What is Affiliate Fraud?Even “Trusted” Partners Can Scam You, too
What is Affiliate Fraud? Definitions & Basics of Performance Marketing Scams
eCommerce merchants often focus on preventing fraud at signup and checkout. That approach makes sense, as fraudsters typically tend to target security vulnerabilities in the buying journey.
However, some sophisticated scammers take another approach.
Rather than posing as a buyer, they pose as an affiliate or publisher instead. And, unlike genuine affiliates, who send real buyers over to your site and are paid commissions from every sale, fraudulent affiliates attempt to hijack the commission-based arrangement so that they get paid… even if you don’t get any sales in return.
In this chapter, let’s take a closer look at affiliate fraud by exploring what affiliate marketing is and how it can be exploited by bad actors.
Affiliate Fraud
In this guide, we’ll take a closer look at affiliate fraud. We’ll examine common tactics used by fraudsters, talk about how it harms merchants, and explore how you can protect yourself from this type of scam.
A Primer on Affiliate Marketing
Before we dive in, I wanna do a quick refresh on affiliate marketing, just to make sure we’re on the same page.
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.
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.
Affiliate fraud is an established — but growing — problem for businesses that advertise online. 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.
What is Affiliate 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.
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Affiliate fraud occurs when third-party affiliate marketers or publishers use deceptive, unethical, or abusive tactics to generate unearned commissions. The scammer ends up getting paid, regardless of whether you actually receive any sales.
In a broader sense, 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.
How Does Affiliate Fraud Work?
Affiliate fraud typically falls into one of two categories. First, the fraudster may employ deceptive tactics to persuade a cardholder to make a purchase. Or, they might use stolen information to submit fraudulent transactions. In either instance, the cardholder may then file a chargeback to recover their lost funds.
Affiliate fraud can take several forms, depending on your payment model. It may target you via:
Cost-Per-Acquisition (CPA)
Cost-Per-Lead (CPL)
Cost-Per-Click (CPC)
Cost-Per-Impression (CPM)
Influencer Model
By the time the fraud is detected, the affiliate has typically cashed the commission check and vanished. This leaves you responsible for the lost commission, the lost product or service, and any chargeback fees resulting from their scam.
Furthermore, your reputation with banks and clients suffers as your chargeback ratio rises. This may drive card processing rates higher over time, or even eliminate your processing capabilities altogether.
