Fast-growing social media startup Pinterest is making money already, it was revealed this week, albeit in a somewhat sneaky way. Pinterest uses a third-party service called Skimlinks that crawls through user-submitted links and checks whether a link points to a merchant (ex. Amazon). Then Skimlinks checks if Amazon or whoever offers an affiliate referral program through which the merchant kicks back a percentage to the referrer if the customer makes a purchase. If there’s a referral program, Skimlinks will change the link so Pinterest gets credit for the referral.
Seems harmless enough—but one blogger found the practice smarmy:
One specific, problematic issue is that when individual online stores pin their own content, it is unlikely they would insert an affiliate code. But if the store has an affiliate program, it is highly likely that those links now will have an affiliate code in them that gives Pinterest a percentage of any sales. Not disclosing this modification is putting individual stores at a disadvantage when they and their customers are putting in the work of adding pins.
Actually, Skimlinks founder Alicia Navarro said, merchants are fine paying for affiliate links through Pinterest—because the site sends tons of traffic and it needs revenue to survive. “The news really was a non-issue, but I cannot complain too much,” she told Betabeat. “In the end, it was great that people found out about what we do, and that it can help other similar companies.”
She answered this and other questions from Betabeat by email.
What about the criticism that Skimlinks dilutes affiliate programs, by making ecommerce sites pay extra for links they were getting for free? (As in, links were sending paying users to Amazon from Pinterest before Pinterest started using Skimlinks, but now Amazon has to pay for it.)
Using this argument, should Google not charge e-commerce sites to be present on AdSense? Pinterest has been using Skimlinks from the beginning, it is the same as any other web site that uses affiliate marketing. They have just as much right to be rewarded for driving traffic to retailers as any other website using affiliate marketing. And merchants are not unhappy: many merchants have said that Pinterest is now the biggest referrer of traffic to their site, and if Pinterest didn’t exist, they wouldn’t have this traffic, and it is revenue that helped Pinterest get to where they are. Another way of putting this: retailers have never had this traffic for free, Pinterest has always used this form of monetization, and it is an incredibly valuable service that merchants should be delighted to pay for.
Why do you think are people upset about this? The original blog post that touched all this off described it as “weird” that there’s no disclosure.
I think the only reason people are upset about this is that despite affiliate marketing being incredibly popular and ubiquitous as a form of monetization, it isn’t as well-known as banner advertising and text ads like AdSense. Finding out that websites can get paid a commission for referring sales to a retailer can feel a bit ‘weird’ when you hear about it for the first time, but it has been around online for over a decade, and it powers a huge number of popular websites around the world.
Disclosure is very much encouraged, but guidelines around this are particularly aimed towards websites that actively endorse products for financial gain, ie. a price comparison site recommending a particular credit card company because it pays them the most. Pinterest has stated clearly in their terms of service that they can alter links posted by users, and that is more than most other publishers do. Sure, they could do more, but so could almost every website. It certainly did not warrant the outpouring of shock. I believe it is just because Pinterest is so big now that people were looking for something negative to say about them, and this was the first minor blip in their otherwise stellar ascent.
Do most companies that use Skimlinks disclose it somewhere?
They are certainly encouraged to do so, we have it in our Terms of Service. But it is up to the publisher how they choose to disclose, and in most cases, it is done discreetly. I always turn the tables back to the interviewer: do you think your site discloses every form of monetization it uses as publicly as you expect Pinterest to do?
What about the FTC regulations that say disclosure is necessary when there is a relationship between an advertiser and a blogger? Does Skimlinks fall under this rule?
The FTC says that when the content creator is being compensated for endorsing a product, adn this is influencing the content creation process, disclosure is required. By using Skimlinks, the publishers is separated from the monetization process, and can write freely without the process being tainted by commercial pressures. In Pinterest’s case, the distance is even further: Pinterest is the platform, and the users are the content creators: in this case the content creators are not endorsing a product nor are they receiving commercial benefit.