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The Main Types of Affiliate Fraud in 2018

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Performance marketing brings brands, networks, and affiliates together to drive more traffic and conversions for brand campaigns. While many brands and performance agencies enjoy successful and mutually beneficial relationships, affiliate fraud has left the industry with a black eye.

Many say that the bad old days of shady affiliate marketing is waning, but it takes more than talk to instill confidence in your partners. In order to rebuild trust with brands and other partners, we must not only acknowledge the issues we face, but actively work to detect, fight, and prevent affiliate fraud.

Here we will go over what affiliate fraud is, what it isn’t, and how to spot the five most common types of affiliate fraud. Want to learn how to stop affiliate fraud also? Download The Affiliate Fraud Prevention Playbook to see how you can fight and prevent affiliate fraud to build trust with your partners, create successful pay-per-call programs, and be a part of creating a new era of confidence in performance marketin

What is Affiliate Fraud?

As you know, pay-per-call is an advertising model where an advertiser pays an affiliate commission for calls driven that meet specific conditions. These conditions can include caller region, time of call, and total talk time, as well as methods used like paid search and directory listings.

Affiliate fraud occurs when an affiliate or publisher purposely drives fake leads that violate any part of the contract in order to receive payment unjustly. This includes mimicking the advertiser’s required conditions in exchange for payment or violating the allowable methods to drive traffic.

Don’t Confuse Invalid Leads With Fraud

Not every lead that an affiliate generates is going to a good fit to become a customer. While getting 100 percent perfect leads would be awesome, you’ll always get some invalid leads with the good ones. The important thing here is to differentiate between fraudulent leads and invalid leads. Affiliates cannot be held accountable for a reasonable number of invalid leads, and since they’re not malicious, the affiliate is entitled to payment.

Five Common Types of Affiliate Fraud

Typical affiliate fraud methods come in four different but equally unsavory flavors. Let’s take a look at each type.

Unauthorized Sources

Advertisers define the acceptable media channels through which an affiliate can drive traffic. These sources may include but are not limited to: Email, paid search (keyword bidding), display, social, print ads, radio, and warm transfers.

Any lead driven outside of the approved media channel is considered a fraudulent lead. While the lead may be technically legitimate, the buyer may not want leads from social, for example, and would be under no obligation to pay for them. As an example, some brands prohibit affiliates from brand name keyword bidding as it interferes with their own campaigns, so even if an affiliate drives a quality lead through that source, they should not be paid out and the call is considered fraudulent.

Stolen Credit Card

Stolen credit card numbers are a classic but persistent method of defrauding performance marketing customers. With a pile of stolen credit card numbers, a shady affiliate can impersonate consumers to buy the product or service from the advertiser in order to receive a commission from the sale driven.

When the real consumer disputes the charge, the credit card company reverts payment from the advertiser, but the bad affiliate keeps their payment. This type of fraud is most prevalent in cost-per-acquisition (CPA) campaigns that require payment from the consumer before the affiliate receives a commission. It can be difficult to spot right away as it takes most advertisers 30 days to receive a dispute. By then, the affiliate will probably be in the wind.

Account Selling

Agreements between advertisers and affiliates are between specific organizations. If an affiliate has a good reputation, quality relationships, and solid commissions, another affiliate may want to impersonate them by buying their online accounts. There are online marketplaces that facilitate the sale of pre-activated affiliate accounts to a specific advertiser or network.

Since advertisers set up agreements with specific affiliates, buying an account to impersonate the established affiliate is a breach of conditions.

Mystery Shopper

Also known as incentive traffic, bad affiliates will impersonate or hire others to impersonate interested buyers in order to meet the advertiser’s requirements and receive a commission. These callers sound interested, provide information, and stay on calls for believable durations.

Mystery shoppers are some of the worst offenders on performance campaigns and can be very difficult to catch.

Many of the “mystery shoppers” are hired through Craigslist ads, emails, and recruiting sites, and the people making the calls are completely unaware that they are part of a scam, so they take what they are doing seriously. Some are actually paid by the affiliate, but most figure out that they made a bad move when the check for their “mystery shopping” duties never arrives.

Preventing and Fighting Affiliate Fraud

Given the history of fraud in performance marketing and the suspicions that brands may have about the industry, it’s tempting to put your head in the sand and quietly fight the baddies. In order to rebuild the reputation of the industry and instill trust in your partners past, present, and future, it’s time to face the beast head on and show that you’re doing everything in your power to fight it.

Download The Affiliate Fraud Prevention Playbook to learn how to prevent and fight affiliate fraud and how you can use your fraud fighting superpowers to build better relationships with brands and affiliates.

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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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