Imagine paying commissions for website clicks that never come from interested users. That is affiliate fraud.
Affiliate fraud is a type of ad fraud in which people manipulate an affiliate marketing program for illegitimate gain. They generate fake clicks, leads, or sales and steal commissions.
Affiliate fraud prevention is paramount because it can help ensure you do not waste your ad budget on fake leads, protect your campaign data, and safeguard your brand image.
In this article, we dive into the world of affiliate marketing fraud:
- The most common affiliate program structures
- Types of Affiliate Fraud
- How to detect and prevent affiliate fraud
- How Spider AF can help you stop affiliate fraud
Common Affiliate Program Structures
Let’s start with how reward programs work and the potential vulnerabilities of each structure.
Pay-per-click (PPC)
This is a common reward structure in which affiliates earn a commission for each click directed to the advertiser’s website.
Many well-known companies use this strategy to advertise their content and services, such as Buzzfeed, in “Tasty” video recipes. Affiliates promoting these recipes earn a commission for each click on Buzzfeed’s webpage.
However, PPC programs are highly susceptible to click-injection fraud. Fraudsters can generate clicks on the affiliate link using automated programs like bots and inflate affiliate clicks without genuine user interest.
Pay-per-sale (PPS)
Also known as CPA (Cost-Per-Acquisition), the PPS approach is also very used among companies. Affiliates get a commission for every completed sale they generate their unique affiliate link.
Best Buy is a great example of a company that offers a PPS program. Every time an affiliate drives a visitor to the Best Buy website through their affiliate link that makes a purchase, the company rewards the affiliate with a commission.
PPS affiliate programs are attractive and can generate plenty of sales. However, when you do not use affiliate fraud detection services like Spider AF to track unusual activity and monitor buyer patterns, fraudsters take advantage of this reward structure to earn commissions illegitimately.
For example, they buy products through the affiliate links with stolen credit cards that eventually are flagged, thus charging back these purchases. They also hijack existing customer accounts through phishing scams or malware.
Pay-per-lead (PPL)
In PPL reward structures, affiliates are rewarded for qualified leads they bring in. This encourages them to target genuinely interested users with a higher chance of converting.
Grammarly, for instance, offers a PPL program in which affiliates earn rewards for qualified leads generated through their links. However, emphasizing lead generation creates two potential problems: fake lead generation and data quality concerns.
As for the first, fraudsters can exploit loopholes by submitting made-up information through forms to inflate lead counts, meaning the advertiser pays for useless leads.
The latter means fraudsters can skew customer data, making it difficult to understand the target audience and optimize ad strategies.
Revenue Share
With revenue share, affiliates do not earn per click or sale. Instead, they earn a percentage of the total sale value they drive.
Sephora is a well-known example of a brand with an affiliate program based on revenue share. Affiliates earn a percentage of the total sale value of their beauty products purchased through their unique link.
While this approach motivates affiliates to promote higher-value items, fraudsters can take advantage of loopholes. For instance, they might exploit the return policy by making multiple purchases through affiliate links, inflating the affiliate's commission. They then return the items shortly after, essentially getting a commission without any actual customer value generated.
Tiered Commissions
This structure rewards affiliates with increasing commission rates as they achieve higher sales or lead generation milestones.
The freelance marketplace Fiverr offers increasing commission rates to affiliates as they generate a higher sales volume. By keeping the top-performing affiliates motivated, the platform can expand its reach.
On the other hand, the tiered commissions program can become highly demanding, leading affiliates to resort to fraudulent activities, such as generating fake purchases and prioritizing quantity over quality to achieve sales milestones and receive bigger payouts.
Types of Affiliate Fraud You Should Look Out For
Now let’s get into the most common types of affiliate fraud in the marketing world.
Fake Traffic
Fraudsters use bots or other automated or manual methods to create fake website traffic and manipulate affiliate links. This generates a surge in clicks that never translate into conversions.
Invalid clicks make advertisers waste resources and pay out commissions for fraudulent activity. And to make matters worse, they can be extremely hard to detect.
Cookie Stuffing
Cookie stuffing is like invisible tracking. Fraudsters embed invisible tracking codes, also known as cookies, on several websites or online ads.
When a user visits these websites, the cookies are placed on the user’s browser, even if they do not click on the affiliate link. Later, if the user makes a purchase, the affiliate receives a commission or percentage for the sale, even though their link was not directly involved.
Click Injection
Click injection is a type of affiliate marketing fraud that occurs when a fraudster uses a mobile app to inject a fake click just before a legitimate click.
These fake clicks are directed toward specific affiliate links, generating unearned commissions.
Domain Spoofing
Domain spoofing is like an impersonation. Fraudsters create websites that look like one of a legitimate company or service to redirect traffic to an affiliate program.
This tactic damages the reputation of the advertiser and affiliate network by creating a negative user experience. In addition, it can lead to phishing attacks and identity theft.
Pay-Per-Click Fraud
Also known as brand bidding, this tactic involves using the brand’s name as a keyword in a paid search advertising campaign to redirect traffic to a fake website instead of the brand’s official website.
When users search for the brand, they click on a fraudulent ad instead of the one that belongs to the actual brand. Naturally, this leads to irrelevant clicks that exhaust the advertiser’s budget.
Affiliate Collusion
Organized groups of affiliates can also orchestrate affiliate fraud. This practice goes by the name of affiliate collusion, and it can be especially hard to detect without specific fraud detection tools as it involves multiple individuals working together.
Attribution Window Manipulation
Fraudsters can also trick attribution systems to defraud advertisers. One common tactic is attribution window manipulation.
Affiliate programs generally credit sales to the affiliates whose link was clicked within a specific timeframe (attribution window). Fraudsters exploit this by using a series of redirects or manipulating timestamps to ensure their affiliate link gets credited.
Detecting Affiliate Fraud
Here's how businesses can leverage various methods and tools to detect and prevent affiliate fraud.
Analyze Traffic Patterns: Regularly analyze website traffic patterns to identify suspicious activity. Look for sudden click surges, abnormal click-through rates (CTRs), or a significant influx of traffic from unexpected geographical locations.
Monitor Conversion Rate: Monitor conversion rates for different affiliate links. A significant discrepancy between an affiliate's click-through rate and conversion rate (plenty of clicks but little-to-no conversions) might indicate fraudulent activity.
Analyze Cookie Tracking: Monitor cookie placement and behavior. Look for excessive cookie stuffing or suspicious cookie lifespan associated with specific affiliates.
Use Affiliate Network Fraud Detection Features: Many reputable affiliate networks offer built-in fraud detection tools that analyze traffic patterns, identify suspicious activity, and flag potential issues for further investigation.
Utilize Web Analytics Tools: Use web analytics tools like Google Analytics to monitor website traffic and user behavior and identify potential sources of fraudulent clicks or referrals.
Work with Third-Party Fraud Detection Services: Specialized companies offer fraud detection services specifically designed for affiliate marketing programs. These services utilize advanced algorithms, machine learning, and data analysis to identify fraudulent activity in real time.
Preventing Affiliate Fraud
Start by building a secure foundation. Establish terms and conditions for the affiliates that clearly outline acceptable and unacceptable practices, select reliable affiliates by making background checks, website traffic analysis, and reference checks, and protect affiliate accounts from unauthorized access through strong password policies and multi-factor authentication.
Technology can also help you further protect your campaigns. Employ third-party services that offer advanced fraud detection algorithms. Sophisticated tools like Spider AF analyze traffic patterns, identify suspicious click activity, and flag potential anomalies in real time.
Finally, maintain a clean environment. Regularly clean and organize your affiliate program data, keep open and transparent communication with your affiliates, and analyze key metrics like conversion rates and CTR to monitor the performance of your affiliates.
Spider AF: The Anti-Affiliate Fraud Solution
With potential losses of up to 90% due to affiliate fraud, third-party automated solutions like Spider AF are the most effective way of detecting and preventing affiliate fraud.
Spider AF’s Affiliate Protection identifies and prevents several types of affiliate fraud, such as click injection, fake traffic, fraudulent lead generation, and more. We combine AI technology and a proactive approach to identify and block deceptive activity, thus preserving the integrity of your affiliate campaigns and rewards programs.
You will have visibility into all detected invalid activities and access to features like placement and keyword insights. Spider AF continuously monitors your website’s traffic to ensure the correct setup of configurations.
Affiliate fraud prevention involves tools and technologies aimed at marketers and affiliate networks to identify and stop fraudulent activity that significantly impacts campaign performance and ROI.
Start preventing affiliates from misleading users with fake incentives. With an easy and quick setup in two steps, we detect, flag, and block illegitimate practices, ensuring your audience engages with your brand genuinely.
Recap
Affiliate fraud can significantly harm affiliate marketing campaigns by draining your budget on fake clicks and conversions. This can lead to wasted resources, skewed data, and a damaged brand reputation.
The article outlines methods to detect affiliate fraud, such as analyzing traffic patterns, monitoring conversion rates, and using affiliate fraud prevention and detection tools. You can also prevent fraud by establishing clear terms and conditions, selecting reliable affiliates, and implementing strong password policies.
Do not let affiliate fraud steal your profits – start building a secure and trustworthy affiliate network today by implementing these steps and working with specialized anti-fraud tools like Spider AF!
