Affiliate Marketing and Click Fraud

Determining how to stand out in the crowded online marketplace can be a great challenge for merchants. Traditional methods of advertising and marketing may no longer be relevant, forcing merchants to get creative and proactive. Instead of looking to newspapers, magazines, and television for marketing and advertising, merchants are using online ads, paid articles, social media marketing, and savvy SEO to reach customers.
Rather than hoping a potential customer will respond to an advertisement, merchants can use targeted advertising to control how and when their advertisements are displayed. This new wave of marketing has created a new domain of payment fraud—click fraud (frequently known as affiliate fraud).
Understanding Targeted Advertising
By employing search engine marketing strategies, merchants can direct their advertisements to those people who have shown an interest in their product. For example, after browsing websites researching cars, a potential buyer then visits a sports website and sees advertisements for cars. This pattern of targeted car advertisements continues to follow the person around the Internet while visiting a variety of websites that may or may not be related to cars.
The goal for marketers and merchants is for the prospect to click a targeted car advertisement.  These targeted advertisements can be a win for both the consumer and the merchant—the consumer sees relevant advertisements, and the merchant can directly target their niche demographic.
Understanding Click Fraud
When most merchants think of payment fraud, they’re thinking about chargeback fraud. However, it’s important for merchants to understand that they unwittingly may be victims of this new form of payment fraud—affiliate fraud.
When done effectively, click fraud drains advertising budgets, diverts traffic, damages brands, and defrauds customers. Click fraud can be committed by people who are paid to click links, or by the use of automated click bots to speed the rate of these clicks.
It’s important for merchants, marketers, and advertisers to understand that intentional click fraud is now part of the e-commerce sales channel and a potential threat to merchants’ revenue.

  • Competitors. A competitor pays people to click a merchant’s advertisements. The affected merchant pays for this click without earning a sale from the fake click. These fake clicks can quickly drain advertising budgets.
  • Affiliates. Affiliate marketers host advertisements for merchants and earn money when the advertisement is clicked. Affiliate fraud occurs when these affiliates cheat the system by using people or automatic click bots to repeatedly click these advertisements.
  • Paid employees. Employees are hired by dishonest merchants, marketers, and advertisers and are paid to click competitor advertisements. These employees use multiple computers, tablets, and smartphones to spend their workday clicking. The victims of this click fraud see their advertising budget drained and no conversion to sales.

The result for the honest merchants, marketers, and advertisers is lost revenue (no sales from the fake clicks), and a drained advertising budget (each click comes with a charge from the advertisement host). The key then is to ensure that this click fraud is not happening and if it is, to stop it as quickly as possible.
To avoid exposure to this type of fraud, a merchant might actually consider abandoning pay-per-click advertising; however, this would prevent the merchant from taking advantage of this otherwise effective solution of targeted advertising. The measured and smart approach is to rely on one fundamental business practice to prevent all types of payment fraud and chargeback fraud—and that’s getting informed.
Increased Knowledge = Less Payment Fraud
Savvy merchants recognize that they need to get the facts on who they are selling to. Acquiring viable cardholder and customer data ensures that merchants can protect themselves from fraudulent sales and outright theft.
Merchants must be as equally savvy when it comes to hiring a marketing company. Do your research and know who you’re working with. Ask the marketing company questions about click fraud and how they monitor for it. Also, be vigilant in monitoring your advertising budget and comparing the click-through numbers to actual revenue.
For many merchants to find the time and resources to do this need not be a great challenge. By working with Verifi’s experts in payment fraud solutions, we can lighten your load and boost your confidence in knowing that monitoring solutions are in place to prevent payment fraud.
Contact us to learn more about payment fraud and affiliate fraud. We want to see you succeed, and we are committed to providing you with expert direction and solutions to make sure you get the best out of your business.