The Real State of Affiliate Marketing?

Last week some of the biggest companies in Affiliate Marketing met up in Europe to discuss the state of the industry, do business and figure out how to evade spam filters

No, really – while there were some of the most reputable companies in the industry, it also included some of the worst companies in marketing, the most infamous spammers, hackers, and scammers.

According to Statista, performance and affiliate marketing spending is expected to reach $8.2 billion by 2022, up from $1.6 billion in 2010. This increase is due to the popularity of affiliate marketing among advertisers and publishers.

Affiliate marketing is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate’s own marketing efforts. It’s a popular way to earn income online, and because of its low barrier to entry, it’s also attractive to bad actors.

Cybercriminals are constantly developing new ways to exploit the affiliate marketing industry, and as a result, businesses need to be vigilant to protect themselves.

Here are some real facts about affiliate marketing:

1) Performance Marketing is NOT Affiliate Marketing. The “affiliate networks” like to point to the spend of $8 billion in affiliate marketing to attempt to claim some legitimacy next to larger media networks. Here’s the problem: most of “affiliate marketing” money is in performance marketing through agencies, where they are rewarding large media partners, or the buy is a CPM ROI-focused buy but is not an “affiliate relationship.” I’ve spoken to some of the large performance marketing companies spending $500 million a year on media buys – and they aren’t using “affiliate networks.” They are buying on Facebook, managing video buys to back into a clients eCPA.

2) Affiliate Companies Can’t Stop Fraud. Stephanie Harris of Partner Centric wrote something interesting. She claims one of her tools helped a client “save 27% in monthly commission payments by blocking and redirecting all fraudulent traffic before it ever reached their site.” Here’s the problem with this claim – and I don’t doubt it – it admits that their partners are fraudulent, trying to game the system and that they caught 27% of them committing fraud. I’ve known Stephanie for over a dozen years and she is one of the more reputable folks in the industry and I don’t doubt her desire to make a change. Why not just cut scammy partners, do due diligence, and make sure only reputable companies are involved? She knows it’s a serious issue, as she has posted about it at least two dozen times in the last year about how pervasive fraud is in the industry, yet why not just use the simplest solution to prevent it?

3) What isn’t Fraud is Often Just Theft. Fraud researcher Augustine Fou points out that the best converting type of affiliate marketing is often just stealing money from the merchant. “They are paying marketing fees to re-targeting vendors or performance networks for sales that would have happened anyway. That’s why retargeting looks so awesome in the click data — it appears you are getting tons of clicks and the sales are attributed back to the retargeted display ads. What is much harder to calculate is the true incrementality of the campaigns – what additional sales did these campaigns drive, above and beyond what would have happened anyway?” Basically, these are sales that would have happened no matter what, but using “affiliate marketing” just stole the sale through stealing the attribution.

So, I’m constantly asked what the key to affiliate marketing getting over its fraud problem, and it’s simple:

1) Work with Trusted Partners Only. No more “anyone can sign up and make money online.” The idea that there are secret sources of traffic left that some “affiliate” will bring to the table is absurd. These are all professional marketers trying to game the system.There needs to be full visibility here: no “mysterious” affiliates and networks behind the scenes. I’m also amazed that people who just a few years ago were settling with the FTC for extreme amounts of fraud, being sued by Facebook for hacking their systems or just getting out of jail for scams are celebrated in the industry as “heroes” and given awards.

2) Zero Tolerance for Fraud. Fraud Detection Systems often have a “acceptable fraud meter,” meaning that the network or vendor is allowing fraud to come in, and can move the dial to allow what they want and don’t want. This is absurd. No fraud should be allowed, and the system should be made to prevent any and all shady traffic. The reason networks allow this is that it’s profitable.

3) Don’t Distribute to Affiliate Networks. Most Affiliate Networks are just partnering up with Spam Artists. Ask them who some of their large media partners are. Is it CNN? Is it Forbes or Hulu? It’s a site you’ve never heard of in Lithuania that claims to have billions of American impressions for some game you’ve never heard of. Why? It’s all fraud. Ask around who the reputable few networks are (or email me, happy to help!)

Businesses that are unaware of the latest cybercriminal tactics and how to protect themselves against them can quickly find their affiliate marketing programs decimated. However, with the help of experts and vigilance, businesses can stay ahead of these threats and safeguard their valuable relationships with affiliates.

Pesach Lattin
Pesach Lattinhttp://pacevegas.com
Pesach "Pace" Lattin is one of the top experts in interactive advertising, affiliate marketing. Pace Lattin is known for his dedication to ethics in marketing, and focus on compliance and fraud in the industry, and has written numerous articles for publications from MediaPost, ClickZ, ADOTAS and his own blogs.

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