Affiliate marketers on both sides of the Atlantic have recently had to face up to regulatory pressures introduced at different levels of their respective governments. The size of these challenges and their implications for the industry have produced much uncertainty, highlighting the need for co-ordination and leadership among its key actors. This article looks at the common factors that link these regulations and compares the UK and US markets’ respective approaches to them.
The Impact of SOPA on Affiliates
It is well-known that in the US affiliate marketing is a business model buffeted by regulatory burdens, most notably the Affiliate Nexus tax. But regulatory challenges come not only from the state-level. More recently, SOPA has shown that all sites can find themselves on the receiving end of regulatory pressures. While protecting copyright owners is the aim of these proposals, because any site which links to copyrighted content can be blocked publishers should be just as afraid as major online players like Google, Wikipedia and WordPress that ‘blacked out’ on January 18th in protest.
Were SOPA to pass into law, publishers would have an unmanageable task in monitoring the content of sites they do not own for copyrighted content, draining time and resources away from their efforts to drive sales. Conversely, changes made by larger sites like Facebook and YouTube that publishers use to link back to their own will have a knock-on effect on the publisher’s own traffic. But even more serious are the suffocating effects on the kinds of user-generated content and engagement that are so crucial in helping publishers establish themselves as destination sites and thus command advertisers’ attention.
The UK’s Experience in Confronting Regulatory Challenges
In the UK, legislation similar in its implications (if not in its aims) has recently come into effect. Enforced in the UK from this month, the EU’s ePrivacy Directive requires site owners to gain consent for information held by cookies to be stored. Like the SOPA proposals it cannot be ignored. But whereas here both the Affiliate Nexus tax and SOPA have been met with concerted opposition, in the UK the law is already on the statute books. The FTC’s ‘Do Not Track’ proposals bear a striking resemblance to the EU Directive. Whereas previously the FTC had only proposed voluntary opt-outs to behavioral advertising, following the intervention of the White House for a ‘Bill of Rights’ for online privacy to replace the current range of voluntary commitments, this will likely serve as a blueprint for future legislation.
Lessons from how the UK has addressed this challenge are therefore apposite. Chief amongst these is that any kind of regulatory challenge requires a co-ordinated response on behalf of the industry as a whole. In the UK, the Affiliate Marketing Council of the IAB performs this function, although its remit goes beyond that of the Performance Marketing Association in the US in having additional powers to enforce compliance standards. Comprised of eight member networks, in addition to publishers, advertisers and agencies, it has broad support for this remit and is looked by government as the representative of the performance marketing industry.
The Role of Networks
Affiliate networks, on both sides of the Atlantic, have a key role to play in the industry’s response to regulation for three reasons. Firstly, they have a duty of care to their advertisers and publishers to ensure that they are well-advised and well-prepared for oncoming changes. Secondly, as the keystone uniting so many of the industry’s relationships they are looked to advocacy bodies like the PMA to provide co-ordination. Finally, their role extends beyond being merely a platform provider to being the public face for common industry challenges.
At the intersection between publishers, advertisers and OPMs, networks can help the industry walk the line between being both the conduit of information and advice on one hand, while not stoking unnecessary panic on the other. The experience of the UK shows that into a vacuum comes misunderstandings and those able to profit from panic. There, a small industry of advisory services has already sprung up in response to the ePrivacy Directive, feeding off (and to some extent unnecessarily exacerbating) understandable trepidation felt on the part of site owners.
The experience of both markets demonstrates the necessity to take proactive steps to comply with regulation coming into force regardless. The US witnessed this recently when FTC guidelines mandated disclosure of commercial relationships where endorsements and testimonials were used by affiliates. Although advertisers assumed liability for the risk of their publishers failing to disclose this, what was important was that advertisers were seen to be taking (sometimes very simple) measures in advance. Similarly, in the UK, last year’s extension of the Advertising Standards Authority’s digital remit produced concern initially, but as with the FTC’s changes, when these regulations came into force the effect (to date) has been less cataclysmic than many predicted.
Count on Ignorance
What is common to the UK and US is that legislators and regulators often have little knowledge of the online industry – especially publishers – and unrealistic expectations. In the fight against the introduction of the affiliate tax in Colorado, campaigners argued that the tax would not raise the revenue legislators expected: when Colorado introduced the tax it collected just $20,000 despite being projected to raise $5 million. This only serves to highlight the need for a louder industry voice, whether to oppose new regulatory proposals or to help the affiliate industry comply with them.