Associate Programs Newsletter #48
CONTENTS:
1. Put your web on a hat
2. Are you breaking the law?
3. Are all two-tier programs multi-level marketing?
4. Where to start MLM research
5. Get the most out of email contacts
6. Coping with long URLs in email
7. Free advertising for a year: another winner
8. Phone cards zapped to your browser
9. Snippets
I've redesigned the newsletter. Hope you like it. A special treat this week is an article by MLM Attorney Gerald P. Nehra.
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1. Put your web on a hat
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I put my web site on a hat this week. Well, sort of. I bought a couple of high-quality caps with “AssociatePrograms.com” monogrammed on them.
One day, I'll wear an AssociatePrograms.com cap to a big Internet conference in New York or somewhere. Mark, John, Patrick, Declan and all the other marketing wizards will be able to spot the AssociatePrograms.com guy from half a room away.
What else can you do with a web on a hat? Buy one for every staff member?
Do you know a pretty girl you could persuade to wear your URL? Would it be too crass to have a photo of one on your site? Perhaps I can persuade my wife Joanna to wear a web hat when she does the grocery shopping.
In the meantime, I'll wear one when I go for a walk on the beach, and impress the seagulls.
You can have up to 22 characters monogrammed on to a cap, included in the price of only $25. The caps come in black, white, navy or maroon.
There's a revenue sharing program, which should be suitable for marketing sites or marketing sections, but it pays only $2.50 per sale – not very exciting – but the caps look good.
[UPDATE: The company died, but my mother-in-law still wears an AssociatePrograms.com cap.]!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!SPONSOR!!!!!!!!!!!
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2. Are you breaking the law?
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Are you running a two-tier program which insists that people have to pay to join before they benefit from second level sales?
Are you participating in a program whose main selling feature is how much money can be made from sub-associates' sales?
Then you should find fascinating the following article, by MLM Attorney Gerald Nehra. His 28 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division.
Recently, I've been swamped by emails from people telling me smugly that I'm wrong and that all two-tier programs are really multi-level marketing programs, and I jolly well ought to list their favorite MLM program.
Well, it's not quite that simple, and I still won't. I'm tired of telling people that MLM programs aren't my field. From now on I'll say multi-tier programs aren't my field.
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3. Are all two-tier programs multi-level marketing?
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By Gerald P. Nehra
The title begs two questions we must address first. What is a two-tier program? And – How does it differ from a one-tier program? And, of course, what is MLM? Let us start the definition process.
An offer to a person to compensate them in some fashion for bringing in business, WITHOUT any additional incentive to locate (find, recommend, recruit, sponsor) more business finders, is a one-tier program (at least for the purposes of this article.) I have personally had two, two-tier programs explained to me in excruciating detail. What I write next is based on that experience, and not on any universal examination of all the programs that are titled “two-tier.” When a program contains TWO sources of income, namely compensation for bringing in business, AND compensation when you locate (find, recommend, recruit, sponsor) more business finders, WHO THEN BRING IN BUSINESS, it is a “two-tier” program.
The “program” involves selling something, and paying commissions for sales.
Look at the money flow, and the REASON for the money flow:
Someone buys something. Money flows from the buyer TO the program. This is a customer sale.
The program pays a commission to the “customer finder.” Money flows AWAY from the program TO an income opportunity seeker, to reward the person for bringing business volume to the program. This money flow evidences the existence of a single-level income opportunity. (To use affiliate program words, “one tier”.) Note that there exists NO incentive for the income opportunity seeker to find more “income opportunity seekers,” only to find customers.
If, in addition to the above, the program pays a commission to an income opportunity seeker, BASED UPON the business volume of another income opportunity seeker introduced by the first income opportunity seeker, a two fold incentive exists. The income opportunity seeker has a financial incentive to get customers for the program, AND a financial incentive to find more income opportunity seekers. In this second case, the second type of money flows AWAY from the program TO an income opportunity seeker, BUT to reward the person for business volume not directly generated, but generated by the income opportunity seeker “found” by the first one. This second type of money flow evidences the existence of a “two-tier” program.
There are two other characteristics to the money flow away from the program that should be noted. It is gross income, taxable to the recipient, to the extent income exceeds allowable business deductions, and it is reportable by the payer under the 1099 rules to the extent it exceeds $600 in a year to an individual recipient.
“Is a two-tier program MLM?” – takes us to an attempt to define MLM. The Direct Selling Association defines MLM (my paraphrasing) as a form of compensation that creates the incentive for income opportunity seekers to “sell” to consumers, AND find more “sellers.” Clearly two-tier programs fit the definition. This is not LAW, and not even all DSA member companies accept this definition. There is MUCH law affecting direct sellers, but LITTLE law specifically defining MLM. Only five states and Puerto Rico attempt a definition. It follows:
“Any person, firm, corporation, or other business entity which sells, distributes, or supplies for valuable consideration, goods, or services through independent agents, contractors, or distributors, at different levels wherein participants in the marketing program may recruit other participants, and wherein commissions, cross-commissions, bonuses, refunds, discounts, dividends, or other considerations in the program are or may be paid as a result of the sale of such goods and services or the recruitment, actions, or performances of additional participants.”
Although there is an argument that the first part of the definition excludes from MLM direct fulfillment (not different level) distribution systems, the rest of the definition talks to recruiting and compensation that would include two-tier affiliate programs. The way out of the dilemma is judicial interpretation. Unfortunately there is none. The real practical answer is – it does not matter. All the laws affecting direct sellers apply to everyone, whether or not a definition is met. The summarized laws of Prohibited Activity in the first four states in an alphabetical list will show what we are up against:
ALABAMA – Prohibited Activity
any plan wherein a person for consideration acquires the opportunity to receive a pecuniary benefit, which is based primarily upon the inducement of additional persons to participate in the same plan and is not primarily contingent on the volume of goods, services or other property sold or distributed.
“Consideration” Exclusion
sales demonstration equipment and materials furnished on a nonprofit basis less than $100.
ALASKA – Prohibited Activity
a sales devise whereby a person, upon condition that he make an investment, is granted a right to recruit additional persons
“Investment” Exclusion
sales demonstration equipment and materials furnished at cost.
ARIZONA – Prohibited Activity
any plan by which a participant gives consideration for the opportunity to receive compensation derived primarily from any person's introduction of other persons into participation in the plan rather than from the sales of goods by the participant introduced into the plan.
“Consideration” Exclusion
goods or services furnished at cost.
ARKANSAS – Prohibited Activity
any scheme whereby a participant pays valuable consideration for the chance to receive compensation primarily from introducing one or more additional persons into participation in the scheme.
“Consideration” Exclusion
payments based upon sales made to persons who are not participants in the scheme and who are not purchasing in order to participate in the scheme.
No one can charge for, or require a product purchase for, entry into an income opportunity that includes the right to recruit other income opportunity seekers. This statement is based on LAWS of a vast majority of states (samples above) and is NOT dependent on any MLM definition. Bottom line, two-tier affiliate programs, while not structured in a traditional MLM way, must be so structured to comply with all the laws affecting direct sellers. Critically important is compliance with laws prohibiting chain recruiting. The legal specialists most knowledgeable in this area refer to themselves as MLM Attorneys. That is my specialty, and there are about eight others.
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Gerald P. Nehra is an MLM Specialist Private Practice Attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multi-level marketing issues. His 28 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, MI 49441, 616-755-3800
616-755-3800, 616-755-4700 FAX. His E-Mail Address is GNehra AT mlmatty.com. You are invited to visit his Web Site at https://www.mlmatty.com
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4. Where to start MLM research
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If you want to do some research on multi-level marketing, a good place to start is Gerald Nehra's web site https://www.mlmatty.com which has an FAQ including these articles:
“Business Opportunity – What do the words mean?”; “Is your MLM legal? Read this to find out”; “Is your MLM Really a Ponzi Scheme or Pyramid? Find out”; “The Legal ABC's of MLM”; “Looking Past The Paper”; “Paper-less Sign Up”; “Prohibited Activities, State by State”; and “Confidentiality of Names & Addresses”.
He also has links to other resources.
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5. Get the most out of email contacts
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John Vorwerk of 4officeautomation.com says he has written a nice application named EmailUnlimited, which lets you run multiple newsletters and send “customized email blasts” (no spamming please!). It is not as powerful as Corey Rudl's Mailloop, John says, but contains some of the most important features. You can download the software free and register it for $US79.
EmailUnlimited automatically deletes redundant email addresses, and acts as an autoresponder that lets you send personalized replies to customers. It runs on Windows NT and Windows 9x.
https://www.4officeautomation.com
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6. Coping with long URLs in email
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“When referral programs have got long URLs, why not use a redirection service?” suggests Martin Kemp.
“You could even use my service ;) Zooming.to and for people who are making money try Zooming.to/gold .
[UPDATE: Zooming.to isn't zooming anywhere these days.]Thanks, Martin, but I guess the point I'm trying to make is that if email marketing is the “killer app”, why don't companies make it EASY for their associates to promote programs using email?
For example, how's this for a brilliant URL for Excel Recovery software? ap.excelrecovery.com
That's a revenue-earning link. Try it. It works.
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7. Free advertising for a year: another winner
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The latest winners of free banner advertising for a year on the AssociatePrograms.com site are Bob and Tricia Smith, Smith Family Enterprises Inc., Internet marketing specialists.
https://www.smithfam.com
Want to go in the draw to free banner advertising? All you have to do is give me a link and tell me you've done so. It's as easy as that.
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8. Phone cards zapped to your browser
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A new program, aimed at U.S. webmasters, caught my eye this week. The rules say I have to get approval for anything I write about it, so I'll just present the info Edward Petersen sent me:
Livephonecard.com
Sell Prepaid Phone cards “instantly” from your site. We deliver the card to a browser and to an e-mail account, so it can be used instantly. Program features include:
20% – 35% based on volume of sales.
Checks sent monthly, minimum of $25.
Online reporting through Be Free.
Free advertising support for those sites with registered user base.
Email us at affiliate AT livephonecard.com for more details.
Livephonecards make excellent gifts, because you can send them instantly to any e-mail address, and everyone uses the phone!
Edward Petersen
livephonecard.com
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9. Snippets
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Anaconda look-alike
Robert Blackstone of scato.com says he has tried and recommends Ross Faulds' free Anaconda-type script. It modifies Amazon.com search results so that the links to books are hard linked (15%) instead of the usual soft links (5%).
https://www.computer-mentors.co.uk/index.html
Increase click-throughs
If your ad banners aren't getting a satisfactory click-through rate, try making your advertising more like your editorial, advises this excellent article.
revenews.com/advice/revenue/editisement.html
Do a friend a favor
Nominate a site for a USA Hotsite award. I got 355 visitors from USA Today when AssociatePrograms.com was chosen last week.
https://www.usatoday.com
Be Free interview
Joshua Reimer recently interviewed Gordon Hoffstien, President and CEO of Be Free. I don't think he revealed any secrets, but one question he answered was: “How can I increase my response from affiliate programs?”
https://www.promotionworld.com/interviews/ghoffstein.html
Words that work
Judy Vorfeld has a good article called “The Value in Using Compelling Text”. She give specific examples.
https://www.ossweb.com/article-4.html
Zooming to gold
Martin Kemp says: “When referral programs have got long URLs, why not use a redirection service? It makes it a lot easier . . . You could even use my service ;) https://zooming.to and for people who are making money try https://zooming.to/gold .” (There is a free and a fee service.)
Amazon expands again
Amazon.com is spending $645 million buying Exchange.com, Accept.com and Alexa Internet. Included are hard-to-find book titles at Bibliofind.com and hard-to-find music titles and memorabilia at MusicFile.com.
news.com/News/Item/0%2C4%2C35666%2C00.html
Useful resources
With ranking and comments by Edwin Hayward. If you're compiling a page of webmaster resources, take a look at the way Edwin has done it. He ranks each site and adds useful comments, making the page well worth visiting.
https://www.pr2.com/resources.htm
Bach gets better
Pay-per-lead network Bach Systems has improved. “We have made it easier for you to link to our offers and easier for you to earn money,” says CEO Scott Averbach. Based on sales, Bach Systems has sneaked into my Top 10.
Subscribers: Over 8,600. Classified ad: $85
verifiable by a trusted third party.
All the best
Allan Gardyne
