Affiliate Marketing Scams

June 16, 2022 | 11 min read

Affiliate Marketing Scams

Affiliate Marketing Scams: The Top 10 Threats to Avoid & How to Protect Yourself

Affiliate marketing is a reciprocal relationship that benefits everyone involved. Affiliates gain commissions, advertisers sell more products, and consumers get the goods they want. In a perfect world, this would be all there is to know about affiliate marketing.

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

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Affiliate marketing scams are serious business. Today, we’re going to look at the top 10 affiliate marketing scams to be on the lookout for, and examine their impact on merchants. We’ll also offer some tips as to how you can prevent them from happening.

How Serious Are Affiliate Marketing Scams?

Digital advertising is big business, and it’s getting bigger every year. Google Ads raked in nearly $210 billion in 2021. That’s quite the jump from 2016’s $80 billion estimate; in other words, Google ad earnings nearly tripled in just a few years.

There are lots of different avenues to pursue in terms of digital marketing. Affiliate programs, in particular, have proven to be a critical pillar for advertisers, with affiliate marketing spending increasing rapidly year-over-year.

But, while there’s a lot of potential in affiliate marketing, this avenue also comes with a few downsides to keep in mind.

A side-effect of making life more convenient for customers is that bad actors are never far behind. To illustrate, consider the following figures:

Ad fraud is a very serious problem that every merchant should be aware of and prepared for. Affiliate marketing scams, in particular, are a hard-to-identify, but devastating source of loss. It can render entire campaigns unreliable, destabilize markets, and cost banks, consumers, and merchants piles of money.

How Affiliate Marketing Scams Hurt Merchants

So, we saw that merchants stand to lose billions of dollars to affiliate marketing scams this year. How, though?

Each fraud attack targeted at your business can obviously mean lost revenue and merchandise, plus added fees. Looking at affiliate fraud specifically, there are other consequences to consider, too:

Irregular Ad Spending

Affiliate fraud can have a devastating effect on marketing budgets and relationships. Fraudsters count on many advertisers and their partners using pay-per-click (PPC) ads that can be manipulated to register fake clicks. Each fraudulent click wastes a portion of your total ad budget.

Inorganic Traffic

With manipulated data comes inaccurate traffic analysis. Without the ability to gather in-depth analytic data, advertisers can’t tell the difference between human users and bots. This means any reporting would reflect faulty numbers rather than actual traffic, leading to less effective campaigns in the future.

Faulty Decisioning

Skewed data and traffic analytics make it very difficult to know what ads are—and are not—working. It's also hard to tell how best to approach that data, and how your business can learn and grow from that information.

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Affiliate marketing scams can wreak all kinds of havoc on your business. It starts with the information you depend on to make good decisions. It may possibly end with conflict between you and your partners. Even worse, a permanent loss of customer faith and trust.

To defeat affiliate marketing scams, knowing precisely what you’re up against is a good place to start.

The Top 10 Most Common Affiliate Marketing Scams

We recently took a deep dive into the various affiliate marketing scam detection methods out there. To better understand how you may be targeted, though, here are a few of the most notorious affiliate marketing scam examples to watch for:

#1 | Click Spam

Click spam, 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.

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 | Fake Products

This affiliate scam is exactly what it sounds like. A fake product scam occurs when a fraudster creates an ad or webpage for a product or service that doesn’t actually exist, then promotes 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.

#4 | Transaction Fraud

Transaction fraud, or transaction laundering, happens when a fraudster uses stolen credit card or payment account information (think Venmo or PayPal) to process a transaction from an affiliate partner’s account.

When a retailer is targeted by this affiliate 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 account, and eventually, the chargeback fees they will fork over when the affiliate files a chargeback for the fraudulent purchase.

#5 | 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.

#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. To do so seamlessly, the hacker will insert affiliate links and data into their redirect process to profit from that impression.

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, hitting the advertiser for an unearned commission while installing malicious software.

#7 | 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.

#8 | 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.

#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” Networks

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.

Now that we’re better acquainted with the various affiliate marketing scams out there, that leaves us with one key question: how do you keep your business safe?

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Now that we’re better acquainted with the various affiliate marketing scams out there, that leaves us with one key question: how do you keep your business safe?

How to Prevent 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.

The best approaches to deal with this threat are:

Review Affiliate Program Terms & 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 a merchant might miss. Of course, this also relies on you to uphold your terms and ensure that affiliates are compliant.

Keep an Eye on Your KPIs

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.

Seek Help

You don’t have to face affiliate fraud alone. Chargebacks911® offers the industry’s only comprehensive solution for affiliate fraud management. With Affiliate Fraud Shield™ from Chargebacks911, you can eliminate criminal activity, stop bad traffic, and protect their revenue. Click below to talk to one of our experts and learn more.

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