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Affiliate Fraud is a collective term for manipulative measures in affiliate marketing that help fraudsters and criminals to earn unjustified as well as non-contractual commissions. Similar to click fraud, fraud in affiliate marketing is not a trivial offence and can be prosecuted after a complaint has been made.
Affiliate marketing is a form of marketing based on the payment of commissions. Advertisers can book advertising space with publishers, called affiliates, in order to receive leads, sales or other conversions. Online shops can start their own affiliate programs and provide advertising material. In this case, they have their own software that registers clicks on an ad or purchase and then pays the agreed commissions to affiliates.
In most cases, companies use affiliate networks to achieve more reach, more transparency, whilst having less administrative effort. In spite of numerous security systems, the commission systems of own affiliate programs and networks show gaps which are abused for Affiliate Fraud. Ultimately, commissions can be allocated relatively precisely, for example using cookies and tracking pixels. But even with simple billing models such as pay-per-click, fraudsters can use the appropriate software to generate false statistics, which can result in high commission payments. In most cases, it is not individual commission fraudsters who are at work, but criminals who engage in affiliate fraud on a large scale. Large affiliate networks work with complex programs to detect fraud. This software recognizes click or purchase patterns and can often identify and assign manipulations. If fraud is detected, depending on the contract model, possible consequences can range from simple exclusion from the affiliate program to criminal or civil prosecution.
Forms of fraud in affiliate marketing
There are various methods of Affiliate Fraud, ranging from simple actions to complex systems.
- Cookie Dropping or Cookie Stuffing: In this case, visitors to a website are unwittingly marked with cookies that belong to an advertising program of a large shopping portal such as ebay or amazon. If the user later buys something on these platforms, the alleged affiliate receives commission even though he did not include any advertising material from the program on his page at all. He is paid for an advertising service that he did not provide. Internet fraudster Shawn Hogan has become "famous" for large-scale cookie dropping. His scam was discovered and he was arrested by the FBI.
- Fake orders: In this case, orders are placed via affiliate links to receive the commission. In this case, the goods are usually ordered cash on delivery and never paid for. Although many affiliate programs usually only pay out commissions after the withdrawal period has expired, this method often affects shops that have developed their own programs and lack the necessary technical means to uncover this rather simple fraud.
- Ad hijacking: Here, fraudsters copy already existing ads on Google AdWords from large online shops or shopping portals and insert their own affiliate links. If the user finally clicks on the fake ad, the affiliate receives the corresponding commission if this user buys something on the stored target page. In order to be listed before the original shop, the fraudsters use a minimally higher CPC. In many cases, affiliate networks can minimize such affiliate fraud by, for example, excluding brand bidding in the affiliate program and sanctioning those who violate the rule.
- Affiliate Hopping: This fraud technique is used to receive multiple commissions. For this purpose, fraudsters register for an affiliate program of an online shop in several affiliate networks. Each visitor is marked with the ID and cookie of each program. If the user finally makes a purchase in the advertised online shop, the fraudster receives a commission from all affiliate networks if the order has been submitted to them. A countermeasure is a so-called cookie switch, which prevents the placement of several cookies from the same advertising program.
- Typosquatting: This method uses incorrectly entered domain names and typos from users. Fraudsters, for example, register such a "mistyped domain", deposit an affiliate code with a link to the original shop there and set up a direct forwarding. This form of affiliate fraud is therefore hardly noticeable for the ordinary user.
- E-mail spam: An affiliate link is included in mass e-mails sent. If the recipients click on this link, they are marked with a cookie, which in turn, as with cookie dropping, leads to the alleged affiliate receiving commissions for a service they have not provided.
Affiliate networks invest a lot to reliably detect affiliate fraud. In addition to extensive software, account managers also work on identifying fraud. Affiliate accounts, for example, are checked regularly. Likewise, a comparison of different orders across affiliate networks usually takes place to expose affiliate hopping, for example. Merchants themselves can take effective action against affiliate fraud by repeatedly checking orders via affiliate links with the help of random samples.
If you start an affiliate program, you must bear in mind that you can be held responsible for the content and use of your advertising material. This also applies to the fraudulent use of affiliate links. It is therefore important that legal issues regarding liability are set out in contracts which each affiliate partner must sign before he/she begins to distribute and use advertising material.
- How eBay Worked With The FBI To Put Its Top Affiliate Marketers In Prison businessinsider.com. Accessed on September 23, 2015.