The problem with online miles malls


I do a decent amount of shopping online. Not a ton, but a decent amount. And, if I were truly dedicated to maximizing every single points and miles earning opportunity I’d do a bunch of research, figure out which online shopping mall give the best value for my spend and then funnel all my shopping through the appropriate site(s). The reality of is that I simply do not bother. Why not? Because the online malls simply aren’t worth it to me.

Yes, I’m giving up some theoretical number of points. But I like that I don’t have to jump through hoops. And I like that I don’t have to keep track of order status emails and following up with the companies to make sure that I’m actually getting the points I’m due. It is this last bit, actually that inspired my post on the topic. It turns out that these online malls are more like shell games than anything resembling respectable operations, and a recent experience by a few frequent fliers is bearing this out in excruciating detail.

Let us first take a look at how the transaction appears to the consumer:

image

Seems pretty simple, right? But there is actually a lot more going on in the background.

For starters, there are the affiliate marketing programs that come into play. These are the folks who arrange to manage the data traffic between the merchants and the affiliate marketers. Basically the merchants do not want to manage hundreds of thousands of different partners so they pay a tiny slice of the transaction to the affiliate marketing folks for handling those relationships, including paying out the commission when it is due. 

Next up are the affiliate managers. In a few cases this is the loyalty program itself. More often, however, there is a third party involved. For reasons similar to why the merchants don’t want to manage all the folks doing the selling, the loyalty programs do not want to manage the different merchants or even affiliate marketing programs they will be dealing with. So they farm that bit out to someone who takes care of the details. In exchange for a small slice of the action, of course.

And then there are the folks managing the mall technology itself. There are a few major players in this market. SkyMall, Points.com and Cartera are the biggest names; there are a few other smaller players, too. These companies run the websites that are branded with the loyalty program names and logos, ensuring that the systems are running smoothly.

Generally speaking the loyalty programs will strike a deal with a mall operator to run the site for them. That operator may partner with an affiliate management company or they may run that functionality in-house. That group then works with the affiliate marketing company to handle the financial and legal arrangements that allow the malls to operate in compliance with all the affiliate marketing policies. When the time comes to deliver points to the consumer the mall operator will pay the loyalty program the necessary funds to cover the bulk volume of points that need to be delivered to consumers.

So it looks a bit more like this:

image

It is pretty easy to see how there are so many places where things can go wrong. And things do go wrong with these programs all the time. More often than not it is a few customers who do not get a bonus or something like that. But every now and then a more significant issue comes to light.

A couple weeks ago the American Airlines mall, operated by Cartera Commerce, had an offer posted for 83,000 AAdvantage miles for making a $5 purchase. Never mind that the T&C for that partner clearly excluded the object being advertised from earning any points; the offer was there and a number of people tried to make a go of it. Most anyone looking at that offer would immediately recognize that it was a mistake to have that number listed that way, but many bought anyways, hoping to win big.

The orders shipped, but credit will not be forthcoming. American points the finger at Cartera, saying that fulfillment is their responsibility. Cartera hides behind their T&C, saying that they owe nothing to anyone most likely because, among other things, they won’t actually earn a commission on the sales. And the merchant, Verizon Wireless, ships all the orders anyways, collecting the cash from the consumers. A bit of a mess, but not nearly as crazy as some can be.

A few months ago there was an offer available to earn several thousand miles in either the Hawaiian or US Airways programs for signing up with a web hosting company. The circumstances were somewhat similar to the AA deal in that the number of points promised was wholly out of line with the price of the transaction that would net those points. But the deal was also online for an extended period of time, not just a couple hours. So maybe it wasn’t so crazy. Just like with the AA deal a bunch of folks got in on it, buying the product in hopes of winning big. And I have it on reasonably solid authority that the outstanding mileage liability number has quite a few zeros on it. But no one is willing to actually pay out the miles supposedly earnt.

So who is on the hook for delivering the miles?

Once again, the airlines are pointing the finger at the mall operator. In the case of Hawaiian the operator is FreeCause. In the case of US Airways the operator is SkyMall but they contract out the affiliate management to FreeCause as well. The merchant claims they have no liability because they only pay out cash commissions, not points, and they only pay those on specific types of transactions made under certain terms. I can see the current rules for them as a merchant and this type of transaction would absolutely not qualify, but I have no idea when those rules were last changed. Still, at best the only thing that the merchant can be compelled to pay is the commission to the company that drove the sale.

Sitting smack in the middle of the crosshairs is FreeCause. They are the folks that were responsible for managing the affiliate relationship and understanding the obligations they have for generating the sales and what the commission would be. They also set the bonus numbers based on their expected revenue models. And now they’re the ones claiming "whoopsie" because they messed up. 

Of course, stuck in the middle are the consumers. The folks that spent their money, based on marketing offers made under the banner of the loyalty programs, are out the cash and also out the points. And no one is willing to take their calls. Hardly seems fair, right?

This is simply another case of over-promising and under-delivering by the loyalty programs, much like how the airlines love to market regional flights as their own, right up until things go bad, at which point the regional carrier is on the hook. Sure, they can turn around and blame someone else. And legally they’re probably in the right to do so. But that doesn’t excuse the failure to deliver. Especially not when they are using their brand name to generate the sales..

Shame on the airlines for not delivering. Yeah, it will cost them some cash, but they put their name out there and vouched for the legitimacy of these portals. They have to stand up and take the hit when the operations don’t go to plan.

Outsourcing the operations is not carte blanche to outsource responsibility, too. And I just don’t have the energy to pick this fight.

Some additional commentary on the topic from Gary can be found here:

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, and LinkedIn.

17 Comments

  1. FatWallet and its ilk are probably a better time investment. You just put a bookmarklet on your bookmark bar and just push it while on a merchant’s site before you make a purchase. It will tell you the percent you get back and you push ok or something. Some number of weeks (generally after the return period) your money gets deposited in your fatwallet account.

    Dave

  2. Actually, when things go south it really isn’t the consumer stuck in the middle. Pick the merchant, affiliate, airline, or all 3! Shopping portals work well until the consumer tries to game the system, whether that be use of a coupon that invalidates the referral or the consumer seeking errors or weaknesses to exploit. Did anyone doing a $1.50 purchase at Easy CGI think the odds were 99.99% it would net them 8,325 miles? Sure, shopping portals could do better at listing exclusions and minimizing errors, but those type of problems will always exist. The solution for that starts with the consumer not the airline. How many consumers attempted to contact AA shopping about the 83K error? How many consumers contacted the portal or Easy CGI to verify that a $1.50 purchase would net them all those miles? The reality here is this so called “problem” does not apply to the vast majority of shopping portal transactions. I would rather see a discussion of real issues and real solutions. What are the real issues? Those of us who do our fair share of shopping through these portals know some are far more reliable and consistent than others. I’d put sites like fatwallet and ebates at the top of the list and airline portals at the bottom of the list. More than anything I’d like to see the airlines require their portals to implement tracking tickets like the cash back sites so that consumers can verify waht purchases were reported by the merchant and the amounts that are pending.

  3. The AA/Verizon and US/HA-EasyCGI scenarios are vastly different.

    1. Ubiquity of mileage offers
    Many mileage malls had many webhosting company mileage earning offers in the mid four figures, including EasyCGI parent subsidiaries.

    The EasyCGI offer itself was materially different on US (4757) and HA (7269), so there was clearly a deliberate methodology to each offer. BTW, the 8300+ only kicks in if you qualify for separate 75% DM online shopping bonus for PLats thru July 31).

    2. Clarity of T/Cs
    Both HA and US offers had clear no restrictions offers, which was indeed intriguing, but certainly not unprecedented…..the US mileage mall deal for TrackItBack in Dec 09, which I participated over 4.6 million miles and Gary Leff placed surrogate orders for 15 million miles, had the same lack of quantity purchase caps.

    3. Purchasing conduct
    There was no attempt to obsfucate my purchasing conduct by ‘flying under radar’- buying in small quantities over a longer period of time or opening up many different accounts for friends and family and using different credit cards to mask any unusually large purchase patterns, hoping the deal would be preserved. The offer was so well-vetted for its legitimacy, that made scaleable purchases in an obvious and transparent manner using ONE account, credit card and name. It would have been easy for FreeCause to identify our purchasing patterns and alert about any issues they might have with the structure and execution of the EasyCGI offer.

    4. Vendor/Affiliate FollowUp
    I personally have no interest in holding anyone hostage for mistake fares/rates. In fact, any mistake rate where the other party recognized an error in a reasonable period of time and contacted me directly, I was more than happy to relent, with no expectation of any consideration.

    Cartera apparently contacted the bulk of participants within 48 hours with a clear explanation. For me, that would have been sufficient, no appeals, no legal threats, no internet petitions. FWIW, I did not participate in the AA/Verizon deal because of the seeming obviousness of the mitake.

    In the case of EasyCGI, for 8 weeks, there has been no proactive contact by the mileage mall (FreeCause) advising that there was a mistake in either the mileage mall offer amount or T/C. And the vendor originally cancelled the purchases I made NOT because of anything mileage mall related, but rather they suspected credit card fraud. Only AFTER it was proven to EasyCGI that the purchases were all legit, did they conjure up that a ‘rogue’ affiliate had made an unauthorized offer in principle, not that any content of the offer, was in question. Neither US or HA have ever made any overtures that a mistake in the mileage mall offer earning amount or T/C happened.

    FWIW, EasyCGI never contacted us to advise that there was credit card fraud and give us a chance to clear our names and maintain the accounts we had purchased. They unilaterally and without any notification cancelled the purchases. Only by chance did a colleague of mine check his EasyCGI webhosting account and notice it was canceled. Otherwise, we would not have found out about the cancelations until our next credit card billing cycle.

    1. The only bit I take issue with in your claim, beaubo, is that this was not an obvious error. Sure, the T&C didn’t seem to prohibit it from being valid but that doesn’t mean it wasn’t obviously a mistake. Someone has to be buying the points to give them to the consumer. At some level anyone who understands the value of the points knows that a vendor is almost certainly not going to sell service at a major loss.

      The historical bonus numbers you have listed there are great but they do not go into sufficient detail to indicate what transactions earn the bonus. Selling a plan that costs a couple hundred dollars could easily justify paying a commission of $100 out to the affiliate, making the 4-8K points a normal number to pay to the consumer. But there is no rational view I can come up with where buying a $2 add-on should net a comparable commission.

      I completely agree that the customer service follow-up and management has been a fiasco from start to finish in this case. But that doesn’t mean it was a legitimate deal from the get-go. It is the same as any of the mistake fares out there. Just with really bad service and lots of finger pointing rather than someone stepping up and being honest that they screwed up. But otherwise I do not see it any differently.

  4. Great article. Best I’ve seen in fact!

    Call me bad guy everyone but sometimes I think that if I’ve ever considered gaming the system, it was because the legitimate way never worked for me first. Lol.

    That said… I think the loser here is everyone.

    A frustrated consumer who read the rules and timed it well in advance and bought online hoping to get some needed miles…

    An airline who once again looks bad for having their name and product associated with failure…

    An affiliate or manager in-fighting and squabbling over commissions..

    And even the stores who ‘sold out’ to the above business factions and later probably have to raise prices to make up for over all loses when things mount against their sales. They look less competitive in the end and the consumer, like this write, throws his or her hands up and walks away.

    No sale. No soup for you!

    And you wonder what’s up with the economy?

    ;MM

  5. Apparently anyone involved the transaction chain can cancel a mileage earning transaction EXCEPT the origional purchaser. Sounds very much to me like an airline canceling a ticket because the fare was a ‘mistake’ BUT if I bought a ticket for Oct 8th when i meant to buy it for Nov 8th, well, sorry that will be an extra $150 fee……

  6. Gary:

    While you don’t have the energy to fight the AA/Verizon/Cartera mess, there are plenty of folks who do. The situation is not quite how you described it, but it is close. If you want to follow our battle, email me and I keep you in the loop. I guess YOU can see my email address posted above.

    Cheers

    Deltahater

    1. Seth here, not Gary. 😉

      And you’re correct that I don’t have the energy to fight it. I know more details about the situation than I’ve included here out of respect for some of the folks currently involved in the discussions. I’ve shared my views privately with them as well. And I expect I’ll be kept in the loop pretty well.

      Moreover, however, I find that these portals in general are not worth the time and energy they require. If you don’t really bother to care about whether the bonus miles eventually post then there’s not much work involved, but at that point why bother. A couple points here and there just don’t do it for me.

  7. Ditto what Seth said. All you have to do is add up the miles and compare to the purchase. $1.50 at easy CGI for thousands of miles? Sorry, doesn’t pass the sniff test! How about a month of hosting at easy CGI for thousands of miles? Getting closer, but still doesn’t pass. How about a paid year of hosting at easy CGI for thousands of miles. Sure, that might make sense. Wait, but they are paying out for just 1 month of hosting! Sounds too good to be true. How about signing up multiple times a easy CGI? Gee, I wonder if they’ll catch on. Duh!

    Website hosting referrals are usually only paid for UNIQUE NEW CUSTOMERS. You can see this in Easy CGI’s affiliate T&C:

    http://www.easycgi.com/affiliate/affiliateagreement.bml

    These T&C are not much different than the T&C you can google for other web hosts paying referrals so I have no reason to assume the T&C were changed after the fact. The problem here is FreeCause didn’t put all of these in the T&C and yes they share some blame but so does the consumer that tried to take advantage of this and is now told santa claus really didn’t exist.

  8. You really should fight it. That nasty attitude of yours should come in handy. Give it some thought.

  9. Taken from above… i gotta laugh:

    “The problem here is FreeCause didn’t put all of these in the T&C and yes they share some blame but so does the consumer that tried to take advantage of this and is now told santa claus really didn’t exist.”

    Well, firstly, if we DO get those mega miles then Santa does indeed exist! I mean, merry effing xmass right?

    but that said, my main issue–regardless of whether I get miles or not, is that these companies actually employee people who get paid to put offers together and they have no idea how to manage them, control them, be honest and forthright, be thorough, be clear, seem less tricky, honor things, promote things, put the right miles with the right products, do timeframes, have good customer service, own up to problems, and shall I go on?

    I can think of people who are out of work and have nothing better than a high school degree who could do a far better job than most of the jokers who run this stuff. And yet they DO in fact con most regular users into buying through their spotty portals! HOW, WHY?

    if anyone is scamming anyone, it is them.

    As for the mega offers offering so much that it cannot be nor should not even be believed, well, that’s all relative. It’s all about value and WE here obviously know the value of what these miles are all about.

    But heck, for many people I know who do not fly, miles are worthless, so who cares about 1 million US AIR? To them, ya cant redeem them any time they want to fly anyway, so they would rather buy a ticket or drive.

    1. A consultant, indeed. Gives me lots of training in preparing reports and charts that are likely not useful to their intended audience and which no one asked for in the first place. 😀

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