Last week Amazon clamped down on Zlio and told the service that they could no longer promote Amazon products in the United States. Amazon informed the site of the decision with a generic email and so far Zlio has been unable to find out the reason behind it. Zlio President and CEO Jeremie Berrebi informed users this morning via an email. (Techcrunch Forums has a copy of the email.)
Zlio is an online service that lets people create their own store, and populate it with products from a number of merchants. Zlio automatically figures out which of their over 25 merchant partners have the best price. They then share affiliate revenue with their users. (See their example store.)
So why did Amazon make their decision? Kristen Nicole at Mashable suspects foul play, comparing it to Amazon's recent campaign against Alexa comparison tool Statsaholic. That could certainly be the case: Amazon's own aStore product functions very similar for merchants, except that it only promotes Amazon's products. (I used to run a competing service to aStore that I stopped developing last August in part because of Amazon's service.)
But I decided to dig a little deeper and see what justification Amazon may have had for pulling the plug on their relationship with Zlio. A quick perusal of the Amazon Associate's Operating Agreement found that Zlio appears to be breaking at least a couple of terms.
First, Amazon requires that if you display prices "together with prices for the same or similar products offered through any web site or other outlet other than the Amazon.com Site" (as in a "comparison shopping" site), you must diplay both the lowest new price and the lowest used price provided by Amazon. Amazon's ecommerce services can be finicky and doesn't always provide all the information that Amazon.com has on each product, but it usually always sends the lowest new price. It appears that Zlio was sometimes only showing the lower used product price (example).
Second, Amazon's operating agreement requires that associates display the term "In association with Amazon" (or a graphic to that effect provided by Amazon) somewhere on your site. I couldn't locate that phrase or graphic anyone on the Zlio shops. A lot of merchants dodge this requirement, but perhaps with Zlio's high profile and large number of affiliate stores they attracted the attention of Amazon. Further, Zlio uses the term "partner" when talking about their relationship with Amazon, which could also theoretically be seen as a violation of the operating agreement, which stipulates that users "may not in any manner misrepresent or embellish the relationship between us and you, or express or imply any relationship or affiliation between us and you or any other person or entity ..."
Neither of these infractions are major, and certainly aren't something that Amazon and Zlio could not have worked out -- and of course they are just speculation on my part. I have no inside knowledge of why Amazon pulled the plug on Zlio's use of the associates program. But as a way to cut Zlio out and push people toward aStore, perhaps they were sufficient as a reason to cancel their affiliation. Oddly enough, Zlio reports that their relationship with Amazon outside of the US remains strong and non-US users will still be able to sell Amazon products. To fill the void, Zlio is already expanding their merchant pool, working to add Barnes & Noble and "other large merchants" soon.
Update: Pete Cashmore has the original email Amazon sent to Zlio. It appears that the reason Amazon gave as to why they barred Zlio hinged on the way Zlio was sharing affiliate fees with their users.
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It is most definitely not a problem that couldn't have been worked out if Amazon had been willing to come to the table. What it amounts to, it seems is a bit of corporate laziness on the part of Amazon management.
It is much, much more simple for them to shut down what appears to be a direct competitor to their new darling of an affiliate program (which I use myself on my own site) than to work out a mutually beneficial arrangement.
Hopefully, Zilo doesn't just take this sitting down. I am sure that there are plenty of people who they could go to (if they choose to press the matter) considering that it was such a general email and not a take down notice of any kind.
Posted by: Steve S | May 21, 2007 1:14 PM
Anyone who builds a business on someone else's web service without a clear contractual relationship and an understanding of their partner's product roadmap and its overlap to their efforts is just gambling with their future.
At some point theres going to have to be a separation of church and state. startups are building on web services have the same relationship as an API developer to Win32 has/had to Microsoft. People are going to have to build white-label, oem-able web services with a metered payment model since it seems probable that the bigcos are likely going to devour any profitable widget business that uses their data.
Posted by: dr chadblog | May 21, 2007 1:19 PM
Maybe they can restructure how Zilo users are paid? Maybe if you choose to use Amazon, you keep all affiliate fees but have to pay a monthly fee to use the Zilo cart with Amazon?
Posted by: Jason - CleverTools.com | May 21, 2007 2:38 PM
Zlio has other merchant partners besides Amazon. But Amazon's products were about 50 percent of all Zlio products. This means that some of the Zlio stored will have to be fully rebuilt by their owners because they were selling only Amazon products. The Amazon move will push a lot of Zlio users away and this is a big test for the still baby company as well as to its users.
Posted by: Zlio user | May 23, 2007 11:01 AM