How Much Fraud Do Affiliate Programs Have?

Modern marketing relies heavily on online influence. Many businesses partner with internet personalities and influencers across a variety of channels to increase their reach and influence potential customers.

Why? Because, unfortunately, many consumers don’t trust standard advertising or messaging put out by businesses. According to a study cited by The Drum, “a scant 34% of 1,000 consumers quizzed had trust in the brands they used, despite averring that trust is a deciding factor in purchase decisions.”

Instead of trusting marketing messages, many consumers instead look for opinions from other sources—such as third-party reviewers, anonymous online reviews, and their friends and family. In fact, Inc.com states that “91 percent of people regularly or occasionally read online reviews, and 84 percent trust online reviews as much as a personal recommendation… 68 percent form an opinion after reading between one and six online reviews.”

Affiliate programs are one way in which businesses of all sizes and industries formally partner with online reviewers and other influencers that consumers trust. In these programs, businesses provide rewards to affiliate partners whenever the affiliate generates marketing results for the company.

Specific reward programs vary from one program to the next. For example, some affiliate programs pay based on how many clicks they generate for an ad, how much traffic the affiliate funnels to the merchant’s website, or based on the dollar value of the transactions created through the affiliate’s efforts.

Unfortunately, not every affiliate is honest about their efforts to help a business grow its customer base. Some unscrupulous individuals will take advantage of affiliate marketing programs to make a quick buck at the expense of the merchant. This affiliate fraud can be a massive drain on a company’s marketing budget—one that can harm other, more honest affiliates while causing the merchant’s lead generation efforts to stagnate.

But, how prevalent is affiliate marketing fraud? Is this something that a business can afford to ignore or is it something that needs to be stopped as soon as possible?

What Is Affiliate Program Fraud?

Affiliate program fraud (also known as affiliate fraud or affiliate marketing fraud) is a type of ad fraud that targets a company’s affiliate marketing program to cheat merchants, ad buyers, and/or even other affiliates of revenue through the use of misleading or fraudulent activities.

The merchant being targeted is tricked into giving out commissions to the illegitimate affiliate—despite the affiliate doing little (or nothing) to promote the merchant or their products to real consumers.

How Does Affiliate Fraud Work?

There are many different ways for crooked marketing affiliates to defraud companies of their marketing money. Some examples of the ways that malicious affiliates have carried out their ad fraud schemes include:

Lead Misattribution Schemes (Cookie Stuffing)

Cookies are a common tool for tracking activity on the internet. Companies often use tracking cookies to help with lead attribution so they know which affiliate to credit for generating a given click, lead, or sale.

Fraudulent affiliates use cookie stuffing techniques to discretely drop third-party cookies onto an unsuspecting website visitor’s browser. In many cases, the person getting the cookies put on their browser never even actually sees an ad or endorsement for the merchant’s product. By stuffing a ton of different cookies in a visitor’s browser, the fraudster can claim credit if the visitor just happens to coincidentally visit a website associated with one of those cookies in the future.

Additionally, the fraudster might overwrite legitimate cookies from other affiliates who did earnestly promote the merchant’s products or services—effectively stealing credit (and the reward) from them.

Some cookie stuffing techniques include:

• Image cookie stuffing—where the source for an image link is set to be an affiliate link.
• Pixel stuffing—where a display ad is set to an area of 1 pixel so that it’s impossible to see and click on, but will register as having been showed to the website visitor.
• Ad stacking—where a fraudster puts ads in the same display space, but only the “top” one is visible. Every ad uploads a cookie, but they don’t all make an impact.
• Iframe cookie stuffing—when fraudsters use Iframes (website code sequences that are used to display ads, videos, or other elements on a page) to engage in cookie stuffing.
• Browser hijacking—malware can be used to forcibly redirect website visitors to web pages that they normally wouldn’t have visited—forcing fraudulent cookies.

Lead Generation Fraud

Rather than trying to claim credit for sending real people over to your website with fraudulent cookie stuffing techniques, some malicious affiliates don’t bother with having “real” consumers involved at all. Instead, they’ll engage in lead generation fraud.

Here, the fraudster uses bots or human fraud farms to create fake leads for companies. The bots or fraud farm operations they employ will fill in the victim’s lead generation forms on the merchant website—often using data stolen from real consumers.

This can be extremely problematic for a variety of reasons. For example, if the company reaches out to a lead created by lead gen fraud that has a real person’s data, that person wouldn’t have actually “opted in” to receive communications. This could result in the company being charged with a TCPA violation.

Considering that TCPA fines range between $500 and $1,500 per incident, and that companies often reach out to thousands of leads in a month, the cost of lead generation fraud can quickly spiral out of control.

How Much Fraud Do Affiliate Programs Have?

So, how common is affiliate fraud? Well, if you have an affiliate program, you can reasonably assume that fraudsters are targeting it. TCPA defense attorney Eric J. Troutman may have put it best when he said that: “If you are a buyer of leads, ad fraud may be your biggest risk right now.”

Based on past Anura customer data, affiliate marketing campaigns often have roughly 45% fraud. However, ad fraud rates can spike much higher than that if fraudsters find them to be easy targets.

Companies can lose massive amounts of money to the impacts of affiliate fraud over the course of a single year. This includes the direct losses of providing money to fraudulent affiliates, the cost of TCPA violations, loss of revenue from missed opportunities, disruptions caused by remediation efforts, skewed marketing metrics increasing wasted ad spend, and counteracting negative PR.

For example, Uber, the ride-sharing app company, once lost over $100 million in a single year through the impacts of ad fraud. The more you spend on online advertising and affiliate marketing, the more you stand to lose to fraud.

Not taking the appropriate measures to protect your affiliate marketing campaigns from fraud can worsen losses and embolden more fraudsters to target your marketing efforts.

What Can I Do to Prevent Ad Fraud in My Affiliate Programs?

As the old saying goes, “an ounce of prevention is worth a pound of cure.” Being able to stop affiliate marketing fraud before you end up paying crooked affiliates or acting on the fake leads they generate can save you a lot of time, trouble, and money in the long run.

Some basic things that you can do to put a stop to affiliate fraud include:

1. Leveraging the National Do-Not-Call Registry

The National Do-Not-Call (DNC) Registry is a massive database of consumers who have specifically opted out of receiving marketing communications from companies over the phone. Checking the registry to verify if your leads are on it is a basic and necessary precaution for avoiding TCPA violations and fines.

If you notice that a majority of your leads are on the registry, then you may need to check if those leads are legitimate.

2. Consider Using Verification Emails

In your lead generation efforts, it can help to use an email verification process to confirm leads before marketing to them or giving affiliates credit for generating them. While this does introduce a risk of increased attrition in your marketing process, it helps to weed out fake leads generated using fake or stolen email addresses.

If the fraudster doesn’t have control of an email account they used to generate a lead, then they won’t be able to click on the verification email.

3. Vet Affiliates Before Adding Them to Your Program

If you don’t currently have a process for vetting affiliates before adding them to your marketing program, then it’s time to establish one. Before adding an affiliate, it’s important to check their online profile to see how long they’ve been around, the size of their following, and the quality of their online following.

Adding an influencer to your affiliate program who doesn’t have an established following or is using purchased followers can hurt your online marketing efforts. So, careful vetting is a must. Some warning signs of an influencer using bot traffic include:

• High viewer/subscriber counts with little content history
• Abnormal engagement rates for posts and content
• Low-quality engagement on posts
• Followers being mostly blank or low-quality accounts (indicating that they’re run by social media bots)

4. Use an Ad Fraud Solution to Verify Every Ad Click and Form Fill

Trying to manually stop affiliate fraud is extremely difficult and time-consuming. It requires extensive experience and knowledge about ad fraud techniques and identifiers. Worse yet, manual remediation methods tend to be reactive rather than proactive—so you may not spot fraud in time to put a stop to it.

Using an ad fraud solution helps improve fraud prevention by automating detection. Instead of having to manually check traffic after the fact, ad fraud solutions like Anura can spot fraudulent website interactions in real time. This allows you to proactively avoid paying for fake leads or adding them to your marketing efforts—sparing you the cost of TCPA violations and wasted sales team time.

Why let fraudsters get away with your money? Start protecting your affiliate marketing campaigns with Anura now!