Affiliate fraud is a type of advertising fraud that involves any false or corrupt activity executed to collect commissions from an affiliate marketing program fraudulently. It’s estimated that 2% of all affiliate transactions are attributed to fraud. Unfortunately, fraudsters are continuously finding new ways to scam the system and cheat merchants out of profits.
The profit and success of 98% of legitimate affiliate marketing is a sizable contributor to ecommerce and lead generation across the web. According to 99 Firms, 15% of digital media advertising revenue can be attributed to affiliate marketing. So as a business, you can’t ignore its success, but you should know about some of the dangers of affiliate marketing and how to prevent it.
What types of affiliate fraud are there?
Affiliate marketing, or performance marketing, is the type of marketing where a publisher promotes a merchant’s products (or services), generates sales for those products, and in return receives a commission. This allows companies to only pay marketers if they’re successful, one of the many benefits of affiliate marketing.
Affiliate abuse and fraud can take the form of whatever the goal of a given performance marketing campaign The most common types of affiliate fraud include:
- Lead fraud: Fake or unqualified leads are generated and submitted.
- Click fraud: Artificially inflating or generating click on a link.
- Install fraud: Illegitimate methods are used to attain app installs.
- Sales fraud: Falsifying sales or using unethical tactics to increase commissions.
- Impression fraud: Manipulating ad impressions attributed to an affiliate.
All of these affiliate scams are illegal and cost businesses marketing dollars. Publishers and affiliate managers often use strict terms and conditions to prevent affiliates from gaming the system yet it still happens. Let’s take a look at how this happens.
How do affiliates commit fraud?
Because affiliate marketers rely on software platforms to manage their programs and those platforms are made by humans, some scammer affiliates can find vulnerabilities that allow them to exploit the system. Affiliates are creative when it comes to committing affiliate fraud. Below are some common methods:
- Faking a conversion
Whether it’s a click, a completed lead form, an app install, or even a sale, much of affiliate fraud revolves around affiliates faking a conversion to collect the commission. This is often done with the use of bots, but can also be done manually by humans, most often in click farms. - Duplicating content from another affiliate
Affiliate publishers are paid for conversions that their original content produces, so nefarious affiliates may simply scrape the sites of legitimate publishers and re-publish original content in a bid to divert traffic to their sites and then take credit for any conversions. - Click stuffing
This often happens around install fraud and involves an affiliate simulating clicks on ads (often with the use of bots) unbeknownst to a user. So, if the user then installs an app organically, the affiliate company will still get a commission even though their ‘marketing’ efforts had nothing to do with the user installing the app.
Negative effects of affiliate fraud
The vast majority of affiliate marketing is a legitimate marketing and sales methodology. However, as an affiliate manager/publisher/merchant you need to be aware of all the different ways that affiliates can cheat the system. There is a direct cost of affiliate fraud (it eats into your profits and depletes your marketing budgets), but there are other not-so-obvious effects of affiliate fraud.
How to protect against affiliate fraud
Identifying and protecting against fraud is done through combatting fraudster’s technologies and through use of affiliate fraud prevention policies.
Anti-Fraud Tools
There are platforms and tools that you can use to help protect against affiliate fraud. FraudLogix offers a robust set of tools for companies to monitor and stamp out any signs of fraud. These tools include things like:
- IP blocklist
- Digital fingerprinting
- Pixel-based detection
- S2S detection
- In-depth behavioral analysis
- Real-time monitoring
Affiliate Fraud Prevention Policies
While applying a third-party fraud solution is highly effective in blocking fraud, here are some tips for preventing fraud that require no technology at all:
- Carefully vet your affiliate partners: A trustworthy affiliate should be able to provide you with examples of other monetization projects, current campaigns, and how and where they plan to run your campaign.
- Check up on your current affiliates.
If you’ve on-boarded an affiliate and they’re making deals, check up on the conversion sites and the metrics. Don’t wait until the end of the year to begin questioning them – it’s easier to cut an affiliate off early than to try and claw back commissions. - Clearly outline what is or is not acceptable in your terms and conditions.
By clearly defining what types of performance that you will or will not accept in your terms and conditions, it sends the message that you have zero tolerance for fraud and gives you a legal basis to pursue any claims.
Here at Fraudlogix, we specialize in affiliate fraud detection and prevention. Contact us to discuss how we can protect your affiliate marketing campaigns.
