Affiliate fraud is time consuming, expensive and can seriously jeopardize an entire affiliate program’s business model. Affiliate Marketing is a great way for companies to broaden their reach on the internet but you need to be careful. The only way to fight affiliate fraud successfully is to meet the problem head on, with a comprehensive approach. The range of tricks goes from the traditionally unmistakable monkey business such as cookie stuffing, bogus leads, fraudulent credit card usage to the more creative and well executed cons such as posing as webmasters of high-profile websites and changing their name and address just before the affiliate checks are issued.
Everyone has the potential to be a perpetrator:
- Merchants & Networks
Fraudulent activity by affiliates comes in both automated and non-automated varieties. Payment model for affiliates is pay per sale or pay per click. Pay per click fraud, where affiliates are paid per click for the amount of traffic they bring to the site, can be automated with scripts that are programmed to resemble the activity of real human visitors. These bots are referred to as “click bots” . Click Bots are one of the main sources of pay per click affiliate fraud.
A merchant needs to be aware that rogue affiliates may try to purchases something with a stolen or invalid credit card with no intention of receiving the actual product, but instead a commission for selling that product. Some of the troubles concerning affiliate fraud, can be prevented early in the process by screening your affiliate applications. When looking at a site for potential acceptance, you should be lenient but cautious. One of the mistakes that you do not want to make is to decline an application that could turn into a profitable relationship. However, some applications will come through with “free hosted” sites, or sites that are simply banner farms. Look around the site, check the “About Us” or “Contact Us” page, and look for any anomalies. Things to look out for:
- You should have the ability to view the page where the banner/link was clicked. This will help you to understand the traffic coming from a specific affiliate.
- Use caution when shipping internationally. You need to view the IP address of the buyer. You check this number with a service called Check IP (if by chance the address doesn’t work type “check ip” on google) and compare the location to the shipping address. If the IP address is located in France for example, but the shipping address is in Taiwan, extra caution should be used. Also look for signs of fraud such as: Larger than average order size, Express delivery requests.
- Conversion percentages should not deviate too far from the average, either high or low. Too high of a conversion rate can indicate that the affiliate is either using incentives, or may simply be placing fraudulent orders. Too low a conversion rate, and it could indicate that an affiliate has placed your link or banner in a “banner farm”, or within a desktop application. A good conversion is about one to three sales per two hundred product views (clicks). Don’t confuse this with ad/banner impressions.
- Unless you are an independent network, you never should offer pay per click payments to your affiliates. This model is way to risky to be carried out by one or few individuals. If you have a product and would like to have your own affiliate program without joining an established network, the only proper and most rewarding affiliate model is pay per sale.
- Credit card fraud done by affiliates in an effort to earn commissions are usually easy to spot. There will be low numbers of orders and low numbers of clicks. Three clicks, one fraudulent sale is more likely to be an affiliate issue than 30,000 clicks, 500 valid sales, and two fraudulent sales.
- The majority of your affiliate generated sales will come from an elite group making up a small percentage of your overall affiliate base. You should make it a habit to review and know who these affiliates are. Not only because this communication and knowledge will help you motivate your best affiliates, but because it will become easier to identify any bad ones. If a brand new affiliate is able to break into your Top 10 for the month, for example, you should check out the site and the orders that came through for any anomalies or patterns.
- Are the affiliates producing too much traffic and no conversions? Watch out for the conversions that your affiliates produce. If there are conversions in non affiliate traffic and the affiliate is not able to produce a reasonable number of conversions despite off making you write an hefty cheque every month for the loads of affiliate traffic generated then it’s most probably an affiliate fraud case.
- Watch out for difference in patterns in traffic without affiliate traffic and then match it with affiliate traffic and mark the unusual spikes in traffic
- If you’re a network or a big merchant, use the phone! An affiliate manager should contact each and every one applicants via telephone, evaluate potential traffic, offer campaign suggestions and let them know about our special affiliate promotions available to them. This “Welcome Call”, when done properly is always received as positive and strengthens the relationship between affiliates and their affiliate manager.
If you receive an affiliate-generated sale which appears to be fraudulent, you should note that the affiliate that referred the sale may have had nothing to do with the fraud, so immediate accusations should be avoided. First step to take is to void the commission through your interface, so that it is not paid out to the affiliate. The next step would be to attempt to gauge if the fraud is a deliberate attempt by the affiliate to earn commission, or is simply an unrelated event as far as the affiliate goes. When it comes to the subject of fraud, subscribing to the belief that an ounce of prevention is worth a pound of cure will keep your affiliate program going in the right direction!
Merchants & Networks
Networks or merchants, if they have the sufficient privileges, can raise the percentage they take before paying you commission and report less leads/sales without you knowing it. Network and merchants do that because it was their intention all along or because they are in a distorted road, right before bankruptcy and trying to survive. Therefor if you are an affiliate it is essential that you choose a good and reputable network you want to advertise for.
List Of Reputable Affiliate Networks
- Commission Junction
- Amazon Associates
Some people will go as far as making purchases using stolen credit cards, fraudulent checks that will bounce, illegal paypal chargebacks or register using fake identification information. The purchases turn later in refunds and chargeback, but the merchants have already paid the affiliate commission. Usually of the transactions are screened by affiliate networks. They check the card numbers, IP’s and everything else that could indicate a fraudulent purchase. They have a huge database of fraud transactions that they built over the years, so this can be one reason more to choose an affiliate network such as Clickbank instead of using an affiliate script to manage your affiliate program on your own.
- Parasiteware Forum – Helpful to keep abreast of anything and everything about known parasites.
- Affiliate Manager Fighters Forum – Affiliate managers convene here to share war stories of fraud breaches and to warn each other.
- Affiliate Fair Play – An effort to establish industry accepted fair trade practices in affiliate marketing.