Is Fraud killing affiliate marketing?

Fraud is on my mind today – it’s a recurring nightmare for most affiliate managers and I do battle with it each month as a new crop of fraudsters tries to pull the wool over our client’s collective eyes.

Not worried about fraud? Perhaps it’s time to delve into your affiliate payment history.

Each day AM’s inboxes are filled with new affiliate applications – and we give an involuntary shudder at the prospect of having to scour through the pile of applications to eradicate the fraudulent applications.

Luckily most fraudsters are not terribly intelligent and make the same mistakes – mismatched IP’s and addresses, obviously fraudulent names / addresses, inconsistent company information and dead phone numbers.

There is however a growing number of sophisticated fraudsters that plan and execute calculated strategies to try and defraud affiliate programs. Think your programs’ clean? Try fraud scoring your affiliates.

Clever fraudsters don’t try to break the bank and walk off with thousands of dollars in the first month, but prefer to ramp up over time, emulating a normal affiliate activity.

I’ve found that one of the best ways to identify fraudulent affiliates is to build a scoring mechanism and rank all affiliate activity based on this scorecard.

Affiliates who go active near the end of the month, change their banking information just after the commission period closes or have an abnormally high click conversion rate (amongst others) all get rated based on the scorecard.
Individually these actions don’t indicate fraud, but collectively they identify behavioral patterns which will help isolate fraud.

If you’re not manually approving affiliates it’s highly likely that you could be losing revenue due to fraud.

Lead programs are especially susceptible to affiliate fraud, as the commissionable action does not require any purchase or stringent verification.

I’ve found that one of the best ways to counteract fraud is to build a personal relationship with your affiliates – this can only be done by personally contacting them and discussing their participation in your program. If you’re finding it difficult to contact an affiliate, or are always playing email and telephone tag with a new or existing affiliate, it may be time to take a deeper look.

I’ve also made it a rule that only verified affiliates get paid – this way we make sure that we know our affiliate, are on a first name basis with them and understand the nature of their traffic. Not only does it eliminate fraud – but it makes for a much stronger affiliate relationship.

I’d love to hear what other affiliate managers are doing to combat fraud, so send your feedback!

Jonathan

About Jonathan Miller

I’m the CEO of Forge Media Investments Limited and its Online Marketing subsidiaries including the Forge Outsourced Affiliate Program Management & offerforge.com Affiliate Network.

I’m more talent scout & ambassador than Business Manager. I do strategy, high level planning & client engagement. I love getting my hands on a project, working with clients to figure out what they need then letting my team get on and do it.

I love finding new businesses for us to grow & opportunities for us & our clients to capitalize on.

I’m well known in Performance Marketing circles and judging by the fact that I keep getting invited back, seem to be rather an engaging, or at least a passable speaker.

I live in Johannesburg with my wife, 2 daughters and assorted pets! I travel relentlessly between our markets in the US, UK and South Africa and consequently my kids often refer to me as stranger ;-(

You can find Jonathan on Twitter: @JonathanAtForge .

Website: http://www.forgebusiness.com