Combating Affiliate Fraud with Qualified Traffic
Advertising fraud is a concern regardless of industry. Bots and fake traffic result in payouts but no sales. Juniper Research found that $68 billion of digital advertising spend will be lost globally to fraud this year, up from $59 billion last year. This can be devastating for brands that rely heavily on the pay-per-click (PPC) model to drive traffic.
More recently, affiliate marketing has come under scrutiny for potential fraud. One study predicted the amount lost to affiliate fraud this year will be $3.4 billion. And while that seems to paint a grim picture of affiliate marketing, it doesn’t tell the whole story. Even though fraud is possible, a well-run affiliate program is far less likely to lose money due to fraud, thanks to checks and balances that detect anomalies.
The Evolution of Affiliate Marketing
Affiliate marketing has been around since the mid-1990s and has grown by leaps and bounds. What once was just a matter of embedding links into blog posts and web pages has become a $20 billion industry that pulls in social media influencers and businesses to promote products. It used to be known as the “Wild, Wild West” of marketing because affiliates could do whatever they wanted with links. But in the past 16 years, many improvements have been made to ensure affiliate marketing is a profitable and trusted marketing channel.
The affiliate marketing model itself is set up with minimal risk. Brands pay when a conversion or action occurs, such as a purchase. If the consumer returns their purchase, the brand doesn’t pay out to the affiliate, so brands only pay for qualified conversions.
Additionally, over the past five years, affiliate programs have put exclusions regarding who is recruited as a partner. For example, partners located in countries with higher fraud, or countries where the brand doesn’t have a presence, may not be selected to work with a brand. Brands can also specify that partners need to include a website they’ll be using, which is important in a world of Instagram and TikTok creators. Guidelines are necessary if brands want to be able to track clicks and sales.
Tools and Processes Ensure Qualified Traffic
As the affiliate marketing industry continues to grow, it also continues to evolve. Brands that use well-run affiliate programs will notice that tools and processes are in place to combat fraud. Depending on the client and network, these programs use artificial intelligence to detect bot traffic directed into lead generation programs, ensuring traffic is qualified.
But for an affiliate program to be successful, a human needs to manage and oversee partner programs daily with the right tools, even during the holiday season and Cyber Weekend. If there’s a spike in traffic, that’s the top indicator that something isn’t right. A program manager can reach out to the partner and find out the reason for the spike, which could be innocuous, like getting picked up on mass media or through a sub-affiliate network.
If the traffic is fraudulent, steps are taken to mitigate it, warning the partner and terminating the partner from the program if necessary. For lead generation programs, the leads can be removed and not paid out because the payment is locked. Partners are not paid immediately, so there is time to investigate potential fraud. Additionally, the partner can be flagged so that it can’t apply to any new programs to make sure it can’t attempt to defraud another brand. New accounts the partner tries to create can also be blocked using emails, IP addresses, and other indicators.
Profitability is a big part of affiliate marketing; brands that participate get money back on their returns. It has many benefits, and traffic can be free if they’re on a cost-per-action (CPA) model. However, a good program wants brands to succeed, not just through affiliate marketing. It will work to send qualified traffic regardless. Consumers hit seven or eight touchpoints before making a purchase, and a ton of traffic may do more harm than good. The only way to keep affiliate marketing as part of the consumer journey, and ensure qualified traffic, is to monitor the kind of traffic being sent.
Affiliate marketing is the only marketing channel that provides money back on returns. It gives more control than PPC models, where buyers can return products, but the brand still pays for the interaction. With the in-depth reporting and monitoring capabilities that are now part of affiliate programs and the mix of people and technology, mechanisms are in place that combat fraud and make affiliate marketing a safe advertising investment.
Brands running their own affiliate programs and not working with an agency or network must familiarize themselves with best practices to prevent affiliate fraud. That means learning the technology, educating themselves on potential sources of fraud, checking traffic daily, and giving themselves a longer window to correct traffic or commissions before they’re paid out.
Ultimately, fraud will happen – there’s no way around it. But it’s how we respond to it that is the key. That’s where tools and human intervention can help prevent it and further minimize the risk in the affiliate marketing industry.
Kelly Ground is Director, Strategy & Insights, at Acceleration Partners.
