Affiliate marketing is rapidly gaining currency as one of the primary revenue sources for many digital media businesses. Up to 15% of their revenue comes from affiliate marketing programs, and during the pandemic, the numbers even increased, with 42% of affiliate publishers reporting a surge in site traffic.
The problem arises when malicious actors step in and start abusing gaps in tracking and attribution processes to earn undeserved commissions, thus harming merchants and their businesses. It’s been estimated that in 2020 affiliate fraud was worth $1.4 billion, and the chances are that sums of wasted money will continue to grow as affiliate marketing keeps expanding.
In this blog post, we’ll discuss affiliate fraud and the most common methods fraudsters use. We’ll also explain how to identify fraud and provide tips for not falling victim to malicious actors.
How does affiliate fraud work?
Affiliate marketing relies on various pricing models that offer different payment terms to the affiliates. However, each pricing scheme has its vulnerabilities that fraudsters can turn to their advantage.
What is affiliate fraud?
Affiliate fraud encompasses any dishonest and unscrupulous behavior performed to generate commissions from affiliate marketing programs. In affiliate marketing, publishers place tracked links on their websites that lead to other businesses’ online stores, product, and registration pages. When users purchase products or register, the affiliate gets paid. At the same time, numerous fraudsters seek to profit from affiliate marketing programs by faking activity and artificially boosting the incoming traffic.
There are many affiliate fraud schemes associated with different pricing models.
- Cost per action (CPA). In this model, an affiliate gets payment once a specified action is fulfilled, such as a sale, registration, or click. Affiliate fraudsters can use stolen credit card numbers and fake IDs to complete the conversion.
- Cost per lead (CPL). The affiliate earns commission upon a sign-up from a potential customer. It can include the submission of a registration form or subscription to a newsletter. Fraudulent affiliates can falsify customer data, use bots to fill forms, and even deliver opt-out lists instead of opt-ins.
- Pay per click (PPC). Affiliate publishers get paid for the number of ad clicks. In this scheme, scammers trick unaware users into hitting clickable links or employ automated methods to cheat clicks.
- Cost per impression (CPI) and cost per thousand impressions (CPM). These pricing models refer to each potential customer who views the ad and every thousand potential customers who view the ad, respectively. In this case, fraudsters build fake websites and use bots to boost the number of ad views.
- Influencer scheme. Companies give their goods for free to an online personality with a sufficient audience, such as bloggers or fashion influencers. Here fraudulent actors have an excellent leeway for the scam, including creating fake accounts and increasing the numbers via bot comments and views.
Affiliate fraud methods
Affiliate marketing processes are mostly automated, which results in a lack of direct human supervision. This gives fraudsters numerous opportunities to play with the operations and twist them to their advantage. There’s a variety of affiliate fraud methods they can use.
Browser cookies are put on all visitors’ computers to enable a more personalized user experience as well as tracking. Affiliate cookie stuffing is a process when a website drops third-party malicious cookies onto a visitor’s browser.
These cookies cause traders with affiliate programs to wrongly attribute traffic to the scammer. In turn, affiliates who actually brought the traffic to the company’s website lose their money. As fraudsters continue stealing their commissions, the affiliates see no further point in participating in the affiliate program.
In many cases, the owner of a website may be unaware of cookie stuffing taking place. For instance, their website uses an extension, such as a chatbot, that is designed to sneakily place third-party cookies in the visitor’s browser.
Fraudsters will get credit from malicious cookies if a customer happens to visit the company’s site and make a purchase that would cause further compensation – no matter if that site was ever promoted via an affiliate program.
As a result, colossal budgets may be wasted on compensations for unscrupulous affiliates who, in fact, never put any effort into driving traffic to businesses.
Most of the time, website visitors don’t even need to click on the ad promoting the business within the affiliate program. Cookies get incorporated into their browsers without their knowledge and permission. Thus, not only affiliate marketing compliance guidelines are violated, but also the European Union’s (EU’s) General Data Protection Regulation (GDPR).
This affiliate fraud tactic involves registering domain names similar to the merchants’ domain names but misspelled in the most anticipated way. When users mistype the URL, they land at the fraudulent domain and then are redirected to the authentic website, thus increasing the number of referrals from redirects for the affiliates.
Typosquatting, also known as URL hijacking, includes five main subtypes:
- A frequent misspelling, or foreign language spelling, of the targeted site.
- A misspelling based on the mistake in a typed or printed text published somewhere else.
- Plural or singular forms of the domain name.
- A different top-level domain name (for example, .org instead of .com).
- Misuse of the Country Code Top-Level Domain (.cm, .co instead of .com).
Software development kit (SDK) spoofing
This affiliate marketing fraud type can be especially profitable if there’s a cost-per-install pricing model associated with the installation of an application. In this case, affiliates are paid for sign-ups and installs.
Software development kit (SDK) spoofing is a way of false traffic generation when malicious actors determine how different app SDKs distribute install and attribution data. For example, fraudsters may use malicious programs that watch over the user’s activity and get informed every time a new app install starts. Later, they use this user data to indicate that a real user’s device had installed an app when, in fact, it never happened.
Without adequate oversight, SDK fraudsters can acquire multiple device IDs to keep generating fake installs and earning the commission. The issue with SDK spoofing is that it’s very hard to track and detect since all installs look totally natural.
Website visitors unintentionally download malicious spyware that may appear in the form of pop-ups and other kinds of advertising fraud. This adware sneaks the code into the user’s browser, which artificially blows up the traffic numbers reported to the merchant.
Another type of malicious spyware is the “loyalty” software. Affiliates place it on visitors’ computers to remind them about the perks and profits of buying these goods from particular merchants. With this software installed, the user reaches the merchant’s website through the affiliate’s link. And fraudsters, as is often the case, claim their unfairly earned commission.
4 ways to prevent affiliate fraud
No one is immune to affiliate marketing fraud, and there’s always a chance that malicious actors are targeting or already exploiting your business. Checking the quality of your affiliate network is imperative, especially if you’re the owner of a small or freshly launched business.
There are several ways to prevent affiliate fraud and the negative consequences of fraudulent affiliates operating on the market.
Select affiliates carefully
Start being cautious about your potential affiliate partners from the very early stages. For instance, you may follow a multi-step application process and confirm new affiliates manually. When testing potential affiliates, you have to make sure they have a legit website and their content is tuned to your company’s products.
Once a new affiliate is accepted and you start cooperating, it’s vital to make your terms and conditions clear and transparent to avoid further misunderstandings. It’s always better to have a legal expert watching over your policies to ensure there are no gaps that can be used for affiliate fraud and abuse.
Regular and active monitoring of your affiliate analytics puts you in a better position to detect affiliate fraud. You can locate suspicious traffic upturns and pages redirects or an unusual amount of transactions from the same IP address.
Keep track of your affiliates and carefully log in their IDs to your system so you can see how many users they bring and what share of them completes the conversion stage. After a while, you will have enough information to analyze your affiliates to distinguish conscientious partners from fraudulent ones.
Allow device fingerprinting
Every user landing on your conversion page leaves a digital footprint, consisting of the device information, installed plugins, time zone, etc. This information is called device fingerprinting. Using this data, you can build profiles of your visitors and see if there’s any suspicious activity. For example, if you notice exactly the same configuration appearing on your website over and over again, there’s a chance it’s a fraudster trying to trick your system.
One of the ways to check if your marketing partners are trustworthy is to test the affiliate links. Residential proxies are the most suitable match for this task since they allow checking localized affiliate content using IPs of the required region.
Besides, if you have multiple affiliate links to check, you would most probably want to automate the process using special software. These testing bots may be seen as suspicious by some websites, which can lead to bans. In this situation, proxies will conceal your real IP address, or you can use rotating proxies to change IPs at your will. These measures will help you look like an organic user and avoid undesirable blocks.
Lastly, if you like to make sure that your affiliates aren’t doing anything shady, you’d want to check their activity without being detected. Proxies can grant you superior anonymity to keep an eye on your affiliate program partners without them knowing.
As you see, proxies are a great tool for affiliate fraud detection. We at Oxylabs strongly adhere to ethical and legal proxy utilization principles and monitor the usage purposes of our proxies via the KYC processes and open Abuse Emails.
While affiliate marketing is one of the most efficient ways to drive traffic to online businesses, it bears certain risks. Flourishing affiliate fraud may severely damage your company’s financial condition and reputation. However, you can always take precautionary measures to prevent affiliate fraud. In particular, you can carefully monitor traffic, enable device fingerprinting, and use proxies.
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