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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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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Every morning I listen to the radio while I’m getting ready for work. Today was kind of interesting in that there were several sound bites from the president and would be presidents about various ideas to solve the “energy crisis.” While I have chosen a specific candidate for whom I am rooting, I have to say that my candidate’s response did not impress me. In fact, none of the proposed suggestions impressed me. Each seemed to be a half assed suggestion designed to get votes that would end up costing us more money in the long run and would not present a real solution to the problem.

After the politicians got done railing about things government could do to solve the problems, there was another story that caught my attention. It seems the Rockefeller family is demanding that Exxon Mobil invest more money into research on alternate fuels sources. You see, the Rockefeller family has a $4 billion stake in Exxon Mobil and they have this crazy idea that maybe the company should do a little work to develop potential revenue streams in case the public has actually gotten the notion that dependence on a finite resource for all of their energy needs is sort of a bad idea, or in case that finite resource reaches the ultimate fruition of its finiteness. While this is obviously an instance of the Rockefellers wanting to remain rich (and who can blame them?), it is refreshing to see someone stepping up and saying “Hey, you know what, we have a few billion dollars in record breaking profits this year, let’s get ahead of the curve, stop waiting for government subsidies to support this research and let’s just knuckle down and build something.” In other words: getting America back to the business of doing business, instead of hiding in a corner bitching about foreign competition, waiting for someone to hand them a subsidy, a tax break, and a tariff to cover their ass…

By now you are sitting there thinking, “What the hell does this have to do with electronic retailing?” Well, hearing about the Rockefellers take action made me wonder: Although I don’t have $4 billion invested in a single chunk with a company I can influence, let alone $4 billion, I started wondering if there was stuff I could be doing that would make a little dent in the fuel situation. The consensus seems to be that fuel prices are being driven higher by demand. So, the solution would be to stop buying gas. Well that’s all well and good, but I already use public transportation to get to work (a luxury we have in DC), so the only reason I ever really use my car is to go shopping.

That was when it occurred to me that shopping online or over the phone is the equivalent of carpooling to buy stuff. Here’s the scenario: on my street there is never a parking space… (more…)

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I admit it…I get my news the old fashioned way—reading the newspaper. Today was no different than any other, except I was struck by a very small blurb in the business section of The Washington Post. The chairman of the Senate Commerce Committee, Daniel K. Inouye (D-HI), has introduced a bill called, the “FTC Reauthorization Act of 2008,” that would double the FTC’s current budget over the next seven years! That’s right, if the bill passes, the FTC’s budget will grow from its current $244 million to $468 million by 2015.

If the bill is successful, you can expect the following changes:

1. Expands the Commission’s authority to litigate civil actions involving the FTC act. (The FTC act establishes the FTC’s authority—what they can pursue). Currently, the majority of these cases are brought by the Department of Justice who rely on the FTC for technical expertise;

2. Expands the Commission’s authority to recover civil penalties for violations, where it is currently limited to recovering civil penalties for violations of a rule or final cease and desist order with respect to an unfair or deceptive act or practice;

3. Allows the Commission to hold entities accountable that aid or abet another in violating any law enforced by the FTC;

4. Allows State attorneys general (AGs) to bring cases and seek civil penalties; and

5. Allows the Commission to streamline the rulemaking process by a majority vote instead of the lengthy procedure set forth by the Magnuson-Moss Act.

Fortunately, as good corporate citizens these developments should not alarm you. However, now more than ever you need to understand the rules of the road.

Barbara Tulipane is ERA’s president and CEO

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I recently heard a statistic that 76 percent of consumers don’t trust advertising. Ouch, that’s gotta hurt. This means that your industry’s credibility is only slightly more viable than Hillary’s sinking odds at snagging the Democratic nomination.

Just when you think the direct response industry, or the advertising industry at large, have finally gained some street cred, we get sacked with more FTC complaints against Kevin Trudeau or revelations that Lipitor ads featuring Dr. Robert Jarvik are misleading.

There’s a reason why “Saturday Night Live” has consistently come up with relevant material to ridicule the ad industry…we practically spoon-feed it to them.

All jokes aside, enough is enough! Join ERA and Electronic Retailer at our upcoming events, where you have the power to learn about and change the course of your industry.

April 30, NYC – ERA Legal Series: Practical Knowledge for the New Technology Landscape

The seminar will shed light on the most recent FTC developments and offer practical insights and in-depth legal solutions in the area of emerging technologies, notably behavioral advertising.

April 31, NYC – Electronic Retailer LiveEdit Lab

Discover the fate of paid programming at our Executive Media Summit, followed by a day of relevant sessions geared to keep your business ahead of the game and afloat in times of economic uncertainty.

May 20, Washington, D.C. – ERA Government Affairs Fly-In

Finally, if you truly want to be involved and have your voice heard on behalf of the industry, join with your colleagues as we teach you the legislative issues facing your business. You’ll then be paired into groups with a seasoned lobbyist to meet with your elected representatives in Congress on Capitol Hill to voice your concerns.

It’s your industry; perhaps it’s time to take some ownership.

Pat Cauley, eMedia Editor, Electronic Retailer Magazine

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Senator John Kerry is up in arms. And no, it has nothing to do with Clinton, Obama, McCain or even Iraq. Recently, Kerry wrote a post for the popular Huffington Post blog in which he detailed a despicable occurrence that took place at the FCC hearing in Cambridge with Comcast concerning Net Neutrality. As if its move to block certain content a few months back wasn’t bad enough, Comcast actually stooped to paying people off the streets to pack the seats that would have otherwise been given to the hundreds of concerned citizens left literally outside in the cold.

You may be thinking to yourself, “Who cares what John Kerry or the Huffington Post say, I’m a conservative!” Well, don’t take Kerry’s word for it. ERA’s own vice president of government affairs, Bill McClellan, was there in person to witness the entire debacle. As I described in an earlier post, Net Neutrality is one of ERA’s core government affairs initiatives, because keeping the Internet free and open is vital to everyone’s continued e-commerce success. With all this talk about repurposing infomercials and content on the Internet, how would you feel if Comcast decided your site was taking up too much bandwidth and they simply stopped allowing consumers access? They wouldn’t be that shameless, would they?

I can’t stress enough the amount of money, time and energy the telecos spend on Capitol Hill lobbying to take control of the Internet, dividing it into a two-tiered system. Are you concerned but don’t know what you can do to help? I encourage you to join ERA on May 20th on Capitol Hill for our annual Government Affairs Fly-In, where we will brief you on the issues and set you up with your elected representatives so that you can voice your concerns about the vitality of your business and its bottom line’s dependence on an open Internet.

Pat Cauley, eMedia Editor, Electronic Retailer Magazine

Our exclusive interview with Senator John Kerry

Our exclusive interview with Arianna Huffington

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Pat- Thank you for your post. We at Quova enjoyed reading it and were glad to see that you appreciated the spirit behind our Valentine’s Day package. While the gift was clearly the attention-grabber, we did have a serious intent—to demonstrate the very real threat of card not present fraud, a critical security issue for online retailers. After all, online fraudsters worldwide weren’t joking around when they unlawfully carried off $3.1 billion in goods from e-commerce sites in 2006.

But there was another clue in our mailer as well. Pinpointing the physical origination point of an order on the Internet and comparing it to the bill-to and ship-to address is one of the most effective tools in combating online fraud.

Many online retailers already use some type of fraud risk scoring method. They may look at whether the buyer is a new or repeat customer, the nature of the purchase, especially a very expensive one, the type of shipping request, credit card security codes and more. But one item frequently overlooked is reviewing a customer’s location when they place an order online. By adding just this one step of comparing the customer’s billing address to his IP address location to the transaction, one Quova e-commerce customer was able to detect an additional 70 percent of his online fraud.

Think about it—nearly every business decision is affected by geography: language, currency, shipping, taxes, licenses, government regulations and more. When a customer walks into a brick-and-mortar store you can tell a number of things about them right away: age, gender, what they’re shopping for, whether they’re return customers. But when a customer visits your retail website, you know exactly none of these things…where they are, what they want, what brought them in, or how likely they are to be crooks. It’s an anonymous process. Knowing the geographic location of your web visitor can provide the same sort of data for an online transaction. So the fact that Tom isn’t actually based in your office was an indicator that something may have been amiss with the package.

Quova does this with a technology called IP Geolocation, which can tell you where your online customers are and how they connect to the Internet as soon as they visit