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What is affiliate fraud?
Affiliate fraud occurs when malicious actors earn unwarranted commission payouts from affiliate marketing programs. Uncontrolled affiliate fraud can lead to excessive payouts to scammers, negative return on investment (ROI), and brand image damage. In fact, a cybersecurity study conducted in 2020 estimated 10% of all affiliate traffic is fraudulent.
5 reasons affiliate fraud happens
- The commission structure is flawed
- Scammers discover new technology loopholes
- The acceptance criteria is too relaxed
- The brand team insufficiently monitors for fraud
- Standard safeguards are not implemented and/or enforced
Brands generally create affiliate marketing programs to incentivize best-in-class content creators and publishers to drive sales. Fraudsters recognize vulnerabilities and aim to make it look like their site is driving more sales than it actually is.
Affiliate marketing programs require sophisticated technologies for tracking and commission payouts. These technologies, while mostly exceptional at those purposes, still contain bugs which fraudsters will leverage to exploit your programs.
Brand and affiliate managers need to exercise caution when accepting members into their affiliate marketing programs. Overly lenient requirements make your program susceptible to scammers.
With any affiliate marketing program, brands must carefully monitor data to catch fraudulent activity swiftly – especially before a payout occurs.
Finally, affiliate marketing safeguards exist for a reason. Brands should always follow the best practices recommended by agencies, software partners, and other reliable resources. Neglecting any component will immediately put your brand at serious risk of financial losses.
10 types of affiliate marketing fraud
Affiliate fraud takes several forms. We’ve put together the most common types so that you can take preventative measures to protect your affiliate revenue.
1. Click fraud
Fraudsters commit click fraud by introducing a network of bots to copy human behavior and trigger thousands of website clicks. If the affiliate program offers incentives for traffic, the scammer will ultimately earn a large, unwarranted payout.
2. Cookie & pixel stuffing
The scammer automatically drops malicious cookies and pixels when their website is visited. If the user eventually purchases, the fraudster will receive credit for affiliate fraud.
3. Click spoofing
Most affiliate marketing campaigns are dependent on accurate click data. Click spoofing is the process in which a scammer will send invalid or fraudulent click events, even if the shopper did not engage with the link. If a shopper completes a transaction, the scammer receives a commission for affiliate fraud.
4. Using stolen information
Scammers will leverage stolen data, like credit card information, to make affiliate purchases. The scammer receives a payout with each criminal purchase.
5. Malvertising
Malvertising is a malicious attack in which a bad actor adds harmful code to legitimate advertising networks. When engaged, the malicious code installs a virus to a shoppers computer that results in fake clicks. The scammer receives a commission whenever the malicious ad is engaged.
6. Viruses and malware
Sophisticated fraudsters will use malware to automatically place a cookie on a shoppers browser, or trigger a discount code at purchase. The scammer is paid every time the shopper completes a purchase.
7. Domain spoofing
The scammer will purchase a domain similar to the brand’s primary URL. When the sneaky URL is clicked, the scammer will quickly redirect to the brand’s actual website while infecting the shopper’s browser with a cookie. The scammer will then receive payouts for orders due to affiliate fraud.
8. Hidden landing pages
Scammers publish landing pages that trigger cookies & pixels without the shopper’s acknowledgement. If the shopper eventually purchases, the fraudster will receive cut.
9. Ad stacking
Ad stacking is when multiple ads are layered on top of each other, with only the top visible to the user. The scammer will then receive credit for fraudulent impressions and unintended user clicks.
10. Brand bidding
Brand bidding is when a fraudster uses paid ads to boost a keyword related to the brand, in order to drive more traffic to the scammer’s site. This will result in fraudulent impressions, clicks, and orders.
How to prevent affiliate fraud?
Once marketers know what to look for, preventing affiliate fraud is relatively easy.
1. Punish affiliate fraud with explicit with requirements, terms and conditions
The many types of affiliate fraud discussed above aren’t generally illegal unless they violate the terms and conditions set forth upon sign-up. Hence, your terms and conditions should clearly outline what’s permitted and prohibited.
These are some examples of what you need to be including in your terms:
- Consequences for violating the terms and conditions
- Clear guidelines on approved promotions
- Copyrights on what affiliates create with your content
- Safeguards from disparagement
- Compliance with influencer / affiliate marketing laws
Software provider, Hubspot, has an extensive affiliate terms and conditions that can serve as a great model for your program.
Monitor for affiliate fraud and enforce consequences
Brands should train their affiliate employees to monitor and enforce the terms and conditions. Setting up a daily or weekly routine to analyze your data and react will ensure malicious activities are not paid out. It’s especially important to be extra diligent prior to affiliate payout dates.
Technologies with fraud detection should also be used to capture instances of fraud that your human counterparts miss.
Don’t auto-approve applicants
Never let a potential fraudster into your program. Upon acceptance, it only takes a fraudster seconds to wreak havoc in your affiliate marketing programs. By turning off program auto-approvals, you are ensuring a human validates the applicant as a legitimate creator.
Check your orders for affiliate fraud
You should frequently check your sales data to ensure that the only orders that are counting:
- Meet your cookie length requirements
- Not canceled (within a defined number of days)
- Not refunded (within a defined number of days)
Be ready to take action if you notice orders that violate any of the above. It may involve either removing the affiliate because of potential fraud or contacting your affiliate marketing software provider for an explanation.
Use a technology partner that will help you identify and prevent affiliate fraud
Even with a strong routine, monitoring an affiliate marketing program for fraud manually is challenging – even for large teams. With that, there are many technology platforms that prioritize fraud detection and prevention.
LoudCrowd provides unique solutions for fraud detection and prevention tools. These tools provide visibility into real-time affiliate traffic and sales data.
LoudCrowd’s Codeless Affiliate Discounts offers direct protection against affiliate coupon fraud coming from discount sites like Honey, Rakuten, and RetailMeNot.
LoudCrowd’s affiliate program settings enable you to customize cookie lengths, and windows for order returns and cancellations. This helps you catch instances of affiliate fraud before a payout occurs.
Finally, every affiliate program with LoudCrowd comes with a dedicated client strategist who will always be a teammate in proactively detecting fraud. Our team has the expertise you need to implement necessary safeguards that protect your affiliate revenue.
Learn more about LoudCrowd and rest easy knowing your affiliate marketing dollars are protected.
Conclusion
Affiliate fraud is out there, but with the right knowledge and technology provider, you can grow your affiliate program with confidence. Want to learn more about affiliate fraud? Book free time with us today.
