By now you’ve likely heard that Google announced that they intend to sell the search division of Performics. In addition to the proposed sale of the SEM division of Performics Google also announced that 300 employees from parent company DoubleClick will be laid off and that the other 1/2 of Performics (the Affiliate Network) will be integrated into Google.

I’m not entirely sure how Google intends to integrate the Performics Affiliate Marketing business into “existing Google operations,” but it’s my guess that there is major disappointment from many Performics clients who were sold on a “full-service,” “integrated” (i.e. search / affiliate) online marketing service that Performics will no longer be able to deliver.

Some of you will remember that I predicted right after the initial announcement of the Google / DoubleClick acquisition, that Google would likely dissolve or sell Performics.

Aside from the disappointment that is likely being registered by existing Performics clients, another potential outcome from Google’s announcement is that ValueClick (VCLK, parent company of affiliate network Commission Junction) becomes the likely suitor (acquirer) of the SEM division of Performics. In fact, according to ClickZ ValueClick has already expressed an interest in acquiring Performics.

To me it would make sense for VCLK to make this acquisition, especially because (no surprise here) I believe a full-service, integrated approach to online marketing is the most efficent approach - the full-service model is what we’ve pioneered and have been providing to clients at Pepperjam for years. In fact, aside from Performics and without the acquistion of Performics by Commission Junction, Pepperjam is the only other major full-service, integrated online marketing agency with an affiliate network option. I like how this sounds, but knowing CJ as well as I do, this is not likely to last long.

Think about it. In light of the recent fallout between Pepperjam and Commission because we launched a competing affiliate network technology, I don’t think CJ is gonna want Pepperjam to be the only real alternative (i.e. full service model with a network) to Performics. I imagine the stage would be set for some fierce competition between Commission Junction and Pepperjam if indeed ValueClick purchases Performics.

Either way, it’s my guess that Pepperjam stands to benefit significantly from the break-up of Performics since currently we remain the last man standing.

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There is no question that the launch of Pepperjam Network has created a lot of positive buzz within the affiliate marketing community. Thousands of affiliates and advertisers have contacted us and congratulated us on advancing the industry by offering an alternative affiliate network that addresses many or most of the shortcomings that have existed for years on the other major affiliate networks.

In fact, most networks have reached out to Pepperjam and want to work more closely and strategically with us, while others, such as Commission Junction, has decided to conclude that we are now competitors that pose serious potential harm to the Commission Junction business and decisive action must be taken against us.

Before I get into the facts of the recent vicious attacks calculated by Commission Junction against Pepperjam, let me start with some brief background information.

I founded Pepperjam in 1999 as an online gourmet food business. With a lot of hard work I was able to quickly realize the power and value of online marketing to grow my own business. In fact, we were so successful that the “Pepperjam” business started getting quite a bit of attention from the media, including an appearance on QVC, which led to other businesses approaching me about helping them grow their business with online marketing, including pay-per-click, search-engine optimization, and affiliate program management. In early 2000, while still in graduate school, I left the gourmet food business in favor of building an online marketing business.

Aside from finishing up a few college degrees along the way, that’s what I’ve been doing since 2000 - building Pepperjam as a full-service internet marketing agency. I remain the only investor in Pepperjam since inception. Early on and still to this day I dreamed of building a company that makes a difference. A company that sets the standard. A company that innovates. A company that inspires others to create companies.

I am proud to call myself an entrepreneur.

The focus of Pepperjam from 2000 through January 15th of this year (2008) has been on providing businesses with professional outsourced management services in the areas of search and affiliate marketing. Pepperjam has made some really great decisions and we have hired some exceptionally smart, talented people. As a result, Pepperjam has experienced solid growth and we now find our company on the radar of many companies that are much larger and better funded than we are. For example, Commission Junction.

I mention January 15, 2008 because on that day we launched Pepperjam Network, a next generation affiliate network. We launched Pepperjam Network because we felt that many of the other major affiliate networks, including Commission Junction, Linkshare, and Performics were failing to address the two most pressing issues effecting the affiliate marketing industry, namely (1) lack of affiliate transparency, and (2) poor communication tools. I will also mention that we launched Pepperjam Network with absolutely no outside funding - we built the product in-house and as part of the development process we creatively used the collective insight (i.e., do this, don’t do that) of over one hundred top advertisers and affiliates.

First, understand that Commission Junction is part of a publicly traded company called ValueClick (VCLK). As a publically traded company Commission Junction is required to follow the laws and regulations of the Securities and Exchange Commission (SEC). As such, there are numerous federal securities laws in place, including the Sherman Antitrust Act, that protect businesses from the financial and decision making power of publically traded companies.

My question to you before I get started with the facts is whether or not Commission Junction is acting fairly, breaking the law, or simply overstepping its power by requiring existing Pepperjam clients who use Pepperjam affiliate program management services on Commission Junction to immediately terminate agreements with Pepperjam or get kicked off Commission Junction?

Let me start by saying that I’m not a licensed attorney and I’m only going to share with you the facts as they happened.

From Sunday through Wednesday of last week nine members of the Pepperjam Team, including four executives, attended Affiliate Summit in Las Vegas. On Tuesday (2/26/08), we were having a great time until members of my team started receiving calls, one after another, from our clients. Our clients told us that they were being aggressively contacted by Commission Junction employees and delivered an ultimatum - either stay with Commission Junction or terminate all agency business with Pepperjam.

Not surprisingly, Pepperjam clients were confused and most were incredibly angry.

To say that Pepperjam was blindsided and surprised by what I believe to be extremely unprofessional and potentially illegal actions on the part of Commission Junction is an understatement. We were personally outraged, especially considering for the last several years we have worked wth Commission Junction very closely and considered them one of our primary strategic partners. Prior to reaching out to each and every one of our affiliate program management clients Pepperjam was not contacted by Commission Junction. We were ambushed, most likely strategically, while my executive team was at a conference on the other side of the country from where we manage our business. By the way, from what we’ve been told by clients, Commission Junction told some of them that they had to consider terminating relations with us immediately, while others were told they had seven days to decide between Pepperjam and Commission Junction. Regardless, Commission Junction delivered ultimatums to advertisers that had existing contractual relationships with Pepperjam.

Commission Junction, with all their financial and decision making power, had single handedly stifled Pepperjam’s core affiliate program management service offering. At the same time, Commission Junction placed dozens of Pepperjam clients in a position where they either had to break an exisiting contractual relationship with Pepperjam or submit to their demands. How’s this for maintaining professional customer and client relations? Pepperjam has roughly 20 dedicated full-time employees that do nothing but manage affiliate programs on Commission Junction. What are we to do with all these incredibly talented, hard working employees if our clients decide to submit to Commission Junctions demands?

While stuck in Vegas at Affiliate Summit the severity of the above fact pattern started to set-in and my executive team and I started to consider our available options. To say the least, Commission Junction successfully scared the hell out of us. With us flying back to Pennsylvania the next day, which would require a full day of travel, how would we be able to set-up meetings with all the clients Commission Junction contacted?

Fortunately, we learned that the head of Commission Junction, Kerri Pollard, and one of her executive colleagues, David Osmond, were attending Affiliate Summit. Once Pepperjam’s COO, Michael C. Jones, and myself located Kerri Pollard and David Osmond we nervously asked what was going on. The response we got was twofold: (1) Sorry guys, it’s just business, and (2) Commission Junction wants “that” business. By “that” business I imagine Kerri was presumptively referring to Pepperjam’s business in the form of affiliate marketing technology (Pepperjam Network) and affiliate program management. I think this assumption on my part is accurate because as part of Commission Junction’s cold calling of Pepperjam’s client base it was found that they were actively seeking our management services, as well as aggressively discouraging clients from leaving their network in favor of Pepperjam Network.

I don’t know about you, but hearing that “it’s just business” and “we want that business” from the head of a company with the size and strength of Commission Junction is very unsettling. Commission Junction generates hundreds of millions of dollars per year in business - Commission Junction’s publicly traded parent company, ValueClick, is worth billions of dollars. Pepperjam has achieved nowhere near the level of success as Commission Junction, let alone ValueClick. As some might say, we are David and they are Goliath.

I will also mention that I asked Kerri Pollard point blank - Has Pepperjam done anything wrong that would necessitate Commission Junction taking action against Pepperjam. Kerri’ answer was clear - the answer was NO.

Another part of this story is that there appears no question that Pepperjam has been singled out. For instance, other companies, such as Forge Corporation, work as an outsourced affiliate program management company on Commission Junction, and also maintain an affiliate network. Keep in mind also that Pepperjam has done nothing wrong. As I mentioned, when we asked Kerri Pollard and David Osman what we did wrong they simply said, “nothing, it’s just business.”

Yes, I know what you’re thinking. How can this happen? Yep, that’s the same thing I thought and with my legal background I couldn’t help thinking shortly thereafter the legal implications of Commission Junction reaching out to all of Pepperjam’s clients and potentially interfering with the existing legal contracts we had in place with them. The contracts in question were between Pepperjam and each of our clients to provide affiliate program management services. To me this appeared to be basic contract law - in Pennsylvania we call it tortious interference with contracts.

My understanding of business like most people is that competition is fair game. In this respect, I guess Commission Junction can claim that all they were doing was attempting to compete with Pepperjam Network.

However, when you are a publicly traded company there are rules and I would assume a high level of professional courtesy. Not only professional courtesy to your strategic partners, but also to existing advertisers on your network. In this situation, Commission Junction paid absolutely no respect to Pepperjam (an existing strategic partner) and complete and utter disrespect to its existing advertisers (Pepperjam’s client’s).

For every affiliate marketer, advertiser, and business owner out there I have a question:

What would you do if a publically traded company used all their power and might to interfere with your exisiting business contracts?

What does Commission Junction’s actions mean for the future direction of the affiliate marketing industry?

I will conclude by expressing clearly that this post is not an attempt by Pepperjam to rekindle our relationship with Commission Junction. Nor is this post a formal legal action against Commission Junction. Instead, the purpose of this post is that I felt I had a duty as a respected member of the affiliate marketing and broader business community to share this story and express my opinion so that other similar innovative companies might be better protected in the future. I also hope that this situation allows all of us to carefully consider whether this is the type of corporate behavior that we are going to accept within our community.

I believe that Commission Junction’s actions ultimately work to minimize innovation within the affiliate marketing industry. To all of the outsourced affiliate program management companies out there that one day dreamed about launching your own network (just like we did at Pepperjam) keep in mind that you apparently can’t do so if you work with Commission Junction or other similar companies that intend to use their power to stifle you, especially if you are innovative and successful in the process.

Thanks for your time.

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