Affiliate fraud is a type of fraud where the fraudsters try to cheat a company for the partnership commission. They will try to manufacture artificial traffic that goes through the company’s website. However, the fake traffic is not contributing any revenue to the company.
As a result, the fraudsters will walk away with the commission they had cheated, and leave the company with nothing to show for their payment. In the case of prolonged exposure to affiliate fraud, the company will suffer bad return on investment (ROI) and damage to their reputation.
Types of Affiliate Fraud
Affiliate fraud can be divided into a few types. Some of the identified types are:
Click spoofing
Fraudsters will set up their website with the affiliate link, and then generate a click event if any visitor visits the website, without care of whether the visitor clicks the link or not. The bad actors will still get their commissions, as the company will not often check if the click is a valid one or not.
URL hijacking
To achieve URL hijacking, fraudsters will purchase the domains that have similar names to some famous websites or the company’s website. Then, they will set up a website on the domain, and wait for the visitors to come to the website. When the visitors accidentally click on it, the website will automatically run the click event on behalf of the visitors. Hence, fraudsters can earn their commission with this method.
Cookie stuffing
Malicious parties can easily set up a few lines of code that will drop cookies on the visitor’s browser in their website. Then, when the visitor clicks on the fraudster’s website, the codes will be executed automatically. As an added bonus, when the visitor buys some products from the company, the fraudsters will get paid for the commission too.
Using stolen data
Sometimes, the fraudsters will also try to obtain the stolen credentials such as login and credit card information. These data are commonly sold on the dark web by hackers or criminal organizations. When they get their hands on such data, they will then use those credentials in their activity. For example, they will generate fake leads to pretend that there is a valid click coming from this user. They will also use stolen credit card credentials to make affiliate purchases, and then get commission paid from the fraud purchase.
Staggering impact on the business
Affiliate fraud is impacting business significantly, in a negative way. In 2022, the affiliate marketing industry had grown from $15 billion in 2020 to over $20 billion in 2022. However, 17% of the traffic is fake, suggesting the industry will suffer from losing over $3.4 billion due to this fraud in 2022.
Besides losing money, the business will suffer various consequences such as:
- Being unable to obtain accurate information for marketing analysis, such as tracking cookies, source of referral and other technical information. Failure in getting this information will cause difficulties in understanding their customer behavior and preferences, and at the end risking the loss of their targeted customers.
- Being unable to measure the performance of their affiliate marketing plan correctly. As businesses are having difficulties in identifying which traffic is valid or invalid, they cannot determine whether the affiliate marketing plan is successful or not. As a result, they might continue to throw their money into the marketing plan without knowing if it is working.
- Damage to their brand reputation. Frequent affiliate fraud will leave a bad impression on the public. People might tend to think that the business will tolerate the fraud, or even cooperate with the fraud. As a result, people will question the trustworthiness of the business, and thus lose their brand value.
Ways to reduce or prevent the impact
From the previous section, we learned how affiliate fraud will impact the business in a bad way. As a business owner or marketer, you will want to know the next thing: how to reduce or eliminate affiliate fraud?
Although it is not easy to combat the affiliate fraud, there are still some ways to help you begin with:
Traffic monitoring and analyzing
Traffic monitoring is essential, because you won’t know whether it is good, bad or fake without monitoring and analyzing. By collecting the traffic data such as origin IP address and referral URL, you can monitor the traffic pattern and analyze if it is abnormal. For example, a bunch of the traffic that’s coming from the same IP address and referring URL could be unusual and therefore need further investigation.
Perform regular review on your affiliate program
After you closely monitor your affiliate traffic, you might be questioning yourself: what can I do next? In fact, there is one thing – re-assessing your affiliate program. It is because fraudsters might find a hole or flaw for them to perform the fraud. While you might have discovered their attempt, you will also need to review the terms and conditions of your affiliate program, so that the same incident will not happen again.
Also, by reviewing and re-assessing your affiliate program, you can also see if there is anything you can change to improve your program performance. This will help you to make more progress towards your goal of boosting your revenue.
Make use of fraud prevention service
You can save your effort by introducing a fraud prevention service like FraudLabs Pro into your business cycle. For example, to prevent fraudsters from using stolen cards to perform affiliate purchases, FraudLabs Pro will validate the purchase based on various aspects such as IP address, device, location and more. By implementing a fraud prevention service, merchants can detect such fraudulent acts quickly and efficiently, and take action accordingly.
Conclusion
In short, affiliate fraud is a growing phenomenon that is threatening the marketing industry and the business. As a marketing professional or business owner, you will have a basic understanding of what affiliate fraud is and how to combat it after reading this article.
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