There has been a growing trend of states passing legislation redefining what constitutes a “local business presence,” widening the definition in order to grab a slice of online sales. States usually require that businesses with a physical presence within their borders collect sales tax from buyers—unless that state does not have a sales tax, in the case of New Hampshire. Out-of-state businesses are not obligated to unless they have a physical presence in the state in question. What the states have been doing is defining members of affiliate programs as a physical presence, so if a Mainer puts Amazon affiliate links on his or her blog, Amazon must collect sales tax for any sales they make to Maine residents. Understandably, this is something online retailers prefer to avoid, as it complicates accounting.

Below is the message sent to members of the program:

Greetings from the Amazon Associates Program.

We’re writing from the Amazon Associates Program to notify you that your Associates account will be closed and your Amazon Services LLC Associates Program Operating Agreement will be terminated effective October 6, 2013. This is a direct result of the unconstitutional Maine state tax collection legislation passed by the state legislature and signed by Governor LePage on June 5, 2013, with an effective date of October 9, 2013. As a result, we will no longer pay any advertising fees for customers referred to an Amazon Site after October 6, nor will we accept new applications for the Associates Program from Maine residents.

Please be assured that all qualifying advertising fees earned prior to October 7, 2013, will be processed and paid in full in accordance with your regular advertising fee schedule. Based on your account closure date of October 6, 2013, any final payments will be paid by December 31, 2013.

While we oppose this unconstitutional state legislation, we strongly support the federal Marketplace Fairness Act now pending before Congress. Congressional legislation is the only way to create a simplified, constitutional framework to resolve interstate sales tax issues and it would allow us to re-open our Associates program to Maine residents.

We thank you for being part of the Amazon Associates Program, and look forward to re-opening our program when Congress passes the Marketplace Fairness Act.

Sincerely,
The Amazon Associates Team

If you have ads on your site from the beginning, your readers aren’t going to complain when you add them in. (Though my advice to the whiners would be to read the article in their RSS aggregator.)

Unfortunately, when you’re starting out, there aren’t a lot of options for ads. You have the ubiquitous AdSense, then you have affiliate programs, and a sprinkling of smaller ad networks.

My advice: Use AdSense in the beginning, and see how well it works with your site. Use some affiliate programs lightly as well (for products you recommend, not just because it’s an affiliate program). Eventually, when your site gets to a reasonable level, transition from AdSense to direct-selling ads (e.g. 125×125 ads).

There are two types of personalities, when it comes to buying things. There are impulse buyers, and those who debate whether or not they should purchase something before they do (I fall into the latter group). Affiliate programs are designed with impulse buyers in mind. The goal is to turn a user on one website into a customer on another.

Consider scenario #1: A user on Example.com is reading through a blog’s archives, and finds a review of a book on PHP. After reading the review, she follows the affiliate link to Amazon, where she noted that it’s only $20, instead of the $40 it would cost at the local Barnes and Noble. An impulse buyer would just add the book to the virtual shopping cart, and surf off somewhere else. But this user just writes down the title of the book, along with the price. She doesn’t actually buy the book until three days have passed, and the 24-hour cookie from Amazon has expired, costing Example.com the commission on the book. The moral of this story? Don’t expect people to buy the product right away.

Scenario #2: An amateur photographer is trying to find the lowest price for a digital camera. He types the make and model into Google, and is greeted with the first ten results. He checks the top three results, and discovers that the top result has the lowest price. He buys is directly from there. How did that online retailer get to be the top result on Google? All the suckers who linked to them, hoping to make a few dollars off their affiliate deal, helped them to the top. For a real-life example, try Google-ing a few book titles. How many times does Amazon come-up?

Affiliate programs can work, but they often don’t. They only really work if the referred user buys the product fairly quick, which not everyone does. Whether you’ll have decent results depends largely on your user base, and the nature of the product. If you’re referring people to a service like Text-Link-Ads, then you may see better results than if you’re trying to persuade people to buy an expensive product like a computer or camcorder. Expense is a big factor in whether someone will complete the action required for your referral.