Digital ad model, affiliate marketing, involves either an individual or a company earning a commission via promoting an advertiser’s service or product. It’s grown in popularity in recent years, making it a successful way for brands to expand their customer base and reach. In fact, per Statista, annual spending by marketers on affiliate marketing between 2010 and 2022 skyrocketed from $1.6 billion to $8.2 billion.
With numbers like that, you can see the appeal when it comes to fraudsters. In other words, the lucrative affiliate marketing trade also draws the attention of “bad actors.” In fact, cybercriminals are getting smarter and developing different tactics to infiltrate the affiliate marketing industry. Affiliate fraud, a subset of advertising fraud, is becoming more and more common.
What is affiliate fraud?
It’s a form of ad fraud in which affiliates use illicit techniques to deceive affiliate programs to collect unearned commissions. The average affiliate fraud attack can cost businesses between 20-65% in sales—a hefty loss.
The following provides important details about the five most common types of affiliate marketing fraud and how brands can detect and prevent fraud from draining their ad budgets:
● App Install Fraud
Also known as CPI (cost-per-install) fraud, app install fraud is a common instance of affiliate fraud. CPI incorporates paying a commission to affiliates for every successful app install. This advertising model is popular in mobile—specifically with gaming companies looking for more app users. They also comprise 21.07% of the market share on the Apple Store. Data.ai’s reports indicate that businesses spent $295 billion on mobile ads in 2021. This is up 23% from 2020.
● Click Fraud
This type of fraud involves the CPC (cost-per-click) advertising model of paying affiliates commission based on the number of ad clicks. Those who are employing click-fraud generate a lot of fake clicks via click farms or by manually clicking on their own ads themselves. Bots are a more involved and sophisticated approach to doing this. Fraudsters might infect user devices with malware and thus recruit users into a robot network, also known as a botnet. Recent data indicates click fraud isn’t slowing down—over 14% of all PPC clicks are estimated to be invalid. This results in businesses losing $20 billion on a global level.
● Lead Fraud
Lead fraud involves manipulating the CPL, or cost-per-lead, advertising model. CPL allows advertisers to pay for generated leads through collecting user information. In fact, 84% of marketers use form submissions in order to generate leads. Affiliates now have a way of manipulating the data. They can do this either by using bots to submit forms or by buying a list of bad emails and using them to pre-fill a lead list. As 53% of marketers spend at least 50% of their budget on lead generation, these are totally useless.
● Acquisition Fraud
Acquisition fraud involves the CPA (cost-per-acquisition) advertising model. How this works is that advertisers pay these affiliates a commission once a sale is fulfilled. This model used to be the most secure ad model—that was, until fraudsters found a way to infiltrate. Using stolen credit cards they find online, fraudsters use those cards to make the sale. Credit card companies then issue a chargeback on the advertiser’s company—this causes them to lose money in both marketing and in sales. Reports from Expert Market estimate 30% of chargebacks result from stolen credit cards. The cost of chargebacks is said to rise to $117.47 billion by 2023.On a grander scale, bots do the heavy lifting of the credit-card sourcing and finalizing the sale for these fraudulent affiliates.
● Cookie Stuffing
Cookie stuffing is a type of fraud that occurs when an affiliate puts different third-party cookies from various advertisers into a user’s computer. Then, once the user visits any of the websites with already-placed cookies and buys something, the affiliate earns commission. With that, you’re well versed in all things affiliate fraud, the various types of it and now you know more about how to protect your business from falling victim to it.
No matter the type of affiliate marketing fraud, if you’re armed with more information about it, you’ll be better prepared to fight it—and avoid losing marketing budget to these bad actors.
