Affiliate marketing has exploded in popularity, but a dark side has emerged – affiliate fraud. Unscrupulous affiliates are costing businesses up to $1.4 billion annually through deceptive tactics like cookie stuffing and typosquatting. As an affiliate manager, you need to protect your program. This comprehensive guide will shed light on the murky world of affiliate fraud, its common techniques, and most importantly, how you can detect and prevent it.
The Rising Threat of Affiliate Fraud
Let‘s start with some context on the growing problem of affiliate fraud:
- Affiliate programs are a major channel, responsible for 5-15% of ecommerce revenue for many retailers. But so is affiliate fraud – approximately 10-20% of affiliate commissions are estimated to be fraudulent, amounting to $1.4 billion in 2020.
- A 2021 survey by Awin found that nearly 60% of advertisers had experienced affiliate fraud in the past year.
- Industries seeing high rates of affiliate fraud include finance, gambling, and retail services. For example, some auto insurance companies have reported click fraud rates exceeding 50%.
- Sophisticated fraudsters are leveraging new tactics like machine learning and bot armies. Fraud rates have increased over 180% since 2016, as tracked by affiliate protection firm Polygraph.
The motivation is clear – with typical commission rates of 5-30%, fraudsters have a lot to gain. But what exactly are they doing? Let‘s break it down.
How Affiliate Fraud Works
While methods vary, affiliate fraud typically aims to falsely earn commissions from a brand‘s affiliate program. Common schemes include:
With cookie stuffing, an affiliate secretly implants a 3rd party tracking cookie on a user‘s browser using techniques like:
- Malicious browser extensions – These add-ons covertly stuff affiliate cookies.
- Pop-ups/pop-unders – Hidden windows are used to load cookies.
- Widget iframes – Fraudsters conceal cookies inside site widgets.
So even if the user never clicks the affiliate‘s link, any resulting sale earns them a commission.
According to a 2020 Adometry report, cookie stuffing accounted for 75% of invalid clicks across affiliate programs. Extensions like Grammarly were found cookie stuffing on a massive scale.
Typosquatting relies on users mistyping a URL – for example, amazn.com instead of amazon.com. The typosquatted domain redirects visitors to the correct URL while claiming a commission.
This tactic earned Walmart affiliates over $10 million in 2015 before being uncovered, as reported by Forbes. Variants like typosquatting with international domains are also popular.
For app install campaigns, fraudsters mimic how app attribution works to fake installs. By determining how install tracking SDKs work, they can trick advertisers into believing installs occurred on real devices when they never happened.
Sdk spoofing costs advertisers an estimated $300 million annually, according to Kochava. The technique is highly profitable since CPI payouts typically run $1-$4.
How You Can Beat Affiliate Fraud
While affiliate fraud is an arms race, advertisers aren‘t powerless. Here are proven techniques to protect your program:
Stringent Affiliate Approval
Vet every affiliate thoroughly – verify their company, website, domain history, content quality, and online footprint. Require updated W9‘s annually.
Ad Verification Tools
Services like Polygraph and Forensiq provide ad verification across channels to identify IVT before it impacts sales.
Traffic Source Analysis
Monitor analytics for unusual spikes, low target CVRs, and sketchy referring domains. Blacklist shady affiliates immediately.
Browser fingerprints help pinpoint patterns indicating fake traffic, like duplicate configurations across many "users."
Residential proxies allow you to anonymously monitor affiliate links for redirects and other shady behavior. Critical for fraud prevention.
Expertise Goes a Long Way
Work with vendors specializing in affiliate fraud prevention. Experts like Elie Kanaan, Head of Operations at Polygraph, have valuable insights:
"We‘re seeing a big rise in ‘gaming fraud‘ – fraudsters taking advantage of attribution loopholes to mimic legitimate actions like account creations. Machine learning is helping detect these patterns across millions of events."
"No silver bullet stops all fraud, so combining tools like proxies, ad verification, fingerprinting, and expert auditing is crucial. You have to outsmart constantly evolving fraudsters."
The key – have layered fraud defenses and zero tolerance for abuse. Report violators to the FTC. With vigilance, you can thrive with affiliate marketing.
The Bottom Line
Affiliate fraud is a modern plague eating away at program profits. But by vetting affiliates, monitoring closely, using ad verification and proxies, and working with experts, you can protect your business. Stop fraudsters from taking advantage of your program and put that money back in your pocket where it belongs.