Affiliate Fraud and Compliance – A Clear Solution (actually an eClario Solution)
 
Affiliate networks have two goals: to get quality publishers and bring in quality advertisers. The problem is that as the broker between the two, networks have a fiduciary responsibility: to serve their best affiliates with quality products and their advertisers with quality leads. Unfortunately, affiliate fraud impacts both of these end goals. Recently, there has been a surge of conversation in the affiliate marketing industry regarding “fraud compliance.” With the release of OfferVault’s Affilicert Program, networks are getting a verifiable product to evaluate affiliate quality. For the few hundred who have signed up and committed to being verified, bravo to them. These are the serious affiliates – the ones you want to do business with. On the other hand, there are still some affiliates who do not feel that a credentialing is worthwhile. Unless a network mandates you go through a program like Affilicert, it becomes more challenging to evaluate affiliate quality. That’s where networks need to get creative and understand the trifecta for successful affiliate fraud management. Networks need to understand how to get the entire picture on an affiliates credibility and trust. A simple phone call or a quick web form just do not cut it anymore. More in depth research is required.
Most networks can simply Google an affiliates name and within three pages get a page worth of data on the affiliate. That should be enough to investigate affiliate credibility and worthiness. But wait, is it? The answer is no. You need to socially engineer every affiliate. While many networks know the basic questions, using reverse psychology and a measurement scale for Affiliate Marketing like a Myers Briggs which can reveal so much more is needed. To learn more about the social engineering profiler called SPIE (Social Profile Information Evaluator), stand by and you will know soon enough.
Next, as part of any application, you need to ask for verifiability. If an affiliate says I have made $1,000,000 ask then how. What Website did they do this on? How did they do this? Quiz them to see if they can really tell the story. But then, this is where technology comes to play. Monitoring and verification must be done. Examining geo-targeted IP information, looking at DNS records, completing data mining (deep searching) activities, conducting site-sucking activities to really see what is under the hood of a Website – thats how you can really tell how legitimate an affiliate is. This activity comes at a cost – extended amounts of time. The other problem, technical proficency. Most 2nd and 3rd tier networks rely on affiliate tracking on one of the big platforms (DirectTrack, LinkTrust, HasOffers, HitPath) to go and raise the red flags. However, having a technical evangelist on your side is the way to really protect your networks.
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Here is a staggering statistic. In 2009, the affiliate marketing industry was plagued by $1.9 billion in fraud. The average 2nd and 3rd tier network whose monthly gross revenue was $500,000 had experienced about 15% of those leads coming from fraudulant activity. That means $75,000 per month of that traffic was fraudulent in some shape or form. Whether it was a bot that submitted bad data or other manual techniques, the point is a network that earns a yearly revenue base $6,000,000 gross actually had $900,000 worth of fraud pass through their network!
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The problem is that while everyone earned money, your advertisers have less money to invest for long term growth and if lead quality is poor, the advertiser will pull out of your network. Is that something that a network wants? No. So how does one resolve this?
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Either hire an information security expert in-house which cost on average of $170,000 per year or hire a consulting firm who can handle technical fraud management for a fraction of the price. Essentially, outsource your fraud management. The networks can focus on building long-term business instead of managing the day-to day operations. One company eClario Solutions LLC, a Virginia based IT consulting firm specializing in affiliate fraud management has a tiered pricing structure to customize your network traffic with compliance solutions to fit any budget. More details will be provided in the coming days but managing a network myself – I am eagerly awaiting to see how this can potentially free up my AMs from having to waste their time looking at the traffic when they could be reaching out to their money makers to add to the bottom line.
The final step in the above process is monitoring. Having people who think like fraudsters watch traffic is always the key to protecting network profits. Did you know the FBI and CIA now have an entire workforce dedicated to watching criminals on social networks? Having people in place track suspected fraudsters and continually monitor traffic is essential. Affiliate Managers do not have the time to deal with fraud monitoring. They need to focus on relationship building. Outsourcing fraud monitoring to a company that is just another ordinary person is the key to success. If an affiliate believes you are monitoring them, they will ultimately stop frauding one network and move onto another. You know the old saying, one rotten apple ruins the bunch. This is true in affiliate fraud too. One fraudster can literally shut down a campaign in multiple networks.
So, the takeaway advice is this. In order to avoid affiliate fraud, a small investment in IT oriented compliance will protect a network financially and also help build great credibility to the often turbulent Internet Marketing industry.
If you are an Affiliate Network or a merchant on CJ, LS, SAS, PJ – ask yourself this – do you have any amount of fraud coming through your channels? What amount of time is lost due to this? What amount of money is lost is figuring this out? Is it not worth a mere percentage of your overall revenues to help ensure that the fraud does not occur? If you fall in this category and I am sure majority of you do, let’s talk before it’s too late.
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One Response to “Affiliate Fraud and Compliance – A Clear Solution (actually an eClario Solution)”
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Great article Ricky, as a network owner myself I have to keep a sturdy compliance team. Everyday, there is a new frauder who has a new way to beat the system and we have to always stay on top of it!
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