8 Affiliates Scams You Need To Look Out For.
So you're thinking of running an affiliate program? Here's what you need to know first.
Where Affiliate Marketing fits in the Advertising Landscape
There are three basic methods (and myriad advanced methods) to bring traffic to your website.
- Pay Per Impression
- Pay Per Click
- Pay Per Action
Pay Per Impression usually involves buying a banner ad on someone's website. "I will display your add for 10,000 impressions" or "I will display your add through the month of May." If your ad doesn't work, you've paid to have a banner ad appear on someone's site that nobody clicks on - you take on all the risk. You're also at the mercy of the website owners for statistics about how many people viewed your ad, and I rarely find that their click through numbers match mine. But if you know how to make a good ad that people will click on, then this could be a great method for advertising your site.
Pay Per Click involves buying a banner ad, but only paying if someone clicks on it. "I will display your ad until 1,000 people click on it" or "I will display your ad through the month of May, and you will pay me $0.10 each time someone clicks on it." This is the Google Adwords model. This mitigates your risk a bit, since now you're only paying for people who are actually coming to your site. On the other hand, any site that carries your ad runs the risk of your ad not performing well, and they don't pay if nobody clicks. You also run the risk of click-fraud - fake clicks from the site owner, the site owner's friends, or people who are paid to click on ads.
Pay Per Action means you only pay when someone performs a certain action (such as buys something on your site). You can either pay a percentage or a flat fee per transaction. You can even pay for specific items sold and not others. This is an affiliate program, and your advertiser takes on all the risk - in theory anyway. If your product doesn't sell, you don't have to pay for the advertising. The truth is, though, that affiliate programs are incredibly risky. The rest of this article outlines just a few of the possible ways affiliates can try to cheat you out of your money.
Throughout this article if I have to refer to your store, it will be "Bob's Widgets."
Aside: A lot of people make a big deal of SEO like SEO is something you buy. The number one rule of SEO is to have content that's relevant to the audience you want to attract. I do zero "SEO" yet I'm highly ranked for any number of keywords related to my blog. Remember the golden rule - to be valuable, add value.
About Affiliate Programs
Normally, when you advertise, you're in control of your marketing message. You choose what sites to appear on, you design the banner, and you choose the text for the ads. When you run an affiliate program, you lose all that control. When you run an affiliate program, you've just hired a number of people to do your advertising for you. This is both good and bad. It's good because you get the creativity and resources of some really smart people who have partnered with you to make money. It's bad because you get the creativity and resources of some really smart people who are looking to make money - even if it's at your expense.
An Affiliate program involves a lot of trust. They trust that you will report sales honestly and pay on time. You trust that they will bring you new customers in an honest and ethical manner that reflects your company in the best possible light. It's the honest & ethical part that doesn't always happen the way you think it should.
There are many types of affiliate programs, 3 of which are relevant to this article.
- Third party affiliate program where they are also your payment processor.
With this type of program, the third party company that runs the affiliate program also processes the payment, insuring that you honestly report sales to the affiliates. These programs tend to heavily favor the affiliates over the stores & often you need to have proven sales to sign up for these progras.
- Third party affiliate program where you have another payment processor & load some code on your "thank you for ordering" page.
These programs allow you to use your own payment processor, and it's a matter of trust that you'll load the affiliate code on the "thank you for ordering" page that tells the affiliate company that a sale was made. These programs tend to favor the stores and are easier to signup for if you're just getting getting your store started.
- First party affiliate program where you track everything on your own servers.
With these, you do everything - you keep affiliate information, you track sales, and you write checks. These are often the most difficult to attract affiliates to.
Here are some of the tricks affiliates have tried to pull on me in my experience running affiliate programs. Not all of these tricks apply to every type of affiliate program so you'll have to decide which ones you need to look out for.
1. Randy the Refresher
If you're using a third-party affiliate program, especially one that isn't also the payment processor, you have to be on the lookout for Randy the Refresher. Randy will buy one of your items (he may even really want it) and will find the payment confirmation page - the one with the affiliate code built in to it - and refresh that page repeatedly. Sometimes he'll do it a lot, and sometimes he'll try to be slick and space it out. Or maybe he'll take that code and copy it into another site that he tricks your affiliate program into thinking is your site (there are plenty of ways to do this).
How do you spot a Randy the Refresher? His referrer stats will look something like this:
|Transaction Date||Referral Date||Transaction ID||Item Purchased||Transaction Amount||Paid to Affiliate|
|June 1, 2010||June 1, 2010||100||Widget||$50||$5|
|June 2, 2010||June 1, 2010||100||Widget||$50||$5|
|June 3, 2010||June 1, 2010||100||Widget||$50||$5|
|June 4, 2010||June 1, 2010||100||Widget||$50||$5|
As you can see, there are four transactions on four different dates, but look at the rest of the information - it's all the same. The same referral date, the same transaction ID (and you supply the transaction ID so you know it will be different with every purchase). Because he kept the same original page open & just refreshed it at a later date, it re-loaded the affiliate code and the third party affiliate service credited him for another sale.
If this happens a lot, it could also be a sign that your affiliate program doesn't have adequate fraud protection in place, which means you need to remain vigilant for all sorts of other scams. You may also want to alter the code on the "thank you" page so that refreshing it in this way doesn't simply load the same page again.
2. Sam the Spoofer
For someone who knows little bit about computers, it's actually frighteningly easy to - on your own computer - spoof a websites. This is a great tool for web developers who need to work on a local version of a public website, but for affiliate cheats, this tool can be used to fake sales.
This trick is a lot like Randy the Refresher. Sam the Spoofer buys one item (and then probably cancels the order) and uses that to learn how your affiliate program works. He's then able to (on his own computer) create a fake website that acts like yours.
From here, it's a simple matter to keep referring himself to "your" website and faking all sorts of purchases with different information for each purchase, making them appear more legitimate than they really are.
Let's take a look at what this will look like in your affiliate reports.
|Date||Referral Date||Member||Transaction ID||Item Purchased||Transaction Amount||Paid to Affiliate|
|June 1, 2010||June 1, 2010||Sam||100||Widget||$50||$5|
|June 2, 2010||June 2, 2010||Fred||126||Sprockets||$38||$5|
|June 3, 2010||June 3, 2010||John||153||Cogs||$62||$5|
|June 4, 2010||June 4, 2010||Sam||110||Widget||$50||$5|
Here it looks like he sends you traffic on different days, and the transaction IDs are different, and on a cursory glance you may think that they're two different transactions - but he doesn't know what the new transaction ID should be so it's out of sync with the the real transaction IDs.
The way to spot both Randy the Refresher and Sam the Spoofer is to monitor your transaction logs & reconcile them with the logs from your affiliate company. Make sure they match - if transaction 110 isn't on June 4 for a widget, then you have a spoofer on your hands. This takes some time to spot - depending on the size of your affiliate program, it could take a few hours to review the logs thoroughly.
How to combat Randy the Refresher and Sam the Spoofer
First, you need to keep a close eye on your transactions and make sure that they match those of your affiliate program. If they don't match, then void that transaction with your affiliate program. If it happens a lot, then you need to remove that affiliate.
Second, you can make your transaction IDs harder to spoof by making them something other than a series of numbers. By putting random or pseudo-random data in them, such as the kind you get from a Cryptographic Hash Function (your tech guys will know what this means) you make it much harder for them to predict all the data they need to spoof a transaction.
For example, I enter "Transaction 100 - June 1, 2010 11:11am" into a cryptographic hash function and I get "2a1c7113c5174009fea345925ec7d9e0". To make it easy to read, we can add in the transaction ID and just use the first few digits of the hash "100-2a1c7".
This will be enough so that they can't spoof your transaction IDs, but again, you must remain vigilant and actually match your transactions with those from the affiliate program. It will at least put someone like this on the alert that you may be aware of this kind of fraud.
3. Dana the Discount Diva
Dana the Discount Diva is actually a customer who signs up for your affiliate program, doesn't promote you to anyone, and just uses the program to give herself a "discount" when buying things from your store.
Maybe Dana is a charity case, or maybe Dana just likes to bargain hunt, and she operates in a bit of a gray area. You may have a strict "no self discounts" rule in your terms, but is she really in violation? It's a tough call and I leave it up to you to decide what to do if you spot her - are you making a profit or is she getting your items at less than wholesale price? Is she just turning around and reselling them? All questions that will have to factor in to your decision.
It's not always easy to spot a Dana - she may sign up for the affiliate program with one name & address, and then buy things with a different name & address (such has her sister's). Just keep an eye on the "long tail" of your affiliate program - people who sign up, but don't send you much traffic. It may be a good idea to clean up your affiliates from time to time and just keep the ones who send you a decent amount of traffic, or to vet them ahead of time to make sure they have a venue from which to promote you.
Amazon tracks this sort of thing & refuses to pay out on items you buy for yourself via your own affiliate code, other companies are more lax and I admit that I've purchased a few items via an affiliate code myself when I was on the other side of the affiliate equation - but always just for personal use, and if I already had an account, I wasn't about to give up my tax information just to get a discount from someone.
4. Charlie the Credit Card Crook
Charlie the Credit Card Crook is cousins with Dana the Discount Diva, only less ethical. Charlie uses stolen credit cards to buy things from your store, and he uses an affiliate code to do it. For Charlie, it's a double win - he gets goods he doesn't have to pay for, and he gets cash from your affiliate program.
These can be tough to spot, depending on how your payment processor reports chargebacks. Most affiliate programs will give you a time period in which you can dispute a payment, but once the check has gone, you won't be able to do anything about it.
To avoid Charlie, you need to vet your first time affiliates carefully, and keep a close eye on your chargebacks. You may want to consider capping commissions in the first month, though this may annoy other good affiliates. A waiting period like this is not uncommon, and probably aimed at combatting Dana and her crooked cousin Charlie.
5. Connie the Constant Canceler
Connie is like also Dana, but most of the orders that she's responsible for are mysteriously canceled before they are shipped. I'm not entirely sure how Connie does this - perhaps she has a stash of stolen credit cards, or a group of people who are willing to buy something & cancel (in exchange for her doing the same for them) but the end result is the same - orders that come from Connie get canceled.
If you're not vigilant, you may end up paying Connie for a boatload of goods that never get shipped.
To combat Connie, you need to to make sure that your terms of service state that you will only pay out for items that ship, then you either need to tie your affiliate program in to your fulfillment system so that you know that you're only paying for what ships, or you need to manually check your affiliate logs against your order history. Again, vigilance is the word of the day.
If, ultimately, you spend more time policing her than you'd like and if she brings in very little real business, you may decide to terminate her account just to save yourself the headache. Just be sure to be fair & give her 7 days notice because I'm sure Connie isn't also a Canceler, but also a Complainer.
6. Reginald the Repeat Returner
You may also want to watch out for Connie's cousin - Reginald the Repeat Returner. An even bolder version of Connie's scam, Reginald will actually wait for you to ship the goods & then return them for a refund. While this is far too much work for most scammers, and risky too - since you have their money until you issue a refund - if the affilite payout is big enough to warrant the risk, there are those out there reprehensible enough to risk the return.
There's not much you can do to combat this, since you'll probably have paid out by the time the return comes in, but there are probably intelligent ways to structure your affiliate program that can prevent, or at least dissuade this type of action. There's little reason to write the rules of your affiliat program in such a way that this type of behaviour would be encouraged.
7. Adwords Alan
Adwords Alan, with the account name Affiliate Secrets signs up for your account. He starts sending you traffic, and the traffic he sends you converts really well. His numbers are among the highest of any affiliate you have. So what's the catch?
It turns out that Adwords Alan buys adwords for keywords related to your product - well that's not a problem - if he wants to spend money buying adwords and sending you the traffic, that's ok. Unfortunately, the adwords he buys are for people who are looking for your product already. He'll buy www.bobswidgets.com as a keyword. He'll buy "bob's widgets" as a keyword. He'll pretty much do anything he can to find people who are already looking for you, and insert his affiliate code in between them trying to find you, and you.
A certain percentage of people go to google and type in "bobswidgets.com" into the search box and then click on the first link that pops up. Normally this is your site, but Adwords Alan buys an ad for the keyword "bobswidgets.com" and his ad (which is really cheap, by the way because there's no competition for that keyword) appears on top.
He adds absolutely no value to you - he sends you absolutely no traffic that isn't already looking for you. Sometimes this traffic is on eBay (people may be looking for "bob's widgets" on ebay) or on Amazon (the same), but never does he send you any traffic that isn't already looking for you and ready to buy.
How do you handle Adwords Alan?
Your affiliate terms must either ban buying these types of ads, or ban buying ads altogether and you run your own ad campaign. Then remove Adwords Alan's account if he violates the terms.
8. Coupon Kate
Coupon Kate signs up for your affiliate program and runs a popular coupon site. You check the site out, it looks real enough and she sends you a steady flow of traffic - better at some times than others - but the traffic does come, and when you check the referring link, it's a page with a description of your product and a referral link.
So if everything's legit, what's the problem? It turns out that Coupon Cate is just a clever variant of Adwords Alan. While her site may be real, and may look real enough, she doesn't have a steady audience of people looking for deals. What she has are people who search google for "bob's widgets coupons".
Just like Adwords Alan, she just tries to insert affiliate code between herself and people who are already looking for your product - only this time for people who are looking for your product, plus the word "coupons".
We ended our affiliate program 3 months ago and our page on Coupon Kate's site is still there. This is another example of how running an affiliate program is a trust relationship and giving people permission to advertise your product is a risky proposition.
Now, some of these are legit - we made a killing when we appeared in Daily Candy (disclosure: we appeared editorially and they did not use an affiliate code) - and there are real deal-of-the-day sites out there. This makes it difficult to come up with a specific ruling on how you handle coupon sites.
How do you handle Coupon Kate?
As with all your affiliates, you need to be selective. You shouldn't just have an open signup form - you should vet all your affiliates carefully. What kind of traffic can they send you? Have some sort of approval process in place first, and be on the lookout for these characters.
How to deal with these scams
The first and most obvious thing to do is to constantly monitor your affiliate logs and reconcile them against your shipping logs. This is a long and tedious process, but it must be done if you run an affiliate program or you're just sending out checks to leeches and that affects your bottom line.
Second, you want to make sure your terms of service forbid these kinds of activities so that you have a basis for dealing with them when you find them.
Third, you want to deal with these people firmly and swiftly as soon as you spot them, possibly looping in the people who run the affiliate program and alerting them to these scamsters (they won't really care - they're ostensibly on your side in these matters & take fraud allegations very seriously, but since they make money on affiliate transactions, they'll keep the person around anyway).
Fourth, you should vet these people before they sign up as affiliates. Have an application process and get them to prove to you that they can send you legitimate traffic.
Is an Affiliate Program Right for Me?
Affiliate Programs are a good way to get lots of people promoting your product. You have to be willing to police them - to make sure that the ways they're portraying you and your product are in line with your terms of service (image management isn't something I've even touched on in this article), and that they aren't just trying to rip you off. At the end of the day, only you can decide whether or not an Affiliate Program is right for you.
In many ways, an affiliate program is the lazy way out. Rather than developing relationships with bloggers and running your own ads, operating an affiliate program lets bloggers come to you - in theory anyway. In an ideal world, only the best & most honorable bloggers sign up for your program and promote you in a good light to their readers. In reality, affiliate programs attract lots of people who are just out to make a quick buck.
An affiliate program done right is an affiliate program where you have a good relationship with each of your affiliates - where they aren't strangers, and the program just helps foster a good relationship between you & the person that you'd already want a relationship with.
Some of the best affiliate partners will be other retailers. If you sell widgets, but don't sell cogs (and cogs are a natural compliment to widgets) recommending cogs to your customers through an affiliate link and having that cogs seller link to you through an affiliate link, is a good way to share a customer base. Again, it's all about developing relationships with the people in your affiliate program - it is a financial relationship, after all, and you should take as great
So the bottom line is, be vigilant, and be selective.
June 22, 2010
© Mark Wieczorek