Amazon Ends Affiliate Program in California

I got the email earlier, "Notice of Contract Termination Due to Potential New California Law."

See San Francisco Business Times, "Amazon threatens to drop California associates" (via Instapundit):

Last night, California Democrats reached an agreement with Gov. Jerry Brown on a proposed state budget that, among other things, would force online retailers like Amazon.com and Overstock.com to collect sales tax in California.

Already, Amazon has made its objections clear, threatening to drop the thousands of "Amazon Associates" in California who make money by referring web users to Amazon.com to buy goods.

Pitting the wealthiest and most populous state in the union against the premier online retailing conglomerate, this is a battle of two amazons — Goliath vs. Goliath, if you will.

But caught in between are thousands of bloggers, marketers and publishers who make money through Amazon's affiliate program, called Amazon Associates. Basically, if a blogger links to Amazon products on a post and a reader ends up buying something through that link, then the blogger gets a percentage of the sale for making the "referral." Small retailers and marketers also use the Associates program.

All these people are at risk of being cut off from this revenue source should the California budget pass on Tuesday.

And it's a done deal.

At Sacramento Bee, "Brown signs tax bill; Amazon tells California affiliates it will drop them":

Amazon.com today said it will sever ties with some 10,000 affiliates in California to protest the Internet sales-tax law signed by Gov. Jerry Brown Wednesday.

The big online retailer has been threatening to cut those ties since February. In emails today to its California affiliates, Amazon called the bill "unconstitutional and counterproductive. " The bill is part of the budget package passed by the Legislature.

The affiliates are businesses and nonprofits that have Amazon links on their websites. When someone clicks through that link and buys something from Amazon, the affiliate gets a fee.

Under the bill, Amazon will have to collect sales tax on all sales to Californians.

Also at Los Angeles Times, "Amazon.com to start collecting sales taxes from California customers."

And from Amazon's email:

Hello,

For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers - including but not limited to those referred by California-based marketing affiliates like you - even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective. We will send a follow-up notice to you confirming the termination date if the California law is enacted. In the event that the California law does not become effective before September 30, 2011, we withdraw this notice. As of the termination date, California residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com. Please be assured that all qualifying advertising fees earned on or before the termination date will be processed and paid in full in accordance with the regular payment schedule.

Bummer.

Great job Democrats!

Added: Astute Bloggers links. Thanks!

Ann Coulter on 'Piers Morgan Tonight'

More talk about her book. Are you reading it? Her same very dry wit fills the pages. I laughed out loud a couple of times: Demonic: How the Liberal Mob Is Endangering America.

There's a Part 2 and Part 3 as well.

Amazon Hosts WikiLeaks?

Oh, great. What a way to start the morning. I sell Amazon products on my blog and I learn that Amazon hosts WikiLeaks on its servers? Sometimes there's no justice in the world.

At WSJ, "WikiLeaks Using Amazon Servers After Attack":

WikiLeaks, the website that published a quarter-million sensitive diplomatic cables on Sunday, is using Amazon.com Inc. servers in the U.S. to help deliver its information. It sounds like an odd choice, but it could make sense.

The site cablegate.wikileaks.org, which WikiLeaks is using for the diplomatic documents, is linked to servers run by Amazon Web Services in Seattle, as well as to French company Octopuce. Wikileaks.org, the site’s front page, links back to Amazon servers in the U.S. and in Ireland. Several Internet watchers, including technologist Alex Norcliffe, reported earlier on WikiLeaks’ use of Amazon services.

Amazon and WikiLeaks did not return requests for comment.

The choice of Amazon, a U.S. company, seems strange given the amount of criticism WikiLeaks has received from the U.S. government. Rep. Peter King of New York, the ranking Republican on the House Committee on Homeland Security, sent a letter to Attorney General Eric Holder Sunday saying he supported charging WikiLeaks activist Julian Assange under the Espionage Act.

But experts said it was unlikely that Amazon would face legal action for selling services to WikiLeaks. For one thing, now that the information disclosed by the site is already public, it might not be considered contraband, said Jonathan Zittrain, a professor of law and computer science at Harvard University.

“If that data happens in the moment to be in the U.S., that’s really good because we have a First Amendment,” said Eben Moglen, a law professor at Columbia Law School.

Mr. Moglen added that, although where hardware is located can make a difference legally, there wouldn’t be much point in getting Amazon to stop providing services to WikiLeaks. “For all practical purposes … if the law is unfavorable, that Web server process will go somewhere else,” he said.

Maybe it's no so bad after all: "It’s Good That Wikileaks Is Using Amazon’s Servers."

Amazon Prime Triggers Shipping Price War Among Retailers

Interesting piece at Business Week, "What's in Amazon's Box? Instant Gratification: Customers love Prime, Amazon's two-day shipping program. Now rivals such as Wal-Mart, Target, Best Buy, and J.C. Penney are copying it":

Ruth Tinsley made two momentous changes to her life in the last year. In December she had identical twin girls. A few weeks later she signed up for Amazon.com's free shipping service, Amazon Prime, which guarantees delivery of products within two days for an annual fee of $79. The combination of those two events turned the graphic designer from Birmingham, Ala., into an Amazon loyalist who now buys software, jewelry, and birthday gifts on the site. Her 2010 Amazon total heading into the holidays: 150 individual items, up from 82 in all of 2009. "Now if I see or hear about a product somewhere else, I'll always check first to see if Amazon has it," Tinsley says.

Amazon Prime may be the most ingenious and effective customer loyalty program in all of e-commerce, if not retail in general. It converts casual shoppers like Tinsley, who gorge on the gratification of having purchases reliably appear two days after they order, into Amazon addicts. Analysts describe Prime as one of the main factors driving Amazon's stock price—up 296 percent in the last two years—and the main reason Amazon's sales grew 30 percent during the recession while other retailers flailed. At the same time, Prime has proven exceedingly difficult for rivals to copy: It allows Amazon to exploit its wide selection, low prices, network of third-party merchants, and finely tuned distribution system, while also keying off that faintly irrational human need to maximize the benefits of a club you have already paid to join.

Now six years after the program's creation, rivals, both online and off, have sensed the increasing threat posed by Prime and are rushing to try to respond. Wal-Mart Stores (WMT), Best Buy (BBY), Target (TGT), and J.C. Penney (JCP) have recently unveiled free shipping promotions for the holidays, turning the fall shopping season into a race to see who can go furthest in lowering shipping costs. In August, eBay announced its first rewards program, eBay Bucks, which gives shoppers 2 percent back on items purchased on the auction site using PayPal. Last month a consortium of more than 20 retailers, including Barnes & Noble, Sports Authority, and Toys 'R' Us, banded together with their own copycat $79, two-day shipping program, ShopRunner, which applies to products across their Web sites. "As Amazon added more merchandising categories to Prime, retailers started feeling the pain," says Fiona Dias, executive vice-president at GSI Commerce (GSIC), which administers the ShopRunner service. "They have finally come to understand that Amazon is an existential threat and that Prime is the fuel of the engine."

Fall Blowout Sale — at Amazon.com

Check out the goods at Amazon.

Summer Reading

Here's some of the books I'm savoring (Geller, Thompson); rereading (9/11 Commission); just starting (Emerson, Gwynne); or finishing up (Markos Moulitsas, on whom I'll have more):