Pay-per-click (PPC) advertising and online affiliate referral programs are powerful tools for attracting valuable web traffic and driving sales. The relationship between a business and an affiliate can be simple and symbiotic: Businesses pay for valuable referrals, and affiliates collect revenue for directing the traffic. Unfortunately, whenever money changes hands, especially online, fraudsters will exploit that relationship.

What Is Click Fraud?

A site that hosts pay-per-click ads has an incentive to maximize the number of times users click on those ads. The more clicks the ad generates, the more revenue the affiliate collects.

Fraudsters take advantage of this by generating artificial traffic to an advertiser’s website via methods such as click farms that pay employees low wages to continually click ads, or creating a computer program that visits the affiliate site and clicks the ads. These methods produce a steady stream of revenue for the fraudulent affiliate—and no legitimate business for the advertiser.

Businesses pay for clicks because they believe they have value. If those clicks are fraudulent, companies aren’t getting what they pay for. Click fraud victims aren’t alone, however. A November 2015 Interactive Advertising Bureau study revealed that U.S. businesses pay $4.6 billion per year for fake traffic. That figure not only represents wasted money but an advertising budget that should have gone toward attracting new customers.

Additional Affiliate Fraud Schemes

Affiliates also defraud advertisers by purchasing goods with stolen credit card information to collect referral commissions. Once those commissions are paid, the business sees a spike in fraud claims and chargebacks.

Other fraudulent affiliates copy a high-ranking website’s content or style to direct customers to their website, stealing the advertiser’s conversions, according to enterprise software firm Avangate.

These forms of fraud are especially dangerous because they often fly under the radar. By the time businesses discover the deception, a significant amount of their advertising budget has been spent on false referrals. Additionally, businesses incur losses from packaging, processing, and even shipping fraudulent orders.

Worse, credit card fraud causes customers to look unfavorably upon the company. After Target’s security was breached, its “[n]et income fell 46 percent to $520 million from $961 million in 2012, and sales were down 5.3 percent,” per USA Today. “Some people who have stopped shopping at Target vow they won’t go back.”

Stop Affiliate Fraud at First Sight

Pinpoint Intelligence implements customized solutions to identify sources of fraudulent traffic before they affect your bottom line. Complete Pay fraud mitigation evaluates the risk of each transaction and stops affiliate fraud at the source to minimize chargebacks. Our experts eliminate bad traffic so you can trust that your pay-per-click advertising budget goes toward attracting valuable leads and maximizing revenue for your business.