more than one place a day. You get +5 bonus points when you check in somewhere the first time and you get an additional +5 bonus points if you add a new place that Foursquare doesn’t already have in its database.

But your points only count until Sunday at midnight and then the slate is wiped clean and you start over. It has to be that way or someone who joined early would always be the point leader.

For some reason, Foursquare won’t give points between 8am and 4pm on weekdays. #lame

Then there are badges, the real reward of many social data sites. I have 5 badges so far. Some are revealed in the FAQ while others you must earn or search Twitter to find out about.

What is it then?

Foursquare is Yelp without the depth.

Foursquare is Twitter without the feed.

Foursquare is a game that allows cheating.

Elect me!

Foursquare appoints the person who has been to a place the most as Mayor. To unseat someone, you have to have been there more times than that person and at least twice on two days. Mark Jeffrey (no, not the English Convict, the one who wrote the Max Quick series and is CTO of Mahalo) was the Mayor of Mahalo and one of the people tweeting he was there. I decided that I wanted to be Mayor of Mahalo. The only problem was that I’ve never been there.

GPS is standard, right?

Just about everyone playing Foursquare has a smartphone with GPS. So you’d assume that Foursquare can verify if I really was where I said I was. Nope. That means you can “cheat” which seems appropriate for becoming mayor.

Will I keep using it?

No, I don’t think that I will. I found it fun for a week. I don’t know enough people on it and don’t go to bars so I don’t see the use of it now. The data isn’t as rich as Yelp and without a group of friends and a feed like Twitter you can’t follow (stalk?) your friends. No real fun in that.

Do I think it has value?

Hell yes! The data that Foursquare is gathering, that it is being given as a gift by its users is amazing. Foursquare knows where I eat and shop. It knows how often. It knows what part of town. Imagine the possibilities for marketing!

You had to be under a rock yesterday to miss the big news: Yahoo took a dose of poison to speed up its death. Rumor has it Steve Ballmer put on a Jack Kevorkian mask to trick Carol Bartz into the deal.

In all seriousness, search has been a confusing place from the beginning and it continues as such. I joined GoTo.com when it was entering the throes of the second phase of search. I have decided to write a different perspective on this with a little long forgotten history. It’s written from my perspective in the industry so if it comes across as self-serving or you want things more clean, just hit the Back button or go read what Danny Sullivan and Jason Calacanis wrote about the deal.

Phase 1: Netscape Built Yahoo, Excite, Lycos and Infoseek

Netscape was THE browser back in the day (I have to put it that way or my Old Internet Guy will be revoked card). It didn’t have its own search engine but it had a button you could press to get to one of the 4 main search engines. The best part was, it gave them traffic for the price of… FREE!

Mind you, Yahoo wasn’t a search engine. It was a directory that David Filo and Jerry Yang (oh, he commits infanticide later in this story) started as grad students at Stanford.

Not that many readers remember the other early players like:  Excite (bought by ISP @Home and destroyed), Lycos (is that German for search?) or Infoseek (bought by Disney, renamed Go and successfully sued by GoTo over the logo before being shutdown… is Disney even on the Web anymore?), and Altavista (which was a project by Digital to prove the value of its servers. It was at altavista.digital.com. Catchy and user-friendly, huh?)

Phase 2: Netscape wants to charge

Imagine that, people realized there was money in search. The big four weren’t so keen on paying (well, the ones that were not Yahoo stuck around for a small amount). There was a group of upstarts with deep VC pockets and were willing to pay to play. GoTo.com was in there as were AskJeeves (IAC later committed “butlercide”), Looksmart (it was our goal that it didn’t look smart… sorry Claudine and Sean), Go2Net / Infospace and a few others. It was fun even if many portal execs (OK, most portal execs) thought we were doing the work of the devil.

GoTo had one thing going for it (this is the self serving part). Todd Tappin, our CFO, wouldn’t let us sign an unprofitable deal. He did let us bid them up to hurt the others, especially Looksmart. There was one deal Jeffrey Brewer, our fearless CEO, insisted that we sign and pray. It was a bet your business deal. It was, of course, Netscape.

Netscape had an annual bidding process for its search traffic. Minimum $30 CPM and maximum 15% of the traffic. I lobbied to have our offer go in at 25% and 35%. We sent in both with different CPMs and (HOLY SEARCH, BATMAN!) they said yes (after asking if we meant it). Panic. Jeffrey remained calm and said he could get the money if the deal went south. Well, the day it was announced the stock we up 40% (we went public 2 weeks prior) and, much to our surprise, it was profitable due to having 20 keywords listed whenever users saw it. That was an important point in the development of paid search. We briefly messed up the marketplace by driving traffic to specific keywords (at least when we let distribution partners do so).

Needless to say, Ask.com is the only survivor of this class (”We’re #3!!!”). GoTo and Altavista (along with FAST and Inktomi) were bought by Yahoo along with Tim Cadogan (who headed up Yahoo Search for a few years before leaving to found OpenX).

Phase 3: Yahoo Builds Google

Did I really write that Yahoo built Google? Yep. Sure Larry Page and Sergey Brin built the technology but Yahoo marketed the hell out of that thing. From 2000-2004 Yahoo continued to provide only the Yahoo Directory and had its search engine “powered by Google”. This legitimized Google by giving it credibility with Yahoo’s users who soon figured out they could go directly to Google.

Google didn’t have to pay for traffic and Yahoo’s former users didn’t have to search via navigating through 6 clicks to find a site in a directory.

Trip to Mountain View to pitch Google on paid search. Yes, we heard that paid search was not relevant and would never be on Google’s SERPs. And they meant it. It wasn’t a trick. Google’s investors later talked to Larry and Sergey and said that the fractions of a cent for Yahoo search was nice to fund development but was nothing compared to what Google could make with GoTo-like paid search. The VCs won and Larry and Sergei became billionaires.

Google figured out to sign a deal that was great for AOL (rumored to be as high as 100% of revenue plus pre-IPO warrants in Google). What did it get from that? It went from 0 to 100 (that’s in 1,000’s of advertisers) overnight as every GoTo advertiser wanted to keep the gravy train that was newbie AOL users.

Oh, MSN launched a search engine too. To its credit, Microsoft wouldn’t poach employees from its partners so Yahoo (which did) got Tim Cadogan.

Over at Yahoo, Terry Semel stepped in and asked why in hell did Yahoo not have a deal with GoTo to monetize search through text ads. Good question. My first call for GoTo (the week before I started) was to Ben Padnos at Yahoo. We spent a year and a half on a deal that got mucked with a handshake (it’s a long story about two people who used to work together and had the relationship turned upside down on this one… oh, and they didn’t like each other). Terry signed the deal and like it so much he bought the company. He didn’t like the idea that Yahoo didn’t have control of its advertiser base (Carol, are you listening? You really should be.)

Phase 4: The Death of Yahoo and the Rise of MicroLiveBing

You’ve all been following what happened to Yahoo when Jerry Yang turned down Microsoft’s $33 a share offer (Oops). You heard that Microsoft just stole Yahoo’s search business with the original Netscape-sized down payment of FREE.

Yahoo hasn’t done much to improve its search engine since Tim left a couple of years ago. Microsoft (as much as we like to knock it for its poor name choices) has been gobbling up every interesting search company it can find and has been trying to build a better search engine. Microsoft even admitted Google was better by using the exact format of Google’s search results (paid and natural). Now it’s buying marketshare.

That leaves us with Google just shy of 70% of the market (including it’s $1 billion dollar deals with AOL and MySpace), MicroHoo at around 28.5%, Ask.com with a few percent (and lots of Google AdWords results) and a few others.

Phase 5: Can there be new search engines?

I really want to say yes but I don’t see how. Back in the day (again, it’s required along with at the end of the day) search engines could start and they could buy traffic. The deals are sealed with BIG money now. They could also get press and get users. The biggest suck in this vacuum is that Google and Microsoft buy them up when they show any promise. And who amongst the giants wants to compete with Microsoft and Google? I’m hiding behind the handball backstop for this playground brawl. These guys are going at it everywhere!

Google has done a few things well.

• Google is a technology company. Yahoo was not, is not and will not be. GoTo wasn’t either. Microsoft isn’t really. By that I mean that Google produces excellent services. They are fast. They are what users want. They aren’t clunky and relying on old technology.
• Google innovates. Who cares if Orkut is only big in Brazil. Look at everything else that Google gives the world… for FREE!
• Google gives it away for free. Half of Microsoft is Windows and Office. If you wanted to hurt Microsoft, what would you do? Give away an operating system (Chrome OS) and a productivity suite (Google Docs). First Round Capital says that “if your company can take $5 of revenue from a competitor for every $1 you earn – let’s talk!” Google uses its significant revenue from search to give everything else away… for FREE! Why? People keep coming back. As much as I want to hate Google, I now have a G1, I use Gmail, etc., etc., etc.

Google isn’t great at marketing, Apple is. Google just builds great technology. It’s winning. If it keeps innovating, it has a good chance of becoming really scary (or even scarier). Think about how many entities’ livelihoods are based on changes to Google’s natural search algorithms and paid search rules. A couple of years ago I read an article on the half-life of tech leaders (I think it was by Josh Kopelman but I can’t find it). IBM’s dominance lasted for 30 years. Microsoft’s for 15 years. Google is past 7 1/2 years. Hmmmm….

I hope that Microsoft succeeds on this one. It hasn’t used its near-monopoly power well in the past. I hope that we can see the market stabilize at 60/40 or to have a real third player (kind of like how I’d like a centrist political party in this country).

My only prediction on this is that there will be a new battle for distribution. Microsoft needs more search traffic. It needs to provide a big base for advertisers to get the CPCs up and to make it worthwhile for us all to spend money there. And it needs the traffic to prove the credibility to the end users and the experts who make the noise that the general public hears. Steve Ballmer has stated that he is willing to spend BILLIONS a year on search for the next 5 years. The man is the world’s first employee billionaire. He seems to know a thing or two.

My only question is this: Microsoft is paying for the search traffic on Facebook. How is it that Facebook still provides 19% of Google’s traffic?

I have two tales to tell about my recent experiment with Twitter. Up until last month, I was in the I-just-don’t-get-Twitter group. You know them. We all know them. They are more reasonable than the I-refuse-to-use-Facebook crowd.

It’s not often that I can credit my mother with getting me to use new technology (it usually works the other way) but she gave me an article in reference to something unrelated to this. One of the conclusions of the article was that we need to use new technology to understand it. That is a requirement of my job and I’ve slipped a little in fulfilling my job requirements lately (too many long stories to get into).

Hmmm, I didn’t get why anyone would tweet or what @, RT and # were all about. I could read about it but that wouldn’t do it. No toe in the water for me. I decided to dive in head first.

There was another big change in my life that made this possible. My fourth and final Sidekick (the old LX) was on the fritz. Worse yet, it wouldn’t sync with Vista (no discussions on Vista, please). I require a spacious thumbpad so I tested out the Android G1. (Yes, it has flaws but it suits my needs better than any phone on the market. I am happy to write about my phone journey but don’t want to go down that path here).

After a few weeks, here’s what I have found about Twitter:

1. It helps to know people personally. At least I found it to be a lot more fun knowing people and interacting with them as opposed to writing to the Tweetosphere.
2. You need to be able to take it wherever you go that you probably have dry hands (see phone change above).
3. 140 characters is perfect for my sense of humor. (My first apology to @wporter.)
4. As always, don’t believe everything you read. Just ask Jeff Goldblum I might have picked a perfect time to try it out as Twitter was alive with all of the real and fake celebrity deaths.

I’m a convert. I still have some open questions. I watched the tweebate between @samharrelson and @jimkukral over using hashtags (you know, the #’s) for marketing purposes. Sam thinks it is spam and Jim thinks it is great marketing. Jim’s solution to Sam was for Sam to unfollow anyone he thinks abuses them. The problem is, Sam will have to unfollow Jim and not see the rest of what Jim tweets. My question on it is whether people should have personal and work Twitter accounts. I think so for people who believe in unbridled marketing. I’m still not sure how Twitter will be monetized (who among us is) but it will be by someone, it just may not be Twitter.

Experiment gone awry

Every now and then I would search for people I know or want to follow on Twitter. There was one person who I couldn’t find. (Did I mention that people search on Twitter sucks and I was too lazy to find the better solutions?) So I typed in his name.

(My 2nd apology to @wporter) Many of you can see the train wreck that is coming…

You guessed it… I looked up twitter.com/jeffmolander. There was nothing there. If you remember the auction of jeffmolander.com three years ago, you can guess the next part. Yes, I opened an account for Jeff. I am coming clean within days as it is a prank now but would go far beyond that if I kept up the charade.

I gave myself a simple prime directive: Do not put words into Jeff’s mouth (or on his fingers, as it were). I had 5 tweets: 4 were articles written by Jeff himself plus one of “OK, now what?” I really wanted to get into a few debates that sparked but I resisted the urge. The only other thing I did was to follow people. Word had to get out somehow that Jeff Molander was on Twitter, especially since he has written so many articles against Twitter including “There is no such thing as social media”. [There is social media, Jeff. People are social creatures by nature and are demanding that of us. Whether or not one site or another fulfills its own mission or a necessary purpose is a different story.]

The response was incredible. People seem to be torn between hating Jeff and generally liking him while disagreeing with what he says and stands for. It was such a big deal that Jeff Molander finally got on Twitter that Wayne Porter was shaken out of a deep sleep and had to check Twitter.

Protect your brand

Here’s what I don’t get… I bought and auctioned off jeffmolander.com for charity. Jeff uses it now. He also owns jeffreymolander.com which redirects to the other. Why didn’t he have @jeffmolander?

The punchline

Kim Rowley tweeted the following: @jeffmolander Long time no see Mr Molander! Is this account taking over your @jeffreymolander acct? Leading double life? Or experimenting?

Oops…

I sent the password to Jeff for his new account where he is more popular… OK, more notorious.

[Please direct all flames to @TheDavidLewis]

A funny thing happened on our way to the Capital and visions of democratic grandeur…

You’ve all read about the Amazon Tax spreading from New York to other states including California, North Carolina, Hawaii and Rhode Island. Here’s the crazy thing… there is little or no revenue behind these bills, only lost revenue for affiliates and lost jobs for employees. Sounds like a great way to generate revenue for the states, eh?

AB178 couldn’t get out of committee

AB178 was California’s version. It stalled in the State Assembly’s Revenue and Tax sub-committee. There weren’t enough votes for passage. In fact, there weren’t enough votes for it to be heard in committee and it was pulled by the bills author (Assemblymember Nancy Skinner from Berkeley) the day it was to be heard.

What’s the democratic solution? Instead of debating it and hearing public opinion, the Budget Conference Committee snuck it into the budget at the last minute (that is, after 6pm on the last day of weeks of budget negotiations).

Both the State Assembly and Senate passed budgets yesterday and today that included changes to nexus. Governor Schwarzenegger has promised to veto any budget that has an increase that is passed by a simple majority instead of the 2/3 required for tax increases. Whether a game or not, legally he is correct.

$150,000,000 is a lot of money!

I can see why the state legislators are drooling at lobbyists promise of $150,000,000 in revenue for the state. That’s a lot of money! I’d go after that too if I could.

The problem is that the number doesn’t look at the downside, only at all of the upside potential. Here are the assumptions:

1. All stores with affiliate programs maintain their programs and their California affiliates and decide to collect California sales tax.
2. Oops, there isn’t a second assumption. Just the one.

What if the assumption is wrong?

I’m glad you asked. If the assumption is wrong, retailers like Amazon, Overstock.com and Zappos will terminate California affiliates. Amazon has already notified California’s leadership in the state house that it will do so and has been terminating affiliates in North Carolina and Rhode Island when their legislatures pass similar bills. It’s safe to assume that will happen here as well.

That means a decrease in income tax revenue as we will generate less revenue. That will be compounded by our sites being less competitive and losing more sales thus more income tax revenue for the state. That will be compounded by layoffs, or at a minimum less hiring, which will result in both less income tax revenue and an increase in unemployment payments by the state.

NY collected $50 million after it passed the Amazon Tax last year

Maybe there was a first mover advantage. Amazon collected NY sales tax. It has clearly stated that it will not collect from any other states unless there is a national solution. That’s what the US Supreme Court stated in Quill v. North Dakota: Only the US Congress can force collection of sales tax where nexus does not exist.

I’ve heard rumors that Amazon accounts for 30% of that increase. Assuming that is correct for California, that’s $45 million that comes off the top before anything else happens. If you think $105 million is still a big number, what happens when other retailers terminate as well? It’s not looking so good, is it?

Why should you care about California

On this one, I think that as California goes, so goes the rest of the country. With the Silicon Valley here and companies like Google, Yahoo and eBay in opposition, you have no hopes of fighting this in your own state if if passes here.

What’s my solution?

This post has gotten too long so I am going to split it into 2. Please read the next one for my way to climb back through legislators’ loophole.