The Value of Performance Marketing and the High Risk of Fraud
What is Performance Marketing?
Performance marketing can span many marketing channels, but in short, it is a digital advertising program that is paid based on the achievement of specific, pre-set quantifiable goals—for example, providing a sales-qualified lead (SQL), a completed sale, a subscription sign-up, etc. As a form of digital marketing that is measured by results, i.e., hitting a pre-defined goal, you may ask, “Aren’t all marketing campaigns measured by results?” Of course. At the core of performance marketing is a quantified ROI. Instead of achieving a set number of impressions that may or may not lead to sales, performance marketing is designed to add directly to your company’s bottom line.
Why Should You Consider Performance Marketing?
Typically, the cost per acquisition is lower and the ROI is higher since performance marketing campaigns are tied directly to revenue-generating results. In addition, the performance of an ad is trackable and monetarily measurable since the campaign’s goals are tied directly to certain achievements.
The top channels for performance marketing include:
Banner (Display) Ads
Much like a print ad in a magazine, these are graphics displayed on the margins of a site. They can have performance-marketing metrics, measured through tracking cookies, tied to when a user performs a particular task. Note that with a new brand, banner ads are typically less effective in encouraging people to take monetary action.
This form of advertising can lead to higher click-through rates due to positioning ads seamlessly alongside organic content. However, although they’re more successful than display ads, it may take a consumer several other brand mentions before they take action from the ad.
Content or Inbound Marketing
Providing valuable information to your audience through thought leadership or other information (whitepapers, case studies, blogs, etc.) is more cost-effective than other outbound marketing efforts.
Engaging with potential new customers via social media is a potential gold mine for performance-marketing campaigns. The opportunity for organic and paid outreach to draw in consumers can yield some of the highest ROI in performance marketing.
Search Engine Marketing (SEM)
Using a cost-per-click approach can lead to successful performance with SEM, but only if your brand’s site is optimized to funnel people to take a monetarily-related action once on your site. SEO, content marketing, and backlinks are all needed to make the best use of SEM.
Customer acquisition and retention may be your key performance indicators (KPI) in initiating any marketing outreach via one of the methods above. The difference in performance marketing is assigning a quantifiable dollar amount to that acquisition and measuring the success of a particular outreach to that ROI. This direct performance approach puts trackable measures in place per advertising channel instead of tying multiple touchpoints to a single sale or subscription.
Now, how do you switch from traditional goals to monetary ROI goals with performance marketing? Many companies use ad agencies or affiliates to publish and monitor their outreach.
Who and What Is Involved with Performance Marketing?
Typically, performance marketing campaigns are set between a company and a third-party agency that publishes the digital ads and other optimization outreach to garner the performance results agreed upon for a specific campaign. Whether that is a direct sale, a subscription sign-up, a SQL, or another performance metric, the publishing agency and the company should agree on how the metric is tied directly to company revenue.
Commerce solution provider BigCommerce outlines the groups that comprise performance marketing partnerships:
Retailers or Merchants
These are the companies or brands looking to acquire new customers with performance marketing.
Affiliates or Publishers
These partners of a company or brand use their influence over a desired audience to attempt to draw them to a new paid consumer or SQL to the original company. Social media influencers, brand ambassadors, and affiliate bloggers are all examples of this type of partnership established for performance marketing campaigns.
Affiliate Networks and Third-Party Tracking Platforms
There are a variety of platforms available to companies and marketing teams specifically designed to monitor and measure a performance marketing campaign. Keeping track of metrics, goals, KPIs, and ROI is the purpose of working within this type of platform.
Affiliate Managers or Outsourced Program Management (OPMs)
There are a variety of marketing partners, aka affiliates, whose sole role is to execute and monitor specific performance marketing campaigns. They partner with internal marketing teams to scope, define, implement, and monitor the various advertising efforts of a company.
Is There Fraud in Performance Marketing?
Undoubtedly, yes. Anura wouldn’t exist if I didn’t evaluate every digital marketing opportunity with an eye on potential fraud.
There are several potential pitfalls to a performance-based marketing approach. Fraud can permeate all eight marketing performance metrics. It can be difficult to measure true performance marketing ROI due to a number of shortcomings with any digital marketing. However, with performance marketing the stakes are even higher because of the revenue tie-in.
Another factor making it hard to tie conversion or acquisition to a performance-marketing campaign is the number of times a consumer sees an ad before deciding to act. Many believe in the “Rule of Seven”—consumers need seven touchpoints before they’ll make a move. Therefore, establishing a realistic and feasible conversion rate for a performance-based campaign is key.
With outlining the trackable and measurable metrics within a campaign, it can be difficult to ensure a variety of factors are truthful. Forbes outlines several case studies on how fraud can infiltrate performance marketing results. Unfortunately, there isn’t a brand out there not facing fraud. However, larger companies can typically recoup and pivot their efforts quickly. On the other hand, smaller companies and brick-and-mortar stores face a harder time recovering from this type of fraud.
Where to Beware
There are six primary areas fraud can penetrate in performance marketing:
1. Data Validation and Data Dumps
Data verification is a 101 to digital marketing. But when working with affiliates or third-party partners for a performance-based campaign, your company can lose control of the incoming data validation process. Affiliates and digital agencies have the incentive to bolster or fluff data for better results and, in turn, receive more money from you.
2. Domain Spoofing
Google is the number one search engine out there, taking up nearly 84% of market share. It makes sense to run Google ads to drive conversion for your brand. This market share means that almost any domain is fair game. Your company’s domains must maintain their position on search engines. Domain spoofing occurs when fraudsters alter your domain slightly and impersonate your brand to lead users away from your site and to theirs, where they can capture any amount of data about users. The users believe they interacted with your company and will likely blame your brand if fraud is exposed.
3. Incentivized Traffic
Alongside data validation is another form of fraud that comes from falsely incentivizing consumers to click on your ads, visit your site, and be drawn into buying something after being promised an incentive. The incentive can be in the form of coupons, discounts, monetary rebates, or other offers. Beware, attrition and loyalty rates are dismal when incentivizing purchases. Your performance-based campaign may be wildly successful the first go, but results will likely dwindle to zero once your audience is tapped out using this method.
4. Pixel Stuffing
Affiliates and agencies have been guilty of pixel stuffing to improve impressions and cost-per-mille (CPM) results. When it comes to performance marketing, asking detailed questions about ad placement and scanning user data for real human activity is crucial in eliminating the potential for pixel stuffing and watering down your performance campaign ROI.
eBay’s two largest affiliates were caught with major cookie stuffing without user consent to boost revenue share directly from eBay. Uber sued 100 mobile exchanges for fraudulent clicks through ads that they were told were on sites but were not actually run. This deceit can happen to the biggest of companies!
5. Geo Masking
Hiding the location of where user traffic is coming from is a classic fraud scheme. Knowing your audience and having accurate personal data for who your company’s buyers are is key to avoiding this type of fraud. International brands have a heightened responsibility to track down user locations. Likewise, brick-and-mortar locations need to ensure new leads are within their store’s buying zones.
T-Mobile faced serious fraud in a promotional sweepstakes campaign. Bots created thousands of fake submissions filtering back to a tiny town in Pennsylvania—conveniently run by an amateur scammer who wanted the gift cards delivered close by.
6. General Click Fraud
We’ve previously discussed several marketing pitfalls related to click fraud. It’s estimated that 17% of all pay-per-clicks are fraudulent. In order to make a return on your performance marketing investment driving clicks, you’d need to reduce your results by at least 17%, although we estimate in some cases it can be up to 25%.
But There’s Good News—You Can Effectively Harness the Opportunity of Performance Marketing and Cheat the Cheaters
My sole purpose in being in the fraud prevention space is to help all businesses recognize their weak points and identify and fix where fraud is affecting marketing performance. We’ve developed a FREE estimation tool to see how much ad fraud costs your business.
We are so confident in our solution’s effectiveness—featuring a 99.999% accuracy rate in weeding out bad data and bad leads—we will prove it with a FREE trial. After you install this powerful tool, you’ll have full access to a comprehensive dashboard to see what type of fraud your company is already interacting with and then have the means to stop it.
Performance marketing is a step towards better measurement of digital marketing spend and achieving acquisition results. Don’t let fraud detract from your revenue!