The majority of affiliates create value for their merchant partners, however most affiliate programs have been subjected to fraud at some point. Affiliate fraud can take many forms; it can be outright transaction fraud or other illegal activity, manufactured leads, misled consumers or traffic from prohibited sources.
The networks do a good job providing basic legal protections against these activities, but merchants should use their own affiliate agreements to ensure maximum protection.
The supplemental affiliate agreement fulfills multiple roles, but there are several aspects of that agreement important to protecting your program from fraud:
Identify Allowable Marketing Techniques
Affiliates use a variety of techniques to market your program including email campaigns, paid search, organic search, desktop software, incentivized programs and even offline advertisements or pitches. Your agreement should consider each of these techniques and describe in plain English which techniques are allowed in your program.
Provide generic statements that can be applied to marketing techniques used in the future. A common approach is to prohibit marketing campaigns deemed to be detrimental to the merchant’s brand. If an unsavory technique is used by an affiliate in the future, this clause may provide additional protection.
Handling Trademark Bidding
If you prohibit trademark bidding, require your search affiliates to add your brand terms to their list of negative keywords. The search engines aggressively broad match and some affiliates take advantage of this to comply with your policy (not bidding on brand terms), while getting their ads shown for searches on your brand. Negative keywords provide the cleanest method for ensuring that affiliates do not advertise on your prohibited terms.
Delay or Deny Fraudulent Payments
Affiliate fraud is frequently perceptible in the data provided by the affiliate networks. Sharp changes in affiliate performance or unusually high conversion rates can be early indicators of a fraudulent affiliate. However, this data is rarely enough to conclusively determine fraud. Credit card fraud can take weeks to surface. Other forms of abuse such as trademark poaching or spyware take time to collect the evidence necessary.
Give yourself the right to delay payments if you suspect fraud. Don’t allow pressure to finalize your payments prevent you from making a good decision about suspected fraud. Delayed payments give you the opportunity to fully research the suspicious activity and collect the data needed to deny or reverse payments.
Once you’ve conclusively identified fraud, give yourself the ability to deny or reverse those payments. Keep in mind that these terms should only be used if fraud is legitimately suspected, not as a tool to manage disagreements with affiliates.
Your affiliate agreement is an excellent tool for managing your fraud risk; however it is only one aspect of a comprehensive fraud prevention program that includes affiliate application review, regular communication and abuse monitoring.
Make sure you consult legal counsel as you craft or modify your affiliate agreement.
David Naffziger is CEO of BrandVerity, a firm that detects affiliate violations of merchant paid search policies.
Download the entire FeedFront issue 7 here – http://www.scribd.com/doc/17376069/FeedFront-Magazine-Issue-7
FeedFront issue 7 articles can be found here as well: http://feedfront.com/archives/article00date/2009/08
