The Clearsale Blog

Affiliate Fraud: The Dirty Secret of Affiliate Marketing

Affiliate Fraud: The Dirty Secret of Affiliate Marketing

The idea of making money while you sleep is undoubtedly appealing, but is it realistic? Through affiliate marketing — a tactic that lets individuals benefit from a steady stream of income while e-commerce merchants enjoy increased sales and traffic and a growing customer base — it just might be. But that doesn’t mean it’s not without risk.

The idea behind this marketing approach is simple: A company recruits affiliates to market a company’s products. In turn, the affiliate receives a portion of each sale they make. Not only is the partnership easy to implement, but it’s also becoming increasingly popular: 81% of brands are currently estimated to engage in affiliate marketing — with a projected spend of $6.8 billion by 2020.

But even with an affiliate marketer receiving up to 30% of a customer’s spend from merchants, there’s still no such thing as a free lunch. So what’s the catch? The growing spend and potentially high yields have made affiliate marketing an attractive target for fraudsters, posing a considerable risk to a growing business. Here are the affiliate fraud strategies merchants should be wary of.

Spam

While most customers identify and delete spam emails before they do any damage, all it takes for spam to perpetuate is for one unsuspecting customer to open junk email and make a purchase from a fraudster. Not only does spam cause legitimate merchants to lose sales, but when customers see the same product, brand or company appear over and over again in their Junk email box, the legitimate company is also at risk of a hit to their reputation.

Fake Websites

Fraudsters register variations of a vendor’s web domains (e.g., amazom.com) to attract unsuspecting buyers, and then the fraudsters sign up the variations for affiliate programs. This process, called domain squatting, ends up directing traffic away from the legitimate affiliate and to the fraudster’s site. The fraudster’s site may even be a complete clone of the legitimate site — graphics and wording alike. Customers end up making their purchases at the wrong site, causing the genuine merchant to lose the sale and letting fraudster cash commissions earned by honest affiliates.

Fake Leads

Fraudsters use software to imitate consumers’ behavior and generate false clicks, transactions and conversions on offers. Through click fraud, greedy fraudsters repeatedly click on income-generating cost-per-click links to inflate their income and, sometimes, just to cost merchants revenue. Merchants end up seeing their funds drained without realizing any sales.

Malicious Browser Extensions

Another way fraudsters cheat the affiliate system is by making browser extensions available in a browser’s “extension stores” for users to download to increase their browser’s functionality. Although the extensions generally do perform a legitimate function (like downloading videos), their true intent is to hijack legitimate users and tag them to collect affiliate and referral fees. Some extensions swap a legitimate affiliate code for their own to get credit for the sale, while others exchange ads on a website for ads of their own.

Fraudulent Purchases

Merchants generally pay affiliate commissions fairly quickly after a sale is processed, so if a transaction was made with a stolen credit card, that could be a big problem. Here’s why. By the time the merchant learns the transaction was fraudulent — usually because the customer files a chargeback or asks for a refund — the fraudster has already received the affiliate commission and is likely long gone.

How to Stop Affiliate Fraud

Although it can be difficult to spot and stop affiliate fraud, there are some best practices merchants can implement to avoid being part of it:

  • Confirming the affiliate has an active website whose content relates to their products
  • Communicating regularly with affiliates to ensure they’re running a legitimate business
  • Confirming the affiliate’s site is optimized for the merchant’s products
  • Enable cookies to track clicks, allowing merchants to more easily identify click fraud from the same IP address
  • Manually approve new affiliates

While working with legitimate affiliate programs can be lucrative for merchants and affiliates alike, merchants are also wise to implement a dynamic fraud prevention solution that can help track IP addresses, monitor affiliates and keep customers safe.

ClearSale’s unique combination of advanced artificial intelligence and highly trained staff helps ensure fraudsters don’t slip through a merchant’s defenses. Helping e-commerce merchants grow in an ever-changing online environment has been our passion for more than 15 years. Contact us today to learn how we can help you.is every valid order being approved?

 

You may also like

3 Ways Tech Can Benefit Remote Teams

3 Ways Tech Can Benefit Remote Teams

Ecommerce businesses are used to an ever-evolving digital connection between them and their customers. But 2020’s COVID-19 pandemic has resulted in that digital connection making its way into the..

Shopping Habits by Gender: What’s Changed in 2020

Shopping Habits by Gender: What’s Changed in 2020

Do men hate shopping online? Are women more worried about fraud?

Is Fraud Risk Scaring You Away From International Shipping?

Is Fraud Risk Scaring You Away From International Shipping?

With cross-border shopping estimated to make up 20% of e-commerce in 2022, many merchants are right to consider expanding into other countries. So what’s stopping them from pulling the trigger?

Headless Commerce: What, Why and How

Headless Commerce: What, Why and How

As technology and e-commerce solutions improve, we’ve seen digital platforms evolve from on-premises platforms to software-as-a-service. Now, while these two models aren’t completely outdated (in..

Country Profile: The Guide to Ecommerce in Mexico

Country Profile: The Guide to Ecommerce in Mexico

¡Bienvenido a México! The digital economy south of the border is growing by leaps and bounds. For the ecommerce retailer, Mexico represents an exciting opportunity to enter a new market of..

4 Reasons to Move Your Brick-and-Mortar Business Online

4 Reasons to Move Your Brick-and-Mortar Business Online

Shoppers’ ways of purchasing products and services have changed dramatically in the past few months of 2020. With 52% of consumers avoiding crowds and 32% staying home more often, stay-at-home..

How to Optimize Your Google Product Feed

How to Optimize Your Google Product Feed

Google’s obviously doing something right. It handles 3.5 billion searches daily and holds 92.71% of the search engine market share. Users love Google because of its robust search capabilities..

Why Ad Fraud Is a Bigger Threat Than We Thought

Why Ad Fraud Is a Bigger Threat Than We Thought

Digital ad spending in the United States was expected to top $129 billion in 2019, accounting for 54.2% of total media ad spending. Given the increased popularity of online browsing and buying,..

E-Commerce Content Marketing: 5 Tips for Success

E-Commerce Content Marketing: 5 Tips for Success

Now that you’ve launched your e-commerce store, you’re ready to sell … but are your potential customers ready to buy? Right now, they might not even know your product or service exists or that it..

Want to write
for our blog?

Please review our writers' guidelines
https://www2.clear.sale/press/clearsale-guest-blog-guidelines
and then email guestwriter@clear.sale with your pitch!

Subscribe to our blog