Tackling fraud & compliance in Performance Marketing
Affiliate Marketing

Tackling fraud & compliance in Performance Marketing

7th June 2011

Some affiliate networks are not very keen on giving information about how they avoid fraud. Some people say they are not doing enough to tackle fraud, because indirectly they are also earning money, when affiliates violate guidelines. So I’m pretty excited about the next session, in which Heiko Hildebrandt, Managing Director of Tradetracker in Germany, will talk about how Tradetracker tackles fraud.

In his session Heiko will not only talk about fraud by affiliates, but also about fraud by merchants. It’s the first time I hear a network speaking about merchant fraud. Good thing!

Heiko starts with a quote of Ben Edelman saying that  about 10% of the industry’s turnover is generated through fraud. Heiko confirms this number as it’s also his feeling. That means that in Germany about 25 million Euros is generated through fraud.

1. Affiliate fraud

In general Tradetracker takes a few action to tackle fraud:
– manual validation of affiliate sites
– change the initial self-categorization if necessary
– check the IP
– blacklist of fraudulent affiliates
– merchant approves or rejects each affiliate site registration manually
– merchants and affiliates communicate through the ticket system

Click fraud
Clicks made manually and / or automatically by and / or on behalf of the affiliate without any interest in the merchant’s products and / or services

How to find click fraud:
– Click to Lead Rate (CLR) and Click to Sales Rate (CSR) are significantly below average
– Massive amounts of clicks are generated within a (relatively) short time frame (via foreign IP addresses)
– After a click has been made / registered the user’s IP address is blocked for a predefined time (e.g. 3 hours)
– Self learning click filters that block / drop clicks if common automated systems or scripts

Fake orders
Sales orders conducted by and / or on behalf of the affiliate without any interest to keep the merchant’s product and / or user the services(s) offered by the merchant

How to find fake orders:
– return quota of affiliate in question are significantly above average.
– orders are often made by the affiliate himself or his relatives (conduct last name checks in case of doubt)
– Merchants should create a blacklist of fraudulent credit card transactions and fake delivery addresses.
– Assessment period of transactions has has to exceed max. return period granted to the merchant’s customer.
– use de-duplication to avoid double payment for the same order!

Cookie dropping / spreading
How to find cookie dropping:
– Conversion rates (CLR and CSR) are significantly below average
– Affiliates provide insufficient information about their source of traffic
– A-brand campaigns and campaign with long (er) cookie runtimes are over proportionally affected.
– Affiliates promote the same campaign via multiple networks and sites to cover their tracks and to make the fraud less obvious.
– Affiliates usually fail to successfully promote any small online shop.

Brand bidding
Unauthorized use of the merchant’s brand name and thereby violation of the merchant’s SEM restrictions
How to find brand bidding:
Use a brand monitoring software.

Misplacement of promotional material
Placement of the merchant’s promotion material on unauthorized websites and thereby violation of the merchant’s publication guidelines

2. Merchant fraud

Yes, also merchants sometimes play dirty:

Arbitrary cancellations
How to avoid:
– cancellation reasons are predefined in writing and reduced to the essential minimum
– reason behind every cancellation
– proof has to be provided by the merchant upon request
– maximum cancellation quota per campaign has to be defined in writing by merchant
– flat cancellation quota

Strategic campaign pausing
– minimum time period before campaign pausing has to be predefined in writing by merchant.

Intended tracking problems (after relaunch)
– Contract penalties are asserted by tt in case of intended or tolerated tracking problems.
– Tracking has to be implemented correctly and tested successfully before campaign start and relaunch.

Non payment of invoices
– merchants are asked to make prepayment for each campaign
– after 3 invoices have not been paid, tt pauses oor stops the merchant’s campaigns.
– Tradetracker hands overdue invoices over to debt collection after the last reminders


Written By
Evert Veldhuijzen is consulting various international brands about different aspects of online marketing. His company Netlead is in affiliate business and develops websites for his joint-ventures.
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