Ooh, Bad Karma for Morpheus, Kazaa and LimeWire

The NY Times says Morpheus, Kazaa and LimeWire are snagging unearned commissions:

Some popular online services are using a new kind of software to divert sales commissions that would otherwise be paid to small online merchants by big sites like Amazon and eToys.

Critics call the software parasite-ware and stealware. But the sites that use the software, which is made by nearly 20 companies and used by dozens, say that it is perfectly legal, because their users agree to the diversion.

The amounts involved are estimated by those in the industry to have mounted into the hundreds of thousands of dollars and are likely to continue to grow — in part because most users are unaware that the software is operating on their computers.

There is no cost to the customer, but those who run small Web sites that funnel sales to the big merchants say that they are being hurt. “It’s painful when someone walks in and takes sales right from under me,” said Shawn Collins, who runs a number of sites that feed customers to Amazon and other merchants. “I probably saw a drop-off of 30 percent in income for the past six months.”

The diversion begins when consumers get software from the Internet that helps them swap music or other files, or find bargains online. As they install the software, they are asked whether they would also like to show support for the software maker by shopping through an online affiliate program. These programs typically give a percentage of each purchase back to the affiliate — in this case, the software maker — as a commission.

What the consumers are not told clearly is that if they agree to participate, their computers may be electronically marked: all future purchases will look as if they were made through the software maker’s site, even if they were not.

In many versions of the software, a purchase will look as if it was made through the software maker’s site even if the shopper came in through another site that has its own affiliate agreement with the online store in question. Those affiliate sites include small businesses and even charities that use affiliate links as fund-raisers.

Some version of the diversion software is used by some of the most popular music trading sites that have tried to fill the void left by the collapse of Napster, including Morpheus, Kazaa and LimeWire. The companies say their software has been downloaded by tens of millions of Web surfers….

Now that would really piss me off.