20% of ad clicks on average are frauds

Affiliate marketing is basically nothing new - the concept of paying someone a commission in exchange for an intermediary in a transaction has been used since the dawn of time, and it was implemented in marketing and the Internet in 1994, i.e. 27 years ago. Interestingly, it hasn’t recorded any declines since then, and currently it is one of the most dynamically developing marketing channels - the affiliate market is growing at a rate of about 10 percent year to year, and in 2018 the global affiliate market was worth over USD 12 billion.

It all started with flowers, music and... books.

William J. Tobin, founder of PC Flowers & Gifts, had a huge impact on the creation of affiliate marketing in its current form. In 1994, he launched a beta version of PC Flowers & Gifts in cooperation with IBM, and in 1995 the commercial version of this website had as many as 2,600 affiliate partners. On January 22, 1996, Tobin applied for a tracking and affiliate marketing patent, and two years later, in 1998, PC Flowers and Gifts developed a business model for paying partners commission on sales.

But this doesn’t mean that others didn’t come up with the same idea ... in the fall of 1994, CDNow launched the BuyWeb affiliate program. Music-related websites not only displayed albums on their pages, but now visitors could also purchase them immediately, and the website owner could earn money on it. All they needed to do was to click and a special link took visitors directly to CDNow to the subpage of a given product. The originator of the project was the Geffen Records music label, which wanted to give its users the opportunity to buy their musicians records directly on the label’s website.

A little later, in July 1996, Amazon launched its affiliate program - its associates could now place on their websites properly linked banners or text links referring to the subpages of individual books.

Okay, but what is affiliate marketing all about?

We’ve actually cleared that up already, but we will try one more time. Affiliate marketing can have two faces. The first based on partnership basically hasn’t changed in its assumptions from the examples given above. In a very simplified manner, the advertiser provides his partners with appropriate marketing materials that these partners can promote using their communication channels (such as websites, blogs, videoblogs, profiles or groups in social media, podcasts, newsletters sent to their databases and others) in return for receiving material benefits - most often commissions constituting a certain percentage of generated sales. In this case, the advertiser works directly with his partners. However, a third party, most often referred to as an affiliate network, may appear in this process. Its task is to provide the advertiser with the right partners, and publishers (i.e. website or database owners, bloggers, influencers, etc.) with a large selection of partner programs in which they can participate.

Why are affiliate networks so important nowadays?

You are surely wondering why the advertiser should pay the intermediary, if he can create an affiliate program himself and the other way around - why should the owner of a given website use the affiliate network instead of negotiating directly with the advertiser?

First of all, out of convenience. Nowadays, when online sales take place on such a large scale, it would be very difficult for an advertiser to serve thousands of partners. The accounting for such transactions could also be difficult. The affiliate network takes over the issue of settlements with publishers, thanks to which the advertiser settles accounts with only one entity. Additionally, affiliate is responsible for answering publisher’s questions, determining what formats of advertising materials will be needed, etc. On top of that, the publisher, seeing the advertiser’s program in the catalog of a given network, may decide to promote a product that otherwise wouldn’t even come him to mind. For example, someone who writes a blog about extreme sports may think of advertising special equipment or sportswear, but seeing an insurance company’s affiliate program offer, they may come up with the idea that they could also promote insurance. Thanks to this, the advertiser reaches new, diverse publishers, and through them, to new potential customers.

And why do owners of websites and other marketing channels decide to cooperate like this? First of all, thanks to this, they save a lot of time - they have immediate access to many marketing campaigns and can choose the ones that will be most beneficial for them - and if the publisher respects its users (or followers), they should carefully select the products and services they promote. Second, the rates offered in campaigns are negotiated by the affiliates and don’t have to be lower than those offered by advertisers directly to their partners. Third, small or novice publishers might find it difficult to contact a large, well-known advertiser. In addition, affiliate networks more and more often specialize in specific segments - so we will find those dedicated to e-commerce, but also to the travel industry or gaming.

Affiliate Marketing - Threats.

The effectiveness of affiliate marketing is impressive - it is said that this form of promoting products and services is responsible on a global scale for up to one in five sales. Unfortunately, this doesn’t mean that it is a completely safe way to promote.

First of all - by using the intermediation of the affiliate network, the advertiser loses control over who his partner actually is. So, it may suddenly turn out that your products are promoted on websites with dubious reputation or advertised by people who shouldn’t be associated with your brand. To avoid this, when creating the terms and conditions of a specific campaign or affiliate program, describe exactly what forms of promotion are allowed and with which channels.

Additionally, affiliate marketing is a breeding ground for scammers. As we wrote above, affiliate programs can be used by virtually every Internet user who has a traffic acquisition channel or at least an idea to promote a given product or service at their disposal. Fraudsters are also happy to take advantage of this. Depending on the selected billing model and campaign assumptions, fraud may concern artificial clicks (with the CPC model), false contact forms (if the settlement takes place in the CPL model), or even fake sales (if the remuneration is paid for the generated sales - the CPS model). In each of these cases, the principle of operation is similar - the scammer creates (using BOTs or cheap labor) an artificial click, lead or sale (for example, one that is later canceled) and then charges a commission for it. Another way to cheat with an affiliate network or affiliate program is by appropriating the manifestations of activity generated by other publishers or organic traffic. In this case, fraudster adds its piece of code to the attribution path of a given transaction, pretending that he was the one who generated the specified form of activity. As a result, the advertiser pays a commission to the wrong partner or pays for a customer who would have ended up on his site anyway (organic traffic).

Of course, larger affiliate networks try to catch scammers and manifestations of artificial traffic using their more or less advanced algorithms and through constant communication with advertisers. False publishers are blacklisted by a given affiliate, and information about them is often transferred also between different networks. However, in practice, fraudsters rarely set up accounts with real data and setting up a new profile is not a problem for them, and also more advanced forms of fraud won’t be detected by the preventive tools used by the networks. Therefore, when working with affiliate partners, we recommend that you invest in protection on your own - only if so, the advertiser can be sure that he isn’t wasting his marketing resources.

Fraud may also occur in the field of obtaining and processing personal data. When working with affiliate networks or other entities as part of affiliate programs, we often process personal data that the publisher has collected. So, we are dealing with a situation in which we need to collect, store and sometimes even share (for example with a courier company in the case of sale) data that has been collected by someone else. It can be very dangerous, so we recommend that you carefully check how and in what form your publishers obtain consent from their users.