What is Affiliate Fraud?
A Merchant’s Guide
Free IP lookup API to uncover fraud, bots, and high risk users.
Affiliate fraud is a form of advertising fraud that uses deceptive tactics to exploit affiliate marketing programs and collect unearned commissions. This type of fraud is a persistent and growing threat, with bad actors constantly evolving their methods to cheat merchants and drain revenue.
At the same time, legitimate affiliate marketing remains a powerful force in e-commerce and lead generation. According to 99 Firms, affiliate marketing drives a substantial share of digital media advertising revenue. As a business, you can’t afford to ignore the opportunities of affiliate marketing—but you also can’t afford to overlook the risks. Staying proactive with the right tools and strategies is essential to protect your brand and your bottom line.
To best understand affiliate fraud and what it means to you as a merchant, we’ll cover:
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Types of Affiliate Fraud
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 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.
- Install fraud: Illegitimate methods are used to attain app installs.
- Sales fraud: Falsifying sales or using unethical tactics to increase commissions.
- Click fraud: Artificially inflating or generating click on a link.
- Impression fraud: Manipulating ad impressions attributed to an affiliate.
Lead, install and sales fraud are a particular problem for affiliate marketers because the commissions paid can be more substantial than for clicks or impressions. Regardless, 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, but it can still happen.
How To Detect Fraud As It Happens
You must be able to identify affiliate fraud and determine how it’s happening to choose the best way to stomp it out. This largely consists of analyzing your incoming data for anomalies pointing to programmatic fraud. Accordingly, the quality of your data and the tools you use to analyze the data will determine how effectively you can detect fraud. There are three broad pools of data to analyze:
- Affiliate ID tracking: With an affiliate tracking ID enabled, get a report on what’s happening with each visitor an affiliate sends your way to look for fraud.
- Affiliate program tools: Affiliate programs and platforms will offer basic fraud detection tools available to marketers.
- Traffic trend analysis: Evaluate traffic sent to you by affiliates and look for unexplained swings.
- Device fingerprinting: Create profiles of user devices that affiliates send to your site to assess their likelihood of being fraudulent.
- User behavior analytics: Look at bounce rates, conversions, engagement levels and time on site to identify low-quality, spammy traffic.
Businesses use in-house analytics and IT expertise, in conjunction with fraud detection tools, to generate automated reporting tools with real-time tracking of traffic as it hits the network. This often involves companies tapping into an API to integrate a suite of anti-fraud tools with their current operations.
How To Protect Your Business
Protecting against fraud is done by implementing affiliate fraud prevention policies and utilizing anti-fraud tools. These policies should clearly define prohibited activities and outline consequences for violations. Anti-fraud tools, on the other hand, provide a technical layer of defense, actively monitoring and flagging suspicious behavior in real-time. Combining these approaches offers a robust strategy for safeguarding your affiliate program and ensuring its long-term integrity.
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. - List consequences for violating TOS: As a deterrent, include as one of your policies the right to pursue legal consequences and what that may entail should the TOS be breached.
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
Here at Fraudlogix, we specialize in affiliate fraud detection and prevention. Contact us to discuss how we can protect your affiliate marketing campaigns.
How Affiliates Commit Fraud
Because affiliate marketers rely on software platforms to manage their programs and those platforms are made by humans, some scam affiliates can find vulnerabilities to exploit the system. Affiliates are creative when it comes to committing affiliate fraud. Below are some common methods:
- Click farms: Often in developing countries, using a VPN or location masking, a large group of low-paid workers are tasked to generate specific user engagements that would earn a fraudster commission.
- Botnets: Malicious software is installed on unknowing users devices to be activated remotely by the scammer to carry out some fraud.
- Traffic bots: Bots designed and operated to generate fake impressions and clicks, the bot version of a click farm.
- Content scraping: Scammers scrape, duplicate and re-publish original content to divert traffic to their sites and take credit for any conversions.
- Stolen credentials/credit cards: After obtaining someone’s login or financial information, scammers purchase products to receive credit knowing that the transaction will be marked as fraudulent and require a chargeback.
- Cookie stuffing: A cookie is placed on a user’s browser and supersedes legitimate affiliate cookies to take undue credit and revenue.
- Pixel stuffing: A small or otherwise invisible to the user pixel is placed on a site appearing to analytics software as legitimate traffic.
- Click stuffing: Sites or apps generate fake clicks by exploiting user interactions with forced clicks or deceptive design.
Unfortunately, this is a list that continues to grow and morph into whatever vulnerabilities scammers can find to exploit. If you work with affiliates, always be on the look out for anomalous data that could be a result of these or similar tactics.
Negative Impacts On Revenue & Beyond
The vast majority of affiliate marketing is legitimate, providing a sound marketing and sales methodology for both the businesses and the affiliates. However, as an affiliate manager/publisher/merchant it’s important to be aware of the possible downsides of fraud and how that will impact your business.
- Lost sales and chargebacks costs: Affiliate fraud leads to significant financial losses, with up to 20% of campaign dollars wasted on fraudulent activities that create more administrative burden than no sales at all.
- Wasted time and loss of productivity: Fraudulent leads consume valuable time and resources, diverting staff efforts from productive sales strategies and revenue generation.
- Loss of confidence in affiliate marketing: Affiliate fraud erodes industry-wide confidence, damaging the reputation of both advertisers and legitimate publishers in the performance marketing channel.
- Misguided strategies due to poor metrics and skewed data:
Fake conversion data from affiliate fraud can mislead marketers, causing them to misallocate resources and develop ineffective campaign strategies. - Brand reputation damage: Brand reputation suffers when customers experience fraud, potentially creating long-lasting negative sentiment even when the brand is not directly responsible.
Looking at the risk associated with affiliate fraud, financial and otherwise, it’s to understand why investing in detection and prevention is worthwhile.
How To Vet Affiliate Partners
Selecting reputable and thoroughly vetted affiliate partners is one of the best ways to prevent affiliate fraud. Some affiliates are better than others and many of the good affiliates share the same attributes, so knowing what to look for can help. Answering these questions appropriately can help demonstrate their ability before you start working with them. Ask or research these questions with your possible affiliate program:
- Participation: How many other affiliate programs and networks have they participated in?
- Longevity: How long has the site or platform been around?
- Quality: Is the site quality, free of errors and professional looking?
- Content: Is the content duplicated or clearly written by AI?
- Social: What’s their social presence and how active are they?
- Site Updates: How frequently do they write new content or update the website?
- References: Can they provide references or cite current campaigns?
- Brand Values: Do they align with your brand values?
- Marketing: Do their marketing tactics comply with your terms and conditions?
- RSS Feeds/ Widgets: Do they produce original content or use RSS feeds to populate their site?
Asking these basic questions will add to your vetting process and set you up for more success. It’s not as though an affiliate has to answer all of these questions perfectly, however, these are good indicators that you’re dealing with a legitimate affiliate. Newer or stagnant affiliates should always warrant extra attention before on-boarding.
How To Report Affiliate Fraud
Ideally you’ve minimized your risk of affiliate fraud but even with protection measures in place, it can still happen. If you believe you’ve been the victim of affiliate fraud, follow these steps
- Gather all evidence: The more documentation and detail the better.
- Contact Merchant/Affiliate: Give them a chance to respond to your accusation.
- Report to Affiliate Network: If they’re part of a larger affiliate network, report them.
- Report to FTC or IC3: Federal authorities should be notified.
By reporting affiliate fraud you do your part to hold fraudulent affiliates accountable and inform the larger community of their reputation.
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