Affiliate Marketing 101

by Manatt, Phelps & Phillips, LLP
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Manatt, Phelps & Phillips, LLP

“What’s affiliate marketing? Should I care?”

The Federal Trade Commission attempted to answer these questions in a new blog post directed to consumers, explaining how the industry works and how to avoid scams.

Affiliate marketers are hired to promote the products of other companies on social media and websites as well as through email, the FTC wrote. They are paid each time a consumer clicks on the ad, signs up to try a product and/or makes a purchase. When consumers do so, their responses in all likelihood are also being tracked.

“Affiliate marketing is a good way to promote a product or service as long as the ad is truthful,” wrote Rosario Mendez of the FTC’s Division of Consumer and Business Education. “The problem is that some dishonest affiliate marketers put out ads with exaggerated claims or misleading information to get people to click.”

Because clicking on an ad puts money in the pocket of affiliate marketers, they have an incentive to “say anything,” the agency noted, and some deceptive ads operate as bait for a scam.

In a recent example, the FTC took action against an online marketing operation that touted low-cost “trial” offers for tooth whiteners ($1.03, plus shipping and handling) but then enrolled consumers in a negative-option scam that cost up to $200 per month. The operation involved 78 companies, dozens of bank accounts and at least 87 websites, the agency alleged in its Nevada federal court complaint.

The blog post cautioned consumers to “pause before clicking” online ads, and to first ask themselves: “How do I know who’s truly behind the ad? Do I know if they’re being truthful? Is someone being paid to get me to click? Who is tracking me when I click on the ad? And who is getting that information about me?”

To read the FTC’s blog post, click here.

Why it matters: The FTC’s blog post also provided an infographic to help explain how affiliate marketing works and to remind consumers that when they click on an ad, it’s likely that “someone is getting paid” and that the consumer is getting tracked. Consumers should first ask themselves: “But is the ad truthful?”

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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