Editor’s Note: We’re covering the Affiliate Management Days conference — and this is the 5th article in the series of our “live” coverage. These articles are on topics of interest to businesses that offer affiliate programs. More coverage of #AMDays.
This is live blogging of the morning keynote “Newest Adware & Affiliate Marketing Abuses.” Below is coverage from the session featuring speaker Ben Edelman (pictured left), Assistant Professor, Harvard Business School.
It’s day two at the new Affiliate Marketing Convention, AMDays – a conference created to help affiliate managers and ecommerce merchants better understand how to be successful in the performance based marketing industry. Below are my notes from Ben’s very interesting session on the issues faced by affiliate managers of the fraud front:
Why affiliate marketing?
- Attractive pricing model
- Low risk model
Affiliates earn commissions if three things happen:
- User browses the affiliate’s web site
- User clicks affiliates link to merchant AND
- User makes a per chase
Issues in affiliate marketing:
- Click Fraud
- Hidden links / Invisible banners
- Cookie Stuffing (attaching a tracking code to a user whether they click on the affiliate link or not)
- How to supervise many small affiliates you’ve never met
- Many and divergent incentives: merchant, network, affiliate program manager, affiliate
- How to retain the cost-effectiveness, excitement, flexibility and passion of affiliate marketing
Cookie dropping / cookie stuffing happens in:
- Forums (which tracks to everyone who visits the post the cookie is dropped in)
- Websites (hidden code on a landing page that drops a cookie on everyone who visits that page)
- Mistyped website addresses (i.e.: sears.com vs sea5s.com)
- Popups (if a popup comes up and you close it right away, that affiliate will still get commission for the sale because the popup hit the customer’s computer with a cookie.
Popups and cookie dropping happen with a variety of tools such as:
- 180 Search Assistant
In 2006, an affiliate cheated eBay of $10.5 million in commissions from cookie dropping. This affiliate is now in court in a legal battle over these payouts. Nothing has been settled yet.
- Penalties, litigation
- Identify verification (people make up names and addresses to create fake IDs all the time)
- Some affiliate networks in Europe will now require the affiliate to pay a minimal fee to join (say $1) by credit card so they can verify the legitimate name and billing address of the affiliate. This is to help reduce fraud.
Strategies to dealing with these guys:
- Payment delays
- Don’t pay commissions when you find someone who’s been using fraudulent methods
- Pay a bonus to make good affiliates indifferent (compensate good affiliates for having to wait and focus delays on affiliates who are suspect.)
Who has a take in it?
- Merchant (wants commissions to go down)
- In house affiliate manager (not clear if they care if they want commission to go up or down. Might depend on their compensation model)
- Outsourced affiliate manager (want commissions to go up – they generally earn a percent of the sale as well)
- Affiliate network (want commissions to go up because they also earn up to 30% on affiliate sales)
- Affiliate (wants the commission to go up, because that’s how they get paid)
For the next few days there will be more examples, perpetrators and infractions on BenEdelman.org. Be sure to check out your own programs on his site to see how clean your program actually is.
More in: AMDays
Oh dear — I had no idea this was going on! What a shame that businesses have to keep a watchful eye on the organizations they have strategic partnerships with. Doesn’t Google dole out punishments for any of this (click fraud especially)?
Ashley K. Edwards
It’s sad, but unfortunately you’re going to fine some sort of fraud in any business.
Yes, this goes on all the time 🙁 There are businesses and third party solutions that are dedicated to this full time, so the good news is there is help if it’s not an expertise. Google does keep an eye on click fraud, but that’s only just a small portion of what’s going on in the industry. Stopping it starts with just being aware it exists, so this was a great talk and a very important one to note.