When done correctly, affiliate marketing can be a huge revenue booster for any business. In 2017, companies across the world spent $12 billion on this marketing avenue; Business Insider has projected that the market will continue to grow at a rapid pace of 10% every year through at least 2021. In 2020, businesses throughout the United States are expected to spend $6.8 billion on affiliate marketing. Both large and small businesses are rapidly adopting affiliate marketing programs. With 16% of all online orders generated through affiliate marketing, it would be a mistake to ignore this opportunity.
However, with affiliate marketing comes the potential for affiliate ad fraud. Keep reading for a complete guide on what affiliate marketing is, what affiliate marketing fraud is, and tips for how you can prevent it.
What Is Affiliate Marketing?
Affiliate marketing is a performance-based online marketing tactic. Under this structure, a company rewards an affiliate for each visitor, customer or purchase that results from the affiliate's own marketing efforts.
Affiliate marketing generally involves three elements:
An affiliate agrees to place your company's ad on its own website.
A potential customer interacts with that ad on the affiliate's website, with that interaction considered a conversion.
The affiliate gets a commission for that conversion.
The specific interaction that counts as a "conversion" varies depending on the program you've set up. A conversion might be defined as an impression — the potential customer simply viewing the ad and therefore becoming aware of your company's services. It might also be defined as a click-through from that ad to your website, as an action taken by the potential customer once on your site, or as an actual sale made on your site.
Some of the most popular affiliate programs are:
Shopify Affiliate Program
Benefits of Affiliate Marketing
Gaining a Motivated Partner
The most obvious benefit is that you're putting the affiliate partner to work for you. The affiliate partner only receives a commission if it can drive a customer to complete your desired conversion on their site. It, therefore, benefits the affiliate to actively draw its audience's attention to your ad.
Broadening Your Audience
Most reputable affiliates have a large, established audience, so when your ad appears on their site, you're getting access to a lot of eyeballs. Affiliate marketing programs also allow you to aim your ads at specific viewer demographics. This means you can use the program as a way to raise your company's overall profile or as an opportunity to target a new audience.
Boosting Your Reputation
By working with large, well-known affiliate partners, you benefit from their reputation; your business is automatically associated with theirs in the customer's mind. When affiliates promote your products, it's like getting their stamp of approval, which helps build initial trust. This is particularly helpful for small businesses, which can come across as much larger and therefore more impressive to new customers.
Keeping Advertising Affordable
Unlike traditional print and display advertising, you only need to pay when you get the result you want. You can also track and evaluate the data generated by the conversions to make improvements along the way. This way, you're not wasting your precious marketing budget on ineffective ad messaging.
You might also choose to use an affiliate program to tentatively explore a new direction for your company. Entering a new market can be complicated, as it involves building new campaigns, researching new demographics and developing new messaging. An affiliate program can let you dip a toe into these waters to see if there's any chance of success without committing to a potentially expensive dead end.
Increasing Your Traffic
An affiliate marketing program is a great way to generate a positive feedback loop for your business. The more sites with backlinks to your product, the more traffic you'll attract; the more people become aware of and search for your product, the higher your website will rank on search engines. All of this leads to more brand awareness, more brand recognition, and most importantly, more sales.
Many businesses use several affiliate programs with different partners to maximize the potential for increased traffic.
What Is Affiliate Ad Fraud?
With so many possible benefits, there has to be a potential danger as well. Affiliate ad fraud refers to illegal or unethical affiliate activity that's meant to deceptively inflate the number of conversions, thereby robbing your company of its ad budget.
Affiliate Marketing Fraud That Increases Commissions
Since an affiliate is only paid when a conversion occurs, an affiliate may pretend to be a customer by creating false conversions. If your conversion is a free action such as signing up to receive your company's newsletters, an unscrupulous affiliate might repeatedly sign up with multiple fake names and email addresses. This type of affiliate marketing fraud is more likely to come from small affiliate partners, such as independent bloggers and social media influencers.
Affiliate Marketing Fraud That Depletes Ad Budgets
The second type of affiliate ad fraud focuses on depleting a business of its advertising dollars. Most companies set a maximum monthly budget for their affiliate program. Once the budget runs out, the ads won't display until the next month. This provides an opportunity for your company's competitors, rather than your affiliates, to undercut your ad budget. In a scenario where the conversion is defined as a click-through from the affiliate ad to your website, a competing business might click on the ad over and over again. These kinds of scammers have no intention of being a real customer on your website; they simply want to force you to burn through your ad budget paying for their bogus clicks.
Other Types of Affiliate Ad Fraud
Both of the above types of affiliate fraud are much less likely to occur if conversions are strictly defined as sales since in that case, the fraudster would lose money by creating bogus conversions. However, the ever-evolving nature of the internet constantly creates new ways of committing affiliate fraud. Some newer types of types of affiliate fraud include:
- Using stolen data for lead generation – for example, illegally obtaining an email list of real people and adding them all to a newsletter subscription, thereby receiving a commission on all the email addresses
- Using stolen credit cards to generate sales
- Getting customers to download malware that automatically inserts an affiliate code
- Hijacking a URL to pick up a referral from the redirect
- Buying pay-per-click ads on the search terms of another company's name or product that ranks highly
- Cloning another affiliate partner's website content to steal away its traffic
- Cookie stuffing, which occurs when a user gets his browser surreptitiously tagged with a piece of affiliate-related data during an unrelated website visit; if the user later visits the target website and makes a conversion, the cookie tricks the browser into counting it as an affiliate conversion
- Using bots to spam a website through an affiliate link
No matter what form it takes, affiliate ad fraud impacts everyone negatively. The business loses its advertising budget, the affiliates may lose the trust of their partners, and customers are duped into unintended actions. A customer tricked through affiliate ad fraud may even ultimately blame the business rather than the fraudster.
Detecting Affiliate Marketing Fraud
Affiliate ad fraud is growing every year, with no signs of slowing down; on the contrary, fraud tactics are becoming more sophisticated and harder to detect. Ad fraud, including affiliate fraud, cost advertisers over $35 billion in 2018 and an estimated $42 billion in 2019.
It is ultimately on your business to detect affiliate marketing fraud before it hurts you since it's your advertising dollars being wasted, your potential sales lost, and your customers put at risk. Unfortunately, ad fraud is quite challenging to detect on your own, since the visitors and conversions can look very real.
Luckily, there are solutions out there. Anura is a platform that specializes in detecting ad fraud. Anura does this by focusing not on the ad or on the content, but on the visitor. The platform validates e-commerce users in real-time, not only detecting ad fraud but also collecting data, analyzing the performance of your ads, and providing recommendations on how to optimize those ads for better performance.
Anura's system evaluates billions of transactions every day in real-time. Thanks to decades of experience and its team of highly skilled engineers, Anura has had zero false positives when flagging ad fraud and catches between 200 to 300% more fraud than its competitors.
With Anura, you can detect fraudulent traffic, eliminate it, and focus on the real customers coming to your website. Contact Anura today for a free demo on the platform and its capabilities.
Related Post: Affiliate Marketing Fraud 101 eBook