Affiliate Marketing Fraud Damages Your Reputation, Inflates Your Advertising Costs and Generates Client Chargebacks.
Global digital ad spend hit $333.25 billion in 2019, and it is only increasing. It does not matter how accurate your audience targeting is, or how well you focus your ads on the right demographics, affiliate marketing fraud will affect you. It is estimated that one out of every four dollars spent on digital advertising is lost to ad fraud.
Affiliate marketing seems like a dream solution. With the affiliate bringing in customers and you only paying commission for conversions or genuine leads, you have a zero-risk strategy. Either the affiliate marketer succeeds and takes their cut, leaving you with a healthy profit from increased sales, or they fail, and you have wasted nothing.
Unfortunately, like many things that look too good to be true, an affiliate marketing strategy often runs into a glaring problem, fraud. This can be carried out and damaging to your company in a number of ways.
Affiliate marketing fraudsters benefit by taking commissions on sales with stolen credit cards way before it gets charged back. They also benefit from generating bad leads using human fraud farms and stolen information to bypass detection. Either way, your advertising budget is drained, your return on investment takes a hit, and ultimately, so does your business.
How it Happens, and How it Hurts
Affiliate marketing fraud is an incredibly broad term covering many different fraud techniques. New methods of fraud are being developed constantly. There are a few types of affiliate fraud that currently make up the overwhelming number of cases we see.
One of the most common forms of affiliate marketing fraud is using a stolen credit card to purchase goods or services. Fraudsters make purchases through your affiliate link and collect their commission usually before the fraud is discovered. In 2019, there were 271,823 cases of credit card fraud in the United States alone. Fraudsters have no shortage of supply and will often buy card details in bulk to profit from you as much as possible in a short space of time.
Not only will this directly cost you money forking out commission for no sale, but can seriously damage your reputation with payment processors, who themselves want to avoid being the victims of fraud. If this happens too often, you may actually find that a processor cuts ties with you altogether and you will have to seek an alternative solution, costing even more time and money.
This form of fraud is particularly painful if you are selling time-dependent products or services, such as airline tickets, coaching courses, or digital event passes, with the chargeback often occurring too late to replace the lost ‘customer’. A hard loss like this is even more financially damaging than just wasting money on the commission and too many of them can cripple even the most well-managed business.
Cookie stuffing is a process whereby a fraudster loads a modified cookie onto an unsuspecting visitor’s computer. When this visitor buys the product or service, the fraudulent affiliate is paid the commission, regardless of how they got there. To you the company, it will appear as though they followed the affiliate’s unique link. This allows the affiliate to take your commissions while providing no benefit to your company whatsoever, eating up a valuable budget on hot air.
The added cost of this is that you will see a large number of purchases from this affiliate that were actually sales from other channels or even an honest affiliate having their commission stolen. This can skew cost per conversions on ad campaigns causing you to drop them when they were actually providing a good return on investment or even make successful affiliates abandon you for your competition when their hard work is not rewarded.
Generally, cookie stuffing is carried out through the use of browser extensions, such as ad blockers or a free VPN service. In this way, the users often remain completely unaware they are being used to commit fraud and continue shopping obliviously. Web browsers know this is a big issue, and are doing their best to prevent malicious extensions from being published. 295 of these extensions were removed from Google’s Chrome browser as recently as August 2020, however, it is clear they still have a long way to go.
Bots are not typically the choice tool for a fraudster in affiliate marketing. However, when done correctly, can help the fraudster generate more income through automation. Bots run in the background of their victim’s computers to mimic a real user’s behavior in order to generate fake impressions, clicks, or even leads. Since affiliates are typically paid on a lead or a purchase, bots have to be custom-built for each offer that they will attack.
Click farms are another tool used in affiliate marketing fraud. Click farms use hundreds or even thousands of low-paid humans clicking on links, filling out forms, making purchases, and simulating real customer activity. It is very difficult to detect them because they are actual humans rather than bots or malware. These human fraud farms can easily complete purchases and will rack up commissions for the fraudster while causing harm to your company.
With cookie stuffing, bots, and click farms you could be a victim without even being aware. If you are running an affiliate marketing program, then chances are you are already a victim. These methods can be catastrophic to an affiliate marketing strategy.
To truly get control of affiliate marketing fraud, you need to be proactive. The only proactive strategy is to eliminate fraud before it affects your affiliate marketing program. To prevent damage to your reputation, inflation of your advertising costs and client chargebacks choose to employ an ad fraud solution.
At Anura, we know exactly what you need to eliminate fraud with minimal disruption, and our ad fraud solution is proven to deliver results. Reach out to us today and see how Anura can unlock the full power of your marketing with an in-depth trial. For more information on affiliate fraud and how it affects businesses, check out our free resources like our whitepaper and our ebook, Affiliate Marketing Fraud 101.