By Todd Crawford on March 11, 2014
There is no way to completely eliminate fraud in any industry and the affiliate marketing space is no different. When there is a promise of easy money, unscrupulous players will always attempt to be one-step ahead of even the most sophisticated fraud detection systems.
Let’s face it, fraud occurs for several reasons:
The network reward/incentive system is flawed – The more money the network appears to make for its advertisers, the more money the network makes. Thus, there is incentive for abuse built into the system.
Program managers allow bad affiliates into the program – Both in-house and outsourced program managers sometimes allow bad apples to slip into the barrel, and then use the inflated numbers to justify their own jobs or the success of the program.
New techniques for fraud are employed – Unethical affiliates discover creative new techniques for fraud that are not yet detected by those managing the programs.
These separate factors produce the same results — fraudulent leads, double payouts, negative ROI for advertisers, weakened advertiser credibility and more, which in the end only undermines the success of an affiliate program.
There are concrete steps affiliate marketers can take to minimize fraud. These preventive actions require vigilance, dedication of resources and a commitment to long-term success – rather than a focus on the quick buck. But they will pay off in the long run.
Create Clear, Ethical Policies
It is vital to have clear, formal Terms and Conditions for your employees and partners. These should not simply be legal documents that absolve your company of liability, but must also stipulate what methods and behavior you deem acceptable. Additionally, your T&Cs must outline what you consider to be a breach of your ethical and legal position.
If you’re an affiliate, be sure to carefully read and abide by all policies established by the advertisers or networks you work with.
Enforce Your Policies
Depending on your company’s business model and size, it can be an onerous task to police affiliates. However, you need to be sure you have the resources to manage and enforce all policies you have implemented. If you don’t have a specific compliance department, you’ll need to ensure that all employees are well-versed in your policies and trained to look for anomalies and questionable behavior. It’s useless to have specific Terms and Conditions if you don’t ensure everyone is complying with your rules.
There are numerous tools and services (such as BrandVerity) that aid in fraud detection. Additionally, you can also use the services of consultants who specialize in rooting out fraudsters, such as Kellie Stevens of AffiliateFairPlay.com. Also, Harvard Business School Associate Professor Ben Edelman focuses on affiliate fraud detection. Check out his most recent paper on fraud in the affiliate industry.
Be Prepared to Take Action
If something seems out of the norm or suspicious, you will need to investigate thoroughly. If your policies are being compromised or violated you must document all the facts surrounding the offense. Initially, you must issue a warning to the offending party, for their first offense might be innocent, such as a glitch, or technical unfamiliarity. But once an offender has been explicitly warned, a second inappropriate action should be cause for termination from the program.
Watch Your Data
As the old saying about bookkeeping goes, “figures lie, and liars figure.” In other words, there is ample room to tell stories with data, and it’s important to ensure you are telling the truthful one, or bad business decisions get made. Analyze data carefully for each affiliate on a weekly basis and run comparison reports. Most importantly, be sure you know where your traffic is coming from. Make sure you have as rich of a data set as possible, including IP and referring URLs.
Don’t Auto-Approve Affiliates
Thoroughly review an affiliate’s website(s) before letting it into your program. Fraud screening tools — that monitor IP addresses of those attempting to sign up — are also useful in determining legitimacy. These tools share information from other networks to identify affiliates who have previously been terminated. This enables you to make better decisions. Keeping bad affiliates out of the program from the start can eliminate a lot of headaches later on.
And if you are an affiliate, make sure the advertiser’s program suits your business and has a reputation for treating affiliates as valuable partners.
Know Your Business Partners
Perform your due diligence. Whether it’s taking on new clients, seeking out partners, or working with affiliates, know who you are working with. Make certain they operate a legitimate, ethical business. Also ensure that your partners embrace the same transparency as your company does. Check on their reputation and business practices and ask specifically about their ethical stance on important issues.
Then go a step further. Reach out and make a personal connection with all your partners, including affiliates. By having actual conversations with prospective partners, you can better determine their legitimacy as well as their potential to help you achieve your business goals.
Fraud-Proof Your Offers
Employ fraud screening services directly into your offers. This allows you to analyze IP addresses, compare lead information with big data sources for verification and quality score, and enables suppression of pixel fires when obvious fraud flags are triggered. This gives you greater control, while letting affiliate program managers review and authorize offers from addresses designated as potentially fraudulent affiliates.
Stay Current on Industry Issues and Trends
The online marketing space is evolving rapidly, so stay apprised of new laws and obligations. Create Google Alerts so you can be notified if the Federal Trade Commission or other regulatory bodies are implementing new policies, or modifying existing ones that might impact your business. Not knowing the laws is not an excuse for breaking them.
Read as much as you can about the industry — and follow leaders in the space — to stay on top of new developments, threats and resources. Also join reputable groups. The earlier you know about issues that can impact you, the more prepared your company can be to address these issues. What’s more, you might even have a voice in effecting change.
Following these basic principles — and adhering to a high standard of business ethics — will position you for long-term success, while helping to root out the bad apples.
Editor’s Note: To further support the fight against fraud, on June 14, 2016 Impact Radius announced the acquisition of Forensiq, a leader in advertising fraud prevention – creating the first truly trusted system of record for marketers to manage and optimize their digital campaigns.