The Commonwealth Network
This was my evaluation (in March 1997) of “The Commonwealth Network,” the first broad-reach web-site banner advertising network.
Interactive Imaginations’ Ad Network: An evaluation by Mark J. Welch
Updated March 4, March 8, and March 15 , 1997
A class action lawsuit against II/CN was filed 3/27/97
The Commonwealth Network (CN) is a division of Interactive Imaginations, a New York company which also operates the Riddler web site.
CN was started in early 1996 with the primary goal of paying small web sites for advertising space to promote the Riddler web site, but the company apparently planned to sell third-party advertising from the very beginning. By April 1996, the company had signed up a large number of web sites, who carried CN advertising banners in exchange for promises of payment.
The original CN program offered a fixed “purse” of $5,000 or $10,000 per month, with affiliates sharing in the purse based on their percentage of the total number of advertising impressions in the network. In effect, this compensation plan offered web publishers a negative return: as web publishers grew their sites or encouraged other web publishers to join, the value of each ad impression declined. (And web sites accruing relatively small royalty amounts wouldn’t get checks at all.)
In April 1996, I posted a web page entitled “Is the Commonwealth Network a Scam?” in which I projected that the majority of participating web sites would never be paid. In May, I sent email to a number of CN affiliates, asking if they had been paid and were satisfied with the CN program; I posted their replies online.
To its credit, CN recognized the flaw in its “purse” compensation plan, and in May 1996, the company announced that it would pay a flat rate of $.0075 (three-quarters of a cent) for each advertising impression, starting June 1, 1996.
After confirming that the Commonwealth Network was paying its “affiliates” (including me), I revised my web page to be less critical of the company. People began sending me information about other advertising networks, and over time my web page about the Commonwealth Network became a more general page discussing Web Site Banner Advertising, including ad networks, banner exchanges, advertising brokers and representatives, banner rotation software, and related resources. That page is now the busiest page at my web site!
In July 1996, the Commonwealth Network experienced exponential growth, as many new affiliates joined, and many other affiliates added new pages to their “portfolios.” Advertising sales were lagging far behind the advertising inventory CN had promised to pay for. In addition, some advertisers apparently complained about paying for each time an ad banner was displayed on multiple pages of a single web site.
At the same time, CN began to realize that some web sites were “cheating” or violated its guidelines. For example, some web publishers were designing pages that would automatically rotate multiple banners, or they would place CN banners on “sex” sites that drew very high traffic. Some web publishers even designed special software that would simulate a web browser loading each page again and again, to increase the number of impressions.
In August 1996, CN decided it needed to make changes to its program, primarily by stating that only one banner display would be counted for each unique visitor per day, so that if a visitor looked at 10 pages containing 10 CN ad banners, only one would be counted. Unfortunately, the company did not send email announcing the change until six hours before it took effect, and many web publishers did not receive word for several days. Many CN affiliates were offended at the suddenness of the change, and some web publishers were outraged at the change because they believed that they had been encouraged by CN to increase the number of ad displays per visitor. Most affiliates adopted a “wait and see” attitude.
By late August, CN was still not selling much of the ad banner inventory it was paying for, and in mid-September, the company announced another major change: it would not pay web sites the “flat rate” of $.0075 for ad displays that it could not sell. Instead, web publishers would be paid a “share of purse” for these impressions — using a purse of just $10,000 for the network’s traffic (at that time) of over 3 million impressions per month. (I estimated that payment for the second half of September was less than two-tenths of a cent per impression.) At the same time, CN restored its earlier counting method, so that a single visitor viewing 10 different ads on 10 pages at a single web site would be counted 10 times.
Unfortunately, CN again waited until only a few days before the change was scheduled to take effect before making any effort to notify affiliates — and then the notices were delayed by a failure at CN’s mail server. Once again, many affiliates did not receive notice of the change until after it had already taken effect. The change (and the delay in notice) provoked more anger; many web publishers (including me) decided to cease participating in the Commonwealth Network at all. (I began stripping CN banners from my pages on September 16, but I later discovered that I accidentally left CN banners on some pages that haven’t been updated since before that date.)
Until September 16, 1996, CN offered an online “leaderboard” that provided each web publisher with a report of the number of ad impressions counted. From September 16 until December 27, no such information was available. In addition, CN did not disclose the total number of ad displays that would share in the monthly “purse.” Therefore, when affiliates received checks for September impressions in mid-November, they had no way to determine whether the payment amount was accurate. (From calculations provided by one web publisher based on his check for October and November, net pay was one-thirteenth of a cent, suggesting that CN received nearly 13 million impressions for its $10,000 “purse”.)
In addition, web publishers began to complain that it was impossible to keep track of which ad displays were paid and which were unpaid. On one day, CN would list an advertising banner as “paid” (category 1), and then the next day the banner would be identified as a “barter” banner (category 2, unpaid). Some banners that were displayed through CN didn’t appear in CN’s list at all. And some web publishers began to question whether “barter” or “exchange” banners were really unpaid: some suspect that CN receives payments or benefits which it conceals from affiliates. CN admitted that some “paid” ads were treated as “barter” if they were “over-delivered.” One web publisher claimed that CN was exchanging “barter” banners for business services and not for ad displays.
At the same time, during August and September, CN’s staff worked overtime to identify and terminate web sites that were “cheating” or which did not meet its guidelines; some were booted without pay, while others whose sites had previously been approved were paid through the termination date.
During the fall, payments from CN were late, and payments were mailed later every month. Payments for October ad impressions were not mailed until December 23 — but to its credit, CN paid web sites on that date for both October and November impressions.
On December 27, 1996, the Commonwealth Network finally unveiled its “Affiliate Information Center,” which web publishers could use to view their site’s ad display statistics. Unlike the earlier “Leaderboard,” the new information center provided no way for web publishers to compare their information with other affiliates, nor did CN disclose information that would allow web publishers to compute the proper measure for their “share of purse” earnings.
One web publisher disclosed that based on his payment for October/November impressions, his pay for “share of purse” impressions was $0.0007864 per impression, or one-thirteenth of a cent per impression, which is one-tenth the rate CN promises for “paid” advertising.
From the Affiliate Information shared by some web publishers, it is obvious that the Commonwealth Network was not very successful at selling advertising space on its network from September through November: it appears that only about 5% of ad displays were paid.
In December, according to the “Affiliate Information center,” ratio of paid to unpaid advertising rose dramatically, with web publishers reporting ratios of 30% to 50% paid. Since CN claimed its overall traffic continued to rise during this time (a claim that is supported by its payment of only one-thirteenth of a cent per “unpaid” impression), it appeared that CN had substantially increased its ad sales. Based on the Commonwealth’s reassurances about increased ad sales, many affiliates restored Commonwealth ad banners that had been removed months earlier.
During January, the ratio of “paid” ads was consistently reported as being above 80%, with many web publishers reporting paid ratios of 84% to 85%, and when some individuals (including me) expressed suspicion about the accuracy of these figures, employees of the Commonwealth Network repeatedly posted reassuring messages in the le.test newsgroup.
At one point, Glenn Kurtzrock even wrote to me, complaining that my statement on this page that “a web site should not expect to accrue $50 in payments in a month (and thus receive payment) unless traffic is more than 50,000 impressions per month.” He complained that this was unfair, and he expressly stated that with the current sales rate for January, he was confident that sites with traffic over 10,000 impressions would definitely be paid. In other words, he expressly represented that sales were over 66%. Read on for the Commonwealth’s surprise revelation that sales were less than one-tenth of that rate!
At the same time, Interactive Imaginations has announced a new advertising network that will be limited to the top 250 affiliates from the Commonwealth Network. (See c|net article about changes planned at Commonwealth Network 2/19/97).
When I first created my web page about the Commonwealth Network, I asked, “Is the Commonwealth Network a Scam?” I still can’t answer that with conviction: the company has demonstrated that at best, it is inept, and at worst, it is engaged in ongoing fraud. Earlier, I wrote that “the company has always eventually honored its payment promises — although it has often been late with payments, and has made two major royalty-slashing changes without advance notice.” That statement is no longer true: the company has failed to pay the amount promised for December advertising impressions, and has stopped responding to inquiries regarding the overdue January payments.
As I wrote in December, after a ten-month roller-coaster experience with the Commonwealth Network, it would be risky to take any action based on the expectation of ad payments from CN. Web publishers should not base their business plans on CN’s current structure, nor incur expenses that can’t be paid if CN defaults on its promises or changes its rules.
On March 4, 1997, I removed all Commonwealth Network banners from my pages, because the company has defaulted on its payment promises on multiple occasions and I no longer believe there is any reasonable probability that they will honor their payment promises. Interactive Imaginations has proven that it will not honor its contractual promises, and I believe the company is engaged in unethical and improper business practices. Indeed, based on the “reassuring statements” from its employees, I believe the company has defrauded web publishers, and should be driven out of business.
Don’t Do Business With the Commonwealth Network!
Update March 8, 1997: Although the Commonwealth Network has continued to ignore all email and telephone inquiries, the company posted an “Open Letter to All Affiliates” on March 7, 1997. The “open letter” was not actually sent to affiliates, but quietly posted on the web site. In the “letter,” the company admits “an overstatement of Category 1 (sold) impression amounts in the Affiliate Information Center, despite our best efforts to provide accurate data.” But although the company has refused to answer email or report “correct” number, and although the company continues to conceal the reductions that will apparently be made to January impressions, the company had the audacity in its “open letter” to assert that “As with every problem we’ve encountered, we made every attempt to communicate these difficulties to affiliates as quickly and as clearly as possible.”
There is some ominous wording at the end of the letter: “We are excited to announce that we will soon launch a new and improved network that will allow Web publishers the opportunity to earn even greater royalties. We will release further details on the Commonwealth site shortly.” (Presumably, this is the “top 250” network mentioned in a c|net article on 2/19/97.
Do the Math: In its “open letter,” the Commonwealth Network states that it has paid “over $400,000” to affiliates since the program began (since checks have not yet been sent for January, I assume this refers to the period from March through December 1996). The company also claims (in the “open letter”) that traffic is over 2 million impressions per day (or 60 million per month). During January, CN’s “Affiliate Information Center” reported that 84% of banners were “category 1” (and thus would be paid the flat rate of three-quarters of one cent per impression):
January only: 60,000,000 x 84% x $.0075 = $378,000
I think it’s pretty clear why the Commonwealth Network (which previously reassured web sites that the figures showing a huge increase in ad sales were accurate) continues to refuse to respond to email: it’s planning to cheat affiliates out of at least a hundred thousand dollars in royalties for January, by shifting one-quarter of the Category 1 “paid banners” to “unpaid” status; but the company wanted to conceal this change for as long as possible in order to cheat affiliates out of additional traffic in February and March.
Don’t Do Business With the Commonwealth Network!
Yes, there is an attorney (not me!) considering filing a class-action lawsuit against the Commonwealth Network/Interactive Imaginations; send me email for more information. Do not send me confidential information!
Update March 15, 1997: On March 11, the Commonwealth Network restored its “Affiliate Information Center,” reflecting a decrease in paid impressions for December and January — but that wasn’t enough. Two days later, on March 13, the numbers were changed again, dropping even further. Here is the comparison, using my site’s statistics for December and January, as reported before the AIC was disabled and after it was last modified in March 13. On March 14, the company posted a new “open letter” affirming that it plans to use the newest figures to compute payment amounts. (December traffic represents ads on only a few pages that had not been updated since before September; January and February traffic includes many more pages.)
| Comparison | AIC 2/1/97 | AIC 3/15/97 |
| Dec. # Cat.1 | 1,761 | 921 |
| Dec. % Cat.1 | 51.7% | 19.8% |
| Dec. $ Cat.1 | $13.20 | $6.91 |
| Jan. # Cat.1 | 20,703 | 1,258 |
| Jan. % Cat.1 | 84.2% | 5.5% |
| Jan. $ Cat.1 | $155.27 | $9.43 |
| Feb. # Cat.1 | — | 104 |
| Feb. % Cat.1 | — | 0.5% |
| Feb. $ Cat.1 | — | $0.78 |
| Mar. 1-6 # Cat.1 | — | 32 |
| Mar. 1-6 % Cat.1 | — | 1.1% |
Web publishers have reported that their December payments were from one-third to two-thirds lower than expected; the above figures reflect an “adjustment” of about one-half for December. For January, a number of webmasters reported the drop from 84% to 68% “Category 1” banners on March 11 and 12, but then on March 13 the ratio plummetted to under 10%. In February, it appears that the Commonwealth Network sold less than one percent of its available inventory. For the first six days of March, web publishers are reporting that the AIC statistics reflect only 1% to 3% of banners as “Category 1.”
It’s easy to see why the Commonwealth has stopped signing up new affiliates, and why it plans to launch a new web advertising program in a few weeks: it has lost all its advertisers! This certainly explains why the company continues to pay late.
In fact, it now appears clear that the Commonwealth Network was deliberately misrepresenting its ad sales, in order to induce web sites to remain affiliated with the Network. The main benefit, of course, is that the unsold ad space was used to promote Interactive Imagination’s “Riddler” web site, building traffic to that site and increasing its ad sales revenue. That strategy will backfire in the next few weeks, as the company’s former network affiliates campaign aggressively for a boycott of the company and its advertisers, and as class-action lawsuits are filed.
This ship is going down! It seems likely that the Commonwealth Network will be remembered as the Titanic of the web advertising business: a huge, sturdy model that failed miserably and took down some of the best and brightest with it.
A Note about Glenn Kurtzrock: For many months, the Commonwealth Network used one employee, Glenn Kurtzrock, as their “point man” to communicate with affiliates. Glenn participated in online discussions and responded to negative comments about the company. In doing so, he made some very unambiguous statements which now appear to have been false and misleading. In other words, Glenn was committing fraud. In February, when a cloud first arose over the ad sales figures, I posted a public message defending the Commonwealth Network, and I used Glenn as my sole reason for doing so: I knew that Glenn was a law student, and I also knew that any legal claims of fraud made against Glenn would substantially impair his ability to get admitted to practice law. Thus, I concluded that Glenn would have quit the company before he would make false or misleading statements, because he would value his reputation and his planned career more highly.
Obviously, I was wrong about something. Maybe Glenn was in the dark about the true ad sales figures; if so, I’m sure that will come out during discovery or during trial in the class action suit, or during criminal or civil investigations by law enforcement agencies in New York. It is unclear whether Glenn still works for Interactive Imaginations; I did receive a copy of a “gag” memo sent to all Interactive Imaginations employees earlier this year, ordering them not to communicate with network affiliates in any way except through official channels. As noted above, the company has ceased responding to electronic mail and company employees do not accept phone calls or return voice-mail messages.
I am sorry to see anyone’s career damaged by circumstances, and I hope that any current or former employees of the Commonwealth Network who were innocent of wrongdoing will be able to repair the damage done by the ongoing criminal fraud perpetrated by the company.
