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Survey: 72% of Marketers are Victims of Fraud

Performance Marketing Insider launched a survey this month to discover what exactly was happening in the trenches with marketers in regards to fraud and CPA affiliate networks. We asked affiliates, networks and advertisers their perceptions of fraud, if they trust CPA Affiliate Networks, and most importantly, if any solutions are working. We had hoped to find good news about fraud, how marketers were catching fraudsters, and how the industry had changed in the last few years.

We didn’t find anything of the such, but just the opposite. The results are shocking and should worry everyone in the industry.

Despite all the solutions being proposed, fraud in the performance marketing industry still seems to be a plague. Discussions at conferences, meetings at industry organizations, and general statements about fixing fraud haven’t done anything in the last decade to improve the situation. Everyone admits the same thing, that fraud is one of the most destructive forces in the marketing business and has the ability to ruin any company caught in some of these complex schemes. Yet, despite all the advancements, the online marketing and especially the performance marketing industry, is facing a crisis in which there are not just more fraudsters but better fraudsters.

Fraud is still here and it’s only getting worse with more and more money flowing into the performance marketing industry and more and more people launching networks and companies with little experience, little ethics and not a whole lot of trust. 

This is what we found — and have provided a nifty infographic.

82% of all marketers say fraud is a serious problem in performance marketing
72% of all advertisers say they have been a victim of fraud.
10% of publishers say a CPA Network has asked them commit fraud.
11% of networks admit they have asked a publishers/affiliate to commit fraud.
52% of publishers do not trust CPA Affiliate Networks
66% of advertisers do not trust CPA Affiliate Networks
While 84% of Networks use some sort of Fraud Detection Program, 49% of Advertisers believe it doesn’t work.

What does this all mean?

In order to sort through all this, we asked some of the experts their advice, looked into the numbers and what exactly they mean, and what can be done. Strangely, despite the overwhelming issues, very few CPA Networks wanted to speak to us about the fraud issue, and the few that spoke to us off the record, said they were worried about retaliation within the industry about talking about fraud too much.

However, Tim Burd, the CEO of Digitize IQ, and a columnist for Entrepreneur, revealed a little insight into why some CPA Networks commit fraud. As the former owner of an affiliate network, he said he dealt with a lot of fraud from affiliates using complex schemes and scripts to trick the CPA Networks. However, he pointed out that the problem with CPA Networks not being trusted is a little different,”advertisers do not trust networks in many cases because many networks are incentivitzed to push through “iffy” traffic. They mix subids to blend the traffic.”

Phil Caramanica of CPAWAY, a relatively prominent CPA Network agrees with the issues and told us “that some networks blend traffic by taking different types of methods of promotion, that are often not allowed, and combine them with legitimate sources hoping the advertiser wont notice the fraud. Many networks we have found doing this as a way to increase the affiliate’s payout to be more compeitive, while paying less the non-complaint traffic. This hurts the guys, trying to play by the rules.”

“It is mind boggling to me the number of affiliate networks that will clearly allow fraud, thanks to lax policies on fraud and also aggressive quotas imposed on affiliate managers,” Ricky Ahuja of RickyAhuja.com told PMI. “This has obviously, and rightfully so might I add, made the advertisers weary working with affiliate networks. My stance for the last 12+ years has been one of complete transparency with the affiliate/network/advertisers and I think working openly rather than trying to hide behind their legal department and fraud detection software would go a long way to help the industry progress.”

David Sendroff, CEO of Forensiq, a fraud detection tool used by many advertisers and networks, says that all advertisers and networks must have some sort of fraud detection tool in place. According to him, “Depending on where you sit in the ecosystem, there are a number of risks you take by working with affiliates. Advertisers risk affiliate payouts and fulfilment costs associated to fraudulent transactions, while networks and aggregators risk advanced payouts, end of month chargebacks and the loss of their advertising clients. Fraud detection creates a level of transparency so that both advertisers and networks have at least a real-time awareness of the intent and integrity behind each conversion. A more advanced integration also creates an ability to proactively block high-risk conversions, which is necessary to eliminate these risks.”

Burd agrees with the issue but also points out that CPA Networks that blatantly aren’t committing fraud aren’t still not really helping fix the issue. He says they “don’t vet the affiliates properly. Its a shit show. Now obviously some networks are better than others at all of this.”

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Yes, obviously not all CPA Networks are committing fraud — we are not even suggesting that. Even by our own numbers, 10% of publishers report that they have been asked to commit fraud and 11% of CPA Networks owners admit to committing fraud — so approximately 90% of the networks are trying to do things the “right way” and follow the rules, but the other 10% of companies seem to be ruining for the rest. Ricky Ahuja agrees, “There are a lot of quality networks out there, let’s not mess it up for everyone on account of a crappy few.”

So for most CPA Networks, Affiliates and Advertisers, the issue isn’t that they are committing fraud, but they are having a bad time preventing fraud from creeping in from bad actors who don’t want to play by the rules. According to the survey 84% of all networks use Fraud Detection programs that are supposed to catch the bad guys in the act of trying to rip off the industry. Yet, despite these steps almost half (49%) of all advertisers say these systems don’t actually work.

Brian McLevis has seen a lot of fraud as the CEO of Scrubkit, a CPA affiliate fraud detection tool. He doesn’t buy that the systems don’t work, telling us that “I am not sure who is saying “they don’t work” because ScrubKit has yet once to steer us in the wrong direction.  Maybe the people saying this are uneducated in the fraud software space and/or basing their opinions on information that isn’t factual or firsthand experience.”

Sendroff of Forensiq seems to agree and told us that the “the increased sophistication of fraudsters, faulty attribution and a lack of granularity in reporting are a few reasons that advertisers may question fraud detection. Attribution fraud happens to be very confusing for advertisers because they are seeing true revenue associated to a set of conversions. For instance, cookie stuffing and mobile device stuffing allow affiliates to steal the credit for real conversions or installs based on traffic they haven’t actually driven. In lead generation, fraudsters will also capture leads through non-approved channels and then recycle them to a number of similar campaigns. Bad actors tend to blend their traffic with legitimate sources, which can also throw off KPI’s. Therefore, it’s important to use a fraud detection solution that evaluates the integrity of each and every conversion rather than looking at the overall success on an aggregate level.”

What are your thoughts about these results? Do the systems work? How do we prevent fraud, and is it really this bad? What do you think can be done to fix this?

Read More:
$75 Billion Lost in Fraud: Smarten Up!
Four Ways to Prevent Fraud in Your Affiliate Program
Clickbooth Attacks Fraud!

 

 

 

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Pesach Lattin

Pesach "Pace" Lattin is one of the top experts in interactive advertising, affiliate marketing. Pace Lattin is known for his dedication to ethics in marketing, and focus on compliance and fraud in the industry, and has written numerous articles for publications from MediaPost, ClickZ, ADOTAS and his own blogs.

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4 Comments

  1. Something I remember from previous cases such as this was advice to NOT SIGN ANYTHING the company gives you. They are going to try to protect themselves from a lawsuit for negligence, and are going to try to cover their butts however they can.

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