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Today, we’re taking a trip to the dark side of affiliate marketing. Fraud, rule-breaking, and nefarious activity. It’s a rare but costly aspect of running an affiliate program and today I’ll show you how to spot the fraud, how to prove it, and what to do about it.

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Previous Episodes of The Affiliate Guy

The Importance of Getting Personal in Your Affiliate Promotions

Launch Lessons: The Affiliate Army Strikes Again

The Evolution of Affiliate Marketing – The Past, Present, And Future

My Dream Client: Interview with Dean Graziosi

How to Become an Affiliate Manager

The Power of the Dream 100 with Dana Derricks

Affiliate Fraud: How to Spot it and What to do About It

Today we’re taking a trip to the dark side of affiliate marketing. Talking about fraud, rule breaking, and nefarious activity.

It’s a rare but costly aspect of running an affiliate program and today I’ll show show you how to spot the fraud, how to prove it, and what to do about it.

So this is a topic I’ve never covered before. 502 podcast episodes never covered.

It fraud rule breaking. When affiliates intentionally or sometimes unintentionally and we’ll talk about that, do something that they shouldn’t be doing.

This is not common, but when it happens, it can be a disaster. Like it can cost a lot of money.

Again, to be totally clear, this is not to scare you away if you don’t have an affiliate program.

This is not like the don’t start an affiliate program. This is very uncommon. But when it happens, it’s bad.

So you have to be diligent and it requires very little effort. I’m going to share more about that shortly.

I’m going to share what to look for, what are the indicators, how do you even know that there is some potential fraud going on?

How do you actually discover it? How do you root it out?

What are the causes, how to prove it, and what to do about it? So first, what do you look for?

You have to be on the lookout for fraud, depending upon the size of your program. I’m going to give you a rough idea here.

For roughly every $100,000 in sales, this is annual sales. Now, if it’s a launch, this would be roughly $100,000 in sales.

For every $100,000 in sales, you’re probably going to spend about five minutes.

So yeah, that means if you’ve got a million dollars in sales, you might spend 50 minutes in a week.

It begins to kind of peter off around the half million dollar mark.

So it’s about five minutes per 100,000, up to about a half a million.

Then it gradually goes up from there. If you’re doing $100 million a year affiliate program, does that mean you’re going to be spending 30 hours?

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Of course, I didn’t do the math on that, by the way, so I don’t know what it is, but I want you to commit to spending at least ten minutes a week for every $200,000 or so, up to about a half million, and then grow from there.

And again, these are rough estimates, but be willing to spend a little bit of time.

For most of our clients, we spend about a half hour a week, maybe upwards of an hour.

Now, what I’m about to share with you in this what to look for section, these are indicators.

These are not necessarily cause for immediate removal so when I say, for instance, number one, their conversion rate is too high, that doesn’t mean kick them out. Oh, the conversion rate is high.

No, that means that’s the flag that makes you go, we should look into this. So number one thing, to look for conversion rates that are too high clicks to leads.

So let’s just say that overall you’ve had 50,000 clicks and 30,000 leads, a 60% conversion rate.

This person sent 500 clicks and they have 496 leads. That’s a red flag. That could be an issue.

We need to look into that. The opposite is true.They’re way too low clicks to leads.

Again, using that example, they have 500 clicks and two leads. That’s kind of weird.

We should look into that. Their conversion rates are too high leads to sales.

So on average, let’s say you have 50,000 leads, and so far you have 500 sales, a 1% close rate, and your top affiliates are all averaging between a half percent and 3%.

But this person has 400. That would be a weird number. They have 200 leads and 70 sales.

Again, that does not necessarily mean they’re doing something nefarious.

It could be that they have some sort of amazing thing going on with their small number of people. Maybe they only invited their mastermind or their buyers.

The only people that they even invited are people who paid them $25,000 and you’re selling $1,000 product and they’re going one on one with them. It could be, but it’s a flag to look into it. So those are the four things related to conversion rates.

The fifth one is they have a flood of clicks followed by droughts. My friend Janine Crooks at Share Sale said on one program, and I’m quoting here, on one program, a certain affiliate seem to be consistently performing at a small but steady level.

However, when she reviewed the daily timing of his activity, it turned out that he was hand entering the leads into our program and our competitors programs as well.

To keep his conversion rate realistic, he generated clicks during his coffee breaks while working his day job.

So in other words, they send 1000 clicks on one day and then none the next day. Or between the hours of one and 330, they sent 455 clicks and then the rest of the day sent none.

Natural things would tend to show filtering of clicks over time. They might send 400 in an hour, and then only 300 the next hour and only 125 the next hour because it’s filtering off.

Now, this again is not a reason to kick somebody out. Why? Because it might have been that they were running ads and their ads account got shut down.

Not because they were doing anything wrong, but it’s a reason to look into it more.

Another one is if someone comes out of nowhere and they’re a top affiliate and you have no idea who the heck they are, they’ve not been on the leads leaderboard.

All of a sudden they’re on the sales leader board way up there and like, who the heck is this person?

The 7th thing to look for is a high refund rate. If your average refund rate is 5%, anything north of 15, I would be investigating deeply.

Obviously, if you ever get a complaint of credit card fraud. Now if it’s a known great affiliate who’s done hundreds or thousands of sales and they have one complaint of credit card fraud, it probably wasn’t them.

It was probably somebody who bought, just happened to buy through their affiliate link. I wouldn’t worry about that. But this is a new affiliate.

They have nine sales ever and one of them complained of credit card front.

I would investigate the other eight and we’ll talk about what to do on that. And then last is complaints of spam.

You’ve got an email forwarded your service team and it’s spam and you trace it back to this affiliate. I’ve seen that happen again in and of itself.

Not necessarily a kick immediately out, but it’s investigate further. It’s investigate further.

So maybe don’t think of any of these as red flags, but yellow flags, red flags, you’re gone.

Now, these could be all be signs of common frauds. I’m going to share a couple of different types of fraud with you. The first is spyware.

They have somebody download some spyware, some pop up, some other adware that inserts it, and the back end secretly inserts this code into their computer and it inflates their traffic.

They might actually be legitimate customers, but that’s fraudulent activity. We don’t allow spyware adware, any of that type of stuff in any of our affiliate programs that’s breaking the rules.

The second is cookie stuffing. This is where they literally insert the cookie. The affiliate like affiliate tracking on the person’s computer.

So whether the user clicked on the affiliate link or not, it’s going to credit that affiliate domain.

Squatting is another one. These look official. So mattmcwilliams.com and they get MattMcwilliams.com. We have no product, no problem.com for our affiliate training.

And they get noproductnoproblem.com. Looks official. And when they go to no product, no problem, it just no product, noproblem.

They have one little typo and it redirects them. Snags the referral, right? IP spoofing.

This is something where they create fake IP addresses to hide their identity.

And then the affiliates are literally clicking on their own lengths to artificially inflate their numbers. That’s a big bad one.

Iframes using iframes basically it’s kind of like cookie stuffing. Maybe they write a review post and they put an Iframe on there that automatically triggers their affiliate link.

So, again, these are all things they could be doing, and you don’t know what they’re doing.

That’s not the point. The point is they’re doing something postbacks. This is where the fraudulent affiliate, they obtain a transaction ID and they have the address, and then they attempt to bypass the actual, like, a real affiliate, and they claim commissions for conversions.

It never actually happened. It’s really like some deep stuff.Never seen it happen. It just can happen. Fake discount codes.

So somebody goes to Google and they type in a discount code for your product, and then it’s like, yeah, click here to retrieve this discount code.

And it never actually happens. Maybe they don’t even offer discount codes, but now it’s cooked them because they clicked that link.

And so when they go back and say, oscar, I’m not even going to bother to try to find a discount code, they just go back to your website. Boom.

It’s credited to them, though, because they were the last click.And then if you have paper call, this is a creative one. I read from Liza Shooter.

She’s with the story of company said affiliates who post fake job opportunities on Craigslist.

They’ll ask a potential job seeker to, quote, call and pretend to be a real customer.

Stay on the phone for at least three minutes. The fraudulent publisher says this call is part of the interviewprocess.

And then if the job seeker does a good job, they will be called in for an interview, which never happens, of course, just a way of simulating traffic because paper call is typically based on the lengthof time.

Now, I would never do three minutes anyway. I would do like, depends on how long it takes to process an order.

But you’re paying for the phone calls, so they’re on the phone call for seven minutes. And there you go.

So those are all reasons why. Now, going back to what we talked about at the beginning, I’m going to give you some reasons for removal, all right?

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These are absolutely like red flags. You are out.

If they break the explicit rules, and it’s like a Blatant Egregious rule break.

If they break the law, if they make false claims, if they’re doing trademark bidding, if it’s not allowed.

One of the ways, by the way, if you don’t know what trademark bidding is, where they bid on your name. Now, here’s the thing.

If they know that the affiliate manager lives in Fort Wayne, Indiana, like I do, guess what they’ll do?

They will say, don’t run ads in that area. They won’t run ads from Illinois, Michigan, Indiana, or Ohio to avoid me catching them.

I just go to Google and change my location, and I changed it to all kinds of different places so I can go look up a trademarked biddingand see if anybody’s bidding on our keywords.

And if they are, especially if it doesn’t show up where I’m at, and then it does show up when I change my location, they know they’re breaking the rules, and I will kick them out in a heartbeat.

I will not yellow flag them, I will not reach out to them, I will kick them out.Anything like that.

If they’re using scammy tactics, if they’re literally, okay, I search for the product and it says it’s such and such a scam.

We don’t allow that. You’re out. You knew what you were doing, you’re out. So from there, you got to dig in.

So we have some yellow flags, right? We’re seeing some abnormal activity. Some conversion rate is too low, too high.

There’s some weird patterns to the clicks. There’s a little bit of higher refund rate.

There’s one complaint about credit card fraud. What do we do now?

We want to dig in and think about some things. So number one, are they in contact with you?

Scammers don’t typically fraudsters don’t typically reach out to the affiliate manager very much.

They’re usually not in contact. They like to hide. So that’s a consideration.

Not the end all, be all, but it’s a consideration. Are they always the last click but never the first?

So if they have 50 sales, and every single one of them had another affiliate assigned to them originally, or 40 of them did, maybe the other ten had no affiliate, they’re always the last click, but none of their sales are ever the first.

But we’re talking about cookie stuff, and we’re talking about possible iframe.

There’s no way that happens, not on that many sales. So I would remove them in that case.

Is their sales page visit duration considerably shorter than normal or longer than normal?

Your average sales page visit per order is 14 minutes. There’s just three on 32 orders.

There’s no way. Or it’s an hour and 15 minutes. There’s no way. That’s just not possible.

Look at the link from the click to the activity. Is it way too short or way too long?

Is the IP address the same for multiple purchases? Maybe.

They have 50 orders and ten IPS. There’s no way that happened. What’s the open rate on their emails?

Someone sent 1000 leads, they have a 0% open rate or they have 100% open rate.

What’s the bounce rate? Or a lot of their emails bouncing? These are signs of fraud, right?

What’s the show up rate for their leads to workshops? What’s the click through rate?

So when they send 1000 leads and none of the people showed up for the webinar, for the workshop, for the live training, well, the normal show up, it’s 27%, so that’s an issue.

Are all of their buyers coming from one route or route? If you want to say route.Route. Route. Don’t really know.

In other words, if you’ve got a big launch and you’ve got a workshop and you’ve got a webinar.

You got a live stream. You got a Q and a live you got a sales page and all their sales are from the sales page.

That’s a possible signs like, okay, there’s no way none of their people bought on the live stream if they have enough leads.

There’s no way none of their people bought on the webinar. We want to look at those things.

We want to look at a pattern to their lead. Sign up. Like their email addresses. Similar.

This was 12-13 years ago, and every single lead that this person sent out of hundreds and hundreds was first, initial, last name@gmail.com. There’s no way that’s the case. That’s not possible.

Every single one of them, their name was Thomas Jones and it was TJones at Gmail. It was like TJones followed by a number. That’s what it was.

Ambersmithasmithree@gmail.com. Is it that way for their purchases? Is there a pattern to their names?

Do they have let’s say they have 40 sales, and normally all your sales, 40% of buyers, upgrade to a VIP version. None of theirs do.

All of theirs do. That’s weird. Is their click to their country different?

So their click is from Spain, but their purchase is in Canada. That’s weird.

All their clicks come from the same country, but their purchases are all over the world. That’s fraud.

Is their shipping address different from their card address? Is that uncommon? No.

Is it common for 15 of 15 sales to have a different shipping address from the card address? No.

That’s just not possible. It’s just not possible. So you dig in now, you’ve red flagged things, right?

Or there’s like a deep yellow and you’re like, you’ve proven there’s something there and then you got to prove it.

So if you’ve checked search results, if we’re talking a violation of trademark bidding, check the search results, take screenshots. That’s it.

You violate our trademark bidding, I have the right to kick you out. We talked about the time between clicks. OK?

There’s always a click at 952 and then another one at 953. It’s always 1 minute later.

Every other affiliate has sporadic patterns. Seven minutes, two minutes, 1 minute, twelve minutes, an hour and 14 minutes.

There’s always 1 minute. That’s probably a script, and I’ve seen that happen.

I’ve seen it happen where they were able to get into the hack the page and they put their script on and it ran at the exact same interval.

1 minute later, there was another click. So then check your page for scripts, make sure you get those removed, right?

And then ultimately, at the end, contact buyers, see if they actually bought. See if they intended to actually buy from this affiliate.

This solves the problem. 90% of the time, you reach out to ten of their buyers and you say, hey, I just wanted to know, how did you hear about us?

And they say, I heard about you from so and so. And it’s not the affiliate that actually got the credit.

Eight people reply back and all of them say, a different affiliate. That’s not normal. They’re doing something.

You’ve proven it beyond a shadow of a doubt. So then what do you do about it? What do you do about it?

First of all, make sure your affiliate terms are airtight. Are the things that you called fraud actually listed as fraud.

Are your rules clear? You can’t kick an affiliate out for bidding on your trademark terms if you don’t tell them not to.

That’s not inherent. Some affiliate programs actually allow it.

Some affiliate programs advocate it, so there’s nothing wrong with it provided that it’s actually allowed. So are your rules clear?

Secondly, when do you warn and when do you remove we warn when they break a rule. Like, yeah, we say don’t do trademark bidding.

Well, here’s the thing. If the term is, of course, companies I used to work for legacy Learning Systems, learn and Master Guitar, and when I go search for Learn and Master guitar and they bid on Learn guitar, that’s not a trademark violation.

So we tell them, we say, hey, make sure you do a negative keyword so you don’t show up. It doesn’t look like you’re bidding on Learning and Master guitar.

That’s it. Just don’t bid on this exact phrase. And we just teach them.

We reach out and we say, hey, don’t do it. If it’s clear they’re running an iframe they’re out, they’re cookie stuff and they’re out.

They’re doing anything like domain squatting or spyware adware, fake discount codes, they are bye bye. Like we are kicking them out.

Some of the things it’s a warning. It’s just a warning. Hey, don’t do that. That’s against the rules. Or maybe we need to update our rules.

Use the picture that we said you shouldn’t use. Hey, make sure you don’t use it. Right?

And then the big thing is act. You’ve got to take action fast. Take action fast.

If you know beyond a shadow of a doubt there is a problem, take action to remedy it. If it’s a script on your page, get the script off there right away.

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There’s nothing wrong with that. It turns out. Maybe it’s not that affiliate like, that’s not even what’s doing it’s not even this thing.

But there’s a weird script, so get it off there. If they’re doing anything nefarious, you got to kick them out right away and let them know.

Because the other thing is you don’t want to just shut down their account and not tell them because then they might still have the ads running or the pop ups running for 36 hours and people are still getting maybe they’re going to an error page or they’re still running the ads and they can come back to bite you and document everything.

Don’t call them. Either text them or email them so you can document.

So if they come back and say, you didn’t pay my commissions, you can go, yes, because you’re fraud. We got proof right here.

And in case anything ever comes back to bite you, this is very rare, but somebody files a complaint against you for running adware when you’re not the one doing it.

So take action fast. Make sure you contact them. Tell them to remove their ads to shut down their stuff.

You’re not going to pay them and make sure they know that. So again, this is not a huge issue, but it’s one that you have to be on top of.

So now you know how to find out what are the triggers, what are the yellow flags? Right?

You know what to be looking for, you know how to dig in and you know what to do about it.

If you have questions about this or anything else, text me anytime at 260-217-4619. I’ve got plenty more stories to share on affiliate fraud.

I’m happy to share with you, so feel free to text me anytime at 260-217-4619 if you got any questions about fraud or anything else.

And make sure you hit subscribe so you don’t miss the next episode. I’ve got some creative ways to triple your affiliate commissions.

You don’t want to miss it. I’ll see you then.

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