If you are a merchant and are selling your products online, you might also be working with fellow affiliate marketers and paying them a commission for every click, conversion or referral they direct to your website and its products. Unfortunately, anytime there is money involved, there is the risk of affiliate fraud.
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What is affiliate fraud?
In brief, affiliate fraud refers to the cheating of merchants, affiliate marketers and/or buyers out of money and/or product using illegal practices. Typically, affiliate fraud involves tricking merchants into paying out affiliate commissions for nonexistent purchases.
Affiliate fraud occurs a number of ways. In some cases, the tricksters employ third parties or software to click on CPC/PPC ads while they collect the profits (i.e., click fraud). In other cases, fraud affiliates hijack a sale and redirect it to a duplicate site that then accepts the buyer’s information. As a result, the merchant pays a commission to the duplicate site (and the fraudster behind it) instead of to the original affiliate marketer who generated the sale.
Some entrepreneurial fraud affiliates go as far as using stolen credit card numbers to make purchases from the merchant. Those purchases are eventually refunded to the buyers, but the affiliate commissions have long since disappeared to the perpetrators of these bogus sales.
Buyers can be affected by affiliate fraud too. In some cases of fraud, buyers are directed to checkout pages that contain a typo in the merchant’s domain. These fake checkout pages not only steal buyers’ money upon checkout, they eventually lead to a high rate of chargebacks, resulting in merchants losing out on their profits.
Other fraud affiliates clone entire product pages and redirect traffic there, harvesting clicks and conversions.
Fraud affiliates can also combine their deception strategies, such as by tricking buyers into clicking on a merchant’s banner ad in order to ‘learn more’ about the product or to contact support.
How to spot affiliate fraud
In many cases, you can determine that there is affiliate fraud at play. If your CPC ads are suddenly experiencing a sharp increase in clicks yet their conversion rates remain low, then you might just have affiliate fraud. If you see massive increases in traffic from locations that aren’t your typical customer base, you may have an unethical affiliate on your hands.
You can do due diligence to a point, such as by regularly checking referring URLs to spot typos. You can also examine payments at the transaction level to better understand where that transaction originated and who the buyer actually is.
However, such vigilance only works up to a point and will take up more and more of your time as your affiliates and buyers grow. To this end, your best bet is to invest in affiliate fraud detection software. There are many different platforms available, including ScrubKit, CPA Detective, Improvely, Corsearch, RiskIQ, TypoAssassin, and PlanetPayment. Some of these platforms, as their names suggest, focus on one key aspect of the affiliate marketing process, while others are more generalized and detect many types of fraud.
Also, some affiliate networks, such as Clickbank, offer their own fraud detection solutions for merchants. Before you sign up with various affiliate networks, ask them how much fraud protection they offer as one of the perks of being a member.
How to prevent affiliate fraud
It is highly recommended that you “vet” new affiliates before working with them by checking out their websites and finding out if that website is related to the products your selling.
It also doesn’t hurt to sign up to your own affiliate emails and promo offers to spot spamming issues and/or marketing practices that don’t fall in line with your established rules. Naturally, you should maintain separate and dedicated email addresses for this exercise so that you don’t end up flooding your own personal inbox with email.
Consider having a yearly sales conference with your affiliates to find out how they are doing and to bring them up to speed with developments and issues.
You should also maintain a list of affiliates that you have rejected or excluded from your network. Such affiliates often reapply by simply plugging in a different website or IP; however, if you have some key information on them, you’ll rediscover them long before they start pitching your products.
In some product industries, merchants maintain files on affiliates who have engaged in fraud. It’s useful to ask about such possible records, and to keep those violations in mind should those same affiliates come knocking on your virtual door.
Is affiliate fraud avoidable?
Affiliate marketing is now in its tenth year and shows no signs of decline. Because it is a big business, fraud and scams are naturally going to become part of the equation. However, you can take steps to spot and stop con artists from taking advantage of you, your legitimate affiliates, and your customers. Affiliate networks are also growing more cognizant of affiliate fraud and ways to prevent it.