A little bird flew in and told us the possible cause for Beatport to suddently abandon their affiliate marketing program, while leaving many sites in the lurch with broken links and no answers.

The little bird surmised that Beatport’s affiliate program was costing them more dollars in fraudulent transactions than they were making in revenues. How does something like this happen? Let us explain.

User A sets up a blog on a hosted blog network, like Blogger.com, complete with Google Adsense links, which in time will become a secondary revenue stream in this scam. We’ll get to that later. Once the blog is set up, User A contacts LinkShare, which operates affiliate programs for hundreds of web sites, including Beatport’s now defunct program.

User A registers for the program. After the LinkShare registration is completed and User A is accepted into the affiliate network, User A then generates affiliate links to each weeks Beatport Top 10 and posts them on the Blogger blog with the Google Adsense program.

Using a stolen credit card number, User A clicks on his/her own affiliate links on the blog to purchase the Top 10 tracks from Beatport, generating affiliate revenue, which is then distribued back to User A through LinkShare. $2000 in transactions might mean about $57 in revenue to User A, funnelled back through LinkShare.

Because Beatport takes the transaction and then pays labels their share, once the transaction is disputed by the card issuer, Beatport has already paid the label and has to fight it out with the credit card company. Of course, the label is not going to return the money and it’s on Beatport to have to deal with it.

The more fraudulent transactions happen through the LinkShare program, the less inclined credit card companies are to work with Beatport for sending them an large amount of questionable purchases. As a business, Beatport can’t operate without credit cards. They are beholden to the card companies, who probably threatened to shut them off if they weren’t able to reduce the number of fraudulent transactions.

Under potential pressure from the card issuers and losing money by paying out affiliate revenue for fraudulent purposes to labels, Beatport was forced to abruptly cancel the affiliate program with no notice.

Now how does Google’s Adsense play into this? User A not only posts the affiliate links to the blog, but also a zip (compressed) file containing each week’s Top 10 tracks on Beatport for anyone to come and download. Of couse, this drives traffic to the blog and potential clicks on Google’s Adsense links, which become another revenue stream for User A.

Although Beatport might complain to Blogger about this practice, Blogger is under no obligation to take down illegal content unless served a take down notice by the copyright holder (generally the label or producer).

Since Beatport only sells the music and are not the rightful copyright owners of the tracks posted to the blog, their hands are tied. Many fledgling dance music labels that subsist on Beatport may not have access to attorneys for a variety of reasons. Blogger.com then goes unchallenged on many occasions, because they are not served with take-down notices.

Google, who owns Blogger, operates the Adsense program. In essence, as User A posts illegal content to Blogger, Google makes money from clicks on their Adense links against that illegally posted content. Nice work, if you can get it.

Now that we understand the dynamics, maybe we were a bit hard on Beatport in our original post. No one wants to see Beatport lose money or be the victim of fraud. That doesn’t benefit the industry that is now being supported through sales on Beatport. That being said, could they have been a bit more sensitive to their partners? Sure. We think they were losing money and needed to shut it down so abruptly, that they really couldn’t notify anyone in advance.

If we were too hard on you Beatport, we apologize. But, we’d at least like some acknowledgment of how much we’ve promoted the service, instead of just being but off with little explanation. A little massaging of your friends goes a long way in terms of good will.

– by Tony Z

Beatport Affiliate Temporary Cancellation Email

Beatport Affiliate Cancellation Email

The venerable Beaport, according to some the most popular DJ download store in America, continues to amaze us with their extraordinarily piss poor vendor support and customer service skills. Sure, we love the service, but they don’t seem to love us–the DJs, blogs and web sites that have helped them brand their service and become the first, succesful dance music download store on the Internet.

On October 20th, Netmix received a cryptic email from Beatport’s affiliate support department notifying us that we had been temporarily removed from their affiliate program. The email implied that we had done something wrong and our partnership is now terminated

All of the Netmix mix shows in the Podcast section have links to purchase titles through Beatport. Without prior notice, Beatport made a decision to shut down the program, without notifying us (or anyone else for that matter) in advance.

As you can see from the emails we have posted above, first we received notification of termination with no explanation. We replied to that email and received the second one, which simply confirmed everything.

If Beatport knew they were shutting down their affiliate program, didn’t they consider it would make sense to do it in phases? They should have let blogs and web sites know that they were going to terminate the service in 30-days time to give their partners (and I use that term very loosely) enough time to remove hard links to titles.

This is especially true in the case of a new DJ culture site, ILOVETHATTRACK.com, which provides DJs with the ability to upload play lists and link titles to services like Beatport for their fans to purchase and download. It must be a stunning blow to their revenue model. Maybe they have some side deal with Beatport to link up to an API or something, but after testing the site tonight, all the Beatport links are broken.

It’s got to be pretty devastating to a new service that is dependent on a partner like Beatport. Just pull the plug and lave ILoveThatTrack’s team high and dry to figure out something overnight. It’s not easy to make a wholesale change to your web database that pulled in and hosted all of those links. It will take days if not weeks and real, hard dollars to remove Beaport from their system, or switch to another service that may not have the same catalog.

This is why I’ve never been a big fan of the affiliate model. Your partner can pull the plug at any time and leave you holding the bag after you’ve invested time, resources and real dollars into building a business that depends on that ongoing relationship.

The company gets all the benefits of your partnership, especially in the form of marketing and promotion of their brand name, as well as the long term customers you’ve pushed into their system. Since you’re not taking the transaction, that customer is never really yours. Although ILoveThatTrack is a great service we hope succeeds, they’ll never be able to build a real business on the affiliate model for this very reason. You can see that dependency on affiliate partnerships as a revenue driver is a risky proposition. They’re going to have to go out and build a music service of their own to fulfill their customers expectations, if they haven’t started already.

It’s just another example of Beatport having absolutely no clue when it comes to relationship building with its partners. The perception is now that they’ve reached a certain level of success, let’s turn off the program that helped get tens of thousands (if not millions) of dollars in FREE exposure and good will through hundreds of web sites from around the world, without any prior warning.

One Beatport executive told me that there were a variety of problems with the affiliate program and it was costing the company more than it was making. Okay, we understand. You need to shut it down to ensure that you’re not spending more than you make.

But, the good will that has been squandered by just turning if off overnight is the same mistake that company after company has made with supporters, suppliers and vendors for hundreds of years. Has anyone at Beatport gone to business school? Don’t they read Seth Godin’s or Guy Kawaski’s blogs?

It’s part of the ethical code of running a business that you notify your partners well in advance that you are going to make a major change to your business model, which will affect their revenue and their content IMMEDIATELY. You must give your partners time to prepare. Beatport did not, and for that they deserve a letter grade of “F” for failure.

What’s worse is, not only did Beatport shut it down, but in our mind slapped all of its partners in the face by telling them that they’ve been removed from the program for negative reasons, without any explanation whatsoever. That’s real warm and fuzzy for ya! A great way to run a business in this day and age. Kick the people who put you where you are today.

Every time a company goes out and makes poor judgments like this one, they can’t expect to go back to the same people for support in the future. Why would anyone want to help you now? They’re probably laughing right now reading this, but I say to them, look at GM and Ford. Two of the greatest car companies in the world are on the brink of collapse, all because they refused to see the future.

Whether something is working on not, you have to ask yourself, is it in my best interest to shut the program down without any prior notification? Or, should I let everyone know what the deal is before I pull the plug? The way I work, I think letting people know is the fair and right thing to do. The way Beatport is run, it seems like a very few in that organization care about their customers or their partners. And that’s what the dance music industry never learns, which is certainly the subject of a future post: How come the dance music industry can’t get out of it’s own way?

It’s all about Beatport and no one else. That’s a lonely road to travel as your competitors chip away at your lead. Sounds like an election we just had.

– by Tony Z.