Affiliate marketing fraud is an enormous problem for any company wanting to advertise its products through a large network of affiliates with their own audiences. In this form of marketing fraud, affiliates abuse various strategies to inappropriately take money from affiliate programs without actually doing much to promote the companies they are taking money from.
Additionally, the misattribution of leads and customer activity from legitimate affiliates to fraudsters can take money from the affiliate who works the hardest to bring in new customers. This, in turn, can lead to honest affiliates leaving the program since they don’t get paid for the results they generate.
How Big Is the Problem of Affiliate Fraud?
Data collected by Anura from past clients reveals that affiliate marketing programs suffer from an average of 40% fraud. This means that, for every $5 you spend on affiliate marketing, $2 is being stolen from you.
The bigger your affiliate marketing program is, the worse the problem of fraud will be.
However, this type of online marketing fraud isn’t completely insurmountable. There are ways to prevent affiliate fraud and minimize its impact on your ad spend and marketing ROI. In fact, numerous businesses have stopped affiliate marketing fraud in the past, and continue to thwart the efforts of fraudsters to this day.
3 Common Trends in Affiliate Marketing Fraud
Before highlighting the examples of companies that beat the fraudsters, it’s important to know some of the trends in affiliate marketing fraud so you can come up with strategies for beating specific tactics.
Learning to anticipate trends in marketing fraud is a key part of knowing how to prevent fraud in business.
1. Affiliate Fraud Is Increasing in Sophistication
Early affiliate fraud schemes often used very simple bots to create fake clicks or applied simple tricks to create fake impressions without generating results. However, marketers learned about these tools and started using software solutions like CAPTCHA to thwart these unsophisticated bots.
Instead of stopping affiliate fraud, however, these simple defenses simply spurred the fraudsters to create new tools that could bypass them. Modern affiliate fraud schemes now leverage much more sophisticated bots that can get past CAPTCHA, reCAPTCHA, and other publicly-available Turing test solutions—turning these protections into a simple annoyance for the real humans trying to use a service or claim a special offer in an ad.
Additionally, some fraudsters employ “human fraud farms” that use live people to click on ads, fill out forms, or perform other actions to get credit for “cost per action” (CPA) marketing campaigns that only pay out when a lead does something specific.
As time goes on, it is a certainty that fraudsters will continue to create more sophisticated schemes to steal money from companies trying to promote their products and services.
2. Fraudsters will Use Mobile Device App Stores to Spread Bots for Affiliate Fraud
One of the ongoing trends for affiliate fraud is that fraudsters are deploying malicious apps on mobile device app stores to trick people into downloading bots. No less than three examples of this practice can be found in a Tech Crunch article: “as a result of Google’s ongoing investigation into the situation, it has discovered three malicious ad network SDKs that were being used to conduct ad fraud.” Specifically, the malicious ad network SDKs mentioned in the article were called AltaMob, BatMobi, and YeahMobi.
The real issue isn’t that the apps contained malware that planted bots on mobile devices, it’s that “the developers with the SDKs (software development kits) installed aren’t necessarily aware of the SDKs’ malicious nature.” App developers looking for simple and cheap software to develop their apps for the Google Play store and other mobile stores become unwitting partners in fraudsters’ schemes.
3. Fraudsters Posing as More Reputable Affiliates or Inflating Their Social Media Presence
To trick potential victims into spending more money on their fraudulent leads, some fraudsters are trying to make their websites and social media channels look more robust and reputable than they actually are. One of the ways that they do this is with domain spoofing for their websites. Another by using purchased followers for their social media.
Domain spoofing in affiliate marketing is when an affiliate intentionally disguises their website as a different, more valuable website. This is often done so the fraudster can charge more for advertising on their site.
Purchased followers inflate an affiliate’s social media profile to make them look bigger and more successful than they actually are. This makes the fraudster’s social media channel more appealing to affiliate marketing programs. Fraudsters can also use bots on their social media channels to increase engagement with any affiliate marketing ads they place there—allowing them to charge for more impressions and “interactions” despite them all being fake.
These are just a few of the trends in affiliate marketing fraud that have persisted throughout the years—largely because they have been so successful for fraudsters. As time goes on, it is likely that scammers will continue to make schemes that leverage even more sophisticated tools and techniques to defraud affiliate marketing programs.
How 3 Companies Put a Stop to Affiliate Marketing Fraud
Another important step in learning how to detect and prevent fraud in CPA marketing affiliate programs (and other types of affiliate marketing payment plans) is to take a look at the successes of others. What did other companies do to prevent affiliate fraud? Which ways to prevent fraud in business generated the most consistent and positive results?
Here are a few examples of companies that were able to successfully put a stop to affiliate fraud:
1. Global Web Services Company
A “Global Web Services” company was facing a problem where they had an unusually large number of chargebacks and other issues that was causing them to lose money. Fraudsters were attacking the company’s websites and infrastructure. Amazon Web Services (AWS), who was the host for the company’s infrastructure, alerted them to these attacks against their infrastructure. So, the company began looking for an anti-fraud solution.
Their search eventually led to the Anura ad fraud solution, which the company launched in January of 2020. Since then, the fraud solution’s machine learning capabilities have allowed it to learn about the company’s interactions and reliably identify patterns that indicate fraud in progress.
As noted by the company’s security, fraud, and compliance specialist: “Any time I see fraud ratios go up, it prepares me for what comes next in terms of our affiliate network. I can always go to Anura, drill down, and find the issue at hand.”
2. Digital Media Solutions
Digital Media Solutions, an independent performance marketing company, was having an issue with its affiliate program. The company’s Best Rate Referrals subsidiary, which specialized in consumer finance, mortgage, and personal loans was seeing a lot of fraudulent traffic coming in from its referral program, and it was affecting their lead quality and marketing ROI.
To combat this problem, they adopted the Anura ad fraud solution. Since implementing Anura, Best Rate Referrals has greatly increased the quality of its affiliate network traffic. They were able to root out the bad actors that were sending them fake leads to mitigate their average fraud rate. This also allowed their sales team to focus on legitimate leads to more quickly grow their business.
Joe D’Aloia, Digital Media Solutions’ Director of Campaign Operations, stated that with Anura, “There’s no more second-guessing why click level traffic is being flagged as bad. Anura detects bad traffic and gives you a clear reason why the traffic is bad.” Having the information they need in a simple dashboard view has helped Digital Media Solutions simplify their process for cutting out bad leads so they waste fewer resources on them. This has helped to fuel growth for the company in the long term.
BriteBox, a company that owns and operates several proprietary websites to create leads for companies in the financial services vertical, was experiencing problems with its affiliate marketing program. Specifically, their affiliate program was slow to launch initiatives because, as noted by Penny Lee, the company’s Head of Sales, “We held back on allowing affiliates to run our offers unless we had met them in person or vetted them through references.”
This manual affiliate verification process helped BriteBox restrict affiliate fraud within their network. However, the delays created by their manual vetting efforts slowed initiatives and took valuable time and labor away from efforts that they could use to build their brand.
To help speed up and automate their affiliate confirmation workflows, BriteBox decided to leverage the Anura fraud detection solution. With Anura, BriteBox was able to, in Penny’s words, “let things go through a little easier knowing Anura will spot the bad leads before getting to our advertiser.” This helped the BriteBox team save some time so they could focus more on growing the business while reducing labor costs for their affiliate marketing program.
How Can You Thwart Affiliate Marketing Fraud and Save Money for Your Business?
In all three of the examples listed above, there was one constant in each company’s strategy for thwarting affiliate fraud: implementing a fraud detection solution. So, if you’re looking for ways to prevent fraud in business dealings with your own affiliate network, this could be a good starting point.
Anura’s fraud detection solution leverages a massive database of past fraud to reliably identify trends and eliminate false positives. If you’re concerned about affiliate fraud in your own network or have noticed that your ROI from your affiliate ad spend is suspiciously low, then now is the perfect time to start a trial of Anura’s solution.