3 Ways To Prevent Affiliate Fraud & Safeguard Affiliate Networks

Oleksandr Rohovnin
23 minutes read
Oleksandr Rohovnin
23 minutes read

Affiliate fraud is rapidly proliferating, causing businesses without up-to-date fraud security measures to become unprofitable. Although affiliate marketing continues to be a lucrative venture for affiliates, advertisers, and affiliate networks, the latter group faces imminent challenges.

Affiliate networks must not only ensure a secure business environment for affiliates and advertisers but also entice them with a compelling value proposition. Regrettably, the presence of affiliate fraud often disrupts these efforts, leading to the downfall of even industry giants such as Amazon, Uber, and eBay.

In parallel with the escalating issue of digital ads fraud, as highlighted in Statista’s data, affiliate fraud looms threateningly over affiliate networks. It is akin to a sword of Damocles, emphasising the necessity of either guaranteeing a healthy business environment for affiliates and advertisers or facing potential collapse. In practical terms, this necessitates the implementation of advanced fraud detection and affiliate compliance algorithms within your network.

Casual oversight of affiliate programmes won’t suffice – delving deep into affiliate data is essential to proactively address and prevent affiliate fraud. This involves two crucial components:

  • In-depth understanding of affiliate fraud and how to prevent it
  • Implementation of automated affiliate marketing software designed for fraud prevention and compliance

Without delay, let’s explore the challenging landscape of affiliate fraud to discover how to minimise risks and ensure compliance within your affiliate network.

Embark on a comprehensive exploration of the diverse world of affiliate marketing in this extensive 33-minute read.

Is Affiliate Fraud Truly a Significant Threat?

Affiliate fraud wreaks havoc on affiliate networks like a wrecking ball, resulting in irreparable financial and, more importantly, reputational harm. When affiliates engage in deceptive practises, the only effective defence for your business is to promptly remove these affiliates from the network.

Understanding the Perils of Affiliate Fraud

Depleted Budgets Fraudsters, solely focused on acquiring undeserved commissions, deplete advertisers’ budgets without delivering commensurate value. Consequently, advertisers struggle to break even, let alone enhance their bottom line, leading to a loss of confidence in their affiliate network.

Considering the exorbitant costs inflicted by digital ad fraud alone – projected to reach approximately $100 billion in 2023, according to Statista – few advertisers are willing to invest in untested marketing methods when uncertain about the return on investment.

Attribution Mismanagement Affiliate fraud not only drains budgets but also disrupts attribution by incorrectly assigning customers to the wrong affiliates. The inability to accurately track affiliates hampers the development of effective marketing strategies and limits the potential for maximising return on investment.
Reputational Erosion Vulnerable affiliate networks are experiencing unprecedented attrition. Constantly treading on thin ice becomes burdensome for advertisers, prompting them to seek alternative networks rather than expose themselves to multidimensional risks.
Compliance Challenges Fraudulent affiliates utilising stolen information for generating call leads may subject you to violations of the Telephone Consumer Protection Act, with subsequent legal consequences.

Infested with fraud, an affiliate network faces a slow demise, akin to a fly entangled in a spider’s web, unless prompt action is taken to purge untrustworthy affiliates and implement robust fraud protection measures.

Source: Anura

But before taking action, it’s crucial to understand your adversary.

Fraud in Lead Generation

In the marketing landscape, leads stand as the Mount Rushmore, and your Pay Per Lead affiliate programme – or any lead-centric initiative – must guarantee a continuous flow of leads and a respectable conversion rate, ideally around 2.5% for e-commerce. To achieve this, addressing lead fraud, the bane of affiliate marketing, is imperative.

  • Tackling lead fraud not only fosters advertiser and affiliate trust but also addresses the concerns of customers who feel vulnerable. A mere 36% of U.S. shoppers believe their merchants can effectively prevent e-commerce fraud. Closing this gap is key to enhancing your bottom line.

Lead fraud manifests in various forms, with a prevalent one being the misrepresentation of how leads are collected or their true identities. Fraudsters exploit everyone in the ecosystem, from advertisers and affiliate networks to unwitting customers disclosing personal information.

Strategies for Combating Lead Gen Fraud

Fake Leads Despite the detectability of fake leads, they camouflage themselves by mimicking engagement, submissions, clicks, and installations from authentic leads. Many affiliate networks remain unaware of fake leads unless an overall decline in a particular affiliate’s performance is observed.
Misleading Offer Unethical affiliates manipulate buyer psychology by distorting the advertiser’s offer. This can involve adding non-existent incentives, reducing prices, or creating FOMO unrelated to the real offer. Such deceptions often become apparent too late, if at all, resulting in financial losses.
Read Indeed’s guide on understanding buyer psychology.
Recycled Leads While affiliates can legitimately sell shared leads with full disclosure, some clandestinely resell their leads, particularly low-intent or irrelevant ones. Presented as new customers, repurposed leads yield minimal profits while triggering regular rewards.
Farmed Leads Lead fraud has reached the point where entire lead farms are producing fraudulent leads and engaging in reciprocal arrangements. These farms share knowledge and devise sophisticated strategies to evade detection, presenting a formidable challenge to affiliate networks.
Mixed Leads Resourceful fraudsters blend genuine leads, acquired from reputable publishers, with fraudulent leads within acceptable compliance limits. Executed within these bounds, lead mixing is nearly impossible to detect, as low-quality leads are perceived as part of the norm.

 

Lead gen fraud is not just detrimental – it can be catastrophic, draining budgets and causing irreparable damage to credibility. Affiliate networks compromised by severe reputational harm may struggle to recover and may even face compliance and legal issues.

Curious to delve deeper into lead generation fraud? Explore how lead gen fraud affects brands and consumers.

Preventing Lead Generation Fraud

Identifying lead gen fraud is pivotal, leading to the expulsion of bad actors from the affiliate network. Detection algorithms may vary based on technical capabilities and affiliate diversity. As with any fraud, monetary abnormalities serve as reliable indicators.

  • Unusual or identical IP addresses, high refund rates, inorganic traffic sources, suspicious demographics, low engagement levels, and dubious conversion patterns are significant red flags pointing to lead gen fraud.

Shielding against lead gen fraud necessitates a comprehensive set of measures for lead tracking, distribution, and analytics. In essence, understanding your affiliates and their customers is paramount.

  • Robust systems like LMS Sync offer extensive lead analytics and real-time reports, elevating lead management to new heights. Moreover, LMS Sync can integrate seamlessly with other proprietary solutions for clicks, calls, email, and more, creating an automated marketing ecosystem for your affiliate network.

Click Fraud

Click fraud entails generating paid clicks through bots, click farms, and scripts, cleverly disguising them as genuine interactions and syphoning off commissions. In the affiliate marketing sector, approximately 14% of all clicks, as per data from ClickCease, originate from non-authentic sources, impacting 90% of all PPC ad campaigns with the scourge of click fraud.

This deceptive practise undermines the integrity of an affiliate network by rendering click data unreliable and inefficient. In its most severe form, click fraud depletes an advertiser’s budget, creating a rift between them and their affiliate network.

Detecting Click Fraud

Abnormal CTR A substantial deviation from the norm in click-through rates (CTR) can signal click fraud, particularly when users swiftly enter and exit a website. Unexplained fluctuations in CTR and disparities across marketing channels may also indicate affiliate fraud.
Short sessions Lack of engagement from referrals, especially when other affiliates perform well, may be indicative of click fraud. Genuine users typically explore a website before departing, whereas irrelevant users or bots leave instantly or without interaction.
High bounce rate With an optimal bounce rate estimated around 20% to 40% by HubSpot, anything exceeding 70% raises red flags. Even if not directly linked to affiliate fraud, a high bounce rate warrants investigation and remedial action.

 

Protecting Your Affiliate Network From Click Fraud

To safeguard your affiliate network from click fraud, adopt a comprehensive set of measures:

  • Examine traffic sources: Prohibit illegal and dubious traffic sources, and keep affiliates aware that they are under scrutiny. Lack of transparency often aligns with affiliate fraud.
  • Utilise long-tail keywords: Promote the use of keywords that accurately reflect the promotion’s essence, making it more challenging for affiliate wrongdoers. Often, affiliate fraud is associated with expensive (branded) keywords.
  • Implement click validation tools: Don’t blindly attribute clicks; validate them before counting toward an affiliate. Validation may include IP address verification and scrutiny of clicks against a checklist of fraudulent resources.

Modern affiliate tracking software provides a comprehensive fraud prevention ecosystem, integrating marketing data, customer behaviour patterns, and AI-driven capabilities.

Want to know more about improving attribution and maximising profit with affiliate marketing software? Here’s everything you need to know.

Click Injection

Click injection represents a more sophisticated yet equally damaging form of affiliate fraud that results in erroneous attribution and payouts.

Learn how to tie affiliate marketing outcomes to actual results.

Here’s how click injection operates:

  • A fraudster distributes malware-infected mobile apps or software that monitors user actions. When the referral makes a purchase, the malware forges a click, attributing the conversion to the fraudster.

To protect against click injection, the same overlapping measures for click fraud apply.

Cookie Stuffing

Cookie stuffing, a favoured tactic among black hat affiliate marketers, retains its disruptive power.

  • Cookie stuffing involves exploiting vulnerabilities in a third-party website to surreptitiously load it with cookies, unbeknownst to the referral, attributing a purchase to the fraudster.

Deleting cookies is the only way to sever the fraudster-user connection. This rarely happens, however, since most users are unaware of the abuse.

Types of Cookie Stuffing

Pixel stuffing Placing a single-pixel cookie-stuffed affiliate ad on a webpage
Image stuffing Stuffing cookies into images on third-party websites
Banner ads stuffing Stuffing cookies into banners on third-party websites
Link stuffing Placing a disguised click-triggering link on a website, with the click occurring automatically upon webpage load

Source: HowToFix.Guide

Preventing Cookie Stuffing

Similar to various forms of affiliate fraud, cookie stuffing results in increased spending within an affiliate programme without a corresponding rise in sales. To counteract the effects of cookie stuffing, it is essential to employ affiliate tracking software equipped to unveil patterns of affiliate fraud, conduct thorough cheques on cookie integrity, and promptly verify attribution, among other measures designed for effective fraud detection.

Eager to embark on transparent affiliate marketing practices from the outset? Discover what it takes to become a successful affiliate marketer in 2023 while staying within legal boundaries.

Ad Stacking

Ad stacking involves the exploitation of overlapping ads to maximise revenue from impressions.

Here’s how ad stacking operates:

  • When multiple ads are stacked on top of each other, a single visit to a webpage generates impressions for all the stacked ads, depleting the advertiser’s budget without delivering commensurate value.

From the customer’s perspective, ad stacking often goes unnoticed unless the ads are rotated, meaning that with each visit, a new ad from the stack is displayed.

Source: Edgemesh

Important Note: Ad stacking does not universally constitute affiliate fraud. When an affiliate rotates high-quality and relevant banners, ad stacking can enhance engagement while serving as a means to test which ads attract attention. However, if stacked ads lack value, or if an affiliate fails to disclose this borderline strategy, it is advisable to scrutinise the affiliate in question.

Preventing Ad Stacking

The most effective way to prevent ad stacking is to establish ad-placement policies and incorporate technical solutions that restrict the number of ads placed or displayed within a specific timeframe. Additionally, conducting spot cheques to evaluate the quality and relevance of ads used in your affiliate campaigns serves as an extra precaution.

While ad stacking may not be classified as affiliate fraud per sae, proactively preventing or regulating ads can help maintain the integrity of your affiliate network and promote equitable marketing practises among affiliates.

Trademark Bidding

Trademarked search terms, also known as trademarked keywords, refer to phrases closely associated with a specific company and legally protected from exploitation by third-party businesses. In simpler terms, affiliates are prohibited from promoting products using branded keywords like “iPhone,” for instance.

  • Consider the “Big Mac” search query as an example. Individuals searching for “McDonald’s Big Mac” or simply “Big Mac” are seeking the iconic McDonald’s burger. If, however, they receive an unknown burger in response, McDonald’s could lose revenue, potentially leading to legal action against the infringing party.

Trademark bidding not only raises legal concerns but is also ethically questionable. Presenting a misleading ad is likely to deter customers from proceeding, benefiting neither the trademark owner nor the exploiters.

How Affiliates Exploit Trademarked Search Items

PPC advertising In a PPC campaign, affiliates may bid on trademarked search terms, elevating a fraudulent ad above its authentic counterpart. Subsequently, users are redirected to an incorrect website, where some may make unintended purchases.
SEO Boosting specific branded keywords in organic search, such as LSI and long-tail keywords, can result in the fraudster outranking the actual trademark owner.
Domain squatting The creation of websites, landing pages, and other resources with lookalike domains, like Coca-ColaForFree.com, aims to capture users searching for the respective trademarked terms.

Domain fraud may involve:

  • Typosquatting: Crafting a lookalike domain that differs only by a few characters, misspellings, etc.
  • Brand extension: Mimicking the structure of the original domain to give the impression of an affiliated or subsidiary company.
  • Geotargeting: Representing the domain as a subsidiary company catering to a local audience.
Display ads Display ads serve as a popular strategy to divert traffic from the brand. Additionally, display ads offer targeting options, allowing them to be shown in specific locations, demographics, and during selected hours.
Location and time-based targeting Reverse IP geo-targeting, one of the more sophisticated forms of affiliate fraud, enables the display of ads in specific locations and time zones. For instance, if an affiliate is aware that a trademark owner is offline during nighttime, they may target nighttime users to evade detection. Similarly, fraudsters can appeal to demographics and psychographics less likely to file complaints.

Deterring Trademark Bidding

To deter trademark bidding, consider the following measures:

  • Establish Clear Policies: Clearly define the consequences of trademark bidding in your policies.
  • Collaborate with Trademark Owners: If possible or necessary, engage in collaboration with trademark owners to address and prevent trademark bidding issues.
  • Screen New Affiliates: Prioritise screening new affiliates thoroughly to ensure compliance with trademark policies.

As for IP targeting, manually examine ads returned for specific search requests at designated times and locations. For instance, to verify whether affiliates are exploiting the “Coca-Cola Los Angeles” search query, use a Los Angeles IP address in your VPN or adjust the preferred location in Google settings.

Programmatic Fraud

Real-time ad trading within affiliate markets is gaining popularity due to its precise targeting, extended reach, scalability, and potential for transparency and improved fraud prevention. However, achieving the latter isn’t always guaranteed due to evolving programmatic fraud techniques like domain spoofing, click injection, ad stacking, etc.

  • Programmatic fraud encompasses familiar methods and techniques within an automated affiliate market that facilitates the real-time buying and selling of digital ads.

Exploiting the intricacies of real-time lead trading, fraudsters manipulate ad placement, sell inorganic traffic, and employ deceptive tactics to dupe advertisers and affiliate networks. Given the rapid pace of these activities, the most effective way to shield your network from programmatic fraud is by consistently updating your anti-fraud software and implementing standard preventive measures.

Combat Complex Programmatic Fraud with Anura

In the realm of anti-fraud software, a recommended approach to protect your affiliate network is by implementing a certified fraud shield like Anura. With the ability to identify fraud with 100% confidence and no false positives, Anura detects 2.5 times more fraud than competitors across over 800 data points. It provides definitive results, categorising actions as Good, Bad, or Warning.

BREAKING: Phonexa has partnered with Anura to enhance protection against ad fraud. Explore the synergy between the two platforms.

Source: Anura

Curious about the financial impact of ad fraud on your business? Utilise this complimentary online ad fraud calculator

The Arms Race Continues

As technologies for detecting affiliate fraud continue to advance, so do the tactics of affiliate wrongdoers. Their efforts extend beyond concealing affiliate fraud; they actively attempt to dissociate themselves from it using disposable domains and counterfeit websites.

The strategy of URL distancing operates as follows:

  • When running a trademarked ad, an affiliate directs customers to fabricated tracking websites that assess them in real-time, redirecting them to the product website through a deceptive link or concealing the link to avoid detection.

In URL distancing, scammers concentrate on refining effective analytics criteria, including evaluating IP addresses, the referring URL, and, historically, browsing history. The essence of this verification is to sift out irrelevant customers and legal authorities. Presenting a deceptive link to an affiliate manager, merchant, or regulator typically results in exclusion from the affiliate programme and, in some cases, legal action.

Source: Warren Dow

 

As the ongoing arms race persists, outdated technologies fall out of favour, making way for emerging ones. For instance, the once-prominent CSS history hack is now obsolete, rendering access to a referral’s browsing history impossible in contemporary browsers.

3 Essential Steps To Preventing Affiliate Fraud in Your Affiliate Network

Step 1. Validate Affiliates, Don’t Just Admit Them

The most effective security measure involves validating affiliates before granting them entry. It’s crucial to attract not just any affiliates but successful ones who adhere to legal standards. Screening applicants ensures quality, trust, compliance, and overall security for your network.

Learn everything you need to know about affiliate marketing compliance from Phonexa’s President, David Gasparyan.

Even if verification takes time, whether done manually or automatically, it surpasses the risks associated with auto-approval. Allowing affiliates to slip through unchecked can lead to irreversible damage to your network.

Step 2. Track Your Affiliates

Even screened affiliates may not remain law-abiding indefinitely. The only way to maintain the integrity of your network is by thoroughly tracking your affiliates.

  • Utilising a sophisticated affiliate programme management system, such as LMS Sync, is essential for uncovering what channels drive what customers, how many of them convert, and whether the marketing strategies are legitimate.

Automated lead tracking systems provide a comprehensive view of your business, offering insights into customer journeys and helping you focus your efforts and resources effectively.

Besides a lead management system, behaviour analytics tools like HitMetrix can evaluate campaigns in real-time, providing actionable insights into customer behaviour.

Step 3. Implement Fraud Detection Software

As your network expands, manual verification of hundreds or thousands of affiliates becomes impractical. Automated screening and fraud detection are essential to protect your network and advertisers from affiliate fraud.

While standalone affiliate fraud detection tools are available, choosing affiliate software with built-in fraud detection is often more practical. For example, Phonexa’s comprehensive affiliate software suite covers email, web, call, mobile, and SMS marketing.

To enhance protection, integrate Phonexa’s affiliate software suite with a robust fraud shield like Anura, providing double protection against bots, human fraud, and malware.

Here are the instructions on how to integrate Anura with Phonexa.

Bonus: Predictive Modelling – The Crystal Ball of Affiliate Marketing

While no one possesses a crystal ball for predicting the future, predictive modelling comes close. This technique simulates marketing campaigns by adjusting parameters until the desired outcome is achieved.

Predictive modelling offers a significant advantage, exposing marketing gaps and revealing untapped revenue streams. By leveraging predictive modelling, you gain insights into the trajectory of your business and strategies to reach your goals.

The Role of Adhering to Affiliate Marketing Compliance in Combatting Affiliate Fraud

Becoming an affiliate marketing vigilante isn’t the solution; instead, combating affiliate fraud must align with national and global laws and regulations. Abiding by recognised rules not only positions you as a reliable and trustworthy player but also aids in mitigating affiliate fraud and enhancing the overall quality of your affiliate programme. Most importantly, it ensures that you steer clear of legal claims.

Affiliate Marketing Compliance Institutions and Regulations

Federal Trade Commission (FTC) Governs national-scale advertising and affiliate marketing
Generate Data Protection Regulation (GDPR) Manages personal data within the European Union (EU) and the European Economic Area (EEA)
Payment Card Industry Data Security Standard (PCI DSS) Applicable to global payment card networks like Mastercard, Visa, American Express, JCB, etc.
CAN-SPAM Act Regulates commercial email communications, covering aspects like information accuracy, sensitive topics, and opt-out mechanisms
California Consumer Privacy Act (CCPA) Governs data privacy laws in California, including providing users with notice and opt-outs
Intellectual property rights:

  • Nation-wide: U.S. Copyright Act, U.S. Trademark Act., and U.S. Patent Act.
  • International: WIPO, TRIPS agreement, etc.
Copyrights, trademarks, patents, industrial design, trade secrets, and other intellectual property rights on a national and international level

Compliance may involve adherence to multiple rule sets, especially for business models involving non-residents. For example, European affiliate networks must comply with PCI DSS and GDPR, while USA-based networks need to adhere to state-specific consumer protection rules in addition to national regulations.

How Affiliate Programme Compliance Can Thwart Affiliate Fraud

Affiliate policy compliance encompasses various aspects, with one critical facet being customer privacy. According to Statista, not only do customers perceive online companies as falling short in safeguarding personal data privacy, but 70% of them proactively take measures to protect their information:

  • 30% enable multi-factor authentication
  • 28% adjust privacy settings on their devices
  • 25% disable third-party cookies in their browsers

Monitoring and enforcing affiliate policy compliance can foster a sense of security in the somewhat transparent digital environment. Affiliates are more likely to adhere to white-hat affiliate marketing techniques, and their referrals will engage with the desired product more efficiently.

Source: Statista

What Does Compliance in Affiliate Agreements Encompass?

Initial Screening The initial affiliate screening process involves conducting background cheques, ensuring quality standards, adherence to regulatory requirements, and other measures. Thorough initial screening enables the identification and removal of deceptive and unethical affiliates before they can harm your affiliate network.
Compliance Screening Compliance screening ensures that your affiliates adhere to all relevant regulations, such as those outlined by the FTC and GDPR.
Affiliate Fraud Detection Implementing multiple monitoring mechanisms for affiliate rules helps prevent and promptly reveal affiliate fraud, eliminating unprofessional affiliates from the network. Identifying anomalies in clicks, conversions, and payouts safeguards your reputation and builds trust.
Training and Education Affiliate information and education are essential components of affiliate marketing compliance regulations. Increasing compliance awareness among your affiliates allows them to create quality content while staying within legal boundaries.
Non-Compliance Reporting Affiliate compliance regulations include mechanisms for reporting suspicious activities by all network participants. A predefined reporting algorithm establishes what, how, and when affiliates must report.
Mandatory Audits Mandatory audits specified in your affiliate agreement facilitate the identification of compliance gaps, improvement of disclosure practises, and prompt resolution of non-compliance issues.
Non-Compliance Penalties Clear terms and conditions regarding non-compliance penalties serve as a deterrent, discouraging affiliates from engaging in unethical practises.

The mentioned components of affiliate compliance are neither exhaustive nor dictated exclusively by a single entity. Businesses often encounter a unique set of national, state, and network requirements that shape their specific business case.

In-House vs. SaaS Affiliate Software: Evaluating Budgets and More

To determine whether you need in-house or SaaS affiliate marketing software, consider the pros and cons of each option, along with your budget, scale, and technical capabilities. See the table below for a comparison:

In-House vs. SaaS Affiliate Marketing Software

In-House Affiliate Software SaaS Affiliate Software
Implementation Requires deep expertise in deployment within an in-house ecosystem. Implemented by the provider
Management Managed in-house without external help Managed by the provider
Integration Requires effort and resources to integrate with other systems, especially for integrations overlooked at the implementation stage Integrates with most affiliate management and CRM platforms and affiliate marketing tools
Scalability An increase in the processing capacity requires extra effort and resources An increase in the processing capacity requires upgrading the subscription plan
Customisation It can be customised however you see fit when developing and after Customisation limits are set by the provider
Fraud Protection Ensured by design and  integration with third-party affiliate fraud protection software Combines built-in affiliate fraud protection algorithms with third-party integrations to create an impregnable anti-fraud shield
Compliance Requires ongoing affiliate agreement monitoring and updating Handled by the provider
Cost Up to $500,000 for a comprehensive affiliate software suite, plus regular maintenance costs $100 to $500 per month, depending on the features of a particular SaaS affiliate software suite

Without a doubt, SaaS affiliate software surpasses its in-house counterpart across most dimensions, especially in terms of pricing and compliance. Developing an in-house affiliate marketing software suite may cost up to half a million dollars, equivalent to a 5,000-month subscription price for a similar cloud solution.

To exacerbate matters, in-house solutions face compliance challenges from a technical standpoint. It necessitates hiring a lawyer, educating your team, and streamlining processes within your company, all incurring exorbitant costs. On the contrary, SaaS affiliate software is compliant “as is,” requiring no additional expenses.

Ensure Compliance and Counter Affiliate Fraud With Phonexa

Phonexa provides a unique solution for SaaS software providers – a singular affiliate marketing software suite that seamlessly integrates with eight other marketing automation solutions for email, web, call, and SMS marketing. With Phonexa, you gain an all-encompassing marketing ecosystem that thoroughly covers your business, including affiliate marketing.

Phonexa’s Comprehensive Software Suite

LMS Sync Lead tracking and distribution
Call Logic Call tracking and distribution
E-Delivery Email and SMS marketing
Cloud PBX Cloud phone system
Lynx Click tracking
Opt-Intel Suppression list management
HitMetrix Use behaviour recording and analytics
Books360 Automated accounting

Phonexa’s industry-leading security and robust redundancy, supported by SOC 2 Type 1 and Type 2 certification, ensures that your affiliate network remains immune to affiliate fraud, maintains compliance, and avoids legal claims.

Transform your affiliate network with a cutting-edge affiliate marketing software suite, or schedule a consultation to explore more about Phonexa.

Frequently Asked Questions

What is affiliate fraud?
Affiliate fraud encompasses illegal activities aimed at unfairly generating revenue using tactics such as adware, malware, cookie stuffing, fake leads, domain squatting, commission theft, coupon fraud, and more. Renowned companies, from Amazon to Uber to eBay, have suffered losses in the millions due to increasingly intricate fraud techniques.

Source: Influencermarketinghub

Is affiliate marketing a legitimate endeavour?
Affiliate marketing is indeed a valid business model where advertisers compensate affiliates for promoting their products or services. However, it’s not immune to fraud. According to the Affiliate Marketing Benchmark Report by Influencer Marketing Hub, 67% of respondents express concerns about affiliate fraud, and 69.1% have encountered affiliate fraud at least once in their professional journey. Additionally, the global cost of digital advertising fraud has surged from $35 billion in 2018 to $100 billion in 2023.

What does affiliate compliance entail?
Affiliate compliance involves ensuring that affiliates, advertisers, and affiliate networks adhere to the regulations and guidelines outlined by entities such as the Federal Trade Commission (FTC), State Attorneys General, Electronic Retailing Self-Regulation Programme (ERSP), Performance Marketing Association (PMA), and other regulatory bodies. Affiliate networks and programme managers can establish their own criteria, covering areas such as content, advertising, trademarks, promotional methods, targeting, data privacy, and more.

What constitutes an affiliate policy violation?
An affiliate policy violation, also known as an affiliate programme violation or affiliate contract violation, occurs when there is a breach of the affiliate agreement or the rules established by national or state regulatory bodies. Violations may involve activities like trademark bidding, prohibited promotional methods, failure to comply with geographical restrictions, cookie stuffing, and more.

What is cookie stuffing?
Cookie stuffing is the unauthorised placement of a cookie on a user’s device. This practise leads to false attribution, where a purchase is wrongly credited to a fraudulent affiliate. To prevent cookie stuffing, most affiliate networks employ stringent regulations, including fraud detection algorithms, conversion analytics, and traffic quality cheques.

What is shopping deals adware?
Shopping deals adware is malicious software or a browser extension that infiltrates a user’s device to inundate them with unwanted advertisements such as pop-ups, banners, text links, and discount overlays. Typically, shopping deals adware does not result in increased sales but rather tarnishes brand reputation and leads to revenue loss over time.

What is the most effective way to prevent affiliate marketing fraud?
The most impactful approach to thwart affiliate marketing fraud involves verifying new affiliates, implementing rigorous compliance guidelines, regularly auditing affiliates, and utilising affiliate marketing software that automates affiliate screening.

Explore Phonexa compliance and certifications here.

Got Questions?

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Oleksandr Rohovnin avatar
Oleksandr Rohovnin
Oleksandr Rohovnin is a copywriter at Phonexa. His passion is digital marketing, innovative technologies, and – above all – distilling vast amounts of complex information into engrossing narratives anyone can relate to. At Phonexa, Oleksandr stokes passion for marketing automation and lead generation in every story he curates.
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