Affiliate Fraud, What Is It, the Types, Effects, and How to Prevent

Every internet business has its challenges and threats. For the affiliate marketing industry, affiliate fraud is one of the most cancerous issues currently. It impacts all the various stakeholders simultaneously.

But do you know what can be identified as affiliate fraud? If you’re in the industry then quite possibly so, but otherwise, let‘s give you a short, accurate answer and then we’ll dive into some detail.

What is affiliate fraud? Any non-compliant, misleading, or illegal behavior against an affiliate program, such as making purchases with fraudulent payments, generating leads with fake user info, marketing false-claims, and similar misleading behavior is categorized as affiliate fraud. The primary purpose of affiliate fraud is to generate commissions paid by the affiliate program, typically with banned methods that are frowned upon.

Affiliate fraud, like any other kind, is deceiving and plays with the livelihoods and interests of customers, businesses, brand reputation, and affiliate networks. It’s the kind of activity that is designed to help no one, other than the person committing the fraud

It needs to be dealt with instantly and thankfully, there are more modern practices which can detect and stop such activities with quick response time. With affiliate marketing business being on an all-time high, such fraudsters to have found their way into the affiliate system.

However, there’s always a solution. The first step toward that solution is identifying the various activities.

Affiliate Fraud Strategies

From our earlier definition of affiliate fraud, you might be thinking it covers a rather wide spectrum of activities. So to help drill down further, let’s try and categorize the most commonly performed types of fraud.

#1 Bots & Automated Leads

These days, it’s common practice to increase views, hits, shares, likes, and visits using bot traffic. Bots are programs that try to mimic human interaction. They are used to target and provide traffic for a specific objective.

Fraudulent social media influencers use bot traffic to increase their followers, likes and comments in a bid to attract lucrative offers from sponsors and affiliates. Similarly, bots traffic can also be used to send visits to a particular affiliate partner.

This would allow the affiliate marketer to increase their earnings, but it would not help the affiliate partner in any way. This represents strictly fraudulent behavior which damages businesses financially and messes with their business metrics by providing false data.

In other words, the business would see X number of visits on their platform but there would not be a corresponding amount of conversions or sales since the traffic is fake and would never have purchased.

Bots can also be used to automatically submit lead generation forms or perform automated account creation with the intent of falsifying legitimate leads. Luckily, bot detection solutions can identify fraud generated by bots.

These kinds of strategies are used mostly in affiliate programs that provide incentives based on visits, views, and hits, rather than conversions. The marketer attempts to disguise the traffic with some human visitors as well to help mimic their interactions and on-site behavior.

#2 VPNs & Residential Proxies

Another fraudulent tactic used by affiliates to hype up their earnings is the use of proxies and VPNs. This allows affiliates to generate sales or leads from bots and visitors in a different geographic location than they are really in.

If you don’t already know, affiliates offer varying rates for conversions depending on the originating country.

For example, if a visitor hailing from the USA fulfills an objective, the marketer will be paid more than if a visitor from China fulfilled the same objective. This is due to several factors including currency variation and demographic preferences.

To increase their earnings, non-compliant marketers will use proxies & VPNs to generate fraudulent traffic. The VPN will help mask the origin and show a different (possibly more lucrative) geographical location to the website. The same can be done with genuine traffic where the marketer incentivizes people to use VPN and visit the affiliate offer. The conversions from these aren’t real but the marketer typically takes away a sizeable payment.

Using a service for proxy detection is highly recommended, as it prevents location spoofing, bots, and fraudulent activity from occurring.

#3 Misleading Promotions

Often used with other tactics on this list, misleading promotions is a popular affiliate strategy. You may have come across YouTube videos that use clickbait thumbnails promising more than the actual content eventually delivers.

It’s a cynical practice! But either way, if you’ve ever wondered why they do that, it’s because they want to dupe the visitors by getting them to click on the video to increase their view count. As their views increase, so does their advertisement earnings.

Marketers use a similar sort of trick with affiliate promotions as well. They will showcase banner and images which are likely to attract attention and then redirect those visitors to an unrelated affiliate.

Now, visitors don’t appreciate being treated in this way, so when this happens, the disappointed visitors simply leave the page immediately. As a result of this, the affiliate website gets low conversions (sometimes no conversions) from such visits, but still, they have to pay the marketer.

These kinds of tactics not only disappoint the visitor but could potentially damage the reputation of the business as well as weaken it financially. As a result, such practices need to be dealt with decisively.

#4 False Incentives

Like misleading promotions, some marketers use false incentives to encourage traffic. However, these incentives do not exist. It’s a dangerous marketing practice, where visitors are left in the dark and are left understandably blaming the affiliate business - believing it must be their fault.

In all of this, the marketer takes away the payment but helps to derail the affiliate business’s brand value along the way. Some of these offers even use fraudulent redirect pages...

The customer is looking for oranges and clicks on the link, only to find that the site sells apples. This is an all too familiar story for most internet browsers. It harasses the visitors and degrades the reputation of the target website. And although Google is getting better at recognizing many of these sites, the practice found today.

However, in parallel, fraud tracking systems are becoming more robust and sophisticated. As a result, such practices do not offer results for much time as the window of fraud opportunity is more quickly found and closed. However, their effects are lingering.

#5 Browser Extensions

Browser extensions are often used to add convenience or add special features to applications. The extensions are also used by application developers since they allow a section of the code to be stored locally on the client computer and speed up the processing.

These browser extensions can be found on the Google Chrome store or on the respective site that wants you to download their product or service extension.

However, there are also a lot of spam extensions available online which look to siphon off your personal data, mimic your behavior and use that to create fake visitors, force you to visit certain sites or add advertisements to your browser. These extensions can also infect your computer and crash your system or corrupt your hard-drive or worse.

Studies have found that an astounding number of extensions were silently siphoning data and forcing customers’ behavior.

To accomplish this, the extension will change the URL in your browser to meet its objectives. Sometimes, affiliates use such extensions to add their code instead of another to increase their revenue. The customer has no idea and neither does the affiliate marketer who’s code has been replaced.

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What Are the Effects of Affiliate Fraud?

There are two sets of people who are affected by fraud of this kind - the scammer and those scammed.

For the person committing the fraud, they are, if not inevitably, then certainly often, found out. As a consequence of using illegal tactics and duping the affiliate network, they will be banned from the platform. Though this might seem like a small price to pay, and certainly not a deterrent.

So despite their best efforts at concealing the tactics, innovations in online fraud detection and website monitoring solutions will soon show patterns that are associated with fake traffic or fraudulent conversions.

There’s another part to this. Affiliate businesses work very much like a community project. They talk to each other and often collaborate. As a result, the industry is pretty tight-knit. When something like this happens in such a tight-knit ecosystem, word travels fast.

People get to know what kind of tactics the fraud marketer is using and can act fast to put prevention in place. As a result of these community methods, the fraudster will lose outlets in which to perform their particular brand of fraud, so their source of income and potentially their livelihood will be denied.

The other set of people who are affected are those who are the victims of such tactics. This includes website visitors, affiliate platform and the target business.

For a web browser or visitor, clicking on a link is indicative of their intent to find information or conduct a transaction. Clearly, this is for a cause or purpose which has meaning to the visitor. When such fraudulent tactics are used, it blinds the visitors into performing an action that they do not want.

They are committed into action under pretenses and it ultimately denies them their intention, or at least takes them far from their goal.

This means the visitor has a bad experience and might feel harassed or embarrassed. Most common web visitors aren’t aware of the technicalities of affiliate marketing. As a result, they’re left harboring doubts and fears about online services.

This impacts the target business as well. Due to adverse sentiments among the visitors, the target website suffers from brand degradation. In simpler terms, people tend to think it’s the target business that’s playing underhand tactics and form a negative image in their mind about it.

‘most common web visitors … are left harboring doubts and fears about online services’

Since the website registers frequent exits and irregular behavior from these kinds of traffic, the website holds the affiliate platform responsible for sending in dubious visitors. The relationship between the business and the affiliate platform is held sacred since they are inter-dependent.

Preventing affiliate fraud is not necessarily a difficult process, if the right steps are taken. It's better to solve or even plan for issues from affiliates sooner rather than later. Often times, affiliate fraud goes undetected for months while publishers are paid out for non-compliant leads that are usually chargebacked.

As websites lose confidence over the traffic they receive from the affiliate platforms, they look to take their business elsewhere. This hampers the overall reputation and the business of the affiliate networks. They are stuck with handling fraudulent marketers as well as face the consequences for their actions when the businesses leave.

It impacts all the stakeholders that take part in the process and leaves a bitter aftertaste for all. That’s why such practices are impractical and should never be adopted. Without safeguards, all hell breaks loose and everyone’s losing money.

The Consequences of Affiliate Fraud on Internet Businesses

In case, it still isn’t clear to you how the internet business as a whole gets affected, I’ll give you a few examples.

Let’s assume you run a business and your product is soap. Now, you would like to sell as much of the product as possible. The best possible way is to get as many leads as possible. To sell your product, you hire a few freelancers who are going to go door-to-door selling your soap.

Now, at the end of the day when the freelancers come back to you with the list of interested parties, you pay them a fee for their hard work. But, what if when you start calling the leads, they turn out to be duds or fake leads. The phone numbers don’t work, the emails to their addresses are bouncing and none of them seem to exist.

You’re at your wit’s end! You’re out of money and you haven’t got your end of the bargain.

So, how do you react now? Well, like any sane person would do… you swear to never hire anyone to promote your product ever again. This means that getting customers is now harder and more time-consuming. Similarly, for the customers, they no longer have access to your products and need to go out searching for them.

How to Stop Affiliate Fraud

Affiliate fraud protection is a complicated process. While there are sophisticated applications that look to nullify any kind of fraudulent practices, there are still some steps that businesses and platforms can take to cover such risks:

• Review if the affiliate marketer has an actual real and active website.
• Look at how long the website has been operating under its current owner and image
• Check the site’s content for relevance with the product it is promoting.
• Review the site’s content and check the SEO has been optimized in accordance with your policies, Google SEO policies and according to the product.
• Keep in touch with your affiliates.
• Ask the businesses to regular report the kind of leads and traffic they are getting.

These steps will allow you to remain alert and stay ahead of the curve. In case, any of your marketers do commit to illegal practices, these steps can help you identify them.

Conclusion

Fraud of any kind is harmful to the various stakeholders in any online business. It harasses people, it emotionally affects people, as well as damages them financially. Not only that, an aspect of its wide-reaching impact is that it scares people from trying affiliate marketing and ends up harming the business as a whole.

If you’re ready to protect your online business from fraudsters and affiliate scammers, then why not get in touch with us, it’s free to talk, and one of our experts will be more than happy to assist with your inquiry.