We all want to get rich quick. It’s what draws most people into the world of affiliate marketing and it could be the reason for your next failure.

Affiliate fraud is a real issue that plagues not just affiliate marketers but e-commerce sites in general. There are many different scams that you can fall victim to, ones that make it hard for customers to differentiate between genuine offers and questionable deals.

Affiliate fraud is a growing problem in the affiliate marketing industry. This has led to many people, who viewed themselves as legitimate affiliates, losing significant amount of money and some going out of business.

What Is Affiliate Fraud?

Affiliate fraud is on the rise, and merchants may suffer from a lack of understanding. To clear things up, let’s start with the definition:

Affiliate fraud is a type of affiliate marketing fraud that occurs when an advertiser is tricked into paying out commissions to a publisher or distributor who did not directly contribute to the lead or sale.

In other words, it’s when someone uses shady tactics to get paid for something they don’t deserve credit for. This hurts affiliates and merchants in two big ways:

• Affiliates can be accused of affiliate fraud just because they are unfortunate enough to be associated with fraudulent websites through their linking campaigns. This could destroy their reputation and deter merchants from working with them in the future. It also increases the risk of being removed from affiliate programs entirely, which would have a devastating effect on their business (especially if they’re primarily an affiliate).
• Merchants can end up paying for fake leads or sales that weren’t actually driven by their own affiliates—and all without realizing it—which obviously hits them where it hurts: the wallet. Over time, this could even cause them to lose confidence in their entire affiliate program.

Common Types of Affiliate Fraud

Here are some of the most common types of affiliate fraud:

Cookie Stuffing

The most common type of affiliate fraud is cookie stuffing, which occurs when a publisher installs code on his site that automatically places tracking cookies on visitors’ computers without their knowledge.

This type of fraudulent activity can be very damaging, especially if it involves your more valuable affiliates because their actions are often indicative of a major problem with your program. Such an issue could include a lack of consent or knowledge by the affiliate; and therefore, using this technique is illegal.

Additionally, as there is no way for you to know if an affiliate’s visitors are making purchases, you may be paying out commissions that have not been earned by valid transactions.

Click Fraud

This occurs when an individual clicks on a link multiple times or uses a script or bot to generate fraudulent clicks. Click fraud can have serious consequences for advertisers by making it difficult to determine which affiliates are producing legitimate traffic and conversions over time.

There are numerous ways in which click fraud occurs within the affiliate channel, many of which can be prevented by using advanced technology solutions.

Lead Fraud

lead fraud occurs when an affiliate sends fraudulent leads to a merchant in order to earn affiliate commission. For example, if an affiliate is running a dating website, he or she might send fake leads to a dating site merchant in order to earn commission on each lead.

Lead fraud hurts merchants because they end up paying for bogus leads and may never recoup the cost of paying for those leads. Lead fraud also hurts other affiliates who send legitimate leads that don’t convert because the merchant doesn’t have as much money to spend on high converting affiliates whose leads do convert.

Install Fraud

In this type of fraud, the affiliate receives compensation from an advertiser for driving installs — even though those installs don’t come from real people. Instead, they’re driven by bots that trick advertisers into thinking a real person downloaded their app.

Incentive Abuse

Another common form of behavior by fraudsters is incentive abuse, which occurs when a publisher uses incentives to increase the number of sales or clicks with no regard for whether those sales are legitimate or not.

This can be carried out by offering rewards to individuals who complete certain tasks such as completing surveys or clicking through on links, rather than actually purchasing products or services.

Advertising Fraud

This occurs when a malicious party clicks on an ad multiple times but doesn’t actually make any purchases.

The purpose of this activity is to siphon off income that should have gone to the business running the ad campaign. Ad fraud is one of the biggest threats faced by businesses using paid ads, and affiliate marketing programs are particularly vulnerable.

Preventing Affiliate Fraud

Luckily, there are ways to prevent affiliate fraud from happening, or at least stop it before it cuts into your business too far.

Keep Your Eyes Open

Affiliate fraud is possible only through the actions of your affiliates. The best way to prevent any kind of affiliate fraud is to keep your eyes open for suspicious behavior among your affiliates.

If you have an affiliate who suddenly gets a huge spike in sales, but their traffic doesn’t increase at all, that’s a red flag. If an affiliate starts using a URL shortener on their links, that could be another clue you need to look more closely at what they’re doing.

Look at the Data

Unusually high click rates. After an affiliate has been given access to your landing page, you should monitor their click rate. If it seems abnormally high, this could indicate that they are using a bot to generate clicks.

Sales that occur immediately after clicks. It’s also important to monitor the amount of time between an affiliate’s clicks and conversions. If conversions are happening immediately after clicks from a specific affiliate, it could indicate that they are using some sort of software to fake sales.

High refunds. Affiliates who use bots or other methods to simulate sales will often generate sales that result in refunds. If you notice a significant number of refunds coming from a specific affiliate, it might be an indication that there is something fraudulent going on.

Double Check the Data

Click-to-sale ratios. Clicks or unique clicks with no sales are obvious red flags, but keep in mind that high click-to-sale ratios can also be indicative of fraud.

Conversions that don’t follow up with sales. Your business should experience a certain level of cart abandonment — but if an affiliate is responsible for a large percentage of your abandoned carts, he or she might have generated fake clicks through automation or bot traffic.

Unusual spikes in conversions from certain affiliates. Some affiliate marketing tools like Post Affiliate Pro allow you to set thresholds for all kinds of data, including conversion rates and overall conversions. If an affiliate exceeds these thresholds, you can automatically flag them for fraud.

Protect Yourself

You can protect yourself from any damage caused by fraudulent affiliates by requiring all affiliates to use tracking codes on their links and prohibiting them from using URL shorteners or other methods of obfuscating the link between themselves and your affiliate site.

This makes it much easier for you to see where your affiliate referral traffic is coming from and whether anyone is engaging in shady behavior.

Hire an Affiliate Fraud Prevention Company

These companies monitor affiliates’ activity and flag them if they detect suspicious activity. You can then contact these affiliates and ask them to change their marketing practices or terminate their relationship with you altogether, depending on the severity of the situation.

Affiliate Red Flags to Look Out For

To prevent bad affiliates from ruining your success story look for these red flags:

1. Traffic sources: if an affiliate doesn’t disclose its traffic source then it’s probably not going to be above board. Most likely it’ll be incentivized and/or desktop traffic (all from the same IP address).

2. Offer types: some merchants or verticals are higher risk than others, especially those that involve sales or subscriptions (e.g., dating offers). If the merchant isn’t sure about something then it’s best to avoid those offers altogether.

3. Creative types: if they ask for custom creatives that aren’t on the merchant’s site then chances are they’re using them somewhere else and aren’t disclosing this information.

Other things to look out for are redirects, malware, device spoofing, and typosquatting. Scammers go to all measures to steal a sale or trick the system.

Summing Up: Protect Your Affiliate Business

You can never be too careful when it comes to affiliate marketing. Know who you’re partnering with/make smart partnerships and what you’re promoting, otherwise it might cost you your entire online business.

Affiliate marketers need high-risk payment processing due to the riskiness of the industry. As you can see, fraud is a major player in the affiliate marketing work and normal processors want nothing to do with it.

You need a processor with built-in fraud detection for things like stolen credit cards so you can lower your chargeback ratio and keep running your top-tier affiliate marketing hustle.

DirectPayNet has the answer. Get in touch with our expert team of high-risk merchant service reps and we’ll hook you up with a high-risk merchant account made for affiliate marketing plus a payment processor that backs you.