Affiliate Marketing ScamsBe On the Lookout for These 10 Affiliate Marketing Scams

How to Spot and Stop Affiliate Scams From Busting Your Marketing Budget

Affiliate marketing has become a very popular approach to digital commerce, particularly with newcomers and emerging brands. The appeal is obvious; it requires minimal initial investment, with the potential for substantial sales generated by affiliate partners.

Unfortunately, fraudsters can exploit loopholes in the system and take advantage of sellers. This is a practice known as affiliate fraud.

Learn more about affiliate fraud

Statistics indicate there’s been a significant surge in global digital ad fraud losses in recent years. We anticipate an increase from $35 billion in losses in 2018 to a staggering $100 billion by 2024. This emerging threat seems to cast a long shadow over the future of the affiliate marketing industry, potentially putting the entire field in jeopardy.

Affiliate Marketing: at a Glance

First, let’s start by clarifying what we’re talking about here.

Affiliate marketing is a results-oriented marketing strategy. Individuals, referred to as affiliates, are compensated for promoting a company's products or services. The role of these affiliates is to endorse the advertiser’s (i.e. the merchant's) offerings to their audience, earning a commission for every sale that they facilitate.

The customer, having been influenced by the affiliate's promotion, purchases the product via the affiliate's unique referral link. Thus, commissions earned by affiliates hinge on the real sales produced by their efforts. 

Affiliate marketing is a legitimate way for businesses to promote their products or services online. As we’ll see, though, there are a number of affiliate marketing scams in which bad actors can engage to steal unearned commissions.

In short, an affiliate marketing scam is any scenario in which a person aims to trick an advertiser into paying a commission on a conversion that never took place. 

How Affiliate Scams Hurt Advertisers

Affiliate marketing scams are a hard-to-identify but devastating source of revenue loss for merchants. It can render entire campaigns unreliable, destabilize markets, and cost banks, consumers, and merchants piles of money.

Some of the most immediate consequences of affiliate marketing scams include:

The Top 10 Most Common Affiliate Marketing Scams (& What to Do About Them)

So, now that we have a better understanding of the threat that affiliate marketing scams pose, let’s talk about the many ways you might be targeted.

Here are the top ten affiliate marketing scams you need to watch out for, and what you can do to prevent each threat:

#1 |  Fake Leads

Fake lead fraud is an affiliate scam in which fraudsters send fake leads to an advertiser to defraud the company for a commission.

This scam relies on synthetic identities and bot traffic to convince companies that the leads they pay for are genuine and actionable. However, all the leads generated are fake, useless junk that can’t be converted to a sale.

#2 |  Cookie Stuffing

Also known as “cookie dropping,” cookie stuffing is an affiliate scam through which a fraudster uses web cookies to collect affiliate commissions on goods they did not sell.

Consumers must click through from the affiliate’s site to the advertiser’s site and make a purchase to legitimize a commission. With cookie stuffing, though, the advertiser pays a commission, even though the fraudster didn’t earn it. The fraudulent cookie might even override another cookie placed by a legitimate affiliate, meaning they don’t get the commission they earned.

#3 |  Click Fraud

Click fraud, or “click flooding,” is an affiliate scam that uses mobile apps or websites to generate fake clicks.

Fraudulent clicks fall into two categories: manual and automated. The former involves human beings clicking a link, while automatic click fraud employs automated tools to work on a larger scale. It can work by generating non-human (i.e., bot) traffic through malware-infected mobile devices. Or, you can have click farms in which humans manually engage with ad links.

Click fraud wastes advertisers’ money and distorts targeting data. It also drives up online advertising costs, causing ongoing damage to the industry.

#4 |  Transaction Fraud

Transaction fraud happens when a fraudster uses stolen credit card or other payment account information to process a transaction from another user’s account. This may also branch out into transaction laundering.

When an advertiser is targeted by this affiliate marketing scam, they wind up paying for more than just the initial attack. First, they lose the original transaction value. They then lose any commission paid to the affiliate scammer and, eventually, the chargeback fees they will fork over when the account holder files a chargeback.

#5 |  Fake Products

A fake product scam occurs when a fraudster creates an ad or webpage for a product or service that doesn’t actually exist. They then promote that product under a legitimate company’s branding and credentials.

This is a prevalent form of affiliate fraud because it is so easy for scammers to take advantage of customers’ scrolling habits through social media. Indeed, Facebook Marketplace contains a veritable hive of fake product scams that led to over $117 million in losses in the first half of 2020.

Fake products are such a problem that the FBI received almost 50,000 complaints and reported $3.5 billion in losses last year alone.

#6 |  URL Hijacking

URL hijacking (or “typosquatting”) happens when a fraudster buys a URL similar to a legitimate retailer’s. The fraudster then redirects traffic to the fake website to claim affiliate commissions. The hacker will insert affiliate links and data into their redirect process, though, to profit from that exchange.

For example, if you misspell a letter or phrase in a legitimate company’s URL, you may be redirected to the fraudster’s site without realizing it. The fraudster may even clone the significant details of the original site and use them in various descending scams. For example, hitting the advertiser for an unearned commission while installing malicious software on the buyer’s machine.

#7 |  Google Ad Hijacking

Fake ad hijacking is a form of affiliate marketing fraud that happens when a fraudster creates a phony ad that appears at the top of a Google search. Consumers will be most likely to assume the ad is legitimate, as they trust Google’s due diligence process.

Once the consumer clicks on the false (and sometimes identical) ad, the hacker can hijack a company’s paid ad space and steal their traffic by targeting branded keywords. If the scam succeeds, consumers will assume they’re visiting a legitimate site and make a purchase, for which the fraudster will claim the affiliate commission.

#8 |  Spoof Traffic

This affiliate marketing scam occurs when spammers send false impressions and invalid click data to advertisers to make it look like they are sending legitimate traffic. Inevitably, the impressions they send will include bots and junk data designed to make them look like credible affiliates.

On the retailer’s end, this spoof data will appear like the false affiliate is sending lots of traffic to their site or service. All those impressions originate with bots or click-farm traffic, though. Spoof traffic scams are widespread in PPC (pay-per-click) affiliate marketing. They let fraudsters make money from the number of clicks they generate rather than tractable funds resulting from the affiliate’s actions.

#9 |  “Get Rich Quick” Schemes

You’d think everyone would be wise to this tactic by now. However, there are still many forms of this tried-and-true clickbait scam that tend to catch consumers now and again.

Fraudsters use talking points like saying “this one simple trick can save you thousands” or “click here for the secret to losing 20 pounds in one week.” Others will imply that the promised benefit will magically appear if you click into a video provided by the poster’s “partners” or “sponsors.”

In reality, the consumer will be led down a rabbit hole of descending click-in scams designed to generate fake affiliate clicks for the scammer. Even worse, they can parlay this scam into gaining access to the user’s computer and private data.

#10 |  “Pay to Play”

Lastly, pay-to-join scams are another form of affiliate fraud that asks retailers to pay for memberships with various agencies. The scam is relatively easy to commit, as it might seem rational that you should pay to join an affiliate program.

The fact is that most credible affiliate programs do not feature sign-up fees or up-front membership costs. As the name implies, performance marketing should be based on performance. If a network has faith in their affiliates, they shouldn’t require a big, up-front investment to start using their service.

Adopt Best Practices to Stop Affiliate Marketing Scams

Any of the above affiliate marketing scams can cause an otherwise profitable campaign to collapse into a major source of revenue loss.

That’s not to say you should cut affiliate marketing out of your business plan, though. Maintaining an affiliate marketing relationship can be extremely lucrative… as long as you take proper precautions.

You should periodically review your affiliate program’s terms and conditions. Keeping terms and conditions up-to-date is one way to close loopholes and prevent affiliate fraud. A good attorney can catch exploitable factors that you might miss. Of course, this also relies on you to uphold your terms and ensure that affiliates are compliant.

Also, remember to keep an eye on your KPIs, or key performance indicators. Managing an affiliate program can be difficult because of the opaqueness of the process. Raw data and relevant KPIs are valuable sources of insight. This may include information from referring sites, sub-affiliate networks, IP addresses, and transaction trends. Deviations — even seemingly good ones — suggest something is wrong.

Have additional questions? Want to learn more about keeping your business safe from affiliate marketing scams and other risk factors? Click below and speak with one of our experts today.