Merchant Madness

In case you haven’t heard, merchants have made news recently by pulling out of the continuity/re-bill space (free trial offers).  Basically what is happening is that credit card merchants are getting tons of complaints from the consumers who are signing up for these free trial offers (about 1-2%).  This is resulting in thousands of dissatisfied customers who are calling in to complain that their CC got charged $89 for the free $1.99 free diet pill trial they signed up for 2 weeks ago.  The merchants are getting tired of the high chargeback ratio (1-2% is considered high), and they feel that their brand name is being tarnished by doing business with such “shady” companies.

The fact of the matter is is that if the advertisers are losing their merchant accounts, they won’t be able to pay the affiliate networks for all leads generated in the last 15 days (the time of the trial period for many offers).   At the same time, affiliate networks are paying out the biggest affiliates on a weekly basis, while only getting paid every 3-4 weeks from the advertiser.  So the biggest loser here is really the affiliate networks, since they are floating massive amounts of cash, and may not get paid from the advertisers who aren’t going to be able to rebill the customers who signed up in the last couple weeks.  It’s one big mess.

Affiliates are feeling the pain, too.  Since networks are setting low caps (or pausing offers outright), publishers are losing access to offers and their campaigns are slowing to a halt.

Only time will tell what will happen in the coming weeks.

Leave a Reply