The Dangers of Toolbars and Adware in B2B Affiliate Programs

Toolbar affiliates have become the subject of much debate within the affiliate industry, with many believing that the data in most cases points to toolbars driving largely non-incremental sales for many online retailers. And there is far less debate about the value of adware which is often installed without the knowledge of the end user.

While each retailer obviously needs to look at their attribution information and make decisions for themselves, one group of companies stands out as being especially at risk for unnecessary commission payments to toolbar, adware and even coupon affiliates: B2B retailers where very large purchases are made by individuals’ on behalf of their company, usually under longer term agreements or contracts.

Considering that companies such as Staples, Office Depot, Office Max, and Tractor Supply are high up on the Internet Retailer 500 list and drive billions of dollars online out of a shared shopping cart and affiliate program, the wasted spend could be quite significant. While we have been hearing a lot about the growth of these online B2B programs lately, a closer look under the hood of these “success stories” has uncovered some worrisome behavior that raises serious questions about incrementality.

Here are two scenarios where the involvement of a toolbar is likely an unnecessary expense for a merchant.

1) The Unknowing Victim:

Imagine the following scenario: A large company with thousands of employees relies on Bill, the operations manager, to handle its office supply needs. Bill places monthly orders with Staples through an online corporate account, totaling thousands of dollars each time. He has a corporate credit card that he uses for ordering, but he also unknowingly has a toolbar or adware program on his work or home PC that is inserting an affiliate cookie each time he visits Staples directly. As a result, every time he places a corporate order, either he or some unscrupulous party is earning a very hefty commission.

2) The Bad Fiduciary

Now let’s look at the above example in another way. One day Bill is placing an order for his company from home and suddenly sees a $700 deposit into his personal ShopAtHome or Upromise account and realizes that he can benefit greatly from all of these corporate sales without his employer ever noticing. Or maybe Bill even realized this opportunity from the outset and as a result recommended that his firm order from Staples. In either case, Bill is not being a good fiduciary for his company, but how does that affect the retailer?

Looking at these examples, one could say “Well, Bill is ordering on behalf of the firm from Staples and not a competitor because of this kicker, which means it is valuable.” However, what if there is a long term contract? Or Bill has also enrolled the firm in the Staples Rewards program (which he would have done as a regular, high-spending customer), which provides up to 5% discounts, free shipping, etc. This is already a loyalty program in itself. Because Bill’s employer sees the benefits of the Staples Rewards program, but not the personal loyalty account which is personal to Bill, it’s almost certainly the Staples Rewards program that is driving Bill’s company’s loyalty to Staples.

In fact, from a personal perspective, Bill may be agnostic about Staples as long as his company orders from any retailer who has an affiliate program (e.g. Office Depot) as he would would still get the credit in his account because the toolbar affiliate is an affiliate of both retailers. This really calls into question the incrementality of this behavior. Then consider that, in addition to rewards and loyalty programs, Staples and other large B2B retailers often have account support teams and even service contracts that lock in customers and prevent churn, further reducing the chance of any Bills switching based on their own criteria. Lastly, consider that margins on office supplies and related products are not high. By both giving a discount through a rewards or in-house loyalty program and paying an affiliate commission, these companies could very well be swinging from a profit to a loss on each of Bill’s orders. If you multiply Bill by many thousands of small and medium-sized businesses out there, you get an understanding of the possible scale of toolbar/adware affiliate commissions that may be going out the door from large B2B retailers for no good reason.

And finally, these are just the examples where Bill is aware of his behavior. With potential transaction values in the tens of thousands of dollars, these B2B merchants are extremely susceptible to being targeted by adware and cookie stuffers who have a tremendous amount to gain by intercepting these transactions in some way for their own financial benefit unbeknownst to either party.

What to Do?

Any retailer with a very large online B2B program should be actively engaged with brand and fraud detection tools such as Brandverity , Forensiq and Ipensatori as a first layer of defense. Additionally, they should be working with their in-house manager or independent agency to do a deep data dive on the types of affiliates who are associated with their B2B orders, reviewing data both from the affiliate network and in-house systems to look for certain patterns. One thing to look for us what percent of affiliate revenue is coming from clients who are under contract and then diving into which affiliates and models and are driving that overlap. Another question that a merchant such as Tractor Supply should be asking is “Why was a $25,000 generator order from a B2B client given credit to a personal Upromise account or a consumer coupon site such as Coupons.com.”  Finally, a merchant cannot expect to rely on the network to do this sort of deep dive given their inherent financial incentives.

We have always defined an affiliate program as a long tail, tracked business development channel and as a result, it makes sense that B2B affiliate programs are seeing more growth and attention. However, there are some major risks that need a closer look so we would urge companies who don’t understand the dynamics of this behavior to consider an independent audit of their program.

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