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Affiliate Fraud, affiliate marketing

Ecommerce Fraud Prevention – 5 Most Prevalent Affiliate Frauds in the Ecommerce Industry

The pandemic in 2020 made the e-commerce industry grow exponentially due to almost everything getting sold on the internet. The ease of getting everything just by a click on mobile phones made users more comfortable and dependable in the eCommerce industry. 

This article covers the state of the eCommerce market and five primary affiliate frauds in the eCommerce industry. 

Table of Content:

  • State Of Ecommerce Industry
  • What are Affiliate Frauds?
  • Five most common affiliate frauds in eCommerce?
  • What do Ecommerce companies need to do to protect their brand reputation?

State of Ecommerce Industry

As internet access and adoption have rapidly increased worldwide, the number of digital buyers keeps climbing every year. In 2020, over two billion people purchased goods or services online, and during the same year, e-retail sales surpassed 4.2 trillion U.S. dollars worldwide. Global retail e-commerce sales grew by more than 25 percent in the pandemic. 

Source

The E-Commerce and online retail industry continue to set new year-over-year records in 2021, creating one of the fastest-growing opportunities for threat actors and cybercriminals to defraud digital businesses of millions of dollars every year.

E-commerce is the buying or selling of goods and services through an electronic medium, mainly through the internet. While global eCommerce is the selling of products or services across geopolitical borders from a company's country of origin to any other location across the world. The business transactions in e-commerce often occur either as business-to-consumer (B2C), business-to-business (B2B), consumer-to-business or consumer-to-consumer. The wide range of goods and services available for the customers, easy accessibility, and international reach are some of the key benefits of e-commerce. 

Over the past few years, e-commerce has become an indispensable part of the global retail framework. 

Like any other industry, the retail landscape has undergone a significant transformation following the advent of the internet. Thanks to the ongoing digitalization of modern life, consumers from virtually every country now prefer transacting online. The increased growth of this sector has invited fraudsters and cybercriminals to extend their ways of deceiving the users and brands to earn money through affiliate scams or extracting users' data to sell on the dark web. 

What are Affiliate Frauds?

Affiliate marketing makes for 15% of the total revenue of the global digital media industry, as per a Business Insider report. Affiliate marketing has become an integral part of the online advertising industry and will continue to grow in the coming era. 

Advertisers pay commission for getting legitimate user traffic to their websites. Intending to make more money, the affiliates get tempted to use unscrupulous ways of extracting money from the brands' marketing budgets. 

In a standard affiliate marketing model, the advertisers employ affiliate networks to attract more users and hike their sales. In turn, they pay the affiliates who can add to the sales by getting web users.  

Affiliate frauds have become more prominent in the post-pandemic era as customers have flocked to digital channels. These are illegitimate techniques that affiliates use to attract traffic for the advertisers and then earn a commission. 

These techniques involve injecting affiliate cookies in the user's systems through Adware, displaying unauthorized advertisements, using expired or non-existing coupons, buying misspelled domains to redirect the users, and more. Let us now see the five types of affiliate frauds most prevalent in the eCommerce industry. 

5 Types of Affiliate Frauds in the eCommerce industry

Many kinds of scams might be used against your campaigns—essentially because scammers are constantly evolving their tactics to make themselves harder to detect and counter.

The best way to combat fraud is to identify why fraud is occurring in the first place and then develop strategies to prevent and protect against these attacks to secure your eCommerce site. To start, advertisers need to identify the fraud occurring on their platform and then address it directly.

While there are countless schemes that fraudsters can use, we want to highlight some of the most common types of eCommerce fraud.

Some examples of standard affiliate fraud techniques threatening the eCommerce industry are listed here. 

1. Cookie Insertion Fraud

Cookies are the essential medium of tracking in affiliate marketing, and cookies can store the details of user activity and transactions. In affiliate marketing, cookies track the affiliate's data and monitor traffic sources. The affiliates are then paid for the traffic that they get for the advertisers. 

Affiliates insert their cookies at the browser or system level and intend to monetize the purchases made online by the users. They are considered malicious only when affiliates use illegitimate ways to inject these cookies. Cookie Stuffing is the term used to address this kind of affiliate fraud. 

Affiliates who drive new customers for the advertisers get paid under different payment models. Malicious affiliates try to overwrite their affiliate cookies and earn commissions without driving user traffic to the advertiser's website. Either they tend to hijack the traffic coming directly to the advertiser's website or through other affiliates. The common tactics used by fraudsters to stuff cookies are:

  • pop-up advertisements
  • iframes embedding
  • JavaScript
  • CSS stylesheets
  • Zero Pixel Images   

2. Click Fraud

 

Click fraud is the act of deliberately clicking on pay-per-click (PPC) ads to increase site revenue or to exhaust a company's advertising budget.

This type of fraud occurs when an individual, a computer program, or bot scripts exploits online advertisers by repeatedly clicking on a Pay-Per-Click advertisement to generate fraudulent commissions. Click fraud drives up advertising costs, lowers conversion rates, and skews user data for online businesses. There are two main reasons why fraudsters indulge in click fraud. 

  • Minimize Competition

Publishers are involved in click frauds and try to exhaust the advertising budget of the competitors of their advertisers. Advertisers use paid advertisements to increase their user traffic and boost sales. The bot clicks are used to increase the number of clicks of the paid advertisements posted by the competitors and utilize their advertising budget without the ad reaching legitimate users. 

  • Boost Commissions

Affiliates get paid for the number of users clicking on their ads in a pay-per-click model. To earn more commission, affiliates use malicious tactics like bot clicks, where an automated script is run to increase the fake clicks on an ad. The advertisers pay to these affiliates without realizing that the clicks were from a bot and not actual users. The threat actors practice this kind of fraud to earn more commissions and consume the advertising budget of the brands. 

3. Adware Frauds

 

Adware refers to a type of malware that displays unwanted advertisements on your computer or device. It has the potential to become malicious and harm your device by slowing it down, hijacking your browser, and installing viruses or spyware. 

The Adware usually gets installed on any user system bundled up with legitimate applications and injects affiliate cookies through pop-up ads, auto redirection, push ad notification, or click-jacking. 

One common form of affiliate fraud used by malicious affiliates is Adware Round Tripping. Adware Round Tripping is an act of deceiving advertisers by stealing their genuine buyers. Affiliates use Adware to navigate users from the advertiser's website to their website and then direct them back to the advertiser's website, injecting affiliate cookies to monetize the sales.

4. Coupon Fraud

As per a recent study by Valassis, more than 90% of shoppers search for and use coupon codes while shopping online.  

Marketers offer deals and coupons to attract more customers online. Advertisers offer direct coupons to their users, or there are also 3rd party companies providing coupons for different brands on their websites. Affiliates also use this marketing tactic to attract more user traffic and earn commissions in turn. A common affiliate fraud associated with coupons is Misleading Deals. 

Misleading deals are deceiving offers and coupons advertised by affiliates to attract buyers' attention, redirect traffic to an advertiser's website, increase sales, and earn a commission. The process includes displaying ads with discount coupons that are either expired or never existed. On clicking such advertisements, the user either lands on an irrelevant web page or receives a message for invalid coupon code/sold-out items and more. 

5. Push-Ad's Fraud

In today's digital era, companies are fighting to attract users to buy their products. Push-up advertisements are a forceful way of catching user attention by displaying ads on the user screen, with or without their consent. Web push notifications are message alerts shown on a user's desktop or other devices when the user allows

The affiliates use mediums like their social media platforms, websites, and more to promote the advertiser's products and services. Affiliates use various promotional platforms to direct the users to their website. They then add web push notifications on their website, already driving user traffic. Once users allow sending messages by opt-in process, they send advertisements in push notifications.

These advertisements are lucrative and attractive and tend to grasp user attention. When the user clicks on any push notification, the affiliates inject their affiliate cookie and then earn a commission from advertisers for getting more users or driving sales.

What do Ecommerce companies need to do to protect their brand reputation?

The digital leaders of e-commerce companies must look out for affiliate monitoring solutions and brand compliance monitoring solutions to ensure their affiliate networks are free from frauds and prevent their customer buying journey hijacking. 

Virus Positive Technologies (VPT) is pioneering the market of Affiliate Fraud Management & Brand Protection. VPT's disruptive methodology identifies non-compliant behaviors that hurt conversion rates and damage the brand's reputation. A few are listed below:

  • Pop-up ads
  • Brand-bidding (the use of brand name keywords that are prohibited)
  • Incentives (any incentive practices, such as offering cash for clicking)
  • Aggressive & Misleading creatives
  • Malvertising (injecting malicious ads or links into legitimate ads)
  • Unauthorized Creatives (the visuals or links for custom ads)
  • Pre-landers & fake browser alerts
  • Google Display Network (any promotional activity on the GDN platform)
  • Spamming and Bundling
  • Forced redirects (clicks injected into consumer web sessions that divert customers to competitor offerings)

VPT offers a range of Brand Compliance Monitoring tools based on customized customer requirements and Affiliate Management Services to track and monitor the activities of the publishers in the advertiser's affiliate network.

 

Gaurav Sethi | Co-Founder & CEO

Gaurav is a passionate people man who has worked on delivering business solutions and unlocking business value for a wide array of clients across different industry verticals and across different geographies. He has been an esteemed speaker at various Ad tech events for many years. With his pedigree rich in technology and business management, he has been an entrepreneur for over 15 years.

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