Affiliate Marketing, also called Performance Marketing, has been a great income driver for vendors large and small. It allows them to sell their products across the USA and around the world, no matter where they are based.
The “Affiliates” are actually separate businesses that display advertisements, using a special code from the vendor. The affiliate sends code that allows the reader’s browser to call and display the advertisement. The reader may then click the advertisement. The reader may be interested in seeing more information or they may wish to buy a product. The affiliate has no control over the reader because the action is taken by the reader clicking the ad in their browser. In most cases, the affiliate doesn’t even know the reader has clicked the ad and visited the vendor’s website. It is up to the vendor to convert the reader to a buyer.
Last year, New York enacted legislation that shut down tens of thousands of affiliate marketers based in that state. Their aim was to raise state income, but it damaged many small businesses instead. Now California is considering similar legislation in AB178.
In an effort to raise $55million in revenue, California legislators risk destroying more than 40,000 small businesses in California, that rely on an advertising relationship with out of state stores.
The California businesses that would be affected understand that the State needs to raise money, but they know this legislation will not have the desired effect. What will happen is that the businesses will lose money, those who rely heavily on the affected payments will likely shed staff, reduce or stop their own advertising spending, cut back on office space, cut back on other business expenses, thereby damaging other small businesses and they all will pay less state and federal taxes.
The projected gain could easily change into a loss for the state. Businesses in other states could gain much of what is lost to California.
In other words, the legislation unbalances the playing field for California businesses and sends business to other states, which is definitely not the intent of the legislators.
Any California resident who is concerned about this should urgently contact their state legislator to register their concern.