Poaching Prohibited
By: John Gartner
What's in a name? According to Shakespeare's Juliet, not much, but if the name is trademarked it has value worth protecting. Successful companies spend millions developing a brand name and promoting their Web domains online. Some publishers, however, treat others' trademarks like their personal ATMs by generating commissions through misleading ads.
This practice has become alarmingly present during the past few years and is often referred to by a variety of names: trademark poaching, trademark bidding, domain name poaching and PPC domain name bidding. Kellie Stevens, president of Affiliate-FairPlay.com, says it's a difficult issue to discuss because the terminology is still not clearly defined or even completely understood.
Some in the industry say it's actually misleading to call it trademark poaching or trademark bidding. Instead they refer to it as PPC domain name poaching because it's really a subset of a merchant's trademark-type words, namely their domain name. Some industry watchers say that using the phrase "trademark poaching" or "trademark bidding" has connotations of it being a legal issue under existing trademark law, but it is really a violation of the terms of services contract between the merchant and the affiliate.
Regardless of the various terminology (which is often used interchangeably), in its most conservative definition, this practice involves a keyword search on a trademarked term or the merchant's domain name that triggers a pay-per-click ad. The ads use a merchant's trademark in the copy, and through clever coding, the display URL appears to consumers to be from the merchant.
The way it works is that consumers type an address in places other than the URL bar - such as the desktop Google bar or into their favorite search engine - and are taken to the merchant's site or an affiliate site via an affiliate link, thus giving an affiliate a commission when none is deserved.
The basis that this commission is unwarranted is the idea that if a consumer types in a merchant's URL or domain address, it is clear they were seeking that merchant and the affiliate provided no added value in getting the potential buyer to that destination. Therefore, the affiliate should not be compensated.
The origin of today's trademark poaching problem dates back to 2004, when Google changed its AdWords policy to allow keyword bidding on trademarks and associated Web domains. Cunning individuals began joining affiliate programs and designing PPC ads to appear to come from a well-known merchant. When clicked on, the ad directs the consumer to the trademark owner's site through a link that inserted the affiliate ID, therefore generating a commission for any resulting purchase. Voilà! No website is required - the ad creates a straight path to easy commissions.
WHY IT'S ATTRACTIVE
Trademark poaching is attractive because of the low barrier to entry. For just the price of a PPC ad, publishers can quickly generate handsome commissions without the usual affiliate administration overhead, and reducing the steps from click to purchase increases the likelihood of a purchase.
One PPC affiliate, who asked not to be named, says there is a "pack of about 30" PPC affiliates that closely monitor the list of new merchants at every network and "crank up campaigns on them all" in order to profit from this behavior.
The anonymous PPC affiliate says "it takes less than four minutes to create a new campaign for a new merchant," and that this pack of rogue PPC affiliates "don't read the terms of service" from the merchants and they "don't care about size - they cover them all." He says it's like a competition among this "pack" and that they do this for hundreds of merchants.
"There's a trickle of others trying it from time to time as well, but the way Google and most search engines work, historical performance and clickthrough rates determine who gets the spots. They're all competing for the one spot that lands on the merchant's domain," the PPC affiliate explains.
He went on to note, "That's a ton of commissions paid out for almost nothing. If a merchant can easily do this PPC themselves, why pay an affiliate a large percent commission for doing it? It's the branded traffic the merchant has earned; giving it away to a lazy poaching affiliate is just ignorant."
Scott Hazard, who runs the website Cooperative- Affiliates.com, says ads that mask their origin in this manner confuse the marketplace and take money away from the merchant and the affiliate channel.
"It's more of a problem for big brands" with recognizable names, Hazard says, as the popularity of the name as a search term will generate the high volume of traffic needed to create sizable commissions.
However, another school of thought says that although big brand merchants are often targeted more - thus losing more money overall - it's a problem for merchants of all sizes. In fact, many smaller merchants are less aware of the issue and how to police it, making them easy marks.
While determining exactly how widespread this practice has become is difficult since it's hard to track throughout the entire industry, a PPC consultant, who asked to remain anonymous, says, that "in some smaller programs I have worked with, as a merchant consultant and/or as a PPC consultant, as much as 40 percent of their registered affiliate sales are coming from this poaching."
The only penalties for being caught poaching is getting kicked out of an affiliate program and having your commission withheld. That's a small price to pay compared with the upside of undetected revenue. (See the "Trademark Ads in Legal Limbo" sidebar on page 048" for details on other potential penalties.) Trademark poaching challenges merchants because as quickly as affiliates are kicked off, others are ready to take their places, according to Hazard.
Hazard launched the website TrademarkPoachers.com in August of 2007 to provide advice and education about the practice. While his site has increased awareness of the problem, "It doesn't seem to be happening any less," he says. Some say that they have anecdotal evidence that nearly 50 percent of pay per click is based on trademark poaching.
Chuck Hamrick, an affiliate manager for AffiliateCrew.com, started noticing trademark poaching in mid-2006. He could see that it was impacting overall revenue for some merchants because after he removed the poachers, the affiliate channel earnings went down, while organic and paid search revenue increased by larger amounts. This showed that trademark poaching "was cannibalizing our other efforts," he says.
In the last two years, Hamrick caught a number of well-known affiliates poaching. He gave them "two strikes and they were out" of the program. If they didn't take down the offending ads, he would reverse their commissions. "If it happened again, it was not by accident," he says.
TRACKING THE POACHERS
Still, merchants that do not protect their trademarks from poachers are like retailers that allow customers to walk out with the price tags still on the clothes - if you're looking the other way, someone will inevitably take advantage of you. Continued on Page 2...
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