Retail, CPG and Logistics

Affiliate fraud prevention: Key ways to protect your brand from scammers

The battle between the scammer and the defrauded is ongoing. If fraudsters had it easy before digitisation, they now have a field day.They pose a threat to any creative plan corporations devise to expand their reach and revenue. Affiliate marketing is one such program. Affiliate marketing entails businesses (merchants) working with affiliates (publishers) who promote the merchant's offerings via their online platforms.

What is affiliate marketing?

Consider an online electronics and gadget store; let’s call it “TechGadgets”. It collaborates with prominent tech bloggers, website owners, and social media influencers — called affiliates — to increase online sales.

Here’s how it works:

1. Meet John Doe, a well-known tech blogger and affiliate of TechGadgets. He writes a blog post about TechGadgets' new smartphone and includes an affiliate link to the product page on the company's website.
2. Consider Jill, who comes across John's review and clicks on the affiliate link. She arrives at the product page and purchases the smartphone.
3. The affiliate tracking system recognises Jill's trip through John's link and rewards John with a percentage of Jill's purchase (e.g., 10%) as commission.

This is affiliate marketing. It is an arrangement in which online retailers pay influencers a commission for driving traffic or generating sales through referrals on their websites. Unethical practice within this program is called affiliate fraud.

Affiliate fraud avatars

Fraudsters use many creative ways to cheat businesses. Here are a few of them:

1. Fake leads or sales: Affiliates may generate fake leads, sales, or transactions by using bots, automated scripts, or other methods to inflate numbers and earn unethical commissions.
2. Cookie stuffing: Affiliates may place affiliate tracking cookies on users' devices unknown to them to claim commissions on sales they did not generate.
3. Click fraud: To increase the click count and potential commissions, some affiliates may resort to repeatedly clicking on their affiliate links, asking others to do so, or using automated click-generating scripts.
4. Cookie replacement: A dishonest affiliate steals commission by replacing another affiliate’s tracking cookie with their own
5. Multiple accounts: Affiliates may use multiple identities to take advantage of referral or bonus programs, essentially double-dipping.
6. Credit card fraud: Fraudulent affiliates might use stolen credit card information to make purchases through their affiliate links and earn commissions illegally.
7. Brand bidding: Deceptive affiliates bid on brand keywords (brand name, product name, etc.) to push their own affiliate links. Clicks and purchases on these ads yield commissions for the fraudulent affiliate at the expense of the brand's official marketing.

11 ways to prevent affiliate fraud

We have compiled a list of 11 affiliate fraud prevention techniques. Take a look:

1. Screen affiliates: Carefully vet potential affiliates before accepting them into your program. Look at their online presence, history, and reputation to ensure they align with your brand values.
2. Set clear guidelines and policies: Establish comprehensive affiliate program terms and conditions. Clearly outline what constitutes fraudulent behaviour, the consequences of such actions, and the expectations you have of your affiliates.
3. Employ monitoring and analytical tools:
1. Use tracking tools to monitor affiliate activities, including clicks, conversions, and sales. This helps identify unusual or suspicious patterns.
2. Utilise analytics to track affiliate traffic quality and sources. Anomalies indicate potential fraud.
4. Track affiliates' IP addresses: Monitor IP addresses associated with affiliate activities for repeated actions from the same IP address. This is a signal of potential fraudulent behaviour.
5. Keep track of affiliate cookies: Ensure that your affiliate tracking cookies are secure and not susceptible to manipulation. Review your cookie implementation regularly to prevent cookie stuffing.
6. Validate leads and sales:
1. Verify the legitimacy of leads, sales, and transactions before awarding commissions.
2. Implement a commission payment delay to allow for potential refunds or chargebacks.
7. Use human verification mechanisms: CAPTCHA, image recognition or a simple checkbox verification in the affiliate sign-up process are effective ways to prevent bots from participating in your program.
8. Limit payouts: Establish commission eligibility conditions or levels to earn payments. This discourages affiliates from creating excess, low-quality leads just to receive quick rewards.
9. Invest in fraud detection software: Fraud detection software helps analyse patterns, detect anomalies, and flag potentially fraudulent activities.
10. Communicate and educate: Maintain open communication with your affiliates. Provide them with updates, and reminders about your program's guidelines and policies. Train them periodically on ethical practices and the importance of maintaining the integrity of the program.
11. Conduct regular audits and reviews: Regular audits and reviews of your affiliate program help identify inconsistencies or potential fraud. Manual reviews are especially effective in uncovering disparities and unexpected actions that automated systems might have overlooked.

A wrap-up

Affiliate marketing accounts for 15% of total digital media advertising income. Many businesses rely on it, particularly in the travel and retail sectors. However, according to a study, affiliate marketing fraud made up $1.4 billion out of a $23 billion ad fraud in 2020.

Therefore, it is crucial to maintain the integrity of affiliate marketing programmes by remaining watchful, informed, and proactive. This fosters a trusting and credible environment within your affiliate network and ensures lasting affiliate partnerships.
Strengthen your affiliate marketing plan today, protect your business and reap the rewards of a safe and vibrant ecosystem.

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