Beware of Fraud

While the column normally focuses on the benefits of affiliate marketing, today we look at one of affiliate marketing’s dirty little secrets: fraud. Frankly, fraud is not something most people in the industry talk about with any regularity at least not yet.

On one hand, it seems to be a relatively minor problem judging by the utter lack of documented cases with which to frame the discussion and scare you into paying attention. At the same time, it doesn’t take much imagination to realize that a few fraudulent affiliates could have a significant impact. Given the tendency of affiliate programs to derive large portions of their performance from only a sliver of overall affiliates, a few bad apples can really spoil things.

Before we go too far, it’s important to recognize that a well managed program is the best defense against fraud. If you’re only checking your stats once a month or worse even less frequently, you’re unlikely to discover the warning signs.

Fraud’s Silver Lining?

What’s great about fraudulent affiliates is that perhaps more than anything else, they’re greedy. In the few instances I’ve witnessed, the scenario is almost always the same. In the course of less than a week, a new affiliate joins a program and immediately begins generating significant volume. These new affiliates tend to perform above the bounds of good judgment. For example, they typically have high click through rates and conversion rates even higher than your best affiliates.

Anytime you get a new affiliate like this, get involved quickly. If you’re checking stats once or twice a week and you notice a new super affiliate, check out its site. Make sure you investigate all the referring URLs. Referral URLs that don’t match the site’s profile are a sure warning sign. Ditto any referral URLs that bring up 404 errors.

When you do successfully find your links and banners on the affiliate site, you’ll know suspicious activity instinctively. In instances where the clues are more subtle and you’re not completely sure, just give it some time, and the affiliate’s true intentions will make themselves known.

Fraud Detection Techniques

Another technique to use in those instance where you’re not sure if it’s fraud or not: Try sending the affiliate a personal email. The more non-confrontational in nature the better. I like to welcome the affiliate to the program, ask about where the affiliate’s traffic comes from, how long the site’s been running, why the site joined our program general conversation that might help me get a picture of what’s going on. All the while, continue monitoring closely. If you get no response from your email after a few business days, your fraud concerns should go up a notch.

In other cases, sites look fine at first, but over time you may start to notice inconsistent patterns in their traffic. Again, catching this type of fraud requires very close monitoring of your program stats. For example, a certain affiliate may have huge variances between earnings or traffic levels from one day to the next. However, closer inspection seems to reveal an eerie pattern to the randomness several days of low volume followed by a day with a significant increase and so forth. Close investigation of these transactions often reveals the fraud.

Besides vigilance by affiliate marketers, another great defense against fraud are the affiliate networks themselves. Several of the providers have gone on record to discuss their efforts to combat fraud. If you encounter suspicious activity from an affiliate, sending your network provider an email explaining your thought process can prove valuable. By viewing an affiliate’s transaction history across numerous merchant programs, networks have a richer data set from which to draw conclusions. Moreover, the best networks should be constantly monitoring your affiliate base to guard against fraud.

While fraud is certainly not a huge issue for affiliate marketers, it can prove costly. The best defense is regular monitoring of affiliate stats. Visiting the referral URLs of your affiliate sites is one fraud detection technique. Couple that with more detailed tracking of affiliate traffic patterns and diligent monitoring by your affiliate network. Ultimately, you should be able to spot any would-be dishonest affiliates with very little cost to your program.