David Gasparyan is the founder & president of Phonexa, a turnkey marketing suite for calls, leads, clicks, email, SMS, accounting and more.
As the affiliate marketing space continues to grow, so too has widespread fraud plaguing affiliates industrywide. Data from a study by CHEQ shows that affiliate fraud rates have nearly doubled in the past two years.
There are countless ways for scammers to defraud affiliate marketers. The most common affiliate marketing scams include—but are not limited to—fraudulent leads, click spam, spoof traffic, URL hijacking and affiliate programs that require payment to join.
As the founder and president of Phonexa, a company that offers a turnkey suite of automated performance marketing solutions, I have a wealth of experience working with marketers in the affiliate marketing space. From my experience, there are various approaches affiliate marketers can use to mitigate fraud.
The following are four effective strategies for deterring affiliate marketing fraud.
1. Conduct a thorough evaluation of affiliates new to your program.
Effective fraud mitigation starts with a thorough understanding of all new members joining your affiliate program. This is a crucial first step for deterring fraud, as the practices employed by new members will directly affect the performance of your affiliate program and, ultimately, impact the reputation of your brand.
The following are just a few warning signs to consider when assessing members who recently joined your affiliate program:
• The new affiliate’s email address doesn’t match their website’s URL. This is indicative of a lack of transparency on the new affiliate’s end and can serve as a major red flag moving forward.
• Failure to promptly respond to emails or requests for communication. A lack of communication is especially concerning if a particular affiliate is engaged in highly suspicious activity.
• Marketing and selling a diverse range of products. This doesn’t necessarily guarantee that a new member is engaged in fraudulent activity. Still, if the affiliate is regularly converting leads with ease (especially for a wide array of products or services that are traditionally harder to sell), this may imply that fraud is taking place. Take note of any significant increases in conversion rates, as this may indicate transaction fraud or click spam.
• A surge in chargebacks. A sudden surge in chargebacks from a relatively new affiliate is one of the biggest red flags to monitor since commissions are often paid months before fraud-related chargebacks are processed, making this a popular scam for fraudulent affiliates.
Mitigating fraud requires more than simply relying on background checks before onboarding new members into your affiliate program. Perform an assessment on new affiliates by evaluating their website and email address to ensure they are related, maintaining regular contact with all affiliates, using due diligence questionnaires and reviews to assess performance, and monitoring the activity of new members at all times.
2. Clearly define your terms and conditions.
Take all of the guesswork out by transparently outlining the terms and conditions for joining your affiliate program. This will communicate the standards and guidelines for the type of traffic prohibited by your program and establish a zero-tolerance environment for fraudulent practices. Clearly defining what is and is not acceptable in your terms and conditions can also protect you if you have to dispute commissions related to chargeback fraud.
3. Cloak and monitor your affiliate links.
Cloaking your affiliate links by shortening the URLs can make tracking them more manageable. It can also make the URLs easier to remember for prospective customers. Most importantly, cloaking your links conceals the unique ID that each affiliate uses, thus helping protect them from lost commissions stemming from URL hijacking.
Upon cloaking your links, monitor each URL to get a clear picture of where your traffic is coming from. Regularly monitoring your affiliate links can allow you to properly assess the validity of clicks generated by a particular affiliate. Cloaking and monitoring your affiliate links can help you identify click spam and other forms of affiliate fraud.
4. Create and implement a long-term fraud mitigation plan.
To protect your affiliate program from potential fraud, you must develop and implement a long-term risk mitigation plan. In addition to the procedures listed above, use the following strategies when creating a plan to mitigate affiliate marketing fraud:
• Fortify your data security by employing additional authentication measures, encrypting data and using a data management system to securely store all sensitive information.
• Research potential marketing tools and platforms to implement that can detect suspicious activity and behavior typically related to fraud.
• Ensure that all of your affiliates adhere to regulatory compliance and consumer protection laws. This is an incredibly important step, as affiliate marketing has become synonymous with fraudulent traffic from the fake web.
Remember, the risk mitigation measures that you employ today may not work tomorrow as fraudulent scams continue to evolve. Create a mitigation plan tailored to the needs and demands of your affiliate program by continually reviewing and updating your risk management policies and procedures to stay current with changing technologies and regulations.
Regardless of the niche audience your affiliate program markets to, the risk of fraud is always present. Protect your affiliate program by conducting an extensive evaluation of all new members, outlining your terms and conditions, enhancing your security infrastructure and adjusting your risk mitigation plan as needed.