How To Prevent Affiliate Fraud

The emergence and rise of the Internet has brought new opportunities for businesses, allowing them to reach new market segments and niches that would have been intangible otherwise. To a certain extent, the power of online businesses comes from affiliate marketing.

Affiliate Marketing has been around for the last 10 or so years, but merchants are nowadays confronted with one of the newest types of scams, namely known as affiliate fraud. As affiliate fraud happens mostly because there is money involved, it's a sure sign it will never stop.

While Affiliate Networks have the technology and know-how to fight affiliate fraud, individual merchants might not be aware of the phenomenon. Here are my 2 cents.

What is Affiliate Fraud?

Affiliate fraud is any type of illegal activity designed with the intention of cheating merchants, other affiliates or buyers. The merchants are at a loss by fraud affiliates that mislead them into paying commissions that they shouldn't be paying.

The extent of such practices ranges from repeated clicks on income-generating links of CPC (cost-per-click) programs to using sophisticated software that will simulate human activity.
Affiliates take loses due to black hat affiliates that redirect the sale to a parasite site and cash the commission that this way never gets to the rightful, hard working affiliate. There are more parasite techniques described in the next chapter.

Buyers are affected by spam, deceiving marketing techniques or by being miss-informed about the product/service they need. The negative effects are obvious for both individual merchants and Affiliate Networks. Affiliate marketing networks face the much dreaded peril of losing their members (i.e. merchants), who will no longer want to become involved in affiliate programs for fear of having to face affiliate fraud, which also translates into merchants losing their customers.

How to Recognize Affiliate Fraud and What to Do About it

If you already have an affiliate program set up and working, and you notice that things are not going the way you hoped they would, maybe it's time to do your homework and make some research. Here are some symptoms specific to affiliate fraud. They may actually help you with the detection of online fraud. Check your activity logs (together with your specialized personnel) and look for anything that looks suspicious, any unusual pattern.

On the other hand, if you outsource your affiliate marketing to an affiliate network, they do most of the work to fight and eliminate fraud, meaning you are safe. Affiliate fraud takes several forms, among which the best known are:

•Use Spamming techniques to promote products

Spam mail is something that we all hate. There are affiliates that will send tons and tons of bulk spam e-mails to customers, hoping that this will increase their income. Of course, those e-mails will end up being erased, but bear in mind that not only will your advertised products not become known, but there's also a great chance to have your name (and your products) associated with such practices, thus leading to a loss of credibility and, ultimately, of conversions. Affiliate Networks strictly forbid spam and take drastic measures against spamming affiliates, including having their account banned and commission blocked.

•Using (typo) variation of the vendor's domain

This is a technique that refers to the act or registering multiple (typo) variations of the vendor successful domain name, and then signing up all those variations for one (or more) particular merchant's affiliate program. Fraudsters place their bets on un-aware buyers that will not make a difference between the original vendor site and the black hat affiliate site, because usually the difference is a wrong or missing letter in the domain name.

As this technique is not based on creating added value but on taking advantage of un-aware buyers, they steal visitors and sales that should have actually been the merchant own traffic, thus resulting in losses for the said merchants. Affiliate networks have a set of quality requirements when accepting new affiliates. Chances are that such affiliate sites will not pass the filters.