Yes, this is one of the digital ad frauds that the affiliate networks are doing, and the advertisers end up paying for orders that are not online orders. As a result, offline orders get cannibalized into online orders, and marketing budgets are drained. Apart from the loss of digital marketing budgets, the advertiser pays online offers/discounts for these offline orders.
How is this Fraud Happening?
In the below graph, a fraud affiliate has used a Bot to send spiked traffic during a specific hour of the day to control the conversion ratio. However, orders are placed during the whole day from two devices only. As a result, the flat line conversion rate is at 26%, in which orders are coming from two devices (offline cannibalizing). However, the spiked traffic conversion rate is 2%, in which orders are all coming from the same two devices. This clarifies that this traffic is purposely spiked in this hour to control the overall conversion ratio.
Actual repetitive events are coming from visits. Moreover, these visits are from the same desktop and IP, which indicates that the visits are coming from the exact location, and offline orders are getting punched in.
These orders can be cash on deliveries and canceled at any time or a meager value that adds nothing to the bottom line.
What Does the Network Achieve?
● Advertisers Make Payouts
Affiliates team up with the retailer to earn commission from advertisers by completing the KPIs of a campaign by unethical means, which are other than digital sources. This happens when a retailer places orders using affiliate and referral links. The affiliate receives a monetary benefit from the advertiser for delivering high conversion rates or confirmed orders.
Moreover, most affiliates receive a fixed payout from the advertiser for delivering confirmed purchases. But, on the other hand, the “order value” is not often set. Therefore, the affiliate could receive a payout of Rs 20,000 or Rs 200/100 order, whereas the order value could be as low as Rs 50/order or Rs 5,000 for 100 orders.
Assuming the affiliate pays a fixed amount to the retailer for placing the order, let’s say Rs 5,000, the fraudulent affiliate still makes Rs 15,000. Moreover, the retailer can place CODs and reject or cancel online orders. So, the advertiser might not even receive money but must make payouts to the fraud affiliate. Therefore, the advertiser loses money for non-online orders.
● Loss of Commission/Offer/Discount on Online Orders
The retailer partnered up with the affiliates to get a better-discounted value on their sale. They also can resell the products to their offline customers at the MRP. As a result, the retailer is making money by reselling products and even receives money from the fraud affiliate for placing the orders.
mFilterIt & Ad Fraud Solution checks for retailers creating multiple fake profiles on e-commerce apps by detecting their location and device as it remains constant. By detecting such anomalies, brands can avoid cannibalizing their online orders and making commission payouts for offline orders to fraudulent retailers.
What Losses Do Advertisers Incur?
● Offline Orders Get Cannibalized
The retailer orders for multiple customers by creating various profiles with a single delivery location. Therefore, the retailer cannibalizes online orders offline and makes additional money by reselling at MRP to offline customers after availing of online discounts/offers.
On the other hand, the brand suffers a loss as it doesn’t expand its customer base. Moreover, the advertiser fails to explore the scope of areas with the demand, as the existing customer base lies with the retailer. Furthermore, the advertiser only receives a signal that a single location has high demand when the reality is different.
● Digital Marketing Budgets Incur Offline Order Payments
Through their digital marketing budget, brands make payouts to affiliates and retailers. As mentioned earlier, the retailer places the order using the fraud affiliate and resources, and the fraud affiliate shares a portion of the earned commission with the retailer.
Moreover, the retailer will likely resell these orders at MRP to offline customers and earn more money from the sale. There were no payouts required for these offline orders as the affiliate is incentivizing retailers for placing orders, a.k.a., incentive fraud. Furthermore, the affiliate hides the peaking conversion rate by using bots to deliver high traffic within certain time intervals.
For example, an affiliate spikes 1000 visits using bots and displays a 100% conversion rate. As such, CVR can never achieve its full scale. On the other hand, legit affiliates have a 1-1.5% CVR. Therefore, such a high CVR indicates ad fraud and is only done by fraud affiliates to hide their fraud CVR. In reality, the fraud affiliate might be using 100 visits to deliver 100 purchases. Therefore, advertisers are losing the marketing budgets by paying commissions to fraud affiliates and retailers.
● Derails Reachability to Potential New Customers
The fraud affiliate uses a retailer to create multiple profiles and place orders at the exact location. As a result, the advertiser fails to build a new customer base. Moreover, the customer base created by the advertiser is also displaying falsified information, as the same retailer creates the profile.
Additionally, we can say that fake users also avail of discounts/ offers. Moreover, the advertiser pays a commission to the fraud affiliate for delivering bot traffic and not a single customer.
Such partnerships between affiliates and retailers drain the marketing budget to attract legitimate customers from different locations. Furthermore, the advertiser may attract zero customers if the retailer cancels the orders.
Takeaway
Partnerships between affiliates and retailers are cannibalizing offline orders as online. As a result, brands and advertisers lose their marketing budgets to commission payouts. Also, it leads to warped marketing analytics and polluted business numbers. Putting an end to this is possible by detecting ad fraud, especially incent fraud in marketing campaigns.
mFilterIt ad fraud solution detects any sudden spike in online traffic and displays the source credentials to advertisers. As a result, advertisers can recognize the fraud affiliate and attract a new customer base.
Furthermore, advertisers would have the option to deviate the marketing budget towards other goals or legitimate affiliates. Additionally, eliminating ad fraud in marketing campaigns would offer access to accurate analytics.
Get in touch to learn more about the Ad Fraud.
