Overstock and LinkShare Part Ways: Insights into the Split

There are merchant programs that have been with certain affiliate networks for so long you think of them almost as growing old together. Today one of those relationships ended. After seven years Overstock.com and LinkShare have split.

Not since Barnes and Noble left BeFree in 2007 has there been such general reaction of surprise from the affiliate industry. Some affiliates in forums over on ABestWeb even made the comparison that Overstock and LinkShare went together like peanut butter and jelly. So after seven years what happened?

According to the press release (shortly after the appearance of this article LinkShare took down the copy of the announcement from its blog, due to that the link now goes to the Google cache of the page so we can show the release in its original format) by LinkShare the network was resigning the engagement with Overstock due to “mutual differences” that “could not be overcome” despite a long period of negotiations. The release itself doesn’t offer much else in the way of insight into why the relationship ended.

To shed some light on the situation I talked to Mark Kirschner, Chief Marketing Officer at LinkShare and Geoff Atkinson, Senior Vice President of Marketing at Overstock.

Laying Rumors to Rest

As with any breakup there are bound to be rumors in the community. Let’s lay those to rest. The split between LinkShare and Overstock was not due to:

1. New York Amazon Tax Concerns: As Kirschner pointed out the New York Department of Taxation and Finance clarified that “…the location of the affiliate network service provider makes no difference in determining whether the seller is presumed to be a vendor under Tax Law section 1101(b)(8)(vi).”
2. Pressure from OneCause Flap: While LinkShare sees OneCause as a completely separate entity to itself the fact that LinkShare’s parent company Rakuten owns this particular affiliate business has put a lot of pressure on LinkShare in affiliate forums. This again was not a point of contention.
3. Diversification of Overstock’s Online Initiatives: As Overstock has grown, $255 million in revenue during Q4 of 2008, it has also diversified from traditional retail moving into such wide categories as automobile sales, real estate, and auctions. Each of these is diverse and arguably could be seen by a network as worthy of separate service fees. Atkinson stated that although such growth posed a variety of challenges it alone was not something that couldn’t have been overcome.

Reasons for the Split

According to Kirschner, LinkShare decided to move forward with the announcement when it became obvious to them that the differences between the two sides could not be satisfactorily bridged. He also said that the language of the press release, including the term “resigns”, was pretty common in traditional agency-client business and that LinkShare had decided it was time move on.

When asked how such a huge merchant leaving will impact LinkShare and its publishers, Kirschner responded that LinkShare is healthy and there is a large array of retailers, including many Inc 500 companies, in the network ready and willing to fill any gap.

While LinkShare’s press release states it was “clear to all involved” that the differences were insurmountable, the tone of the release reads like a preemptive move on LinkShare’s part. It certainly seems that way since no coordinated announcement occurred between the two companies. In fact Atkinson confided that the move caught Overstock by surprise. “We are just as shocked as the rest of the industry at the way the announcement was delivered,” he said.

On Overstock’s part, Atkinson says that Overstock was “getting the lay of the land” when it came to network options but implied that the process was simply a matter of due diligence.

Moving Forward

One of the big questions is how the transition will be handled. Both parties pledged to make the transition as smooth as possible for involved publishers. According to Atkinson Overstock is committed to insuring that its affiliate partners receive prompt and accurate payments during this transition. He says Overstock plans to release more details about exactly what form that transition will take early next week. Overstock affiliates who have questions or concerns are encouraged to email: affiliategroup@overstock.com

Of course the bigger question is what Overstock will now do with its affiliate program. Since Atkinson was quick to assure that Overstock was committed to its publishers, there seem to be only two options:

1. Move to a New Affiliate Network: I once said that Zappos could move to a network as small as ShareASale and it wouldn’t matter because affiliates would follow the brand. The same goes for Overstock: where ever they move affiliates will most likely follow. The main option seems to be Commission Junction.

What about Google you ask? Well I did take the time to contact Google and Commission Junction for this story. In almost a comic situation, as I was gathering information for this story I was contacted by a Google representative wanting to know if there was any indication where Overstock might move. Commission Junction had no comment.

2. Bring the Program In-House: There are plenty of cases of merchants having a successful affiliate program managed in-house; Amazon is the most successful example of this. Despite their initial mishandling of the New York Amazon Tax law issue, Overstock has maintained a large array of excellent resources for its publishers. They even have a yearly conference of their own for top affiliates. It wouldn’t take much organization to bring the tracking services a network provides internally.

Traditionally the transition phase of a program lasts about thirty days. Hopefully both parties will keep their promises to keep that process smooth for the sake of the publishers involved. Here’s to the split going off without a messy divorce.

This is the type of story that is dynamic and evolving. As more events unfold and news is announced we will keep updating here.