Q&A: Ben Edelman of Harvard on adware & affiliate commission fraud

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Posted 31 January 2012 14:42pm by Geno Prussakov with 0 comments

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It has been a while since the topic of adware and conjugated affiliate commission fraud has been brought up on digital marketing blogs. It may appear that the problem is gone. However, this is by no means so.

Today I am thrilled to bring you a Q&A with Ben Edelman, a Harvard Business School-based expert on affiliate commission fraud.

Ben, what, in your opinion, are the top areas in which merchants fall victim of affiliate commission fraud?

I've been tracking a variety of problems. Spyware and adware can invoke a merchant's affiliate links when a user is already at the merchant's site, claiming commission on traffic the merchant would otherwise get for free.

Cookie-stuffers can drop cookies when a user is merely browsing the web, again, claiming commission the merchant shouldn't have to pay.

Typosquatters wait for a user to mistype a merchant's domain, then send the user where the user wanted to go, but charge the merchant for the referral (even though the typosquatting domain registration was illegal to begin with).

The techniques vary, but the key tactic is the same i.e. finding a way to get between the user and the merchant, in order to claim commission that wasn't actually earned.

I know you believe adware to be one of the worst types of affiliate marketing abuses. Why? And can you quickly explain how things work here?

Spyware and adware are particularly pernicious because they offer such effective targeting. If you want to find a thousand customers about to buy new Dell laptops, where are you going to find them? To a rogue affiliate, spyware and adware offer an answer: just wait for the user to browse to the Dell web site, or even through to the checkout page, and then pop open the affiliate link then.

To a merchant that's not thinking about this problem, the traffic can look just great. Conversion rates can be high. Average order size also good. Click-through rate can be superb. But it's all a ruse since it's traffic the merchant would have gotten for free.

You've been researching and writing on affiliate adware and spyware for nearly a decade. How have things changed in the course of the past few years?

One major change over the last few years is the rise of complacency. Folks think "the adware mess is over," and in some respects that's right, certainly there are no more mega-adware vendors collecting millions and planning IPOs.

Yet plenty of users are still infected. And keeping a program clean requires ongoing diligence. Indeed, as fraudsters have gotten trickier, (recognizing known IPs, using history sniffing to detect folks who might be trying to flesh them out, and so on) the risks have actually grown.

Prohibiting adware, BHOs and other parasites in the affiliate program's Terms & Conditions agreement is only the first step. What can merchants do to effectively police affiliate compliance with such a clause?

One crucial first step is to combine tough T&C's with genuine enforcement. T&C's alone won't do the job as rogue affiliates are inclined to try their luck and see what happens. So then the question is where enforcement comes from. Some affiliate program managers can do this, and some networks offer the service too. Savvy affiliate managers can even do it themselves, especially if they examine traffic stats and referer headers to try to get a sense of who may be up to no good. But complacency isn't a sensible choice.

It's also important to discuss this problem with affiliate networks. The standard contracts between merchants and networks disavow a network's responsibility for these shenanigans. I understand a network's hesitance to promise good behavior by its affiliates, but suppose a network is on actual notice that a given affiliate is a cheating. Perhaps the network has received impeccable proof of that cheating.

Can the network continue to send that affiliate's traffic to other merchants? Continue to tell the other merchants that that affiliate is active and in good standing?

Savvy merchants should demand better, and should insist that networks use best efforts to block bad affiliates, and that networks act on information in their possession.

Give us a good reason why etailers and affiliate managers should attend your keynote at Affiliate Management Days.

There's real money at stake here. For example, the 2010 indictment of Shawn Hogan alleges that he was the single largest affiliate in eBay's affiliate program in 2006-2007, collecting more than $15m over 18 months. (eBay and the US Attorney's Office now allege he was cookie-stuffing all along.) Of course, most affiliate programs are far smaller than eBay's, yielding a correspondingly lower opportunity for fraud.

But for mid-sized merchants, there are typically large savings in catching and ejecting rule-breakers. That means more commission available for legitimate affiliates who do their best and follow the rules. Merchants and good affiliates should both be pushing to put an end to this kind of fraud.