Tackling Fraud & Compliance In Performance Marketing

l Agenda

1. Facts and Figures about Fraud

2. Affiliate Fraud

3. Merchant Fraud

4. Tackling Affiliate Fraud

5. Tackling Merchant Fraud

6. Transparency and Compliance:

“The role of an affiliate network”

l Facts and Figures about Fraud

* Source: Edelman, Ben (2008): interview on affiliate marketing fraud published by Econsultancy

(http://econsultancy.com/uk/blog/2908-ben-edelman-on-affiliate-marketing-fraud)

Imagine 10%* of the industry’s turnover

is generated through fraud

l Affiliate Fraud: Forms and definitions (1/2)

Click fraud

Clicks made manually and/or automatically by and/or on

behalf of the affiliate without any interest in the merchant’s

product(s) and/or services

Fake orders

Sales orders conducted by and/or on behalf of the affiliate

without any interest to keep the merchant’s product(s) and/or

use the service(s) offered by the merchant

Cookie dropping/spreading

Placement of multiple cookies in the user’s browser through a

single click without the user’s awareness of or interest in the

merchant’s promotional material or website

l Affiliate Fraud: Forms and definitions (2/2)

Brand bidding

Unauthorized use of the merchant’s brand name and thereby

violation of the merchant’s SEM restrictions

Misplacement of promotional material

Placement of the merchant’s promotional material on

unauthorized websites and thereby violation of the merchant’s

publication restrictions

l Tackling Affiliate Fraud: General

TT validates every affiliate (site) registration manually (language,

content, “Impressum”, etc.) and avoids automated approvals.

TT changes the affiliate’s initial self-categorization if necessary.

Upon registration, TT investigates the affiliates by using the TT

User Check which gives off a signal in case an earlier flagged

fraudulent IP is used by a new user.

TT maintains a blacklist of fraudulent affiliates.

Merchant approves or rejects each affiliate site registration for his

program(s) manually (if he is in doubt, he contacts TT and/or the

affiliate immediately).

Merchants and affiliates communicate via the TT Ticket System.

l Tackling Affiliate Fraud: Click fraud

Click to Lead Rate (CLR) and Click to Sales Rate (CSR) are

significantly below average.

Massive amounts of clicks are generated within a (relatively)

short time frame (via foreign IP addresses).

After a click has been made/registered the user’s IP address is

blocked for a predefined time period (e.g. 3 hours).

TT uses self-learning click filters that block/drop clicks if common

automated systems or scripts simulate clicks.

l Tackling Affiliate Fraud: Fake orders

Return quota of affiliate in question are significantly above

average.

Orders are often made by the affiliate himself or his relatives

(conduct last name checks in case of doubt).

Merchants should create a blacklist of fraudulent credit card

transactions and fake delivery addresses.

Assessment period of transactions has to exceed max. return

period granted to the merchant’s customer.

Keep in mind to use de-duplication to avoid double payment for

the same order!

l Tackling Affiliate Fraud: Cookie dropping/spreading

Conversion rates (CLR and CSR) are significantly below average.

Affiliates provide insufficient information about their source(s) of

traffic.

A-brand campaigns and campaigns with long(er) cookie runtimes

are over proportionally affected.

Affiliates promote the same campaign via multiple networks and

sites to cover their tracks and to make the fraud less obvious.

Affiliates usually fail to successfully promote any small online

shop.

l Tackling Affiliate Fraud: Brand bidding TT can enable the TT Brand Monitor as a premium service for

merchants which monitors the use of the merchant’s brand name by scanning the most popular search engines multiple times per day.

The monitor will pick out all tracking links, including other main networks.

Merchant receives detailed reports.

l Tackling Affiliate Fraud:l Misplacement of promotional material

TT software gives insight into location of originating click and

thereby prevents misplacement of promotional material.

l Merchant Fraud: Forms and definitions (1/2)

Arbitrary cancellations

Merchant cancels valid clicks and/or transactions.

Flat cancellation quota

Merchant applies a flat cancellation quota policy regarding all

generated clicks and/or transactions.

Strategic campaign pausing

Merchant pauses his campaign(s) abruptly without any pre-

information given to the network and his affiliates.

l Merchant Fraud: Forms and definitions (2/2)

Intended tracking problems (after re-launch)

Merchant intentionally causes tracking problems and/or delays

the fixing of such.

Delayed or non-payment of invoices

Merchant intentionally delays invoice payments and/or does

not pay them at all.

l Tackling Merchant Fraud:l Arbitrary cancellations and flat cancellation quota

Cancellation reasons are predefined in writing and reduced to the

essential minimum by merchant and TT.

Reason behind each cancellation has to be given to TT and the

affected affiliate(s).

Proof has to be provided by the merchant upon request.

Maximum cancellation quota per campaign has to be defined in

writing by merchant and TT.

l Tackling Merchant Fraud: Strategic campaign pausing

Minimum time period before campaign pausing has to be

predefined in writing by merchant and TT in order to give affiliates

enough time to remove the merchant’s promotional material.

Reasons for campaign pausing have to be predefined in writing by

merchant and TT and communicated up front to the affiliates.

l Tackling Merchant Fraud: l Intended tracking problems (after re-launch)

Contract penalties are asserted by TT in case of intended or

tolerated tracking problems:

“Client undertakes that any tracking code placed on the site(s) of Client will

be operational at all times and for all payment methods. In the event that

TradeTracker ascertains that this is not the case, an amount of € 0.15 shall

be charged to Client by TradeTracker for each visitor provided to Client

from the date that the tracking code has not been (correctly) in place until

the time that the tracking code is once again implemented correctly on

Client´s site(s).”

Tracking has to be implemented correctly and tested successfully

before campaign start and re-launch.

l Tackling Merchant Fraud: l Delayed or non-payment of invoices

Merchants are asked to make prepayment for each campaign.

After three monthly invoices have not been paid, TT pauses or

stops the merchant‘s campaign(s).

TT hands overdue invoices over to debt collection after the last

reminders.

l Transparency and compliance: l“The role of an affiliate network”

TT is first and foremost a technology provider.

By not acting as a merchant, affiliate or media agency TT does

not face any conflict of interest.

TT is fully independent.

TT acts according to a strict code of conduct to secure its high

traffic quality.

TT acts as an intermediary between merchants and affiliates.

TT excludes affiliates and merchants that have committed fraud

and informs the police in such cases.

If something is too good to be true,

it usually isn't!

Thank you. Vielen Dank.

Heiko Hildebrandt