Education efforts and recent settlements may signal new interest in a shadowy world

What Lies Beneath

For most consumers who use the internet, online ads are a fact of life. On many sites, advertising is nearly ubiquitous, squeezed into any piece of screen real estate that might grab the attention of a website visitor.

But the simple fact of online advertising disguises a complex reality. It would be hard to blame a consumer for thinking that product-pushing advertisements are created (or at the very least paid for) by the company producing the product. Underneath countless online ads is a complicated web of relationships that can lead to risks for consumers.

Partners In ... ?

Product manufacturers team up with affiliate networks, which act as middlemen between manufacturers and teams of marketers. It’s an ideal structure for the way the web works, because it subjects the marketers to extreme competition: The marketers get paid when you click on an ad, and then earn more if you eventually buy the product.

Nonetheless, this competitive atmosphere can engender negative results. Affiliate marketers, who are by definition remote from the manufacturer, may make dishonest or misleading statements just to garner more clicks, which is the real currency of their work. Additionally, the marketers track individual customers as they move through the web, building up a profile that allows them to create ever-more-targeted ads. While there may be some benefit to this practice – consumers get to see ads that reflect their actual tastes – privacy concerns are raised as well.

The Takeaway

The Federal Trade Commission (FTC) recently released a blog post and infographic covering the practices and potential dangers of affiliate marketing. The post describes a simple low-cost trial scam that sucked consumers into massive monthly payments when they were sold at one low upfront cost for the product.

In the post, the Commission referenced its recently announced pursuit of a number of defendants in just such a case. The FTC has also tackled affiliate marketing in recent settlements involving alleged false claims by a diet-pill operation and a tech support service.

The Commission’s willingness and interest in informing consumers about the inner workings of affiliate marketing may signal increased scrutiny ahead for marketers and networks alike.