In recent years, affiliate marketing has really stepped into the limelight. According to one report, almost 90% of advertisers state affiliate programs are a key driver to their marketing strategies; it’s a powerful tool for brand engagement. Even more, the industry is expected to grow 10 percent by 2020 - which will land affiliate marketing at a worth of $6.8 billion.
It’s no wonder more organizations are turning to the marketing genre to boost their brands. However, e-retailers and advertisers beware: just like in every successful industry, fraudsters do exist, and there are bad apple affiliates out there looking to steal your money. Perhaps the most infamous in the industry is Shawn Hogan - once eBay’s top affiliate marketer, eBay worked with the FBI to put him behind bars. Why? Well, he defrauded the e-commerce giant out of $28 million.
So as the affiliate marketing industry continues to expand, it’s essential that e-retailers and advertisers understand how to recognize fraud - and more, how to protect themselves from it.
What types of fraud exist?
If brands or advertisers are working with a cost-per-action (CPA) model - that is, they pay affiliates for each sale or click received - there are two major types of fraud to keep an eye out for:
Trademark bidding is a prevalent technique, which takes advantage of a brand’s efforts to appear in search. But to understand fully, you first need to know what brand bidding is. A perfectly legal part of keyword advertising, advertisers use this to bid on the brand terms of a competitor - the goal is to take traffic from them in search, and redirect it to their own website. To stop this from happening, brands might trademark certain keywords. This way, others can't bid on their terms and steal SEO traffic.
That’s where fraudulent trademark bidding comes in. Essentially, it’s when an affiliate bids on a keyword the brand they work for has trademarked. When they do this, they’re getting paid for clicks from people who are already interested in the brand - thus, taking revenue from an advertiser when they don’t deserve it.
While the phrase “cookie dropping” may sound harmless, it’s actually a pretty nasty type of fraud. In fact, it’s the method Shawn Hogan used to defraud eBay for all those years. Essentially, it’s when a fraudster drops a cookie on an unrelated website, so an unknowing consumer picks it up while surfing the web. The fraudster's hope is that this consumer will eventually visit the target website - that is, the website of the brand they’re working for - to make a purchase. So while the retailers believe the user’s visit is organic, a fraudulent affiliate will unjustly get the payment.
How can brands combat it?
It’s prudent for advertisers and e-retailers to do their homework before partnering with any affiliate network. The most important thing is to understand exactly how the network will bring traffic to their website. To find this out, good questions to ask include:
- Where are the leads coming from?
- How do you find affiliates?
- And how will the affiliates ensure the traffic won’t go to a competitor’s website?
If after one month of partnering with a network the traffic to a brand’s website isn’t increasing, but affiliates are still being paid for clicks or sales, it’s a good time to sound the alarm. Likewise, if there’s been an acceleration of affiliate activity - that is, the affiliates just seem too good - trademark bidding or cookie dropping may well be happening right under a brand’s nose.
But how can one tell for sure? In the case of trademark bidding, every e-retailer or advertiser can manually check to see if affiliates are acting illegally, by simply inputting the name of their brand into a search engine and searching ads on their site. If they see fake clicks and referrals, it’s time to confront the network.
However, as affiliate marketing grows in popularity, this process is becoming more and more automated. Many larger brands are developing their own tools to monitor the trademark bidding, but for smaller companies, there are some pretty accessible third-party tools on the market.
There are some intuitive tools to catch cookie stuffers in the act, too - some enable e-trailer and advertisers to analyze traffic from an affiliate network, and better yet, can integrate right into a brand’s website.
How can fraud be reported?
Unless a brand’s been defrauded of millions, chances are the FBI won’t be involved in investigating any of their crooked affiliate marketers. So while less dramatic, it’s best brands speak with the affiliate marketing manager if they think they’re being scammed. If these fraudulent techniques are prohibited in the contract, the brand has the grounds to request they've refunded the money they’ve paid and lost.
A brand also has the grounds to head to court. However, keep in mind that not every country has developed procedures on how to deal with fraudulent affiliate marketers. So while it might sound like the wild west out there, we can’t deny it - it is. There is no rulebook on how to deal fraudulent affiliate marketers, and oftentimes no specific country-wide laws. At least, not until the industry matures.