Affiliate marketing has been a great thing for many companies and has allowed a large number of people to work from home. However, as with any good thing, there are those intent on abusing it and turning it from a way to make a legitimate living into a tool for thievery. It doesn’t matter where on the affiliate program ladder they are—affiliate, merchant or buyer—scammers and fraud can appear anywhere.
However, as with any other fraudulent activity, if you keep your eyes open and your wits about you, you will see the signs and be able to disengage before too much damage is done. Here are some things you ought to look for, some red lights that can save you money, time and a great deal of aggravation.
Affiliates bent on fraudulent activities typically have their efforts revolve around the payment model, which is usually a pay-per-click or a pay-per-action (sale, registration, etc.) and can be either a manual thing or, in the case of pay-per-click affiliates, fully automated through the use of scripts, called “click bots” that mimic the activities of real human visitors. There is also the danger of credit card fraud and other fraudulent activities designed to simply generate commissions.
You can eliminate many of these problems by taking a close look at those sites that are applying to your affiliate program. By performing some due diligence ahead of time, you will be able to save yourself a lot of headaches later on. Here are some of the things you should do and a few things to watch for once your affiliate is onboard.
Determine Your Payment Strategy
Forget pay-per-click, the fraud potential with that is far too high. As long as you have something to sell, stick with a pay-per-sale (or at least a pay-per-action) model. It is safer for you and more difficult—though not impossible—to defraud.
Research Your Applicant
Are they a first time affiliate or have they built up a track record? If so, when and where and what kind of track record is it? When you visit their site, do all their links work? Do they take you to where you expect to go? Do merchant banners stand out or are they grouped into a massive banner wall? You want to have a thorough knowledge of your potential affiliates.
The Welcome Call
Your affiliate manager should contact each affiliate applicant over the telephone. During this call you will begin to develop a relationship with the new applicant and get to know them. You will also evaluate potential traffic, discuss expectations, offer campaign suggestions and inform them of any special affiliate promotions you may be running.
Managing the Metrics
Once your affiliate is up and running, you need to keep an eye on what they are doing. The two primary metrics you need to be looking at are traffic patterns and conversions. Traffic patterns are simply the flow of visitors through their site and where they go once they click on the affiliate’s banner ads. Conversions are those clicks coming to your site that end in either a sale or some other valuable activity such as filling out a registration form. Exactly what counts as a conversion is up to you.
When it comes to conversions, you want to play the averages. The results of your affiliate should not deviate too much from the established average conversion rates (usually about 1-3 conversions per 200 product views) for your business. If they are too low, your ad is probably in the wrong place. If they are too high, you need to consider whether or not your affiliate is using incentives or placing fake orders.
How do your affiliate conversions stack up against the traffic they are producing? To put it another way, if you see a great deal of traffic from an affiliate but few or no conversions, then there may be a problem, especially if you are running a pay-per-click program and your non-affiliate conversions are significantly higher. This is an illustration of why you want to move away from a pay-per-click model and go to a pay-per-sale one instead.
Look to Your Top Producers for Clues
You will have a handful of affiliates that will produce most of your good traffic. Establish and maintain a solid working relationship with this group. Not only will this benefit both you and your affiliates by keeping communications and the free flow of ideas open, but it will also help you identify problem affiliates. In addition, this elite group can provide a kind of benchmark in that any new affiliate that can break into this top group of producers will warrant added scrutiny on your part.
Just as unscrupulous affiliates can try to cheat merchants; it also works the other way around. Abuses can range from changing the percentage they take before paying their affiliate commission. According to Dave Cosper, Vice President of marketing here at America’s Best Companies, “You should always look for programs where the affiliate payout is at least 25% of the product/service being referred.” For example, if a merchant is selling a product for $100, they should be paying the affiliate at least $25. “Here at ABC, for example, we pay a 33% commission to our affiliates for one-year member enrollments,” added Cosper. Fraudulent merchants can also deliberately underreporting sales or lead figures. This can be the result of criminal intent or desperation in the face of bankruptcy or some other crisis. Either way, it is the affiliate that pays.
In his article, “The Red Flags of Affiliate Marketing Scams,” affiliate entrepreneur Clay Mabbit describes the six things that any potential affiliate should look for when considering developing a relationship with a merchant as well as what they mean. These signs of a scam are:
- No affiliate support contact. When an affiliate program includes a toll-free telephone number, it's a good sign that things are on the up and up. However, the lack of a phone number does not necessarily mean the program needs to be avoided. The Internet lends itself to email contact, and most websites structure their contact support system accordingly. If the website for an online income opportunity does not include an email or a contact form, though, you are probably looking at an affiliate program scam. Once you locate the email or contact from, it's a good idea to send a message with a simple question to see how long it takes the company to respond. If you don't receive a response addressing your question within a few days, tread lightly. The company might not be intentionally trying to scam you, but if they can't quickly respond to emails, they are doing something wrong.
- No website. Similarly a contact email without a website shouldn't instill much confidence. A legitimate online income opportunity will have a detailed web site, providing information and showing some time and energy has gone into planning. A simple website is not difficult to create, but leaves a slightly larger trail leading back to the creator than that left by a mass emailing. Again, while the presence of a website is not a guarantee that a program is trustworthy, the absence of a web site should definitely be viewed with a healthy dose of skepticism.
- No product or service. What is the company selling? If the only product is a chance to make money, you've probably stumbled onto a pyramid scheme. In order for any referral marketing organization to make money, someone on the outside must pay money to the organization. If the only people paying are joining the organization, than no income is being generated. The members are just passing money around between themselves with everyone hoping to be holding the bag of money when the music stops. Above and beyond this fundamental flaw in the business model, pyramid schemes are also illegal in the United States.
- No free participation. If you have to pay a company for the privilege of trying to sell their product and increase their profits, you aren't looking at an affiliate program. You've found an example of multi-level marketing (MLM). Not all MLM opportunities are scams, and some people are extremely successful at MLM. Unfortunately, if you aren't one of the few who can make it work; you'll usually spend a fair chunk of change discovering this MLM program doesn't fit your needs. True affiliate programs are free to join. If things don't work out the way you expected, you haven't risked any of your money.
- No positive testimonials. Even though there is no financial cost for an affiliate program, you will be investing quite a bit of your most precious commodity, time. Before making that sacrifice, it's always a good idea to spend some time scouring the Internet for people who have some experience with your program. Don't rely on the testimonials a company provides on their website to give you a complete and accurate picture. Head to your favorite search engine and see what kind of dirt you can dig up. A search with the program name and the word "review", "scam", or "experience" is a good place to start. Even high caliber programs will likely have some negative reviews from people frustrated the program wasn't a good fit for them, so don't immediately condemn an opportunity for a little bad press. Unless a program is brand new, though, you should be able to find a few positive experiences and success stories.
- No track record. A good affiliate program is going to continue to be a good affiliate program for a while. Resist the temptation to be swayed by marketing hype that urges you to "get in on the ground floor" of a brand new opportunity. Of course, there's something to be said for being the first to market with a new idea, so you shouldn't be afraid to immediately embrace an affiliate program that you feel good about and doesn't set off any of the other red flags described here. If you are on the bubble trying to decide if a program is legitimate, though, you're better off waiting. In six months dependable affiliate opportunities with quality, high-demand products will still be around, and they'll still be plenty of money to be made. Meanwhile, most of the affiliate program scams will have collapsed.
Bullying Buyers and the Network
Yes, even some of your customers will try to cheat you. You may find yourself facing stolen or fraudulent credit and debit cards, bad checks of various stripes, illegal paypal chargebacks, fake registration information and more. The number of ways that these criminals try to work you over is dizzying proof of human ingenuity if nothing else. This is where a legitimate affiliate network can come in handy. These organizations will check out transactions—credit and debit card numbers, IP-addresses and other things that could indicate fraud—before they take place and often have a fraud database to keep criminals, once they have been identified by their system, from coming back and trying again.
Reputable Affiliate Networks
When considering an affiliate program, either as a merchant looking to recruit affiliates or as a potential affiliate looking for business, it is a good idea to consider joining a network. They offer safety to merchants and add a bit of credibility to fledgling affiliate sites.
The following is a list of affiliate networks you might consider exploring:
The Bottom Line
There is no reason to suffer a scam for long if you do your due diligence ahead of time and are conscientious about managing your merchant-affiliate relationships. Bear in mind that you may receive something that will make you believe that the other side of the relationship is engaged in fraud or some other problematic behavior. Tread lightly and try to determine the truth of the matter before you take any action that goes beyond the suspect transaction. However, before that happens, plan for prevention. It will save you and your program a lot of trouble down the road.