AuctionBytes Blog
Covering auctions, collectibles and marketplace selling.

AuctionBytes Blog The AuctionBytes Blog has been giving a voice to online merchants since its launch in 2005. Named one of the world's top 30 blogs in 2008 by "Blogging Heroes." Weigh in with your thoughts on the joys and pitfalls of selling online.
Tue Aug 10 2010 22:49:14

Indicted Affiliate Blasts eBay in Blog-Post Defense

By: Ina Steiner

Sponsored Link

eBay filed a lawsuit against three affiliates in 2008, and in June, federal prosecutors charged two of them with wire fraud in connection with "cookie-stuffing." One of the affiliates shot back, blasting eBay in a blog post last week.

First, readers may wish to pause and try to absorb how much money eBay was paying top affiliates. According to Federal indictments, eBay paid Shawn Hogan's Digital Point Solutions $10.5 million in compensation from the eBay Affiliate Program in 2006, and paid $2.8 million to Brian Dunning's company, Kessler's Flying Circus in 2006. In the first 6 months of 2007, they were the top two earners in the program.

Like other Internet companies, eBay pays affiliates to drive traffic to its site. eBay accused the three affiliates of violating its terms of service by tricking it into paying them for users that didn't click on an eBay ad and never saw the eBay website load on their computers. Federal prosecutors agreed.

After being indicted on criminal felony charges, Shawn Hogan alleged eBay had encouraged him to violate the terms of service of its Affiliate program. In his blog he wrote:

"In the summer of 2005, eBay decided it needed more traffic from me. I told eBay I couldn't drive any more traffic. They responded that I should "experiment" with what they deemed "grey area" things (this is what eBay called anything that violated their terms of service)."

He goes on to allege he was coerced into giving an eBay employee expensive gifts. Hogan said eBay told him the Affiliate Program was a facade, and that "It allowed eBay to do things they wanted to do (like spam search engines, deploy in countries where they had no actual presence, etc.), while also giving them a way to wash their hands of any wrong-doing when any of their large partners (like Google) would question them about it (like why there are so many spam sites directing people to eBay)."

The compensation eBay paid affiliates is proof of the importance of the Program to help drive not only sales, but boost metrics as well. Wall Street used eBay's number of registered users as a key metric for gauging the company's current and potential performance. Then-CEO Meg Whitman and CFO Rajiv Dutta vaunted the numbers in quarterly conference calls with analysts.

The eBay Affiliate program had a history of allowing questionable tactics, as John Battelle documented in his 2005 book, "The Search," when he wrote about a black-hat eBay affiliate story AuctionBytes broke in 2003.

AuctionBytes wrote about an affiliate named Ryle Goodrich who had allegedly created hundreds of thousands of doorway pages that diverted traffic to eBay. John Battelle wrote in his book, "The Search," that the affiliate was "siphoning off thousands of dollars in affiliate lucre for his work. Even more damning, Goodrich had the implicit approval of eBay,..." (page 162).

Louis Monier, who was director of research at eBay, is quoted in Battelle's book, saying: "Some of our affiliates are a little bit aggressive, but it's a general problem on the web: any time someone will gain from traffic, they'll try to abuse the search engines. It's a well-known arms race. It was true in 1997; it's even more true today. My only comment would be: best of luck to Google."

Digital Point's Hogan writes that he was coerced into buying his eBay contact a Plasma TV and laptop computer, and was told, "Yes, all the affiliates buy their contacts stuff like this."

Hogan and Dunning have not been given a chance yet to defend themselves from these charges (Dunning next appears in Court later this month, and Hogan, next month). But regardless of their guilt or innocence, eBay itself does not come out of this looking good - it didn't have a handle on just what these two men were doing.

If the affiliate program didn't explicitly encourage questionable practices by their participants, it appears that, at minimum, it looked the other way.

The indictments allege that Commission Junction and eBay questioned these affiliates about their practices in 2005, but let them continue in the program through June of 2007. Was it only when affiliates turned to cookie-stuffing, thereby ripping off eBay's own program, that it cried foul and filed the lawsuit against the affiliates?

Hogan's claims in his blog post might be dismissed as someone trying to divert blame (CYA) - and some stretch credulity, as in when he says eBay wanted to pay him with a secret fund - the Black Budget, "a large allotment of money that eBay was free to do what they wanted with, without it being reported on accounting sheets" - if he would "hurt Google."

But by virtue of eBay's claims against the men, the company may be acknowledging its negligence in managing its affiliates - and, perhaps, its own employees.




Comments (39) | Permalink

Readers Comments

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: Average Bowler

Tue Aug 10 23:14:22 2010

This is fascinating. And very revealing. Not only does it shine a light on eBay's past activities, it may help to explain some of the reasons that eBay is in the bad shape it's currently in.

As an unenlightened outsider, I assume that this is the type of thing that eBay would have preferred to keep secret. I'll bet that eBay didn't WANT to move forward with a lawsuit.

That said, there must be some compelling reasons that eBay felt they had no choice but to sue someone (and reveal their past activities)

I wonder if the BM is going to hit the fan... is something ELSE about to burst? Does eBay choose to reveal their past activities because there's something WORSE?

I imagine that it's like a blackmail victim deciding to publicly confess to his misdeeds in order to thwart the blackmailer... and because a confession (even forced ones) seem to play better than when the facts are exposed against your will.

I am SO over this company. I'm totally over PayPal.

Goodbye eBay, goodbye paypal... HELLO FREEDOM!

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: ebay seller

Tue Aug 10 23:39:12 2010

Isn't this what Auctiva was doing? Will they be charged next?

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: Doug
Web Site

Tue Aug 10 23:56:55 2010

"violating its terms of service by tricking it into paying them for users that didn't click on an eBay ad and never saw the eBay website load on their computers"

In what way is this a "gray area"? Why in the world would eBay want anyone to do this?

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

This user has validated their user name. by: Philip Cohen

Wed Aug 11 00:17:03 2010

So, what’s new? Anyone with an IQ higher than 25 knows that eBay’s executive management, and their mates, are a bunch of criminals: they knowingly and deliberately aid and abet, before and after the fact, wire fraud by unscrupulous sellers on unsuspecting eBay buyers. Why aren’t the conspiring criminal facilitators at eBay in the dock also? Maybe there is a chance yet …

http://forums.auctionbytes.com/vbulletin/showthread.php?t=23529>

eBay/PayPal/Donahoe: Dead Men Walking

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: gonefromebay

Wed Aug 11 00:18:49 2010

," that the affiliate  "siphoning off thousands of dollars in affiliate lucre for his work. Even more damning, Goodrich had the implicit approval of eBay,..." (page 162).

Amazing, isn't it?  How could ebay not know?  Apparently desperation set in even earlier than many of us thought.

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: Sayonara eBay

Wed Aug 11 01:11:51 2010

HOW SWEET IT IS!

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: My fees, Meg and the gang's swimming pools and ran

Wed Aug 11 01:47:24 2010

Great post, Ina and David. Can't wait to see RBH and the PR hacks come in to spin this one.

Nice to see some corporate crimes and hijinx come to light while the players are still among us (not the usual case, historically)....sure, the affiliates are slimy, too, but that doesn't excuse eBay from doing their business under the table and above the table all at the same time...

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

This user has validated their user name. by: Ed Gadfly

Wed Aug 11 02:19:38 2010

Again it is shown that YOU CAN MAKE MILLIONS OF DOLLARS ON EBAY.

Guess it's not about community values or a level playing field. Looks like it's all about raking in the money.

Get that pervert catcher, Chris Hansen from NBC Dateline to check out all these rip-offs going on.

Ah, but when you look at it, it's just a Queen trying to be a governor, a tall thin man who creates through destruction, a pudgy, bearded Fairy Godmother / Evil Stepmother who keeps the kool-aid flowing and a cast of millions, contributing dimes, dollars and dreams to enrich ''The Shareholders.''

They always say there's worse ways to make a living.  

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

This user has validated their user name. by: Philip Cohen

Wed Aug 11 02:51:43 2010

@ Ed Gadfly ,

The "shareholders" would be the original shareholders who have probably sold most of their shares by now. The shareholders who bought in after the float have never had a dividend from this criminal organization ...

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: GazLanNaThai This user has validated their user name.
Web Site

Wed Aug 11 02:59:10 2010

It's interesting from one critical standpoint that no-one else has spotted yet ...

Early - mid 2007 is when eBay traffic and page views went into free-fall and started crashing off the graph.  It's also when eBay chopped trans-Atlantic visibility on dot com of UK listings.

To me these two events have correlation with Ina's story - eBay chopped the trans-Atlantic visibility causing massive revenue losses from sales to the US out of the UK and traffic plummeted on the US site (less variety so less reason to browse).  Then they chopped their biggest two affiliates who collectively must have been generating billions of page views per year and traffic collapsed even further.  Around this time too, they also began cutting back on external advertising on and off-line, further eroding "engaged traffic" and page views.

Am I right in thinking this is also around the time that Donahoe had the reins for eBay North America?  I'm not sure on that point, but think it might be.

There's lots more correlates into this, and I have a gut feeling (without reading the full story) that these two guys are being used as unwilling patsies to cover something else.

Gaz

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: Marvin This user has validated their user name.

Wed Aug 11 04:12:07 2010

Leave poor old ebay alone. They have never over billed or double billed their customers, engaged in any illegal or unethical activity, manipulated their stock prices, padded their site hits, cheated or used anyone to fill their corporate coffers, took money for services they never provided, gave money politicians to to buy influence in Washington. ebay would never intimidate or coerce anyone into doing anything, they would never take advantage of their position to create policies and contracts to unfairly favor them.

ebay has led an exemplary life of goodness and virtue worthy of imitation and they are constantly performing miracles. They should be canonized not victimized. They are Saints.

To those who say ebay is the corrupt mafia Don (ahoe) with politicians in their back pocket so consumed with greed they are willing to turning their cappos into the feds for stealing from them, I say whoey, rubbish. Why would anyone think ebay encourages shill bidding or use others to do it's dirty work or pits its users against each other so they can deny discounts or have paypal freeze accounts? ebay engaging in any illegal, unethical, greedy, corrupt manor? Man. Why would anyone think that?

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: roflol

Wed Aug 11 04:45:48 2010

yea, what he said. ^

roflol

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

This user has validated their user name. by: Philip Cohen

Wed Aug 11 07:22:13 2010

Shill Bidding on eBay: Case Study #4

This study makes even clearer eBay’s utter desperation for revenue, and eBay’s even more blatant criminal facilitation of this criminal activity:

http://forums.auctionbytes.com/vbulletin/showthread.p
hp?t=23540

eBay/PayPal/Donahoe:
Dead Men Walking.

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: former Auctiva user

Wed Aug 11 08:14:29 2010

Yes, Auctiva was doing this. That is how they could offer their "services" for free for so long. Anyone viewing an auction made with an Auctiva template was pushing affiliate revenue back to Auctiva.

The worst part was if someone found a listing through a legit affiliate source (including the seller's own store link that refunded a portion of the Final Value Fee to the user to reward them for advertising), Auctiva's cookie-stuffing template would override the legitimate source of traffic who should have gotten credit and steal that from them for any viewer who clicked to enlarge any of the pictures in the listing.

So, short answer, yes. Auctiva was guilty of the same slimy business practices. One can only imagine how much they received in fraudulent revenue this way, as they initially tried to charge users exhorbinant monthly fees once eBay called them out and ordered them to stop.

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: AC_in_Mich This user has validated their user name.

Wed Aug 11 09:52:56 2010

Hey, Phil - I just added a comment to your Shill posting on the forums - I love the feedback her ONLY buyer gave her

''Quick response and fast payment. Perfect! THANKS!!''

Nice to know that the seller is paying the buyer!  LOL

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: Can't Look Away

Wed Aug 11 10:41:33 2010

I must admit it is actually FUN and a PLEASURE to watch eBay slowly crash and burn. It is now simply a ghost town with fake junk sellers and thugs as buyers. Gotta love how they destroyed themselves. Such fools!

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: Now it makes sense

Wed Aug 11 10:54:44 2010

@GazLanNaThai
'Early - mid 2007 is when eBay traffic and page views went into free-fall and started crashing off the graph.  It's also when eBay chopped trans-Atlantic visibility on dot com of UK listings.'

YES!!! This exactly when traffic fell off and our businesses slowed.
I think ebays lawsuit was a defensive action for fear of being exposed. They might have known this was going to be exposed and were are trying to separate themselves from the affiliates

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: Patricia This user has validated their user name.

Wed Aug 11 12:24:58 2010

Oh....this is rich...think I'll just sit back and enjoy it all.  Please pass the popcorn :-)

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: Ron

Wed Aug 11 12:32:32 2010

"But regardless of their guilt or innocence, eBay itself does not come out of this looking good - it didn't have a handle on just what these two men were doing.

If the affiliate program didn't explicitly encourage questionable practices by their participants, it appears that, at minimum, it looked the other way"

HA! They knew exactly what was going on and further more encouraged it.  To think otherwise, is simply naive.

Indicted Affiliate Blasts eBay in Blog-Post Defense   Indicted Affiliate Blasts eBay in Blog-Post Defense

by: Rich

Wed Aug 11 12:40:47 2010

I guess Ebay figures that the best defense is a good offense.  Sometimes that can be the best strategy, but I doubt it is here.  The end game to this will be more bad publicity for Ebay

Click to view more comments
1 2  [Next Page]


Login is required to post comments.
To sign in to leave a comment using your AB Verify User Name, fill in the form below. If you have not yet signed up for AB Verify, or if you'd like more information, go to the Registration Page
.

Login for AB Verify
Be sure and use your email address and password to log in.

 
Email:
Password:
 
 Forgot Your Password?
 Even though you are signed in with the AuctionBytes Blog, you will have to sign in to the EcommerceBytes blog. But you can sign in with your existing AB Verify info.