Affiliate marketing has become an increasingly popular way for companies to drive traffic and generate sales. However, with the rise in popularity comes an increase in affiliate fraud, which can cost businesses millions. In this comprehensive guide, we will define affiliate fraud, explain how it works, outline the common fraud methods, and provide tips to prevent affiliate fraud from impacting your business.
What is Affiliate Marketing?
Before diving into affiliate fraud, it‘s important to understand what affiliate marketing is. Affiliate marketing is a performance-based marketing strategy where a company recruits affiliates to promote its products or services. The affiliates receive a commission for each customer they refer to the company.
There are a few different types of affiliate marketing models:
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Pay-per-sale (PPS) – Affiliates earn a commission for each sale they generate. This is the most common model.
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Pay-per-lead (PPL) – Affiliates are paid for generating leads, such as newsletter sign-ups or contact form submissions.
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Pay-per-click (PPC) – Affiliates earn a commission each time a user clicks on their affiliate link to the company‘s website.
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Pay-per-action (PPA) – Affiliates are compensated for other user actions, like app downloads or account registrations.
No matter the model, the idea is that affiliates promote the company‘s offerings in exchange for a cut of the revenue or other compensation. This arrangement benefits both parties, as the company only pays when affiliates drive real business results.
What is Affiliate Fraud?
Affiliate fraud refers to any fraudulent activity or invalid actions taken by affiliates to generate undeserved commissions from a company‘s affiliate program. Affiliates may use a variety of deceptive tactics to make it appear as if they‘ve brought in legitimate sales or leads, when in reality, it‘s fake activity.
Some examples of affiliate fraud include:
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Cookie stuffing – Placing commissions-tracking cookies on users‘ devices without their consent. This allows affiliates to get credit for sales they didn‘t generate.
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Invalid clicks – Using bots or click farms to artificially generate clicks on an affiliate link.
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Fake leads – Submitting leads with false or stolen information just to collect the bounty.
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Fake sales – Using stolen credit cards or posing as real customers to generate orders.
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Trademark bidding – Bidding on trademarks as keywords without permission to piggyback off a brand.
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Typosquatting – Registering domains with slight misspellings to intercept mistyped URLs.
Affiliate fraud ultimately cheats merchants out of commission dollars. It also gives honest affiliates an unfair disadvantage. That‘s why it‘s crucial for companies to monitor affiliate activity and have protective measures in place.
How Affiliate Fraud Works
To commit affiliate fraud, scammers exploit vulnerabilities in the various payout models and tracking methods. Here are some of the ways they game the system:
Pay-Per-Sale Fraud
In pay-per-sale programs, one popular tactic is using stolen credit cards or gift cards to generate sales. The affiliate places an order using fraudulent payment details to earn their commission. However, when the merchant attempts to charge the card, the transaction bounces.
Fraudsters may also use proxy IP addresses and fake accounts to make orders appear legitimate. Clearing cookies between orders can disguise the fact that the sales are coming from a single source.
Pay-Per-Lead Fraud
With pay-per-lead programs, affiliates are paid when a visitor fills out a form, signs up for a trial, or takes another valuable action deemed a "lead."
Scammers often create fake leads with false information just to get the bounty. Other times they will steal identities or purchase lead lists on the black market. They may also use automated bots to fill out forms en masse.
Pay-Per-Click Fraud
Since affiliates earn a commission when users click their links, fraudsters have developed sneaky ways to generate invalid clicks.
Some methods include:
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Cookie stuffing – Loading cookies on users‘ browsers without consent so they get credit for clicks.
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Click farms – Using low-paid workers to manually click links over and over.
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Click bots – Bots programmed to simulate clicks from unique IP addresses.
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Click injection – Malware on users‘ devices that cause phantom clicks without interaction.
Other Affiliate Fraud Tactics
Along with abusing common payout models, fraudsters use other deceptive tactics like:
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Typosquatting – Registering misspelled domains to intercept mistyped URLs and earn commissions.
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Arbitrage – Taking advantage of better offers from competing affiliate programs for the same product.
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Coupon stacking – Combining multiple coupons or promo codes to earn higher commissions.
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Trademark infringement – Bidding on trademarked keywords without permission to piggyback on brands.
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Deep linking – Skipping the homepage and linking directly to inner-pages to conceal the referral source.
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Spyware – Installing tracking cookies through deceptive downloads to get credit for sales.
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Quality score manipulation – Artificially boosting rankings in search affiliates by exploiting loopholes.
As you can see, fraudsters are creative in finding ways to game affiliate programs. That‘s why constant vigilance is required.
Common Affiliate Fraud Methods to Watch Out For
While affiliate fraud comes in many forms, there are a few prevalent methods that represent the bulk of abuses today. Being aware of these top schemes is the first step in protecting your business.
Cookie Stuffing
Cookie stuffing remains one of the most rampant affiliate fraud tactics. With cookie stuffing, affiliates place tracking cookies from various merchants on users‘ browsers without consent. This allows them to receive commissions for purchases or actions that they didn‘t directly refer.
Some common cookie dropping methods include:
- Hidden links on websites
- Malicious browser extensions
- Software downloads
- Deceptive ads or banners
When users eventually make a purchase on one of the merchant sites, the cookie registers the affiliate commission—even though they provided no real influence.
Incentivized Traffic
Many affiliates rely on incentivized traffic sources to drive clicks. This includes paying users small sums or offering prizes to click their links. Often these users have no real interest in the product or service. Their sole motivation is the incentive being offered.
While not overtly fraudulent, incentivized traffic violates many affiliate program terms. The clicks are of poor quality and have little chance of converting.
Typosquatting
Typosquatting involves purposefully registering domains that are slight misspellings of popular merchant sites. For example, amzon.com instead of amazon.com. The goal is to intercept users who accidentally mistype the URL.
The user gets redirected to the real site, triggering the affiliate cookie and commission for the typosquatter. But they provided no real value to the merchant.
Affiliate Link Collusion
Also known as cart sharing, this scheme involves two affiliates working together through their links. The first affiliate attracts the user and gets them to add items to their cart. Then the second affiliate enters and gets the abandoned cart commission when the user eventually completes checkout.
While not directly fraudulent, this method allows affiliates to collect commissions without fully influencing the sale.
Loyalty/Reward Programs
Some software bundles that affiliates market to users come with "loyalty" programs. These background programs detect when users visit merchant sites and then display reminders about earning points or rewards.
The reminders entice users to click the affiliate link again to shop. This tricks merchants into paying multiple commissions for a single sale.
Review Manipulation
Many affiliates operate review sites that allow them to rank high for product keywords. Unethical affiliates will manipulate reviews to favor merchants they are affiliated with—either by giving positive reviews or bashing competitor products.
Deceptive reviews earn commissions while depriving users of impartial information. This violates FTC guidelines.
Deep Linking
With deep linking, affiliates send users directly to inner product pages rather than merchant homepages. This conceals the fact that the traffic is coming through an affiliate. It‘s against most programs‘ terms.
Deep linking denies merchants data on traffic sources. It also allows affiliates to earn commissions while avoiding promotional guidelines.
How to Prevent Affiliate Fraud
Affiliate fraud drains budgets and damages trust in affiliate programs. The key is implementing protective measures to deter fraud and catch it swiftly. Here are some tips:
Closely Screen Affiliates
Start by carefully vetting all new affiliates before approval. Review their website content, advertising methods, and transparency about disclosures. Set a high bar for entry.
Monitor Traffic Quality
Analyze traffic sources, conversions rates, and user behavior across all affiliates. Detect patterns indicative of invalid traffic or deception. Use web analytics and fraud detection tools.
Enforce Strong Terms of Service
Have explicit terms prohibiting all types of fraudulent behavior. Require upfront disclosures about advertising methods. Continuously monitor compliance.
Limit High-Risk Offers
Avoid excessively generous bounties that motivate fraudulent lead generation or sales abuse. Place volume caps as needed.
Implement Device Fingerprinting
Use technology to identify and track returning users across devices to detect patterns of fake traffic and conversions.
Conduct Test Purchases
Occasionally make purchases through affiliate links yourself to verify legitimacy. Look for red flags like deep linking and trademark bidding.
Leverage Proxy Detection
Proxies are commonly used to mask invalid clicks and sales activity. Leverage IP address tracking and proxy detection tools.
Maintain Visibility
Use affiliate link tagging and tracking to monitor clicks and stay visible throughout the conversion process. This deters deep linking.
Communicate Expectations
Keep affiliates apprised of your terms, deal structures, tools, and restrictions. Make it clear fraud will result in swift termination.
The Bottom Line
Affiliate marketing can drive impressive ROI when done ethically and transparently. But unchecked affiliate fraud can quickly negate all potential gains. Stopping fraud requires constant vigilance, high standards, proactive monitoring, and the right fraud prevention tools.
While no program can prevent all fraud, the tips in this guide will limit risks and help reinforce the integrity of your affiliate channel. With greater visibility and control, you can cultivate an affiliate program powered by legitimate advocacy instead of deceit.
