What happens when a market tries to regulate itself? First, the extremists dominate the discussion. Sometimes, the market understands and adapts.

In the case of the Code of Conduct and LinkShare's Addendum, clearly on one side a small, vocal, vigilant group of affiliates will accept nothing short of stopping the evil adware companies. On the other side, adware companies are saying everything is all right, they've made changes, and things are going better.

Both sides are right, and both are very wrong. In the middle are the affiliate networks and the merchants, trying to guide an industry with a few regulatory attempts. There has been an impact. Merchants are taking a closer look at adware companies and making sure they follow the rules.

It boils down to three issues:

• Do not interfere with affiliate links and referrals.
  
  
• Do not alter a publisher's Web site.
  
  
• Create rules governing software installation and removal.

Affiliate Networks' Perspective: Let's Move On

The sense from the affiliate networks is the problem has been dealt with. It's not solved, but at least it's recognized. The Code of Conduct is more PR than enforceable rules, but it's remarkable how positive this PR has been. Most adware companies and merchants now view the issue seriously. Most do not want to cheat affiliates out of commissions.

Since the Code of Conduct was released together with a stronger LinkShare Addendum late last year, there have been changes. Few if any adware companies now redirect affiliate links (yet inherent problems still exist). Altering a publisher's Web site is reduced to elements that pop over and under, and the practice of replacing links or banners on a physical page is not as frequent.

Software installation and removal challenges remain. There are many interpretations of the rules, but most no longer allow software to just miraculously appear on a desktop. Notification is coming along. It's still vague, but clearer.

All in all, the Code of Conduct and LinkShare's Addendum should be taken as positive initial steps. None of the networks sees this as an end, but all trust the market to evolve and regulate itself. I believe they are right.

Judging from the mood of raucous affiliates, it will never be enough. Nothing short of a complete change of the adware business model will suffice.

That's part of regulation. It's not a perfect world. The extremists cannot run the show because they do not represent everyone. Merchants will not punish adware companies, any more than they will punish smaller affiliates.

Is the adware problem over? Depends on who you believe.

The Few, Proud, and Loud: Affiliates' Perspective

All you have to do is read endless discussions posted by a few affiliates to realize how political this issue has become. For them, it will never end. It's the apocalypse, it's an outrage, and nothing short of legal sanctions protecting their territory will suffice. Sorry to say, this won't happen in our lifetimes.

Affiliates believe the issue is redirecting affiliate links. Yet in numerous interviews, I found it hard to determine the precise damage. The affiliate networks didn't view this as a huge problem. It clearly could have been, but it was identified and curtailed. The problem isn't growing, although older adware applications may still redirect, so it remains an issue. In brief:

• Affiliate redirecting is being dealt with by adware companies, but not to the satisfaction of a few zealous affiliates.
  
  
• They want adware companies to change their business model. Short of suing Gator (as a consortium of publishers did), there's little you can do to adware companies. Most don't make money from affiliate redirecting.
  
  
• Affiliates argue they have been doing things their own way for years, and adware companies should adapt to their practices.

Adware Companies: We Are Changing, Leave Us Alone

Most adware companies have adapted. They don't support affiliate redirecting. In none of my interviews with adware companies or affiliate networks was this pointed out as a significant economic problem. In fact, that's why most adware companies agreed to stop -- it wasn't making money.

Yet adware companies come in many guises. Most now follow the rules, but the damage from bundling and redirecting is still evident. Here's why:

• Adware software is not easily updated. Although many companies have adapted their latest versions, automatic updating capabilities weren't built in. People are lazy about updating software, and old versions are out there.
  
  
• Bundling tricks (software bundled with another download) are being changed, but it is hard to say what's proper download procedure. It's like opt-in e-mail -- easy to advocate, hard to enforce.
  
  
• Everyone in adware defends their "value add" for customers. Sometimes, merchants do, too, as with Ebates. The only way to judge a value add is to gauge how many users and merchants employ the adware. It seems adware is developing a value add for customers and merchants, but, like most marketing, there's a point where the novelty wears off. Only time will tell what truly adds value and what does not.

Merchants: Due Diligence and Self-Regulation

Merchants have been extremely reluctant to share their viewpoints for this series. Small wonder. They'd be chastised for any support of an adware company, although most now include basic due diligence to ensure adware follows basic good practices for downloading and does not redirect affiliate links. There's no advantage for a merchant to speak out. Most take the issues seriously and believe affiliates should be treated with respect. If they work with adware companies, they will be attacked by the vocal affiliates. It's part of doing business.

Is Either Document Enforceable?

• The Code of Conduct was written to address the problem (arguably, LinkShare's Addendum was conceived before the problem but wasn't powerful enough to have an effect). Effectively both started in late 2002. Since then, business practices have significantly changed.
  
  
• No one can change the past. Millions of adware applications have not been updated and may still commit transgressions, such as affiliate redirecting.
  
  
• The fact many adware companies bundling with downloadable applications also cannot be reversed. Most companies don't have the freedom to practice this now. But like many e-mail companies that got started with spam before going legit, in a few years it will be hard to remember who violated the rules and who didn't.

When a market regulates itself, all parties involved are rarely happy. But there has been change, albeit small, and it has affected how adware companies do business.

The future is hard to predict, but it's good to see affiliate markets regulate themselves and assume responsibility. It is one of the rare cases where a market has improved its own practices.

That said, I bid you farewell. Time to move on to performance marketing and other issues. It's been my honor and pleasure to share perspectives. Please write if you would like to keep in touch or share a story or some insight.

Remember the power of affiliate programs is in this market, small and powerful, regulating itself and adapting. We are the pioneers of performance. Although most branding folks don't get it, we do. It's about results.

Peace,

Declan

About the Author:
Declan Dunn is one of the leading experts on affiliate programs, sculpting business strategies for businesses like Priceline, Travelocity, CNET, and Network Solutions. Performance marketing is his specialty, increasing ROI through simple, proven methods of Internet business development. He is the author of "The Complete, Insiders' Guide To Affiliate Programs".