Amazon says it is advertising when it compensates New York-based websites for posting links that refer customers to Amazon.com. New York says it’s soliciting business. The distinction means all the difference in the world for sales taxes, for Amazon, and possibly even print media, television and radio.

Amazon.com sued New York State earlier this month, challenging a newly enacted law that has serious implications for online advertisements. In April, the New York legislature passed a law designed to increase sales tax revenue from Internet sales. The law is known as the “Amazon tax” because of the way it broadens the sales tax law to apply to Amazon’s Associates Program, thereby achieving the necessary legal nexus for New York to force Amazon (and other Internet retailers) to collect and remit taxes on all sales to N.Y. residents.

A little bit of history helps put this law into context. The Supreme Court has held that a state can only impose sales or use tax-collection obligations on an out-of-state retailer if the retailer has a “substantial nexus” with the state (the Quill decision). Nexus occurs from a sufficient physical presence, which can be an office or warehouse, but physical presence can also derive from soliciting a state’s consumers via sales representatives located in the state. However, it can’t be just any sales rep, according to another Supreme Court case—in-state representatives must be “significantly associated with the taxpayer’s ability to establish and maintain a market in the state,” according to Tyler Pipe v. Wash. Dept. of Rev.

Amazon doesn’t have an office, warehouse or other physical presence in New York, but it has thousands of New York-based members of its Advertising Associates program. Per the Quill decision, advertising alone is insufficient to establish a substantial nexus. So New York has changed the definition of what it means to be a sales representative to capture these in-state associates that Amazon says merely hosts its ads. Under the new law, New York has changed the presumption of what it means to be “soliciting business” in the state. (more…)

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There’s no denying that the main objective for any e-commerce sales or retail marketing executive is to maximize the total value of visitor traffic on their site, simply put— turning web browsers into buyers and clicks into cash. Search is certainly leveling the playing field as well, so how do companies stand out from the crowd? And why are some sites still failing to deliver compelling and relevant content to their customer base?

In today’s saturated marketplace, retailers can no longer rely on the traditional marketing techniques and media vehicles to manage customer interaction and drive home sales. In order to achieve greater web interaction optimization, e-commerce and retail sites must recognize the inherent value of social behavioral merchandising and effectively increase the relevance of communications by automatically promoting the most relevant products to each visitor, thereby maximizing conversion rates and average order values.

By making websites more customer-centric via these “recommendation engines,” retailers can essentially optimize customer interaction through improved content and messaging based on a customer’s specific needs and behavioral patterns.

We all know who Amazon.com is. Besides the millions of SKUs at Amazon.com, the site is easy to use and “steers” browsers in the right direction when they need help (recommendations, user reviews, etc.). The addition of recommendations from other customers can build a sense of trust and community between new and returning customers—and probably better than any 17-year old working the floor at Border’s Books.

Given the wide variety of tools available in the market, online retailers must familiarize themselves with the different points of customer contact and approaches towards reaching interaction optimization. The Customer Interaction Cycle, shown below, depicts the many different points—from initial landing page through transaction—where collective intelligence can be applied to maximize value.

Rolf Elmer is CEO of Avail Intelligence

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Behavioral advertising, the anonymous or pseudonymous tracking of online activities for purposes of providing more targeted advertising and content, promises great potential for advertisers and publishers to build more relevant and trusting experiences for their users. But if you are thinking about using social or behavioral advertising because traditional display and email are yielding deplorably low response rates - don’t cross that fine line between creeping in and creeping out. Currently, consumers are unhappy with behavioral targeting practices, and now legislatures are getting involved. The New York State Assembly has plans to impose legal restrictions on the ways in which personal data is collected and used.

In line with the proposed New York State bill, a recent consumer poll conducted by TRUSTe and TNS Global indicates consumer demand for more transparency and user control around behavioral targeting. The survey provides insight into how marketers can make behavioral targeting more welcoming from a consumer perspective. Finding the right balance between wowing customers with superior customization and simply freaking them out will preserve consumer trust and help prevent state and federal legislation from curtailing your marketing plans for 2008.
Much of the evidence collected in the TRUSTe and TNS survey points to a consumer demand for more customized online ads and for an end to irrelevant, untargeted ads most commonly observed today.
• 87 percent reveal that fewer than 25 percent of the ads they see today are of any relevance.
• 72 percent of consumers find online advertising to be intrusive and annoying when ads are irrelevant to their interests.
• 64 percent say they would prefer to see only ads from online stores and brands they know and trust.
• 55 percent would be willing to fill out an anonymous survey about products, services, and brands they purchase in order to limit the online ads they see to those indicated in the survey.

But, according to survey results, two main obstacles threaten the promise of behavioral targeting: 1) the lack of consumer education and understanding, and 2) the lack of transparency and affirmative choice. Consumers indicate a high level of apprehension when it comes to tracking their browsing history and express little familiarity with the term “behavioral targeting.”
• 57 percent of survey respondents say they are uncomfortable with advertisers using their browsing history to provide relevant ads
• Only 40 percent of respondents are familiar with the term “behavioral targeting.”

While advertising based on anonymous information should be embraced by privacy sensitive individuals, there is still significant unease with behavioral techniques. This is not surprising when consumers are familiar with privacy mishaps such as the AOL search data disclosure, which allowed researchers to piece together several pieces of anonymous information to positively identify an individual. Seventy one percent of consumers said they were uncomfortable with third parties tracking their behavior for purposes of serving ads even when it couldn’t be tied with any PII.

Behavioral Advertising Dos and Don’ts

DO
- Matter-of-factly incorporate some disclosure of tracking and targeting as part of your product or service value proposition. Provide a “what is this” button to explain how your customization works.
- Make sure your service providers, agencies, and others are following industry standards for privacy notice and disclosure. The majority of serious complaints TRUSTe encounters are privacy breaches by marketing vendors.

DON’T
- Think you can get away with not giving your customers notice and choice. See Cathryn Harris v. Blockbuster.
- Undermine your investment in building your brand for a few response points. (more…)

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Well, it’s getting to my favorite time of year! No, I’m not talking about the NHL and NBA playoffs, although they’re a bonus. I’m talking about an annual tradition where the cherry blossoms accent our nation’s capital and ERA members congregate to discuss with lawmakers important issues that affect the very vitality of our industry.

I was lucky enough to be embraced by the direct response community about 15 years ago. And, in that time, I’ve seen a lot of changes that have been mandated down to us by the very people we put into office to govern us. Most legislation I’ve applauded because it makes us stronger as an industry and solidifies our future. Some I’ve scratched my head at and wondered why they came to the conclusions they did. In the end, I determined that you and I are ultimately to blame for their poor decisions. WHAT?! YOU? ME?? How can one person or an individual be saddled with this blame? But, in reality, standing idly by and not participating in the legislative process is why.

ERA realized this fact three years ago and put together the Government Affairs Fly-In. It is an easy way to make our voices heard. I was fortunate enough to be a part of the first session. I was absolutely giddy to be a part of something so important. Upon arriving for the day’s events, we were broken up into teams and assigned a lobbyist that would serve as our guide through the halls and administrative offices of Capitol Hill. Each lobbyist caught us up to speed on the pending legislation. That year, it was net neutrality and online taxes, and how we could present our side of the issue in a uniformed and concise manner. We were also given a list of our congressional and senate members we had prearranged meetings with. Participation, so far, in the legislative process was as easy as getting on the waiting bus outside the hotel that took us to Capitol Hill.

Once on the Hill, our teams split up and headed for our perspective meetings. Standing on the front steps of the Capitol, I couldn’t help but feel dwarfed by the immenseness of what I was about to do. On the bright, sunny day, I reached the top of the stairs and took one last look down the Mall with its monuments and reflecting pools and knew this was going to be a special day. Entering the building I couldn’t help but feel that this is what our country is about. Hundreds of people swirled around me as they swept their way to their destinations at all levels of the rotunda. What struck me the most was how relatively quiet it was. I could hear every step I made on the marble floors echo through the labyrinth of hallways. It served as a comforting melodic beat as I moved to my meetings.

My first meeting was with a well-tenured congressman from Arizona. He and his staff were warm with their welcomes when we arrived. When we sat down, they listened respectfully as each one of us presented our part of the solution to pending legislation. It was an easy-going give and take of dialogue as the topics of our industry rolled on. Before I knew it, an hour had passed and our points were presented satisfactorily. Each meeting afterwards progressed in the same manner, with each party treating the other with respect and quite a bit of admiration for the task at hand. It was, to me, the democratic process at its best and as it was designed to be.

Getting on the bus to head back to the hotel, I took a last look back at the lit Capitol, shining outward into the night sky, and reflected. I realized then that we all made a difference that day because we came to voice our opinion on subjects that were important to this industry and to our livelihoods. I can remember a time when I thought I was a part of the legislative process by merely voting for my representatives. But, I now realize that checking a box (or hanging chad) is not the end of individual responsibility in the legislative process—it is only the beginning. The next step is as easy as joining hundreds of your fellow colleagues and me, on May 20th, on Capitol Hill for ERA’s GA Fly-In. I’m hoping to hear more than my own footsteps echoing through the halls, but rather the thunderous roar of all of us marching to ensure we influence those who influence us. After all, we’re all in this together!

Scott Swanson is vice president of sales for Motivational Fulfillment and Logistics Services

Have you been the GA Fly-In before? What was your experience like?

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During my senior year of college, I was part of an intensive journalism program where I had to show up Monday-Friday from 9-5 to further develop my skills before entering the scary real world. It was almost like a forced internship, if you will. My concentration within the school of journalism was print, rather than broadcast, multimedia, advertising or public relations.

It was a rather sunny day in South Carolina, as I raced across campus for the first day of my new program. Hung-over, disheveled, and now awkwardly sweaty, I made it through the classroom door with just a few seconds to spare.

“I don’t know why you’re even here,” professor Fisher said to the class. “You’ve spent four years learning about a dying industry.” Wow. Not what you want to hear while calculating your looming student loans in your head. I thought I was just going to receive the syllabus and call it a day! He went on to explain dwindling advertising revenues and circulation rates for newspapers as the reason for his dark humor.

Things have changed even more dramatically since that spring day a few years ago. Newspapers have continued to fade, and TV has begun to fade as well, as the Internet continues to gain steam as our society’s main platform for entertainment and news. The ad spend budget for the Internet is now poised to surpass TV in the UK. As with popular music trends, it’s only a matter of time before that’s the scenario in the U.S., as well.

That same South Carolina professor once read a quote from Molly Ivans that I still have trouble shaking. “I don’t so much mind newspapers dying—it’s watching them commit suicide that pisses me off.” As a magazine focused on educating multichannel marketers, we urge those in traditional media spaces not to be the next medium to meet their demise. With the research, webinars, seminars and conferences that ERA and Electronic Retailer put on throughout the year, you can be sure to remain relevant and viable in this ever-changing media landscape.

If you think a world without newspapers seems likely down the road, check out this hilarious clip from South Park that highlights a world without Internet, and what effect it has on our behavior and media consumption.

Pat Cauley is Electronic Retailer Magazine’s eMedia Editor

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Pick up the newspaper: Our country and the world are in a state of anxiety about the economy, especially in light of a potential recession. What does that mean to us as marketers? Just how does the recession affect direct response advertising? Recessions are different from other economic downturns and need to be approached differently, but there are ways to weather the storm.

History teaches us that recessions reward the aggressive advertiser and penalize the timid one. Indeed, firms that maintained or increased their advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth, both during the recession and for the following three years, than those that eliminated or decreased advertising.

By 1985, sales of companies that were aggressive recession advertisers had risen 256 percent over those that didn’t keep up their advertising. Why? One reason is that a recessionary market can provide an opportunity for businesses to build a greater share of market through aggressive advertising. Sometimes, we need to remind ourselves about the short-term benefits of advertising: It creates sales immediately; it generates added business from current customers; and it brings in new leads and prospects. In short, as one marketer pointed out, “When times are good, you should advertise. When times are bad, you must advertise.”

One trait of a true recession lies with shifts in consumer patterns. We can no longer expect even our core base of customers to behave in ways familiar to us and comfortable to them. Preparing for changes in consumer behavior will allow us to jumpstart new messaging, platforms and technologies—when this makes strategic sense—to capture the attention of both loyal and new customers. One false assumption is that it’s safe to reduce the advertising budget if the competition is reducing theirs. Research shows that companies maintaining or increasing advertising during periods of economic slow-down will boost market share. (more…)

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If you’re an events manager with a death wish, invite Jason Calacanis to deliver the keynote address at your next conference. Sure, Calacanis—a serial Internet entrepreneur who made the bulk of his fortune with the sale of his company Weblogs, Inc. to AOL—will deliver an engaging, thought-provoking and sometimes flat-out inspirational talk. But then again, he might just start a riot.

After all, this is the guy who, at SES Chicago in 2006, announced—to a group of search professionals—that “SEO is bullshit!” and compared those engaging in SEO to “snake oil salesmen.”

It didn’t go over well.

Having escaped Chicago, living to speak another day, Calacanis recently addressed a room full of affiliate marketers at the Affiliate Summit West. Apparently unruffled by the flap and furor over his SEO comments, Calacanis explained to the affiliate folks that the rest of the industry saw them as the bottom rung of the food chain, wired to make the quick buck.

There was no standing ovation.

But to be fair to Calacanis, he’s not some sort of egomaniacal misanthrope who gets a perverse pleasure out of standing on a stage and belittling the audience. (Actually, he might just take a little pleasure in it.) In fact, the point he’s trying to make is a valid and intriguing one.

First of all, Calacanis was over-generalizing for effect: he sees value in ethical SEO and understands that there are legitimate best practices to follow in designing, maintaining and promoting a site that will allow it to rank higher in search results. And he certainly doesn’t see anything wrong with the fundamental concept of affiliate marketing: engaging a group of websites to help sell product or generate leads as a sort-of extended sales force.

Calacanis has a problem with those interested in gaming the system to make a quick buck—whether it’s the black-hat SEO firm that exploits a weakness in a search engine algorithm to garner a temporary high rank for an undeserving website (until the search engine closes the loophole and the site plummets off the search results page) or the affiliate who steals content to game the search engines to generate more traffic and commissions, or the marketer who floods blogs, message boards and social networks with paid posts.

According to Calacanis, it’s all borne out of a misguided ethic that has pervaded the Internet since the mid-’90s: if one is technically capable of doing something, then it’s OK.

But he—and others—see reason for optimism. As more and more black-hat marketers exploit the various systems, these systems eventually break down, to be replaced by ones that are more resistant to gaming. Consumers are helping to drive change, too. We leave MySpace to go to Facebook and then to LinkedIn as policing technologies are developed that help eliminate spam or fraud. Sites like Angie’s List—a ratings and reviews site for home-improvement contractors—take off because they are curated to ensure the reviews’ (and reviewers’) legitimacy. In other words, because they earn our trust. Calacanis himself has developed Mahalo.com, a search engine that uses human beings to find and organize the best links for given search terms—and to filter out irrelevant or spam results.

A new ethic is evolving: trustworthiness is good for business.

Tom Dellner is executive editor of Electronic Retailer Magazine and editor of its supplement, Online Strategies

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After Omniture’s acquisition surge last year, the web analytics industry has just been made even smaller by Yahoo’s acquisition of IndexTools. What does it mean when a relatively high-end tool like IndexTools is turned into a free offering like Google had done for Urchin?

Mostly, it means that Yahoo will be able to compete head-on with Google and Microsoft as they offer measured proof that advertising on their properties is a good investment. But how does this shrinking vendor landscape play against growing customer demand?

In these rocky economic times, upper management wants to know that a dollar spent online will result in two dollars earned. The online budget is not getting cut, but it is getting scrutinized like never before. They are looking for all the tools and best practices they can lay their hands on.

As free tools get better, the pay-for-play tools do as well. I look to Omniture, Coremetrics and WebTrends to step up to the challenge and help their high-end clients with even more systems, methods and consulting services. They are incorporating multi-campaign attribution in their tools so more of their clients are learning the ropes. Soon, there will be case studies and best practices.

Until then, I turn to people like Jim Novo and his post on Marketing Attribution Models. I look to E