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