Affiliate marketing is alive and kicking. In the U.S., companies will spend over $8.2 billion on this channel in 2022.
But while there is undeniable potential for lead generation and increased sales, there are a lot of affiliate marketing scams you should be aware of.
Affiliate advertising fraud topped $65 billion in 2020 and could surge north of $100 billion by 2023, which is staggering!
If you don't know what to look for, affiliate fraudsters could trick you out of massive sums of money. This guide exposes eight of the most common affiliate marketing scams. We'll explain how it all works, and reveal the warning signs, so you don’t fall victim to these expensive traps.
What Is Affiliate Marketing?
Affiliate marketing is an advertising model where a third-party publisher earns a commission for promoting the products or services of another retailer. The affiliate partners receive rewards in return for helping the retailer generate new leads or sales.
It’s a win-win situation, where affiliate partners can help retailers generate more leads for their business, which helps grow sales and profits.
Sounds good, right? The question on many people's minds is whether affiliate marketing is too good to be true?
Is Affiliate Marketing Legit?
Some people are skeptical about this form of digital marketing, lumping affiliate marketing programs in with shady get-rich-quick schemes.
Despite the concerns, affiliate marketing is a perfectly legal way to make money and has been a highly successful customer acquisition channel for many years. It is not only legit, but it is still growing.
42% of affiliate publishers reported an increase in traffic during the pandemic.
16% of all online orders involve an affiliate partner.
These are real, bonafide businesses that use affiliate marketing networks to promote their brand and advertise their products. However, many people harbor doubts because, unfortunately, affiliate marketing scams do exist.
A notable example is the court battle Uber found itself in after the ridesharing company lost $100 million to ad fraud. If industry giants are susceptible to this type of fraud, you better believe it can happen to anyone.
Why Are Affiliate Marketing Scams On The Rise?
Wherever there is great opportunity online, there are nefarious individuals looking to take advantage.
People are online more now, especially since the pandemic, which triggered a global shift to a remote work environment. As a result, there has been a spike in eCommerce activity.
In a RAND study, all age groups report online shopping more than before the outbreak. As people buy more and from more sources, the chances of fraud increase.
The trend is set to continue, so it's time for retailers and advertisers to get familiar with the playing field. If you want to tap into the immense potential of affiliate marketing, you must know what you're up against.
8 Affiliate Marketing Scams To Know About.
If you want to prevent affiliate marketing fraud, you must get to know your enemy. Here are eight types of affiliate marketing scams you must keep an eye out for:
1. Cookie Stuffing
Cookie stuffing is an affiliate scam where fraudsters force malicious tracking code from multiple affiliate networks onto a visitor's computer. If the visitor purchases on another retail site, the scammer can claim the commission from the sale.
Also known as cookie dropping, this ad fraud leads to wrongful attribution, enabling the fake affiliate to take a cut of the sale, even though they did nothing to advertise the product or facilitate the transaction.
2. Click Spam
Click spam is when a fraudster uses malware to make it look like a person had clicked a link for a PPC ad when no click actually happened. If a sale occurs on that site, it is registered as a referral for the affiliate partner.
This affiliate marketing scam is tough for affiliate networks and advertisers to identify and stop. Bad actors drive traffic from users without their consent or knowledge, making it look like the clicks come from someone using a mobile application.
In 2015, a click-fraud kingpin was convicted after amassing a rumored $14 million from click spam. Vladimir Tsastin had built a network of fake publishing companies to scam over 4 million people in the space of a decade.
3. Fake Products
As you might guess, a fake product scam is a fraud where scammers create ads or webpages for products or services that don’t actually exist. Typically, the fraudster will promote the fake products under the guise of a well-established business, going so far as to falsify a reputable company’s website and branding to gain the trust of potential customers.
This type of fraud is very deceptive, as the scammers can also leverage the credibility of influencers and other successful websites to convince people to purchase the fake products. Social media has become a nesting ground for fake product ads, with countless examples of these scams on Facebook marketplace.
In the UK, a medical student working in the Forex industry cost investors £3.8 million as he recruited them to a fake investing network. Whichever variation of phony product or service scam you might encounter, the results are usually the same—the fraudster will vanish with the money before you realize it's a scam.
4. Transaction Fraud
Transaction fraud is when a thief uses stolen credit cards or online accounts such as PayPal to make a transaction via an affiliate partner's account.
This scam doesn’t just impact the advertising companies—it also robs genuine affiliate partners. Credit card details are commonly stolen and traded on the black market, which leaves victims vulnerable to this type of identity theft. For this very reason, consumers must remain vigilant and take proactive steps to prevent identity theft.
For a retailer, transaction fraud means they get hit from all angles. They pay commission to the affiliate’s account, lose a product to the thief, and also face losing out on the revenue as the affiliate will inevitably request a credit card chargeback after discovering the identity fraud.
5. Spoof Traffic (aka bot traffic)
Spoof traffic is an online advertising fraud where scammers send invalid clicks and false impressions to a website to make it look like they are sending legitimate referral traffic. This influx may include bot traffic and international junk clicks.
Scammers use data centers as link farms to cultivate fake followers on social media, making it seem like they are a credible, valuable affiliate partner who can help a business generate lots of new leads through affiliate marketing.
For a retailer, it will look like an affiliate is driving lots of traffic to their site or service. In reality, there are no genuine customers on the other end. The scammer uses bot traffic to game the system, or they might even hire low-paid workers to make clicks on PPC campaigns manually.
This online fraud is the internet equivalent of call center fraud, where people use an auto-dialer or manually make spam calls.
These scams are common with PPC affiliate programs or those that pay per impression. The scammer can make money just by sending traffic, so it doesn’t depend on completing a sale.
6. URL Hijacking
URL hijacking is when someone buys a similar URL to that of a legitimate business and redirects the traffic to the fake website to claim commission from affiliate partners. In the redirect process, the scammers insert an affiliate link and make a profit from genuine customers.
Also known as typosquatting, this kind of fraud is another affiliate marketing scam that users might not even notice happening. If you accidentally spell a word wrong, the fake web page automatically redirects you, so you might assume everything is okay.
For affiliate programs, this scam can cost a lot of money. Some fraudsters go to the lengths of using SEO techniques to clone the content on the original domain and even steal traffic from the search engine results pages.
7. Fake Leads
Fake leads fraud is a type of affiliate marketing scam where fraudsters will send fake leads sent to an advertiser or retailer in an attempt to fluff the numbers and defraud the company for a commission.
Fake leads are commonly composed of synthetic identities, and most people will never know parts of their identity have been stolen. Stolen data, often traded on the black market, is used to spoof a genuine interaction in this form of marketing fraud.
Scammers will use someone’s personal details to fill in a form registering interest in a product or service. Using a specific affiliate link, they can generate revenue in the process. The seller pays for an unqualified lead that is unlikely to have any interest in the product whatsoever.
8. Google Ad Hijacking
Google ad hijacking is a scam where someone creates fake ads to appear above search results in Google, luring people to click on illegitimate affiliate links.
The affiliate partner can hijack your brand's paid ad space to steal your direct traffic simply by outbidding you for a branded keyword.
If they are successful, the scammer will place an identical copy of your ad and use the same display URL to fool users into clicking their ad. People who click the ads assume they are visiting a legitimate site, but when they make a purchase, scammers claim credit for the affiliate commission.
Aside from costing them money and potential sales, this hijacking can damage a brand’s reputation. Most affiliate partnerships don’t allow marketers to target ad keywords relating to the company’s products or services.
In two case studies in the UK, a consumer brand made fake businesses, created ads for them, and outranked official pages by paying to be displayed on Google Ads. One search term even appeared above an NHS page in the search engine.
5 Warning Signs Of Affiliate Marketing Scams
It’s clear how damaging affiliate marketing scams can be to your business. As a retailer or advertiser, you must be able to spot an affiliate partner who has dishonest intentions.
Before recruiting new affiliate partners, you can perform due diligence, such as:
Checking that their website isn’t full of spam
Requesting an ID to verify an account
Working with an affiliate recruitment agency to find verified partners
Unfortunately, some of the signs of scams aren’t clear until the account is up and running. When that happens, it’s important to react quickly when you suspect there is something amiss.
Here are five telltale signs of affiliate marketing scams:
1. Traffic Is High & Conversions Are Low
Many spammy methods rely on vanity metrics. A scammer might not be able to send you sales, but they can send you huge levels of click farm traffic. If your affiliate traffic never converts, it’s worth digging into the problem.
2. One Affiliate’s Numbers Don’t Follow The Pattern
If one affiliate has a disproportionately high conversion rate and numbers that don't fall in line with the averages set by legitimate affiliate partners, you should investigate. Keep a close watch on the numbers. If you notice a massive spike in conversion rate from one affiliate, it could be a sign of typosquatting.
3. Disproportionate Refund Claims Or Chargebacks
If an affiliate's leads tend to convert to a sale but result in a refund claim or chargeback, a scam is quite likely in progress. Fraudsters might be using stolen credit card details to make purchases. Many people don't notice the warning signs of identity theft, so they won’t realize they are a victim until after the affiliate payout.
4. Potential Leads Don’t Know Who You Are
If you pay for potential leads, but the so-called "warm" leads have no idea who you are or why you are contacting them, there's a chance a fraudster has used their details in a scam. As one of the easier affiliate marketing scams for fraudsters to pull off, this scam is especially prevalent in lead gen programs.
5. IP Addresses From Data Centers
You can look up the IP address of your traffic to see its source. You might find that a lot of traffic is coming from a known data center, which could be a sign of IP address fraud. A scammer is running a click farm to send fake bot traffic to your site.
6. Your Site Has Links From Shady Websites
Have you noticed that your affiliate partner sends a lot of links from shady sites, like poor-quality coupon websites or forums laden with pop-ups and spammy ads? This practice is a red flag. Many of these sites engage in scams and fraudulent methods of dropping affiliate cookies on peoples' machines.
Avoid Affiliate Scams
Affiliate marketing is a powerful customer acquisition channel to promote your brand, products, and services. With the right partners, you can leverage this channel to grow your business successfully. However, there are also many undesirable partners out there, including people with skills in hacking, fraud, and cybercrime.
Vigilance is essential when you’re online. We've given you vital information about common affiliate marketing scams and the critical warning signs to watch for when dealing with affiliate partners. It's not easy to stay on top of this situation, especially as your business grows. But it's a mission you simply can't ignore.
Over the last 10 years Dmitry Dragilev has helped 200+ clients rank #1 on Google for their main keyword. He documents all his SEO and PR work and research on his blog Criminally Prolific.
Dmitry is the founder of JustReachOut.io, a software tool that has been used by 5K+ content marketers to build links and get covered in press, blogs and podcasts without the help of PR firms.
Dmitry also runs PRThatConverts.com, an online PR & SEO coaching program with 800+ students from 25+ countries. Dmitry's other blog Smallbiz.tools focuses on reviews of the best business software tools for people who want to save time and eliminate stress.