How Merchants Can Recognize and Fight Affiliate Fraud

Affiliate fraud, designed to cheat merchants, is getting worse. The only way to fight fraud successfully is to meet the problem head-on, with a comprehensive team approach. First, let's consider types of fraud you may be faced with.

Types of Affiliate Fraud

Fraudulent and Fake Transactions. A few fraudsters create scripts to generate bogus clicks, leads, or transactions. Others sign up as affiliates and then make large purchases using a stolen credit card. The merchant will eventually learn of the fraudulent transaction but may let slip payment of the affiliate commission due for the purchase.

Parasites. Some adware that is inadvertently installed on a person's computer is designed to steal traffic from legitimate affiliates by replacing their links with new ones. Legitimate affiliates don't get paid and eventually move on.

Typosquatting. Typosquatters register several variations of a well-known, high traffic domain names then sign up for that same merchant's affiliate program to sell them what should have been their own traffic.

Copycats. Copycats are sites that look exactly like your site due to stealing of the your site's graphics and content. A copycat then signs up for an affiliate program with a site that looks like a legitimate, popular site with good content. A good way to catch a copycat is to follow several links on the site. Upon closer inspection, many of these sites are frequently only two levels deep, then you simply get error pages after clicking on links.

Spammers. Affiliates who send unsolicited e-mails featuring a merchant's brand can tarnish the brand, making many merchants nervous about affiliates who e-mail. Spammers also make it difficult for the legitimate e-mailers to separate themselves in an industry where almost any e-mail promoting an offer is considered SPAM. Complaints can get the merchant's domain on blacklists.

Other Signs. A phony social security number or federal employer ID is a red flag. False or disconnected telephone numbers are other indicators. Requesting immediate payment via PayPal almost always points to fraud.

Screening Affiliates

The best way to prevent fraud in your network of affiliates is to screen affiliates as they apply so you can weed out unwanted partners.

First, divide new applications between affiliate program staff and have them run through a checklist on the data affiliates used to sign up to the program. The last checklist item before accepting an affiliate might be a personal phone call. Sometimes the only way to know for sure if someone is legitimate is to call.

Next, good affiliates are accepted and assigned an affiliate manager. Rejects are added to a database of red flagged URLs, names, e-mails, IP addresses, etc. that can be used to quickly spot repeat applicants.

Then, continually monitor your affiliates. Review their newsletters. Visit their sites for your offers and links. You might call, e-mail, and IM them periodically to make sure things are going well and the affiliate remains compliant with your terms.

The tech department should check incoming IP patterns for any suspicious activity coming from affiliate links. You should also review stats for any noticeable fluctuations or changes that cannot be attributed to regular changes such as holiday increases and decreases.