Marketers were expected to lose $1.4 billion in 2020 due to affiliate fraud!

The question is, why do affiliate programs get overrun with fraud?

Affiliate marketing is one of the most powerful forms of digital marketing. This is because the marketer doesn’t pay until they get the sale — i.e. they only “pay upon success.” This has been the method of choice for so many companies. But when speaking to brands and looking deeper into affiliate marketing why is it affiliate programs get overrun with fraud.

Marketers were expected to lose $1.4 billion last year due to affiliate fraud, according to a global economic study. Affiliate marketing stands at $15 billion in 2020, however, at least 9% of all transactions are affected by fraud — with bad actors exploiting brands to claim commissions unfairly. In return, this is damaging the bottom line of companies in online sectors. But before getting into the now let us firstly take a step back and look at some big historic moments of affiliate fraud from lawsuits to hidden schemes.

This historical affiliate fraud cases

Over the years, fraudsters have found ways to make money by cheating affiliate programs. For example, two of eBay’s super-affiliates, the ones that drove enormous numbers of sales for eBay, were caught and convicted of fraud in 2013. These fraudsters stuffed their affiliate cookies into many users’ browsers to take credit for driving sales that they did not actually drive. Normally affiliate cookies are set when users click on affiliate links; but these cheaters used technology to auto-click the links and load hidden pages, without the users’ knowledge – i.e. “stuffed” their cookies fraudulently. By doing these tens of millions of times, they got paid revenue shares by eBay on sales they did not help create. Millions of dollars were paid out to them until eBay got wise to the fraud scheme and stopped them. There have been hundreds more from cases such as Nordstrom to Google who removed two apps from the Play Store for advertising fraud, what is clear that this problem does not seem to go away.

Browser Toolbars and Extensions

Fast forward to web 2.0 when browser toolbars and extensions became popular. These toolbars were downloaded and installed voluntarily by users because they promised shopping discounts and “secret coupon codes.” But what they did was affiliate fraud, stuffing cookies in the background without the users’ knowledge. Of course, users would click on some links to get coupon codes, but many other pages from hundreds of other merchants were also loaded in hidden windows so the toolbar maker could fraudulently earn revenue shares. These fraud schemes continue today and are often even better hidden.

What data analysis techniques do brands have for fraud?

While “affiliate” programs and related fraud are not in the news much anymore, new forms of fraud still plague performance marketing campaigns. Even though performance marketers like ecommerce merchants and app marketers feel they are immune to fraud, they are not. What is clear it can affect everyone, and with recent high-profile cases such as Uber for example who ran mobile marketing campaigns to drive more installs of their app. Uber only uncovered this when their head of analytics Kevin Frisch became suspicious after looking into the data more carefully.

So the question is what data analysis techniques do companies have for fraud, quite often brands are relying on several methods from manual investigative methods & using insight tools to fraud prevention features available via a network/agency.

But with countless ways a fraudsters can scam your affiliate program. Such as those trying to send you fake leads, bid on your trademark, divert and hide links, use stolen credit cards and more. All with the goal of making money off of your program. Like Uber, transparency of data was key in how the fraud occurred and is the first step to act and to fight it.

What can you do to prevent fraud?

Manually Approve Every Affiliate.

Yes, this can be a slog and very time consuming, especially for large programs but this is your first line of defence. Before approving an affiliate check the following.

Their website(s) represents & aligns with your brand standards.

Check if the affiliate has a fraudulent past, You should be able to review any notes or history provided by the affiliate networks or SaaS platforms, however this is not always possible.

Rebuff your T&Cs

When you update your affiliate terms and conditions it is always a good policy to send a newsletter out to all of your affiliates announcing the changes to your terms. Be sure to include a due date for affiliates to bring their promotional efforts in compliance to your updated terms. This will ensure that honest affiliates comply with your new terms and allow them time to update their campaigns. 

Using Data to Spot Fraud

Data is the most powerful tool at your fingertips, the more transparency you have the more ability you have in uncovering mis-behaving affiliates. What to look out for.

Referring URLs: Go through referring URLs and visit pages that you do not recognize. If you notice several redirects, it could mean an affiliate is trying to hide the real source of traffic from you. Verify that all sites promoting your brand realistically drive the level of traffic being shown, Alexa Rankings is a great place to do that. Other web metrics, audience engagement, etc. Shady traffic often hides behind front sites that may appear legitimate at first glance, but do not have the traffic numbers to support conversions being shown.

Sub-affiliate networks: Looking at data we have seen sub-affiliate networks within your affiliate program can cause deeper issue and add a complexity to your fraud detection efforts. These networks can give your program a tremendous boost by allowing you instant access to thousands of additional affiliates. However, it also means you have less control on what affiliates you let in to your program as they can always re-apply to one of these sub-affiliate networks. Again your best tool to detect fraud from affiliates in these networks is to look at your referring URLs and determine the original source of the lead or sale. Consider requiring sub-affiliate network partners to pass back a unique ID for all of their publishers to analyze traffic on a sub-affiliate level.

IP addresses: Look at all the IP addresses for your sales and leads. Do multiple transactions come from one single IP address? This could mean one person is placing multiple orders with stolen credit cards or some other form of illegal activity. If you can, try to authenticate these transactions to determine their validity.

Data: Trends is also something to look out for, such as ad Impressions decreasing for no reason and significant increases in the conversion rates of your affiliates can be an indication that something fishy is going on. Techniques have become more sophisticated so with that in mind make sure the data you have is thorough and detailed.

Create a Routine

Routine is key to keeping your affiliate program in check, recommendation is once a week however many affiliate marketers like to keep a daily check on things, it depends on how meticulous you are. In addition to the above, creating a blacklist of affiliates you do not want in your program and staying current on industry trends and issues really adds to creating a solid in-house fraud free program.

Sticking to a routine gives you the best shot at uncovering and stopping fraud in your affiliate program. Keeping this routine will mean higher ROI, better on-brand promotion from your affiliates, and more success overall.

So what’s the big deal with automated monitoring solutions?

Dependant on how you collect data, whether thats your own in-house solution, fraud prevention features available via your network/platform or time consuimuing manual investigative methods, automated paid search monitoring solutions make impossible tasks easy. Monitoring solutions automatically crawls the web, and in some cases up to every minute uncovering fraud that even the most experienced Affiliate Managers & Performance Marketers wouldn’t be able to find. On top of getting full transparency on what is happening via using self developed smart technologies, violations can be flagged automaically making enforcement of these agreements much easier.

Taking these fraudsters down

Some solutions also provide in-built email tools & APIs, so when a violation is flagged the affiliate manager can quickly notify the affiliate, partner, network or search engine.

The features are endless down to bespoke reporting and how you view the data, automated takedowns to workflows helping affiliate teams and managers to build a fraud free program & solid brand protection.

Who to Choose?

If you are considering which dedicated solution to choose or maybe you still have doubts on if it is worthwhile, my advice is to see if you can get a demo, some solutions will offer a full view on what is happening and here you can see how much fraud you have and what technicnal benefits can align with your needs and wants.

If you are interested in learning more and would like a complimentary fraud check, just click here and fill out the form.