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If you can't get them to agree to let you do what you want to do, then you better be careful about it.
1. Buy a domain yourself and frame the merchant's site, as Receptional suggested
2. Ask the merchant to use a separate domain for PPC affiliates (eg, widgetmerchant.com for their main site, widget-merchant.com/widgetmerchant.co.uk for PPC affiliates).
3. Build a landing page.
Of course, you don't want to upset your merchants, so best to run one and two past them before you try them.
because they want you to make a site that links in and boosts there PR. Simple as that. PPC links don't help in SEO, but site links do.
If a merchant is trying to wrangle PR or linkpop from their affiliates, RUN AWAY.
It's more a matter of protecting their branding (and their trademark in some cases), and not allowing their affiliates to drive up the cost of their own PPC efforts by competing. Some affiliate managers handle both the affiliate channel and the PPC for their employer/client, and it's in their own best interest to keep the channels separate.
It's best to check the merchant's TOS carefully and thoroughly and if you don't like it, move on to another. That's a whole lot better than getting booted out of a program for TOS violations, in which case commissions can be withheld altogether.
Couldn't you put the merchant's site in a frame?
[edited by: Marcia at 2:58 am (utc) on Feb. 27, 2007]
From what I understand, when the merchant doesn't allow you to use their DISPLAY URL, you simply register your own domain and use that as the DISPLAY. The DESTINATION URL is the Affiliate Networks domain (This tells you they don't need to match!).
Whether or not the merchant allows direct-to-merchant PPC for affiliates is usually stated in their T&Cs -- and doesn't necessarily have anything to do with whether or not they allow you to use their domain as your DISPLAY URL.