Is your affiliate network protected from Performance Marketing Fraud?

A report estimated that the global digital market would grow from $178.60 billion in 2021 to around $208.00 billion in 2022 at a compound annual growth rate (CAGR) of 16.5%.

With increased advertising spending, the market is also observing the rapid development of other technologies that provide supplementary services and deliver added value to advertising software. However, the interest arises not only among reliable tech vendors. With billions of dollars in turnover, digital advertising, especially performance marketing, is also attractive to fraudsters. And the more funds the industry has, the more sophisticated fraudsters become, inventing new fraudulent techniques.

Imperva Threat Research discovered that 42.3% of all processed traffic (both mobile and web) was fraudulent in 2021.

A new recent study by Juniper Research found that the value of digital advertising spent lost to fraudulent activities committed via online, mobile, and in-app advertising is expected to reach USD 68 billion globally in 2022, rising from USD 59 billion in 2021. The top 5 countries most impacted by ad fraud, which account for 60% of global losses, are

• United States
• Japan
• China
• South Korea
• United Kingdom

With this number of spending and losses growing exponentially, do you think your affiliate network is free from fraud?

What exactly is fraud in performance marketing?

Fraud in performance marketing is understood as an infringement of the terms and conditions under an affiliate marketing program, i. e. any malicious activity which aims to make profits by harming other businesses. It hurts businesses in a way that, through inadmissible methods, fraudsters generate misleading commissions from affiliate programs that end in malicious affiliates' pockets. When in reality, the actions caused by the commission do not bring any income to the program. Alternatively, another widespread tendency is to redirect sales to parasite sites, which results in paying a commission to fraudsters instead of an affiliate who rightly earned it.

As per the report by Fortune Business Insights, the global market size for fraud detection and prevention is estimated to reach $129.17 billion in 2029, at a CAGR of 22.8% between the forecast period 2022-2029.

Here is a list of a few of the fraud techniques commonly used by malicious affiliates to disrupt your ad campaigns and defraud you for fake sales.

1. Cookie Stuffing

Cookie Stuffing fraud scheme aims to add multiple false cookies that hinder affiliates from earning commissions for the sales they provoked. Instead, the fraudsters make sure to place their cookies last, in this way getting paid based on the "last cookie counts" principle.

2. Typosquatting

Typo Squatting means creating several domain names close to popular websites with a difference in one letter, either missed or misspelled. Names usually correspond to the most typical typos that users make. For example, when visitors go to a site through an accidental typo, they are greeted with a page that looks like a genuine site and offers products to purchase there, diverting sales from the original merchant.

3. Cookie Hijacking

Cookie hijacking is a type of affiliate fraud where malicious affiliates insert cookies in a user’s browser or machine by distributing adware through mediums like web browser extensions, downloadable tools, or software applications. Such affiliates bundle up adware with legitimate applications or browser extensions and use it to hijack the click elements to inject their affiliate cookies.

4. MisDirect

Misdirect is when fraudsters divert traffic from an affiliate's site, bypassing the intended merchant. In practical terms, it is often achieved by creating fake affiliate links on sites that further mislead customers. For example, when buyers are redirected to a faux site, they can still purchase, but affiliates won't receive their commission.

5. Pixel stuffing

Pixel stuffing is fraud in which multiple ads are stuffed into a tiny 1×1 pixel using an iframe. Real users trigger impressions; however, these users never see any ads because a single pixel is impossible to spot.

6. Parked Domain

Domain parking fraud is the practice of registering domain names similar to legitimate & popular websites with the intention to steal traffic or monetize sales from genuine sources. Fraudulent affiliates purchase twisted domain names and display ad’s that divert to the advertiser’s website. This is a way of stealing the genuine traffic of the advertisers and in turn, they earn commissions by dropping their affiliate cookies.

7. ClickJacking

ClickJacking is a method used to trick users into clicking an invisible web page element or disguised as another element. The hidden element deceives the user to unwittingly download adware in their system, redirecting them to malicious websites, making their credentials or sensitive information vulnerable in the dark web, compromising user’s financial transactions, and more.

These are a few common types, but scammers create new ideas to fool advertisers and deceive them into earning extra money.

Best practices to combat performance marketing fraud

• Partner Profiling - Careful validation of new affiliates

It's easier to prevent possible losses than to clean up afterward. Thus, be careful with adding new affiliates. Check their websites, brand alignment with your program, and relevant content profiles on social media and different portals. 

• Data Monitoring - Checking and analyzing the data

Data can tell you a lot. Marketers need to monitor the performance of their ad campaigns for unusual changes. The following tips can help you to avoid fraud.

• Monitor information from referring sites and URLs
• Track multiple transactions received from the same IP address
• Pay attention to sub-affiliate networks
• Keep an eye on metrics growth like - monthly clicks & earnings, conversion ratio, latency ratio, round-tripping ratio, and more.

If you observe sudden traffic surges and quick increases in affiliate-referred transactions, then fraud is likely to have occurred.

• Revisiting and updating the program terms and conditions

To keep it always up-to-date and avoid being trapped in a loophole. Don t hesitate to act upon fraud in any form. Upon detecting fraud, don't hesitate to send violation warnings to affiliates or terminate affiliates from the program.

Occasionally you can recognize and block suspicious affiliates, but when it comes to fraud, it's difficult to always be on the lookout. By doing the actions described above, you only minimize the risks from fraud but do not eliminate them. Virus Positive Technologies ad fraud detection and brand compliance monitoring solutions help you automate the monitoring and tracking of all your affiliate activities and brand promotion. Talk to our experts today and get a sample report of frauds already happening in your network.