How Pay Per Call & Pay Per Lead Affiliate Networks Can Counter Fraud

Affiliate fraud is increasing rapidly, exploiting every weakness in your security shield. Even large platforms like Amazon, Uber, and eBay were targeted by bad actors, losing millions of dollars immediately and dozens or hundreds of millions more in reputational damage over time.

So whether you are in a pay per call or pay per lead business, there’s no better investment than advanced fraud detection and affiliate compliance software. And, of course, it helps to know your current fraud protection status.

Affiliate Fraud Types & Prevention Measures

Lead Generation Fraud

For pay per lead affiliate networks, one of the major marketing objectives is to ensure a steady influx of qualified leads and high conversion rates. At the same time, only 36% of shoppers in the United States believe merchants can prevent e-commerce fraud.

This gap points out the need for better validation and attribution.

The most common lead fraud is misrepresenting how leads were collected or who they really are. Fraudsters are eager to exploit both systems and user data, including pay per lead affiliate networks and customers who unknowingly expose their personal details.

Lead Gen Fraud Strategies

Fake Leads	The signs of fake leads include simulated form submissions, sign-ups, clicks, downloads, etc. Even if you don’t catch fraudulent activity directly, patterns can be identified through performance analysis.
Misleading Offers	Misleading offers include non-existent incentives, prices, or other elements that create FOMO while misrepresenting the real offer. Manipulating consumer psychology is what marketing is about, but you can’t cross the legal boundaries.
Recycled Leads	While pay per lead affiliate networks can legally sell shared leads, some may present them as exclusive. At the same time, shared leads involve competition with other companies and are therefore harder to convert into paying customers
Mixed Leads	Resourceful fraudsters often mix genuine and fraudulent leads. When lead mixing occurs within the admissible margin, it is almost impossible to spot because low-quality leads are perceived as a part of the game.
Farmed Leads	Lead farms are arguably the deadliest form of affiliate marketing fraud, capable of producing fake leads at scale. Such farms share expertise and develop sophisticated strategies to avoid detection, which presents a major obstacle to affiliate networks.

Lead generation fraud drains budgets, reduces conversion efficiency, and damages trust in partner networks. Having sustained significant reputational damage, compromised affiliate networks may never recover and may have to face compliance and legal issues.

Learn how lead gen fraud affects brands and consumers.

How to Prevent Lead Generation Fraud

How exactly you protect your pay per lead network from fraud largely depends on your tech stack. However, there are some common patterns, like lots of disqualified leads, abnormally low conversion rates, unusual IP addresses, high refund rates, and mismatched demographics.

Source: Influencermarketinghub

To protect from lead gen fraud, you need to know your affiliates and their leads, which you can both track with LMS Sync, Phonexa’s lead tracking and distribution software. 

Moreover, you can use the iClear module to auto-screen leads in real time, accepting those that match your qualification criteria and rejecting or flagging those that don’t.

Click Fraud

Clicks from farms and scripts are another popular fraud technique, with around 14% of all clicks coming from non-genuine sources and 90% of PPC campaigns affected by click fraud. If there are no daily ad limits, click fraud can drain all budgets before you have time to react.

How To Spot Click Fraud

Click fraud usually manifests as a very high CTR with little on-site engagement, or as a disproportionate distribution of CTRs across marketing channels. Genuine users tend to explore a website before leaving, whereas irrelevant users or bots leave instantly or without interacting.

A bounce rate above 70% is usually a red flag, with an optimal range of 20% to 40%. Even if the cause isn’t affiliate fraud, a high bounce rate is worth exploring.

Here’s a set of overlapping measures to shield your affiliate network from click fraud:

• Examine your traffic sources: Block illegal and dubious traffic sources and regularly review affiliate traffic sources to ensure transparency and compliance. Lack of transparency and affiliate fraud are closely linked.
• Use long-tail keywords: Focus on keywords that accurately reflect the gist of the promotion to make it harder to defraud you. More often than not, affiliate fraud takes place with high-competition and branded keywords.
• Implement click validation tools: Validate clicks before attributing them to affiliates; validate them before counting toward an affiliate. Validation may include verifying the IP address and running clicks through your checklist of fraudulent resources.

Read also: How to Improve Attribution and Maximize Profit with Affiliate Tracking Software

Click Injection

Click injection is a sophisticated affiliate fraud technique in which a fraudster distributes malware that monitors what users do on a website. When they make a purchase, the malware forges a click that attributes the conversion to the fraudster.

The good news is that for click injection, the same set of overlapping measures applies (see click fraud).

Cookie Stuffing

Cookie stuffing has been all the rage among black hat affiliate marketers for quite a while and still hasn’t lost its destructive power. It does exactly what its name suggests: a bad actor exploits a website’s vulnerabilities to stuff it with cookies that attribute a purchase to them.

Cookie Stuffing Types

Pixel stuffing	Placing a single-pixel cookie-stuffed affiliate ad on a webpage
Image stuffing	Stuffing cookies into images on third-party websites
Banner ads stuffing	Stuffing cookies into banners on third-party websites
Link stuffing	Placing a disguised click-triggering link on a website (the click happens automatically upon the webpage load)

When a cookie is stuffed, the only way to prevent fraud is to delete cookies from the user’s browser, which almost never happens because the user is unaware of the abuse. 

How To Prevent Cookie Stuffing

Like most types of affiliate fraud, cookie stuffing leads to increased spending without a proportional increase in sales. So you need affiliate tracking software that can reveal fraudulent patterns, perform cookie integrity checks, and verify attribution without delay.

Ad Stacking

Ad stacking is when a few overlapping ads are stacked on top of each other, so the user sees only a single ad while generating impressions for all of them. 

Source: Edgemesh

Note that ad rotation isn’t considered ad stacking. 

How To Prevent Ad Stacking

The best way to prevent ad stacking is to limit the number of ads placed or displayed within a given timeframe. As an additional measure, you can spot-check the ad quality in your affiliate campaigns.

Trademark Bidding

Trademarked search terms are phrases closely associated with a specific company and legally prohibited from exploitation by third-party businesses. 

Take, for example, the “Big Mac” search query. Anyone searching for “McDonald’s Big Mac” or “Big Mac” is searching for the iconic McDonald’s burger. They don’t want an unknown burger, and if they do get one, McDonald’s would lose revenue and sustain reputational damage. 

Trademark Bidding Strategies

PPC advertising	Bidding on a trademarked search term in a PPC campaign may move a fraudulent ad above its original version.
SEO	Promoting specific branded keywords in organic search – for example, LSI and long-tail keywords – may rank the fraudster higher than the trademark owner.
Domain squatting	Creating websites, landing pages, and other resources with lookalike domains – for example, Coca-ColaForFree.com – can steal users searching for the respective trademarked terms.  Domain fraud may include: Typosquatting: creating a lookalike domain that only differs by a few characters, misspellings, etc. Brand extension: mimicking the structure of the original domain to make users believe they are buying from an affiliated or subsidiary company. Geotargeting: representing the domain as a subsidiary company catering to a local audience.
Location and time-based targeting	One of the most sophisticated types of affiliate fraud, reverse IP geo-targeting, allows ads to be displayed in specific locations and time zones. If an affiliate knows a trademark owner is offline during nighttime, they can show ads to nighttime users to avoid getting caught. Likewise, fraudsters can appeal to demographics and psychographics who are less likely to file complaints.

How To Prevent Trademark Bidding

To prevent trademark bidding, establish clear policies on the matter (if you’re a trademark owner), collaborate with trademark owners if possible, and screen new affiliates in your network. 

But you can even check it manually. For example, to verify whether your affiliates are abusing “Coca-Cola Los Angeles,” switch to a Los Angeles IP address and check the SERPs.

Programmatic Fraud

Programmatic fraud is the same kind of fraud – domain spoofing, click injection, ad stacking, etc. – but automated and usually at scale. Exploiting the complexities of real-time lead trade, fraudsters manipulate ad placement and sell inorganic traffic. 

With everything happening within seconds, the only viable way to shield your network from programmatic fraud is by having robust anti-fraud software and updating it timely.

Fight the Most Complex Programmatic Fraud with Anura

Speaking of anti-fraud software, one way to safeguard your affiliate network is to implement a certified fraud shield like Anura. Marking fraud with 100% confidence and no false positives, Anura detects 2.5 times more fraud than competitors across more than 800 data points, issuing definitive results such as Good, Bad, or Warning.

BREAKING: Phonexa has partnered with Anura to protect you from ad fraud. Explore the synergy.

Source: Anura

Wondering how much ad fraud is costing you? Use this free online ad fraud calculator. 

Ad Hijacking

Abusive affiliates may run trademark-bidding ads, send users to disposable or fake “front” sites, perform an IP check, and then route qualifying visitors through an affiliate link. At the same time, the system displays something different to merchants, affiliate managers, compliance monitors, or regulators, blocking or redirecting them harmlessly; the affiliate link is not shown.

How To Prevent Affiliate Fraud within Your Affiliate Network

Step 1. Validate New Affiliates

There’s no better security measure than validating affiliates before you accept them. Remember, you don’t just need any affiliates but successful ones that respect the rule of law. Screening applicants will ensure quality, trust, compliance, and security for your network.

Read also: Affiliate Marketing Compliance: 4 Things You Need To Know, from our CEO, David Gasparyan.

Step 2. Track Your Leads and Calls in Real-Time

Initial screening is crucial, but it’s not where checks end. For successful operation, you need to continuously track your affiliates. You need a complex affiliate program management system to unlock what channels drive what customers, how many of them convert, and whether the marketing strategies are legitimate.

At Phonexa, it’s all done with LMS Sync, an automated lead tracking and distribution system that uncovers the entire customer journey from top to bottom and allows you to set up custom rules to connect a specific lead to a specific buyer.

 

Step 3. Implement Fraud Detection Software

The best thing you can do to protect your pipeline from low-quality, mismatched, and fraudulent leads and calls is to screen them instantly after submission and BEFORE you pay for them. Whether you’re testing new campaigns, want to spot-check your traffic sources, or have noticed unusual performance patterns, a real-time check can separate good leads from bad leads.

That’s exactly what Phonexa’s iClear does. The software screens all inbound leads and calls in real-time against chosen parameters, such as ZIP code, email address, and IP, and also industry-specific data like, for example, the lead’s credit rating or their history of infractions.

As a Phonexa client, you can integrate iClear with LMS Sync or Call Logic and set up custom rules to accept and reject leads and calls, all fully customizable to fit your specific marketing objectives. Once set up, the system automatically verifies incoming traffic (or a selected percentage of it, depending on the settings) and accepts only leads that meet your criteria.

Example: If you’re a solar provider from California, you can use iClear to screen inbound phone numbers and, for users who have previously filled out a form, also compare those numbers with the information on the form. Then you can auto-reject leads and calls that don’t match California area codes.

Affiliate Marketing Compliance Institutions and Provisions

Did you know that 70% of consumers take proactive measures to protect their personal information: 30% enable multi-factor authentication, 28% toggle privacy settings on their devices, and 25% disable third-party cookies in their browser?

Federal Trade Commission (FTC)	National-scale advertising and affiliate marketing
General Data Protection Regulation (GDPR)	Personal data management within the European Union (EU) and the European Economic Area (EEA)
Payment Card Industry Data Security Standard (PCI DSS)	Global payment card networks, such as Mastercard, Visa, American Express, JCB, etc.
CAN-SPAM Act	Commercial email communications, including information accuracy, sensitive topics, and opt-out mechanisms
California Consumer Privacy Act (CCPA)	California data privacy laws, such as providing users with notice and opt-outs
Intellectual property rights:Nationwide: U.S. Copyright Act, U.S. Trademark Act, U.S. Patent Act.International: WIPO, TRIPS agreement, etc.	Copyrights, trademarks, patents, industrial design, trade secrets, and other intellectual property rights on a national and international level

Protect from Pay Per Call & Pay Per Lead Fraud with Phonexa

First of all, if you’re new to affiliate marketing or are looking for a unique perspective from a successful pay per call and pay per lead software team, please don’t hesitate to download our guide to affiliate marketing (it’s free):

And now it’s getting even better.

If you’re a pay per call or pay per lead affiliate network, large-scale advertiser, or affiliate, you might benefit from our enterprise-grade software suite that covers every single aspect of your business, from consumer tracking to distribution to analytics to predictive modeling.

Here are the two core products you get as a client with Phonexa:

Here are the six extra features you get as a client with Phonexa:

Get started now to grow your pay per call and pay per call business with no fraud, low-quality leads, and customer complaints.

Frequently Asked Questions

What is affiliate fraud?

Affiliate fraud includes activities designed to generate fraudulent or unearned revenue using adware, malware, cookie stuffing, fake leads, domain squatting, commission theft, coupon fraud, and more. From Amazon to Uber to eBay, many renowned companies suffer from affiliate fraud, losing millions to increasingly sophisticated fraud techniques.

What is affiliate compliance?

Affiliate compliance is the adherence of affiliates, advertisers, and affiliate networks to the rules and guidelines set forth by the Federal Trade Commission (FTC), State Attorneys General, Electronic Retailing Self-Regulation Program (ERSP), Performance Marketing Association (PMA), and regulatory bodies.

What is the best way to avoid affiliate marketing fraud?

The most effective way to avoid affiliate marketing fraud is to verify new affiliates, implement strict compliance guidelines, and conduct regular audits.

What can be considered an affiliate policy violation?

An affiliate policy violation is any breach of the affiliate agreement or of the rules set forth by national or state regulatory bodies, including trademark bidding, prohibited promotional methods, non-compliance with geographical restrictions, cookie stuffing, etc.

What is shopping deals adware?

Shopping deals adware is malicious software or a browser extension that infiltrates a user’s device to bombard them with unwanted pop-ups, banners, text links, discount overlays, etc.