It’s been discussed for years, ever since Froogle was in beta, how Google would eventually get money out of their free product listings. Retailers have been seeing shifts in traffic for several months now, where clicks are moving away from Google Product Search and over to Google Product Listing Ads.

The exact amount of the shift will depend on the product segment and retailers in question, but the trend is undeniable and feeds into Google’s strategy to more aggressively pull in revenue from their programs. There are still likely to be many changes upcoming for for Google, including potentially new programs which are based on the product data which is sent to Google Product Search. However for now, retailers should aggressively work to expand their Product Listing Ad programs through:

• Aggressive bidding
• Campaign and ad group structure
• Negative keyword lists
• Promotion text
• More advanced techniques such as day parting which is now available

After all, if Google is aggressively pushing the program, that can be a powerful current to ride.

SOPA is now being oppossed by industry leaders Google, Facebook, Amazon, and Twitter. Essentially SOPA would allow the federal government to block sites from a U.S. audience which have been shown to be pirating content (estimated to cost $775B in lost revenue annually). There are many problems with this measure as Inc. points out, including a heavy burden on small business, questions for companies with user supplied content, and problems with existing security protocol. Additionally, having such sweeping powers to block sites creates all of kinds of questions about who is doing the blocking and how sites are properly judged.

The good news is that is looks like the issue has gotten enough attention, this measure will not pass in it’s current form. However, it brings to light an important point about why companies like Yahoo, Google, Amazon, and others have found common ground in groups like NetCoalition. The internet is new enough, that the public and government do not have a firm grasp on technical and structural issues to form rules which will bring more positive benefit than negative. It is the responsibility of those engaged in online business to be aware and take part in the formation of rules and regulations which help the public, but do not infringe on the openness which has allowed online business to expand at an exponential rate.

All of Amazon’s work with individual states suggest that by 2014, Amazon expects to have the internet sales tax issue worked out. As Internet Retailer reported, Amazon has cut a deal with another state, this time being Indiana to solve the tax issue. Their provision pledges that Amazon will voluntarily collect sales by January 1, 2014 for all Indiana consumers on Amazon. Some people believe Amazon is anti-tax, but that’s not the case. As Jeff Bezos has stated, Amazon is just pressing for a sensible tax system, and it’s looking more and more likely a system will be in place within 1-2 years, with a bill being passed either this year or next.

What makes the 2012 push for 1099 forms interesting is a rumor written about by Jason Calacanis that Amazon may open retail stores. That would be a huge change, and if it were to happen, it would make Amazon instantly tax liable in any state which a store is opened in. Adding more credibility to the rumor, the physical store roll out would also make sense because it’s inline with Amazon’s always aggressive strategy, fits with their push to grab offline sales such as Amazon’s Q4 offer to credit consumers to buy on Amazon, would stick it to Walmart (I wouldn’t underestimate this one), and fits with their same day delivery experiments where a consumer could have an item delivered to them same day and thus create a store with very little overhead expenses due to the light inventory.

I don’t usually devote space to speculation, but this rumor has a certain ring to it which may be worth listening to.

Shopzilla has already gone back to standard rates, so this should be a prime location for pushing budget to. On the other side of the coin, some engines are not rolling back rates until January 15th, so throttles should be available if needed.

End of Holiday CPC Rate Card

• Shopzilla December 25
• Gifts.com December 31
• NexTag December 31
• Shopping.com December 31
• PriceGrabber January 15
• Pronto.com January 15

Moving to California, the passing of state sales tax laws there is causing Amazon to give the axe to 10,000 affiliates to avoid paying the sales tax. As more of these bills are passed, aside from the tax issues, some questions emerge around the affiliates. If this saga stretches out, the competitive landscape is thinning out so that states with strong affiliates are now gaining a big advantage. Additionally, questions have to emerge at some point if Amazon will feel the effects of this as their marketing network is changing. It’s not likely this will affect Amazon’s top line revenue based on their extensive and aggressive marketing operations, but at some point it should encourage shifts in strategy where gaps are opening up in driving sales.

Texas

First, the defining characteristic of the sales tax argument is whether a retailer has a physical presence in a state, which would then qualify for the collection of taxes. States have progressively pushed to extend how this reach can be thought of,  thereby creating a nexus. In the state of Texas, this has recently brought about by legislators looking to expand who is part of this nexus. First Amazon was pulled into the fray because of a large distribution facility they have in the state. The facility is owned by an Amazon subsidiary, not directly by Amazon, so Amazon’s argument is that sales taxes are not owed. However, the bill being pushed would extend a nexus to related companies, in the same manner affiliate marketers have been targeted before.

As a temporary reprieve, the Texas governor vetoed the bill because the scope could have been extended to a company using just a server in Texas, thus being enough to establish a nexus. Fortunately the governor had enough incite to see the impact on technology companies in the state, so the bill has been vetoed. Right now it’s a safe assumption a modified version of the bill will be passed however, the Amazon fulfillment center will not have a future, Amazon affiliates will get the blocked out in the state, and technology companies will be safe to some extent while online marketers will feel the brunt.

South Carolina

Speaking of fulfillment centers. Amazon is coming to South Carolina with $125M to invest in a new fulfillment center creating 1200 new jobs. Of course being caught in the cross hairs of the nexus argument, Amazon has made sure to have the sign-off of the state government, which has extended a provision which will give Amazon tax breaks on their property as well as a 5 year exemption on sales taxes based on having a physical location in the state. The interesting aspect of this, beyond South Carolina really trying to get some economic activity going in the state, is that this signifies Amazon believes the subsidiary argument is no longer one which states will accept, and they are being very strategic by placing the fulfillment center in state which has a minimal amount of instate purchases, which would then be vulnerable to taxes in 5 years. There is also a chance this indicates Amazon believes the tax argument may be settled in the next 5 years, but that’s a guess at best.

Tennessee, Arkansas, Connecticut, and California

For quick notes on other states, Tennessee is targeted for a new fulfillment center from Amazon as well . Tennessee was pushing a sales tax bill, but has deferred based on the potential Amazon investment in the state. In Arkansas and Connecticut, Amazon has cut off their affiliates because of recently passed bills which force the collection of taxes based on a nexus created by these marketers. California affiliates are likely next in line, as California has recently passed a bill of their own to impose a sales tax collection.

The good thing about California’s bill, is they put together some neat facts in presenting and passing the bill. This includes facts like California estimates it could have collected $795M in taxes in 2010 from online sales, $83M could have come from Amazon alone, California residents spend 1% of their personal income on online purchases, and the top 500 online retailers own 94% of all online sales. Interesting tidbits, at least proving research can be well conducted.

Overall, the wave is building, but the various different efforts here resemble the United States in the early days of the union under the Articles of Confederation. Then states did business separately, printing their own money, charging tariffs on interstate trade, and generally proving that states (or perhaps even countries) when acting separately on their own, are not truly acting in their own best interests because acting in unison can be produce much more profit for everyone.

Speaking a few days ago at an Amazon shareholder meeting in Seattle, Jeff Bezos (CEO, Amazon) said, “The right solution to sales tax in my view, and certainly this is Amazon’s position and its been consistent and we’ve had this position for 10 years, is that the right place to solve this is federal legislation…There is an initiative called the simplified sales tax initiative. 22 states have already signed on. That legislation needs to get passed…Keep in mind, in more than half of the geographies where we do business in certain states as well as Europe and Asia, altogether, more than half of our business is in jurisdictions where we already collect sales tax or its equivalent, like the value-added tax.”

Essentially having a unified tax structure creates many benefits. The most immediate impact is that there is a level playing field not only for physical stores, but also for online marketers who are being hurt based on the state they reside in. Also, it creates a simplified structure, where if instead individual states continue to define their structure, a consumer could possibly be asked to pay sales tax in several states, based on an affiliate in one state leading to a sale, a fulfillment center in another state sending the item, and then the retailer having it’s main operation in another state. Under this scenario, 3 separate states could request sales tax be paid, leading to a cluster of overlapping interests and laws. The call for federal, and hopefully  international agreement, should continue to grow and hopefully bring some clarity that will help the expansion of business, rather than hinder through confusion and disagreement.