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Fraud Proofing Your Affiliate Program #57

Hello, 👋 

Today, we are delving into the not-so-fun topic of fraud.

TLDR

• Fraud is still a problem

• Types of ad fraud and its evolution

• Some practical ways you can monitor and mitigate against fraud

Let’s get to it!

The Problem

Unfortunately, fraud exists in almost every business, accounting for a significant percentage of digital marketing activity.

Ad fraud is estimated to account for 15% to 30% of digital ad spend globally. This includes practices like click fraud, impression fraud, and fake bot-generated traffic.

In monetary terms, the World Federation of Advertisers (WFA) has estimated that if unchecked, ad fraud could cost advertisers over $50 billion annually by 2025.

It's time to put on your private investigator hats.

Some studies and industry reports suggest that fraud affects between 2% and 10% of affiliate marketing revenue.

It is generally estimated that affiliate marketing fraud costs U.S. businesses around $1 to $1.5 billion annually. This includes losses due to fraud, such as fake leads, cookie stuffing, and bot traffic.

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The topic has come up recently in the MarTech Record community. While fraud has improved significantly in the affiliate marketing community, it’s a constant effort to stay on top of it.

While affiliate marketing fraud has improved over the years with better resources to monitor and improved technical tools to help track and reverse fraudulent actions, significant work remains to be done.

The MarTech Record community recently reported an increase in fraud issues and complaints.

If your brand, agency, or network does not have a specific plan of action to monitor and mitigate fraud risk, then…

What are the types of fraud, and how has it evolved?

• Cookie Stuffing (or Cookie Dropping) involves placing an affiliate tracking cookie on a user's computer without their knowledge. This ensures that if the user purchases later, the fraudster will get a commission even if they did nothing to drive that sale.

• Adware and Spyware: Some affiliates use unwanted software to hijack a user's browser, replace genuine affiliate links with their own, or display their ads even if it overrides an existing affiliate's efforts.

  

  Sherlock Holmes

• Click Fraud occurs when fake clicks are generated manually or through automated bots to make it appear that real users are clicking on affiliate links. 

• Fake Leads or Conversions: Some affiliates generate fake sign-ups, registrations, or other lead-based actions to earn commissions without providing any real value to the advertiser.

• Typosquatting (or URL Hijacking): This involves registering domain names that are misspellings or close variations of famous brands or products. Users who mistakenly type these URLs can be redirected through affiliate links, ensuring the fraudster earns a commission on any resulting sales.

• Wash Sales occur when an affiliate makes a purchase using their affiliate link, intending to earn a commission, and then returns the product.

  

  Mr Robot

• Hidden Ads: Place affiliate ads where users can't see them, such as behind other webpage elements or in 1x1 pixel frames, so they are triggered without user knowledge.

• Self-referral: Some programs offer benefits for referring new affiliates. A fraudster could create fake 'new' affiliate accounts to gain these rewards.

• Spamming involves sending unsolicited messages or posting unsolicited content containing affiliate links.

• Fake Websites or Stolen Content: Creating low-quality or duplicate websites to host affiliate links. This can also involve copying content from legitimate sites.

  

  Murder She Wrote

How you can defend against fraud

1. Screen affiliates thoroughly

   • Manual Vetting: Manually review each affiliate application, checking the website's content, history, and reputation. Use tools like SimilarWeb, SEMRush, A H REFS, and your affiliate network of choice (Impact, AWIN, CJ, PartnerStack, etc.) to analyze traffic sources and verify the legitimacy of their audience. Referring to URL visibility is a must.

   • Background Checks: Check if the affiliate has any history of fraud or suspicious activity. Engage with other brands or your affiliate community (PMA, MarTech Record, trusted affiliate agencies) to see if they have had issues with the affiliate. While networks remove some of the bad guys, far too many get through the network review process and even the brand application process, so it’s important to dive deeper if you see high volume with low visibility or other suspicious behavior.

   • Interview Affiliates: Interview prospective affiliates, particularly those new to your network, to understand their marketing strategies and assess alignment with your brand. While they don’t need to provide all their secret sauce, you need to be able to answer HOW they promote your brand. Gaining visibility into referring URLs is a must here.

     

     True Detective

2. Establish clear program policies.

   • Detailed Terms and Conditions: Your affiliate agreement should include specific clauses against fraud, such as prohibitions on cookie stuffing, ad hijacking, and unauthorized paid search campaigns. Many brands are unaware of the implications of their policies and can leave the door open for approved activity that does not bring value to the brand. While this is not fraud since the brand’s program terms approve it, it’s an opportunity to clarify with partners to maximize incremental value.

   • Regular Policy Updates: Review and update your program’s terms and conditions regularly to adapt to new forms of fraud and ensure that affiliates are always aware of the latest rules.

   • You will want to be clear about marketing channels allowed and provide specifics, especially around channels like paid search

3. Analyze data weekly

   • Behavioral Analytics: Utilize advanced analytics to track unusual patterns such as conversion spikes, high click-to-conversion ratios, or anomalies in geographic traffic distribution.

   • Custom Dashboards: Create dashboards highlighting key fraud indicators, like conversion rates by affiliate, to identify outliers that may suggest fraudulent activity quickly.

   • Benchmarking: Regularly compare affiliate performance against industry benchmarks to spot discrepancies that may indicate fraud.

   • Our system: We have an internal process at RBL to monitor and alert clients to fraud issues or anomalies in data to investigate and address.

   • Additional tools are available to consider, such as Traffic Guard

   

   Law & Order

4. Monitor in real-time

   • Automated Fraud Detection Tools: Implement real-time monitoring tools that can detect and alert you to suspicious activities, such as IP address anomalies or rapid-fire clicks typical of bot traffic.

   • Sub-Affiliate Network Tracking: If you work with sub-affiliate networks, ensure you have visibility into each sub-affiliate individual performance to detect and address fraudulent behavior promptly.

   • Sometimes, it is not fraud—it’s essential to distinguish between fraud and communication or promotional methods. Often, a brand might think that a partner is committing fraud when the partner thinks and promotes within the approved terms and conditions of the network and the brand itself. Hence, it’s critical to be very clear about your program terms and what is allowed and not within various affiliate marketing promotional methods.

   

   The Simpsons

5. Conduct audits

   • Surprise Audits: Conduct unannounced audits of high-performing affiliates to verify the legitimacy of their traffic and sales sources.

   • Transaction Validation: Consider implementing a transaction validation process for high-value transactions or those flagged as suspicious. This involves sending over affiliate-driven orders to clients for review and confirmation before commissions are approved. This extra step ensures that sales are legitimate and helps prevent fraudulent activities from slipping through the cracks.

   • Deep Dive into High-Risk Affiliates: Regularly audit affiliates with unusually high conversion rates, traffic spikes, or low-quality leads. Cross-check their data with your analytics tools to ensure all activities are above board.

   • Third-Party Verification: Use third-party fraud detection services to audit affiliate activities independently, adding an extra layer of scrutiny.

   • For paid search monitoring, I would look into tools offered to brands in affiliate marketing, such as BrandVerity and Impact.

6. Removal and rehabilitation

   • Zero-Tolerance Policy: Communicate that any proven fraud will result in immediate removal from the program, and enforce this policy strictly.

   • Rehabilitation Programs: Consider offering a rehabilitation program for affiliates engaging in borderline or minor fraudulent activities. This might include additional training on acceptable practices and monitoring to ensure compliance. This is often recommended when it’s a communication policy issue rather than an issue of knowingly committing fraud.

   • Documentation and Reporting: Keep detailed records of all infractions and actions taken. This will help with future decision-making and provide transparency in case of disputes.

Conclusion

In the battle against affiliate fraud, knowledge is your best defense. We've unpacked the common schemes, from cookie stuffing to hidden ads, and armed you with practical strategies to safeguard your program.

Remember, staying vigilant and proactive is key—fraud isn't going away, but with the right tools and tactics, you can minimize its impact. Keep your eyes open, your data sharp, and your program secure.

Remember the greatest trick the devil ever pulled: convincing you he does not exist. Fraud is here, so you had better have a plan to address it.

Happy hunting,
Tye