Prevent Affiliate Fraud: Tips & Tricks From Experts Across the Industry
Affiliate fraud is a growing problem affecting online advertisers. While affiliate marketing is an excellent, self-sustaining way to build a revenue stream, there are bad actors who want to take advantage of your hard work for their own personal profit.
Consumer data company Statista calculated that digital advertisers spent over $378.16 billion in 2020. Unfortunately, other research has found that digital advertisers’ total losses due to fraud will top $100 billion by 2023. That could mean that more than one-quarter of digital advertising costs are going to be paid to criminals.
In this post, we’ll explain the ins and outs of affiliate marketing fraud. We’ll see how it works, and how you might be able to identify and prevent affiliate fraud. We’ll also hear from industry experts who’ll speak to the scope of the problem and offer unique tips to manage affiliate schemes.
What Is Affiliate Marketing?
Affiliate marketing describes a body of digital advertising tactics by which one company or individual (the “affiliate," or “publisher”) uses its website to recommend the products or services of another company (the “advertiser"). The hope is that users of the affiliate site will click directly over to the advertiser’s site. Then, when traffic driven by the affiliate converts, the affiliate earns a commission.
Online mega-sellers like Amazon invest heavily in affiliate marketing. Whenever you see a link to Amazon on another website—or see an Amazon link below an online product review—you’re looking at affiliate marketing in action. When a specified action (such as a registration or sale of a product) gets tracked back to that link, the affiliate gets paid.
It's a reciprocal relationship that benefits everyone in the process. Affiliates gain commissions, advertisers sell more products, and consumers get the goods they want. Nobody would complain if affiliate marketing always worked this way in real life. Unfortunately, there are a few loopholes in the system that fraudsters can exploit.
What Is Affiliate Marketing Fraud?
- Affiliate Fraud
Affiliate fraud refers to a broad category of illicit or unscrupulous tactics designed to generate unearned commissions from an advertiser’s affiliate marketing program.
[noun]/* ə • fɪl • i • eɪt • frɔd/
Affiliate fraud can be any deliberate attempt to make illegitimate money off an advertiser's affiliate marketing efforts. It's similar to triangulation fraud, in that it involves fraudsters using stolen data or misleading information to middleman a transaction. Industry experts report that affiliate marketing fraud rivals identity theft and friendly fraud in terms of potential financial impact.
Much of the affiliate marketing process is automated, saving time and effort for all parties. This lack of direct human oversight, however, gives fraudsters opportunities to hijack the operation and twist it to their own ends. They accomplish this through ad fraud, as well as a variety of other methods:
Remember: this is not an exhaustive list. There are plenty of other tactics that fraudsters can use to commit affiliate fraud. Plus, the more time that goes by once you discover fraudulent tactics, the more you lose.
Act quickly and document any evidence, then issue a warning to the affiliate if you feel it could be an honest mistake. If the issue reoccurs, though, you'll need to terminate that affiliate relationship.
Protect Your Next Campaign Against Fraud.
It's Time to Fight Back Against Affiliate Fraud.
The Threat is Real
The list above shows fairly high-level techniques. To gain more knowledge of real-life affiliate fraud scenarios, we asked a panel of experts for examples of more specific tactics. We also asked them to share some of their insights to help advertisers protect their revenue.
One issue we're currently facing is an affiliate who is also a direct partner with our client. They drive more traffic via the affiliate channel but have a lower payout on the affiliate program. In an effort to get the most ROI, this affiliate is redirecting its traffic to the hard-coded partner landing pages for essentially a higher payout.
Syzygy NYC
Here, the affiliate is part of an affiliate network. However, by partnering with the network’s client, they are effectively “double-dipping.” They earn commissions as members of the affiliate network, but also directly via the merchant.
How about fraudulent affiliates who post fake job opportunities on Craigslist? They ask a potential job seeker to, ‘Call and pretend to be a real customer. Stay on the phone for at least three minutes.’ The fraudulent publisher says that this call is part of the interview process and that if the job seeker does a good job, they will be called in for an interview,' which never happens, of course. It's all just a way of simulating traffic.
Astoria Company
This is, admittedly, a novel approach to affiliate marketing fraud. The fraudster manages to rope innocent job seekers into their scheme, using the phone traffic to simulate genuine traffic driven by the affiliate marketer.
On one program, a certain affiliate seemed to be consistently performing at a small but steady level. However, upon reviewing the daily timing of his activity, it turned out that he was hand-entering the leads into our program and our competitor’s programs as well. To keep his conversion rate realistic, he generated clicks during his coffee breaks while working his day job.
Affiliate Window
It’s important to vet potential affiliates beforehand. Many scammers will pretend to be genuine affiliates despite having no intention of ever driving authentic traffic to an advertiser’s site.
We had a publisher who was stacking several campaigns and serving each one to the same user. We determined that multiple leads were coming from the same affiliate on different campaigns using an identical timestamp. Identifying this issue quickly allowed us to pause the affiliate, notify all advertisers who were impacted, and offer a full refund for media spend.
MUNDOmedia
This degree of oversight is necessary to prevent affiliate fraud. It also illustrates why affiliate networks take this matter so seriously: their reputation depends on it. Plus, they may have to refund advertisers for media spend wasted on affiliate fraudsters.
The Goal of Affiliate Fraud
We see that fraudsters deployed totally different tactics in all the above scenarios. What unites them is that, in every situation, the fraudster was trying to trick an advertiser into paying unearned commissions.
Paying unearned commissions is reason enough to fight back against affiliate fraud. The threat, however, actually goes far beyond just the unearned commission.
Affiliate fraud often falls into one of two camps: either the fraudster used deceptive tactics to convince a cardholder to make a purchase, or used the stolen information to submit fake transactions. In either of these cases, the cardholder will typically file a chargeback to recoup their lost funds.
Of course, by the time the fraud is discovered, the affiliate will have already cashed the commission check and disappeared. The inability to prevent affiliate fraud leaves the merchant holding the bag for the lost commission, as well as the lost product or service, and the chargeback fees. The merchant’s reputation with both banks and clients will also take a hit as their chargeback ratio increases. That can potentially drive processing rates higher over time, or even shut down their processing ability altogether.
Challenges of Fighting Affiliate Fraud
Affiliate fraud tactics are dynamic, making mitigation a real challenge. Our experts shared the issues they deal with on a daily basis, from identifying fraud red flags to proving an affiliate is actually a fraudster in disguise:
At the moment, the biggest challenge in fraud mitigation is ad placement fraud. First, ads aren’t seen because they're in that 1x1 iframe that's virtually invisible to the user. Second, the publisher can render one ad viewable but create a script where multiple, invisible-to-the-eye ads are triggered simultaneously. It’s challenging to identify fraud. Because iframe technology doesn’t easily allow for traffic source identification, it’s difficult to trace.
Adcash
Honestly, sometimes the biggest challenge of mitigating affiliate fraud is proving it. There are several factors that will raise a red flag: short call durations is an obvious one. Affiliates who convert much higher than others with the same offers are another. Seeing the same caller IDs appearing in several different offers from the same affiliate is a clear eye-brow raiser! Once you recognize suspicious trends, having 2-3 team members dedicated to compliance and listening to calls all day usually finds fraud quickly.
Astoria Company
I feel like the biggest challenge is the adaptation of new technologies. It's gotten to the point where each time I see a new functionality announced, my first thought is, ‘How can this be twisted by a fraudster to scam a merchant?’
Affiliate Window
Affiliate fraud tactics seem to adapt even faster than legitimate affiliate marketers create and perfect their techniques. When one method of gaming the system is detected and blocked, fraudsters will simply create a new strategy.
5 Tips to Prevent Affiliate Fraud
The best way to spot affiliate fraud is to view every single payment at the transaction level and make a concentrated effort to identify where the transaction originated. Of course, that’s easier said than done; manual reviews are an extremely time-consuming and tedious endeavor. For most businesses, it’s simply unrealistic.
There's a fine line between eCommerce conversion optimization and being too lenient on fraud. That's why effective fraud management demands a multilayer approach. As Chargebacks911® COO Monica Eaton explains, “Fraudsters are cunning, and they change tactics as soon as they realize their efforts might be detected. You need to be just as agile and innovative; you can’t use just one or two tools and call it a day.”
What sorts of tools are we talking about? Let's look at five moves that merchants can make to reduce affiliate fraud:
I think my best advice for fraud mitigation is to always keep looking. Fraud doesn’t show itself in just the bad events, but also good ones. Most marketers will see their brand down by a certain percentage, freak out, and look everywhere for fraud. But when their campaign is a certain percentage up, they sit back and assume there is no fraud at all and the increase is attributed solely to their hard work.
Syzygy NYC
What’s Next for Affiliate Fraud?
So, now that we have a clearer understanding of the current state of affiliate fraud…what does the future hold? Our experts had some additional insights regarding where they anticipate affiliate fraud will move next.
As we move away from the last click, I see a huge new wave of fraud coming through to prove incrementally, including dropping false-positive cookies, and it will likely become sort of a wild west at the beginning.
Syzygy NYC
I am consistently surprised by the new and technologically innovative ways fraudsters find to dupe the system. Phone number spoofing and voice-altering software will continue to be a problem. What happens from here, only the pay-per-call gods know!
Astoria Company
I expect to see continuous issues of extensive re-brokering within the CPA realm, with offers shared 5 or more times until it is impossible for the merchant to identify the traffic source and quality drops off completely.
Affiliate Window
I'm worried about incentivized real users, where an entire community of users crawls websites and applications to trigger conversions, such as static and video impressions. They're similar to click farms, but these groups are harder to track because they don’t leave conspicuous fingerprints—their pattern appears natural.
Adcash
Need Additional Help?
The key to prevent affiliate fraud is to minimize risk without sacrificing revenue potential. This calls for the right combination of tools and services.
Chargebacks911's exclusive Affiliate Fraud Shield™ has a proven track record of helping merchants prevent affiliate fraud. This exclusive tool allows you to prevent abuse while minimizing costs such as shipping, loss of product, and chargeback fees. Let us show you how much ROI you can expect from this revolutionary solution. Click here and prevent affiliate fraud today.
FAQs
What is affiliate marketing?
Affiliate marketing is where one company or individual (the “affiliate," or “publisher”) uses its website to recommend the products or services of another company (the “advertiser") in hope of receiving a commission.
What is affiliate marketing fraud?
Affiliate fraud is a deliberate attempt to make illegitimate money off an advertiser's affiliate marketing. Fraud experts report affiliate fraud is one of the costliest threats for eCommerce businesses, rivaling identity theft and friendly fraud in terms of potential impact.
How do criminals commit affiliate fraud?
Criminals use multiple methods to perpetuate affiliate fraud, including spyware, cookie stuffing, IP spoofing, iframes, and phony discount code sites.
How can you detect affiliate fraud?
Common signs of affiliate fraud include inconsistent browser sessions, IP addresses from data centers, bad geolocation indicators, and bad device reputations.
Can you prevent affiliate fraud?
In many cases, yes. Effective fraud management requires a multi-layer approach that allows merchants to react quickly to new techniques.
