Types of Fraud in Affiliate Marketing Relationships and How to Fight It

Affiliate marketing is a powerful tool for driving conversions. But it also comes with the risk of fraud. Let's talk about the common types of fraud and how to combat them:

1. Click Fraud

   Fraudulent clicks can generate commissions without genuine interest or potential for conversion. Automated scripts or bots generate fake clicks. Some affiliates might use click farms — groups of people paid to click on ads.
   
   How to detect it?

   To notice that, we need to detect anomalies and spot click patterns. Look for IP addresses generating high click volumes or unusual geographic click distributions.
   
   What you can do about it

   The most obvious solution to verify clicks is to use CAPTCHA. But of course, we don't want to check every single user. We can implement a threshold that will limit the number of clicks from certain IP addresses. And if that is exceeded, use CAPTCHA. Some third-party tools like ClickCease or CHEQ use similar techniques.

2. Cookie Stuffing

   This one is nasty. Affiliates may drop cookies on a user's browser without their knowledge. That allows them to capture commissions without being a real part of the user journey.

   This is done through JS or hidden iframes. Cookie stuffing may happen through browser extensions or even public wifi networks.
   
   How to detect it?

   The detection mechanism comes from the definition of fraud. We want to find user journeys where the affiliate cookie is placed without a click. On a high level, we can just monitor the clicks-to-cookies ratio.
   
   What you can do about it

   The most robust solution against cookie stuffing is server-side implementation. Information about the cookies is also stored in the backend for easier validation.

3. Conversion Fraud

   Fake conversions or leads generated by bots or manipulated data to earn commissions. Fraudsters use scripts to simulate user actions like form submissions or purchases. This is a quite obvious type of fraud. If there is an easy way to generate conversions, affiliates might do it themselves.
   
   What you can do about it

   The most secure way to fight it is with the right agreements in the first place. It is not possible to fake a conversion if to get a commission, it has to be paid. But also you can validate conversion data for patterns indicative of non-human behavior. Use fraud detection services to analyze lead quality. Implement multi-step verification (e.g., email or phone verification), and use CAPTCHA on forms. There are also real-time fraud detection services like Sift or Kount.

4. Ad Hijacking

   This is when affiliates copy and use a merchant's ads to divert traffic and earn commissions. They create fake ads or take over legitimate ones to reroute traffic through their links.
   
   How to detect it?

   To spot this, you need to monitor for duplicate ad content across search engines and social media. With that, brand monitoring tools can help.
   
   What you can do about it

   Prevent this by setting clear rules, and regularly reviewing affiliate promotions. As for tools, there are ones like AdThwart or The Search Monitor

5. Typosquatting

   Affiliates create domains to capture users who misspell the URL. Fraudsters register domains with slight variations of the operator domain name.
   
   How to detect it?

   To detect typosquatting, monitor new domain registrations for names that resemble yours. Tools like DomainTools can help track these domains.
   
   What you can do about it
   Prevent this by registering common misspellings of your domain. You can also take legal action against typosquatters. And using brand monitoring services like BrandVerity.

    

   Combating Affiliate Marketing Fraud

   Carefully vet affiliates before approval by checking their traffic sources. You can check their historical performance and promotional methods. Platforms like Affise or Partnerize can help with this process.

   Use advanced analytics and fraud detection tools to keep an eye on activities. Analyze traffic patterns, conversion rates, and user behavior. As simple as using tools like Google Analytics. Conduct regular audits of affiliate activities to catch potential fraud early.

   Ensure transparent reporting and communication with affiliates about acceptable practices. Update affiliates on compliance requirements and report suspicious activities. Use platforms like Impact or CJ Affiliate for detailed reporting.

   Draft clear legal agreements that outline acceptable behaviors and penalties for fraudulent activities. Having a robust logic to identify conversions can beat any fraud detection tools.

   If you need any help with setting up tracking or analytics, reach out to us.