Affiliate fraud: what is it and how does it impact your brand?

Affiliate fraud is a dishonest practice that contaminates the affiliate marketing ecosystem, generating hidden costs and hampering the performance of brands that seek growth through partnerships.

That's because, while a well-managed affiliate marketing program boosts sales and visibility, the actions of disoriented entrepreneurs can undermine their results, inflating expenses and diverting revenues that should be theirs.

In other words, identifying and combating this threat requires constant vigilance and the right tools. A scenario that we, at Branddi, are familiar with up close, helping several companies to protect their investments and the integrity of their brands in the digital environment.

But what exactly sets up affiliate fraud? What are your most common ways and, most importantly, how can your brand defend itself against these invisible threats?

Read on to unravel the details of this harmful practice and discover effective strategies to protect your business!

What is affiliate fraud?

As we've mentioned here a few times, affiliate marketing has become a valuable acquisition strategy for countless businesses. After all, at its core, it's a performance-based model: brands reward partners (affiliates) for each customer or sale generated through the affiliate's marketing efforts.

However, this promising ecosystem is not immune to unethical practices. This is where affiliate fraud comes in. This term generally encompasses a set of dishonest tactics employed by some affiliates to generate undue commissions, often artificially inflating results or violating program terms.

In addition, these actions may range from false clicks and cookie stuffing to the unauthorized use of brand marketing materials or unfair competition tactics.

However, although the term affiliate fraud is widely used, at Branddi, we understand that many of these practices, especially those involving the dispute for qualified traffic using the company's brand without permission (such as brand bidding in advertisements), better fit the definition of unfair competition between affiliates or even of the affiliate against the advertising brand itself.

This is because the affiliate is competing directly in an unfair way, cannibalizing clicks that would go to the brand, or inflating advertising costs.

Market data, such as those compiled by WPBeginner referring to 2020, indicated that these related practices may have resulted in estimated losses of $1.4 billion in revenues globally.

Main Types of Affiliate Fraud

As we said above, this threat is not manifested in a single way: it encompasses a spectrum of deceptive tactics to manipulate tracking systems and generate commissions that are not due to them.

The ultimate goal is always the same: to profit at the expense of the advertising brand, often violating the terms of the affiliate marketing program and jeopardizing the integrity of the performance data.

And the concern about these practices is palpable in the market. Proof of this are the data compiled by WP Affiliates, who indicate that 63% of marketers are concerned about these issues in affiliate marketing.

This underlines the importance of knowing the methods used by offenders to defend themselves properly.

With that in mind, in the following sections, we will detail some of the most common types of these harmful practices, explaining how they work and the impact they can have on your business.

Undue commission

Undue commission is the most direct form of affiliate fraud. It occurs when an affiliate receives payment for a conversion (sale, lead, click) that was not legitimately generated through your promotional efforts, according to the rules of the affiliate marketing program.

That is, in essence, the affiliate manipulates the system to appear to have fulfilled the requirements for the commission, when, in fact, they have not.

This can happen in several ways, such as the use of bots to generate false clicks or impressions, the submission of leads with invalid or stolen information, or even the making of purchases through the affiliate links themselves (self-referral) when this is prohibited by the terms.

The impact for the brand is clear: payment for non-existent or invalid results, distortion of affiliate marketing performance metrics, and a reduced or negative ROI for affected partners.

Typosquatting

Typosquatting is a tactic that exploits common typos that users make when entering a URL directly into the browser.

In it, the malicious affiliate registers domains with names very similar to those of well-known brands, but with minor variations or misspellings (for example, gooogle.com instead of google.com, or adding/removing hyphens). That is, when a user enters the wrong address and falls into one of these “typo” domains, the affiliate can employ different strategies.

One of them is to redirect the user to the brand's official website, but inserting their affiliate link in the process.

This installs a tracking cookie, allowing the affiliate to receive commission for any future purchase, even if the customer's initial intention was to access the brand's website without intermediaries.

This practice not only constitutes affiliate fraud, as it illegitimately embezzles commissions, but also unfair competition, undermining direct brand traffic.

Brand bidding

Brand bidding It's an extremely common form of unfair competition in affiliate marketing, often categorized as affiliate fraud when it violates program terms.

It consists of the practice of affiliates bidding on brand keywords (the exact name of the company or its products/services) on sponsored link platforms, such as Google Ads.

The affiliate's objective in this case is for their ads to appear when a user searches directly for the brand. That is, if the user clicks on the affiliate advertisement (instead of the official brand announcement or the organic result) and makes a purchase, the affiliate receives the commission.

The impact for the brand is twofold:

• First, the cost per click (CPC) of your own brand campaigns increases, as it starts to compete with its own affiliates on the same terms;
• Second, the affiliate cannibalizes sales that would probably take place anyway, since the user was actively searching for the brand.

whereas 68% of online experiences start with a search engine, intercepting users at this time with unauthorized brand bidding is highly detrimental to the brand's marketing ROI.

Attribution deviations

Os attribution deviations represent a direct violation of the rules and policies established by an affiliate program. That is, they occur when an affiliate acts in bad faith, using methods prohibited by the terms of the program, with the purpose of receiving credit (and commission) for a conversion in which they had no legitimate participation or in accordance with the agreed guidelines.

This violation of the program's rules not only results in payment of undue commissions, but it also corrupts attribution data, making it difficult to assess the real effectiveness of marketing channels and affiliates that operate within established standards.

How does affiliate fraud impact brands?

The effects of this threat go far beyond the simple loss of improperly paid commissions.

This is because the dishonest practices associated with this activity generate a multifactorial impact that can seriously compromise the financial health, reputation, and operational efficiency of a brand that invests in affiliate marketing.

Ranging from the artificial increase in advertising costs to the corruption of data essential to decision-making and the erosion of customer trust, the consequences are wide-ranging and often intertwined. For this reason, understanding the depth and variety of these impacts is the first step in justifying and implementing robust protection strategies.

Below, we will detail the main damages that unfair competition can cause to your business. Check it out!

Financial losses

The most direct impact of unfair competition between partners is financial. This is mainly manifested in two ways:

• Payment of undue commissions: every real paid for a false conversion is a direct waste of resources;
• Sales deviation and cost inflation: practices such as brand bidding and typosquatting intercept customers who were already searching for the brand.

In both cases, the cost of acquiring customers increases unnecessarily, eroding the profit margin and return on investment of the affiliate marketing program.

Damage to reputation

Trust issues between affiliates can seriously tarnish the image and trust in your brand. This is because when affiliates use aggressive, misleading, or illegal tactics (such as Fake ads, spam, or typosquatting sites that host malware or inappropriate content) associated with the name of your company, the negative perception falls on the brand itself.

As a result, customers misled by fake promotions or who have poor experiences on fake sites that mimic the brand lose trust.

This is especially true for younger, more connected generations. A study by Wunderkind, cited by Marketeer, revealed that 28% of UK Gen Z shoppers abandon online shopping due to lack of trust in the brand.

If the activities of affiliates (or offenders impersonating them) generate mistrust, the brand may lose not only immediate sales but also long-term customer loyalty.

In other words: protecting the online experience associated with your brand is protecting your reputation.

Limiting the brand's growth potential

Affiliate fraud not only costs money now, but it also impedes future growth. After all, performance data corrupted by fake clicks, leads, or sales leads to a distorted view of the effectiveness of marketing channels and affiliate partners.

This results in misguided strategic decisions. Want examples?

• Inefficient budget allocation;
• Impaired market analysis;
• Difficulty identifying good partners.

Essentially, these distortions obscure the reality of performance, leading the brand to make decisions based on false information and squander opportunities for real growth.

Consumer confusion

Practices associated with unfair competition create a confusing and frustrating online environment for consumers. That's because seeing affiliate ads competing with those of the brand in search results (brand bidding), often with conflicting messages or offers, can leave the customer unaware of the official link or valid promotion.

In addition, typosquatting sites that redirect the user or, worse, attempt to collect data, generate disorientation and mistrust.

The result is a fragmented and potentially negative customer journey, which can lead to the abandonment of the purchase or, in more serious cases, to cause the customer to fall into scams, associating the poor experience with the legitimate brand.

Increased costs with legal actions

Combating unfair competition often requires investment in legal measures. This may include:

• Monitoring and notifications: spending on tools and equipment to identify violations (such as unauthorized brand bidding or misuse of a trademark in typosquatting) and notify violators;
• Removal actions (Takedown): costs associated with taking down fraudulent sites, advertisements, or profiles;
• Disputes: in persistent or serious cases, the brand may need to resort to legal proceedings, which involve legal fees, court costs, and internal team time.

Notorious cases, such as the long-running dispute in US 1-800 Contacts v. FTC about agreements that restrict brand bidding between competitors in search ads, illustrate the complexity and potential costs involved in protecting brand keywords and combating practices that may be considered anticompetitive or violating terms.

Decreased ROI

Ultimately, all of the negative impacts of this so-called affiliate fraud converge to a decrease in the ROI of your affiliate marketing and, potentially, of your marketing as a whole.

Do you know how? Like this:

• When you pay undue commissions, your costs increase without a corresponding return in real sales;
• When brand bidding inflates your CPCs, the efficiency of your advertising spending decreases;
• When sales are cannibalized, the incremental value generated by affiliates is questionable.

Internal data from Branddi and its clients demonstrate the potential for recovery when combating these practices: we observed average reductions of up to 70% in the CPC of institutional terms and we have already helped brands save an estimated total of R$ 250 million in inflated sponsored link costs.

How to protect your brand against unfair affiliate competition?

Fortunately, despite the challenges posed by unfair competition, there are effective strategies that brands can implement to protect themselves.

Remember that the objective is not to give up the potential of affiliate marketing, which remains a valuable channel, but rather to build a safer, more transparent and, consequently, more profitable affiliate marketing program.

Based on our experience at Branddi, we know that it is totally possible to create powerful partnerships based on mutual trust, provided that the correct control and monitoring measures are in place.

The following are some of the key protection tactics and tools that can make a difference in the integrity of your affiliate program and to defend your brand in the digital environment.

Define a clear policy for partnerships

The basis for avoiding problems with affiliates lies in robust Terms and Conditions (T&Cs) for your affiliate marketing program. This document details what is permitted and prohibited, including rules regarding promotional methods, brand use, and fundamentally, brand bidding.

After all, a clear policy protects your business, sets expectations, and serves as a legal basis against violations. Despite the risks, the value is recognized: 73% of marketers are happy with affiliate revenue.

Well-defined rules are vital to this success, ensuring a safe environment, preventing unfair competition, and attracting serious partners.

Make an informed choice of affiliates

Don't automatically approve all affiliates: careful selection is a proactive defense against these threats. Therefore, analyze the applications, verifying the quality of the partner's site/social channel, the relevance of the audience, and the promotional methods.

Additionally, research the candidate's online reputation and consider interviewing high-volume partners.

Establishing clear entry criteria helps filter out bad actors and build an affiliate marketing program with quality partners aligned with your brand and less likely to violate rules or engage in dishonest practices.

Count on an audit of campaigns and results

Regularly monitoring and auditing the results is essential to detect affiliate infractions and unfair competition.

Therefore, analyze metrics other than sales: conversion rates, traffic sources, chargeback rates, and unusual patterns (click peaks, unrealistic conversions). In addition, compare performance and use analytics to investigate anomalies.

The scale of the problem is vast, with projections of losses due to digital advertising infringements in the house of hundreds of billions of dollars annually, highlighting the importance of constant vigilance in your affiliate marketing program.

Count on good prevention technology

The complexity of modern affiliate fraud requires specialized technology.

To do this, prevention tools automate monitoring, identifying sophisticated patterns (bots, cookie stuffing) and brand abuses such as unauthorized brand bidding and typosquatting in real time, 24/7.

And that's where solutions like Branddi come in, which offer this continuous surveillance on search engines, social networks, and marketplaces.

Investing in the right technology not only protects against losses and unfair competition, but it also frees your team to focus on valuable strategies and partnerships, ensuring the integrity and profitability of your affiliate marketing!

Branddi monitoring: more transparency for your brand

Combating affiliate infractions and unfair competition requires more than just good intentions and clear policies: it requires active and specialized surveillance. This is exactly where Branddi comes in, offering a complete solution that brings transparency and control to your investment in affiliate marketing and to the protection of your brand as a whole.

Using a powerful combination of artificial intelligence for 24/7 monitoring and the expertise of dedicated experts, Branddi scans the global digital environment for violations. We automatically identify practices such as:

• Unauthorized brand bidding;
• Typosquatting and fraudulent domains;
• Misuse on social networks and marketplaces.

Our action is complete, from initial monitoring to takedown (removal) of violations, without limits on notifications or complaints and preserving the continuity and good relationship of our partners.

With Branddi, you gain visibility into what actually happens with your brand online, ensure that your affiliate marketing program works for you, not against, and protects your customers from scams, ensuring more transparency and protection for your business.

Do you want to know more? Visit our site and learn more about our Shielding marketing!