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For as long as I've promoted affiliate products I've suspected fraud. You can track your results, but only based on what the affiliate network reports to you. Many times I've seen leads mysteriously disappear without warning at the end of the month (what? what do mean they suddenly don't count? If someone comes through my link and fills out a lead, I should get the profit; it shouldn't matter if the merchant isn't able to convert that lead to a sale), I've seen suspiciously high rates of return on per sale sites, and often conversions rates vary beyond statistical norm. Programs like clickalyzer, which claims to be able to track affiliate links to the sale, just don't work in my experience (I really wish it did, but I'm sorry to say that despite claims it just doesn't... yet). Anyway, I've always suspected affiliates were being routinely defrauded, but I've only recently been able to prove it, with the help of my joint-venture partner. Here's how we did it:
First I should point out that this particular merchant was pay-per-sale, and we aren't run of the mill affiliates. In the 2 months we had been promoting this merchant, we had already done over 1 million in sales, and jumped to their #2 affiliate in their whole network (I think we've since moved to #1). I mention this not to brag, but to point out that because we did such a volume of sales for them, we were able to get some leeway from them. Interestingly, no matter how many sales we ever did, only the merchant would converse with us. It didn't matter to the affiliate network how many millions in sales we did - they still treated us like dirt.
Initially the problem started as one with tracking. The affiliate network we were promoting through was so delayed in its reporting (sometimes 2 weeks for sales to show up) that we felt paralyzed to make adjustments and optimize our campaigns. We wanted something closer to real-time feedback.
We contacted the merchant we were promoting (because the affiliate network wouldn't even talk to us) and requested help. Because of the volume of sales we were generating for this merchant (sometimes 40k/day) they agreed to supply us with daily reports telling us exactly what we'd sold the day prior. In this way we could make adjustments quickly and optimize our campaigns.
We immediately saw a huge discrepancy between what the merchant reported we had sold and what the affiliate network was reporting we had sold on any given date. About 43% of our sales were simply missing.
Now we knew that the merchant had the power to hold back a certain percentage of sales from being reported, based on the premise that some sales would be returned or prove to be bought with fraudulent credit cards, etc... The trouble is over time we had established our fraud/return rate at just over 3%, and this doesn't account for the other 40%. And once sales are proved to be genuine, non-returns, the commission should come through. But these sales/commissions *never* appeared in the affiliate network reporting.
The merchant blamed the affiliate network and expressed surprise, but it's difficult to tell how much of the missing sales were due to the merchant witholding them (they claim they weren't) and how much is due to the affiliate network stealing them. Either way, because the affiliate network runs the tracking mechanism, they bear the most responsibility.
But the merchant also turned out to be guilty of other fraud. After analyzing our sales (which we do to determine customer buying habits) we discovered another statistical impossibility. This merchant, like many others, operates on a cookie. The timeframe the cookie covers isn't 30 days, but for the purpose of simplicity, I'll use that timeframe as an example. What we discovered was out of millions of dollars of sales, not one single sale occured after day 15. We had strong sales right up until day 15 (in fact, 10% of our total sales occured on day 15), but nothing on day 16 or beyond. Not one single sale.
We brought this to the attention of both the network and the merchant, and pointed out it was statistically impossible. We suggested that although the merchant was purportedly operating on a 30 day cookie, they were in fact only operating on a 15 day cookie. We were told it was just a coincidence, that people just didn't buy after day 15, that there was no problem. We couldn't even get them to look at the possibility that we might be right.
So we went through our own affiliate link and made a small purchase. Then we went back to the merchant's site every day after that, not through our own links, and made a small purchase every day. Surprise, surprise, after day 15 none of our purchases were credited to us. Now armed with proof, we went back to the merchant. They grudgingly admitted there might be a problem, but it surely was restricted to just us. Well, my partner had a smaller separate account with the same affiliate network, and his numbers confirmed it was a system-wide problem.
Finally the cookie was fixed, only a few days before Christmas. In essence though, this particular merchant defrauded all of its affiliates (hundreds at least, probably thousands) for half of the cookie timeframe for all of last year at least, and possibly several years prior. This is a big merchant, who did billions in sales last year. Even if only 10% of sales occur after day 15 (which seems from our new data since the problem was fixed to be a lowball projection), 10% of a billion dollars is 100 MILLION DOLLARS in sales and commissions that affiliates were defrauded last year alone.
Now we've fixed that problem, and we've got a solution in the works to fix all our other problems so we won't have to worry about fraud, but what concerns me is that the problem exists at all, and that no other affiliate had apparently discovered this prior to us. I believe this is the tip of the iceberg, and I'm very concerned that affiliate networks seem to be accountable to no-one. I don't believe this is an isolated event... the affiliate network in question is one of the biggest on the net and the way they have dealt with this was to treat us like we were criminals for daring to bring proof of *their* fraud. I've been screamed at, lied to, and hung up on by their telemarketing division. That really frosts me - it shouldn't matter whether I've done $100 in sales or 100 million, as an affiliate I should be treated with respect. THEY WORK FOR US, NOT THE OTHER WAY AROUND. And since we have done several million in sales already in the very short time we've been promoting through their network, you would think they'd at least treat my concerns with proffesionalism. But the prevailing attitude from all the big affiliate networks, and this one in particular, is that "you'll take whatever crumbs I decide to give you, you little affiliate you, and don't you dare question me." They treat fraud like it's their god-given right to steal from affiliates, and honestly seem surprised that I would even dare to voice objection!
I believe this is common practice and a wide problem among affiliate networks, and I'm concerned that there is no-one on the side of the little affiliate. The affiliate network should serve this purpose and guard the affiliate's interests, but they simply don't. I believe something has to be done.
Anyway, I know this has been a really long drawn-out explanation of what is at heart a simple problem, but I wanted your opinions on this, because I know I can't be the only affiliate in history who's ever caught the affiliate networks with their hands in the cookie jar. Have any of you encountered fraud like this before? Have you suspected it?
Most important of all, what solutions have you found for it?
In the spirit of sharing, I'll give the only solution I've found so far, which is unworkable for most affiliates I know but is I think 100% fraud-proof. That is the 'buy it yourself' method. Instead of sending traffic to the merchant, set up a website yourself displaying the same wares. When the customer orders, he's buying from you, not the merchant. Then turn around and buy through your own links from the merchant. That way you have a record of every sale, and you know of every return and any fraud, and can prove when sales get skimmed. The upside of this approach is it works. The downside is it takes an incredible investment of time (to set up a fully functioning website that converts at least as well as the merchant's) and money (you have to be able to buy all your customer's orders before their own payments to you have cleared through). It's highly unworkable for most rank and file, but it is one solution, and theoretically it could work for pay-per-lead campaigns too (the problem is that in pay-per-lead the merchant would have to allow you to set up a special system and then trust that your leads were all good... they just aren't going to be willing to do that, and why should they when they can so easily screw over affiliates in the current system?).
This whole problem has infuriated me, and the rank unfairness of it has moved me to take some action. I've started to put together a non-commercial (meaning no sales solicitation) mailing list to connect affiliates who are concerned about this problem, because what I discovered when dealing with the affiliate networks is that one affiliate, even a super-affiliate who generates substantial sales volume, really isn't taken seriously. I think that if I can build a large enough group of concerned affiliates that the networks will have to listen, and make reasonable concessions. So far I've only talked to other ppc marketers, mostly just associates, competitors and friends I know in the business, but there has been strong interest. I'm calling the project Stop Fraud Now (yep there's a website, you can probably guess it but I'm not looking to promote here and I think it's against rules anyway).
I'm thinking there needs to be some kind of oversight agency which verifies that everything is kept on the up-and-up. At best, it would overlook the affiliate networks and keep them on the square, at the very least it could operate as some kind of 'better business bureau'. I'm just looking for ideas on how to combat this problem on a wide scale.
Anyway, I know this has been a super-long post, and I should really close. The one thing that bothers me most is that a lot of affiliates I've talked to about this have sort of shrugged their shoulders and said "well, what are you going to do? I guess there'll always be fraud; it's just the cost of doing business in this field." Well, I don't feel that way. Imagine if we used that same reasoning to justify murder: "well, there's always going to be someone committing murder. What are you going to do? You can't stop it all, so we might as well not bother trying." I feel very passionately about this and I can't understand apathy. I'm not saying that every affiliate network steals 30% of sales, but how do any of us know they don't? And ask yourselves what 30% of commissions not being reported to you equals. Is it 5 dollars a day? 10? Even if it's only 10 dollars a day that's still 300 dollars a month that's being stolen from you. Isn't that worth objecting over?
:) Now I'm straying, ranting about affiliate apathy. But I think apathy on this issue is deadly, and a big part of the reason that affiliate networks feel they can rip us off indiscriminately.
Any thoughts or opinions?
The tracking link that Amazon provides when logging into the associate section and using their link building tool has the associate ID embedded in it. Unknown to most people, these links pay no commissions. Is there any question whether Amazon is intentionally cheating associates by not paying out on these deep links?
If you want to deep link and earn a commission, you have to use the format
http:// www.amazon.com/exec/obidos/ASIN/productID/affiliateID
How many of you are aware that Amazon does not credit affiliate/associate sales for using their link building tool to deep link to product pages?
Wait a minute, amazon says that no matter what or where the link comes from, the ID tag will produce a record of sale and impression, that goes for :
[amazon.com...]
to a keyword search
[amazon.com...]
Recommended Product Links
[amazon.com...]
nativenewyorker , or anyone else , please further elaborate this subject
wait... I use this type of links & urls.. so which one is invalid? they seem ok..right?
as long as the <affiliateId> and <subscriptionId> are correct.. no?
<iframe src="http://rcm.amazon.com/e/cm?t=<affiliateid>&o=1&p=8
&l=as1&asins=BXXXXXXXX&fc1=000000&lc1=0000ff&bc1=
<1=_blank&IS2=1&bg1=ffffff&f=ifr" width="120" height="240" scrolling="no" marginwidth="0" marginheight="0" frameborder="0"></iframe>
[amazon.com...]
=<affiliateid>%26link_code=xm2%26camp=2025%26creative
=165953%26path=http://www.amazon.com/gp/redirect.html%253fASIN
=BXXXXXXXXX%2526location=/o/ASIN/BXXXXXXX%25253FSubscriptionId
=<subsid>
[edited by: jcoronella at 3:40 pm (utc) on Jan. 30, 2005]
[edit reason] Fixed right scroll - re-assemble the urls without breaks. [/edit]
"I agree that you might be making some going points, but you lose some credibility due to the stretched numbers and liberal use of the words stealing and fraud. Fraud is intentional by definition. You've not shown that any of this was intentional."
If you're saying I have to prove what the mindset of the people who defrauded me was, I find that absurd. It's like throwing up a trial defense for a murderer saying 'well, your honor, our client doesn't dispute that he used the axe to kill the victim, and forensically there's absolute proof that he did so. But can you prove he actually intended to murder the victim? Might it not be that he was merely sleepwalking, with an axe, and dreaming of cutting down trees? Unless you can prove what his intentions are, I must ask you to dismiss the case."
Here's the bottom line: money that was contractually owed to me for services rendered was not paid. It doesn't matter if this was because the merchant and affiliate network and all their representatives are part of the 'I worship Satan club' and are committed to robbing and plundering at every opportunity, or whether they're all complete bumbling idiots who just somehow through massive human and computer error allowed the theft to occur - it's still theft of services and breach of contract, and they are liable. If the word 'fraud' offends you, well it offends me too. I don't believe I've misused it, and I hope it will shock you into looking more closely at your own tracking to see whether or not you too are being defrauded.
"It sounds like the merchant has gone out of it's way to correct problems and provide you information, which it certainly wouldn't do if it were trying to defraud you."
The merchant made one concession in providing backup tracking. Their purpose in this was to help us generate more sales for them, and I don't believe in their wildest dreams they thought we'd be able to use this backup tracking to prove fraud. The merchant is friendly and respectful on the phone - they understand at least the rudiments of customer service when dealing with their affiliates, and should be complimented on this. However, they have also lied to us, refused to acknowledge problems, and only when confronted with irrefutable evidence have they taken action to correct the fraud we found in their system. Many, many man-hours were spent in negotiations with them before they would even agree to look to see if there was a problem, and something as basic as fixing a tracking cookie wasn't resolved for nearly a month after it was brought to their attention. I prefer dealing with them to dealing with the affiliate network, who are absolute bastards, but just because they are friendly and conciliatory on the phone and just because they were eventually forced to make a change to their system based on the weight of irrefutable evidence hardly qualifies them as 'bending over backwards' to help fix our problems. And just because they are smart enough to be friendly on the phone doesn't mean they have built a relationship of trust. The best con men in the world seem like nice guys too. The good news about the merchant is that they can (eventually) be made to see reason and play fair. The bad news is we can only trust them not to defraud us if we make them believe they'll always get caught. That's bad news for any other affiliate of theirs who hasn't taken them to task.
"What you describe with merchants not posting a certain percent of sales to account for fraud is ridiculous. I work with many different merchants, and have never seen one do that. They'll reverse (or not post) fraudulent transactions, but I've never seen any merchant that indiscriminately holds back random orders."
First off, how do you know? Do you have some backdoor window into their practices - or are you just saying that as far as you know none of the merchants you promote operate that way. As far as I would have known, this merchant would also have operated that way - we still see reversals on sales that are reported, and on the surface it would appear that they operate in just the way you describe. When we first saw the drastic difference in what was being reported to us by the aff network vs what the merchant's own reports said and voiced our concerns to the merchant, the very first thing they said to us was 'oh, we hold back on reporting a certain percentage of sales based on the possibility that they might turn out to be fraudulent or reversed'. We asked what the percentage was. We heard all sorts of answers, ranging from 15% to 40%. I can't tell you whether this is a real business practice or just an excuse they offered for the missing sales.
Just to be clear, if you're saying it's a ridiculous business practice, I 100% agree. If you're saying that it's a ridiculous story I've concocted (and therefore I'm lying) than I'm offended by the comment and you're way out of line. As far as I know, this is the way that this merchant does business, according to their affiliate managers.
"It's easy enough to check to see how much sales a public company does, and if they're as large as you say they probably are public. You say that they do billions a year in sales, yet you say you haven't checked. What other "facts" haven't you checked? Credibility."
Off the top of your head, without looking at any technical info, would you say Wal Mart does billions of dollars worth of sales every year? Or do you feel that that would be such a sweeping statement that you wouldn't want to make such a generality without first doing some research and confirming. Wal Mart wasn't the merchant; in fact I think it unlikely that Wal Mart did a billion in sales online last year. But I have no trouble believing the affiliate managers of this merchant (on this at least) that this merchant did over a billion in sales last year, and the exact amount, whether it turns out to be 900 million or 1.2 billion, isn't germane to my argument - which is that this is a *big* online merchant.
The whole question of credibility is absurd. For all you know I'm a 10 year-old kid who's playing on his father's computer and pranking the forum here. For all I know you're an agent of CJ sent to smear anyone who would dare to raise the issue of affiliate network fraud. I could make any claim I wanted to, and it could all be lies, and if you believe this is all a cock-and-bull story than what's the point of reading or replying to my post? My point here wasn't to self-aggrandize, it was to share a personal experience of fraud that I encountered in the way of warning others that it could be possible that it could happen to them, and to give an idea of how to detect it, and also to solicit other solutions from forum members who've encountered this problem before. I'm not so naive as to think that I am the first affiliate ever to run into this problem, and I was hoping that there would be some solid contributions of other ways to detect and avoid merchant fraud from other affiliates who have gone before. What on earth would my dark motive be in warning others that fraud might be happening to them?
Ralent very wisely did a scan of some of his sales to see what percentage of sales happened on what day after the initial click. He only looked at 3 days, but learned some things about the buying habits of his customers, and also since 18% of his sales were occuring on day 16 and beyond, it seems very likely that he isn't having problems with his merchant giving a dishonest cookie.
Wouldn't that be a valuable thing for any affiliate to know?
In fact, that was the whole point of my post. I think it would be great if every affiliate started tracking their stats a little more closely. How many affiliates even think to look at the sale vs the initial click to make certain that they're getting the full cookie timeframe? If all affiliates were more vigilant, there would be less room for fraud to occur. Which approach is more likely to catch and protect an affiliate from fraud? To carefully track stats and look for inconsistancies, or to bury your head in the sand and decry that it can't be happening while attacking me for bringing it up.
"Your distribution of sales based on the initial click date is still quite suspect. You say 50% on days 1-3, 10% on day 15, and 13% spread between days 16-30. That's 73%, which leaves 27% for days 4-14, or about 2.5% per day. Why would your sale spike up 4x on day 15? This strikes at your credibility once again."
There is validity to your argument, but it is based upon false numbers. As I clearly stated in my original post, the cookie in question was *not* a 30 day cookie. I used a 30 day cookie as my example because it is a very common time length for cookies, and because I wanted to keep the merchant anonymous. The cookie length for this merchant is much less than 30 days, but the principle remains the same. I would also point out Ralent's numbers from his quick 3 day scan match very well with my own findings, though I admit that different markets may convert differently. Before the cookie was fixed, the midpoint of the cookie timeframe (which was *not* day 15, and couldn't be as the cookie was not 30 days in length) we were making almost 10% of our sales on that day. Following that day there were no sales reported. Since the cookie has been fixed, we are getting slightly over 13% of our sales in the last half of the timeframe. This is less than what Ralent reports, with 18% happening over the last half of the timeframe, and I'm sure there may be wide variation depending on market, but neither of us is anywhere near the 1% of sales you suggested would be more appropriate to that timeframe. I would suggest taking a closer look at your own stats for merchants you promote under a cookie timeframe; if the number of sales for the last half of the timeframe is as low as 1% you are probably being cheated of some of your cookie.
"Rebate sites are sites like Ebates that give a rebate back to the customer when the customer shops through Ebates' affiliate links. You can imagine the customer service issues if 30% of orders weren't tracked. I don't hear those types of sites screaming."
I'm sorry, you're going to have to explain this better, because I still don't understand how the rebate affiliate operates any differently than a normal affiliate. Do rebate affiliates have some special method of tracking what a customer does after he's been sent through an affiliate link to the merchant? Are they on a different system than regular affiliates? I'm not doubting you have a solid point here, but I don't understand it.
"Did the merchant pay the network for those sales? What is the network telling the merchant about those sales?"
The merchant claims they did. They claim they're having a hard time getting any answer back from the network about those sales, and I can believe it because when we try to talk to someone with any power at the network we are met with a stone wall of telemarketers who have nothing but form answers, and they are very unpleasant to deal with. I'd like to believe the merchant, but I can't be 100% certain they're being honest about the communications between the two.
"It sounds to me like your affiliate manager doesn't really know what's going on. Based on their initial responses to the both the cookie problem and the discrepancies, it looks like they're not digging deep enough. You're going to have to force them to dig deeper if you want to get to the bottom of things."
I hope you're right, just because I'd prefer to work with honest people. Empirical evidence is mounting up against them and it's starting to look pretty undeniable that they're complicit. But either way, I'm not inclined to place my trust in them, and we're moving towards a business model which I believe will eliminate the possibility of fraud in this case. My reason for posting the particulars of the fraud that I caught wasn't to ask for help or pointers on how to deal with my specific case; I really believe I've got the problem licked. It was to point out to the forum in general that these problems exist, and to show a few ways that fraud could be committed, as well as a few ways to catch it and deal with it. I was hoping to spark some creative thought from the forum members and hear some other examples of how to defeat fraud.
-qwik
You've identified potential discrepancies, but so far your explanations of these discrepancies are pure speculation, both on your part and the merchant's. With the amount of information the merchant has given you, you're in a position to be asking all the right questions and demanding explanations. It sounds like you've been very ineffective in that area.
You're painting pictures with a very broad brush, implying that fraud is common in the industry and that the networks are stealing. The networks may have lousy customer service and inept technical abilities, but they would not be foolish enough to systematically steal from their merchants and affiliates.
I've done similar comparisons with two of my largest merchants (one large company and one small one, both on different major networks) and found only minor discrepancies.
I'm not sure why you're having a hard time understanding the concept of rebate sites. Rebate sites use affiliate programs, mainly through the large networks. When a customer shops through the rebate site affiliate links, a special tracking code is appended to the link that causes that sale to be identified with a specific customer. (Google "affiliate sub id tracking" to find more details.) Once that sale posts to the network, the rebate site will show it in the customer's account. Once the rebate site gets its commissions and the customer accumulates a set amount of money, the rebate site sends a rebate to the customer. All of this relies on accurate network tracking of sales. Can you see why I keep bringing this up? There are hundreds of rebate sites out there, and probably a dozen of them generate more sales than you do. If those sites were experiencing the same type of tracking/reporting problems you seem to be, they would be inundated with customer support issues. They aren't.
I think the problems you are experiencing are nowhere near as widespread as you are implying. I think most similar problems are due to technical problems, not deliberate fraud. I think that a large part of the problems you are experiencing can likely be explained with legitimate reasons once you dig deeper. I do not at all believe that networks are systematically stealing from merchants and affiliates.
I'm sure this varies tremendously depending on the merchants, products, and how well targeted the traffic is. Most of my sales are primarily low-end merchandise (mostly under $100), impluse buys, and consumers who are ready to buy. Something like computers, high-end electronics, or travel would obviously have a longer buying cycle.
I can see how a very well-known merchant could have a wider distribution. If I send a customer to Some-Cheap-Merchant.com and they don't buy right away, they probably won't go back. If I send a customer to Amazon.com, they're much more likely to go back. (Of course it wouldn't do any good since they don't offer a cookie.) But other well known merchants probably get more return buys.
In any case, I'm much more comfortable with your return day distribution after your latest explanation.
"You continue to say that the discrepancy is because the merchant is holding back sales to account for fraud and then that the merchant is sending the sales but the network is not reporting them. Which is it?"
I don't know who is lying. I don't really expect ever to know, and it doesn't matter to me anyway. What I can prove is that between the two entities, the merchant and the aff network, a huge number of the sales that I generated were not credited to me. If we decided to embark on a full legal course and had our attorney file for discovery, put together a class action, and really take the issue to court, perhaps then we'd have a trail to follow to answer definitively how much of what is missing was stolen by the aff network, and how much went to the merchant, though for all I know the trail could lead to some unwitting programmer who had nothing to do with the fraud but has been set up to take the fall. We are not going to pursue legal action for two important reasons: 1 - we feel that whatever fraud was perpetrated on us in the past, we can ensure that no more fraud will hit us in the future, and 2 - we were profitable with the merchant even with all the fraud. If we escalate our complaint to a legal matter, we might kill the goose with the golden eggs. A huge class action lawsuit that ends up destroying the merchant, freezing their assets, and not having us get paid does not serve our purposes at all.
"You're painting pictures with a very broad brush, implying that fraud is common in the industry and that the networks are stealing. The networks may have lousy customer service and inept technical abilities, but they would not be foolish enough to systematically steal from their merchants and affiliates."
How do you know this? Because they said so? If you've uncovered definitive proof of how to tell an affiliate network is dealing fairly, I'm the first in line to find out how it's done. Until then I'm going to continue to mistrust and stringently track for fraud. I'm not saying that every merchant and affiliate network is fraudulent, or suggesting that every affiliate is being screwed out of 30% of their earnings. I'm saying that fraud is possible; I've seen it. And 'because we say so' isn't a good enough answer - they need to do better. Of course my opinion is colored - I've seen positive evidence that fraud can and does occur. Where's your evidence that it doesn't?
"I'm not sure why you're having a hard time understanding the concept of rebate sites."
This point you've brought up about rebate sites seems very important to me. I'm asking for further clarification of exactly how the rebate sites work - and it would be great if there are any rebate site-owners here who could chime in and confirm. I've seen coupon sites, filled with coupons (ie click here and get $5 off any order of $6000 or more) and that's the first thing I thought of when you mentioned this, but that business model wouldn't be any different than any other affiliate, and would be just as susceptible to fraud. However, from your clarification I gather you're talking about a business model where the website is actually paying the customer money out of their own pockets in exchange for the customer making the purchase through the website's links. Yes? If so, than what you're saying is that if the aff network wasn't being honest about sales, and customer requests started pouring in for rebates on sales that the rebate site showed no record of ever being credited for by the aff network, there'd be fireworks. Ok, I'm officially very interested in knowing more. This seems like the rebate site affiliate would *have* to have some way of ensuring there would be no fraud, or he'd be out of pocket paying on rebates he never got commission for. Whatever you may believe of my motives, I'm only looking for solutions to a problem that I know is real, and it sounds like these rebate sites may already have found one. Of course if this is apples and oranges, than it doesn't apply. The rebate would (I think) have to be supplied by the website, not the merchant, and the rebate merchants would have to be on the same system as any other affiliate. If rebate sites are only telling customers about a rebate they'll recieve through the merchant, than they're in the same boat as everyone else, and just as prone to be unable to prove fraud. On the other hand, if being a rebate site that pays out from it's own pockets for the rebate also means that you have to have a special agreement with the merchant, or a special setup for tracking, than that would be a different situation that what the ordinary affiliates are confronted with. If there are any webmasters who use this rebate-site business model, I would love to hear some comment confirming how it works.
"I do not at all believe that networks are systematically stealing from merchants and affiliates."
I think it's unlikely that they all are, but that's just my subjective opinion, no more valid than yours. However for me there is no longer any question of whether fraud exists. But the point of my original post is simply this: How do you know they aren't? Again, it might seem like I'm backing you into a corner and asking you to prove a negative (which is impossible) but if there is any measure, any litmus test which can prove honesty and fair-dealing, I earnestly want to know what it is. Until I have such a litmus test I will operate under the assumption that no affiliate network is honest, and look for statistical discrepancies.
"I did an analysis on my CJ transactions for the month on January..."
Different markets and products do vary widely, I readily admit that the buying patterns of my customers may be nothing like your own customers buying patterns. However, bearing in mind I know nothing about the market you're promoting, such numbers would raise a red flag to me. If you're promoting low cost stuff you might want to make a few test purchases after day three to make certain you aren't getting shorted on your promised cookie timeframe. You can always return the items once you've verified that everything is working correctly, but discovering a bonified cookie problem could add not inconsiderable profit if you can get it fixed.
"I can see how a very well-known merchant could have a wider distribution...."
I see your point, and agree. I suppose some of that is the benefit of brand name awareness. It's a tangent to mention here, but I find it interesting that many of the most well-known online retailers have short and easy to spell names that have nothing at all to do with their products or services (yahoo, ebay, google, amazon...) which begs the question of how exactly to build name brand awareness. Home-of-incredibly-cheap-but-great-red-widgets-emporium-superstore.com might be very descriptive, but I doubt much brand-name awareness could be built up on it.
"In any case, I'm much more comfortable with your return day distribution after your latest explanation."
You have a keen eye for numbers, and you spotted something that appeared illogical. I should have been clearer in my original explanation, and I apologize if it was misleading, but it was important to me for more than one reason to keep the merchant anonymous. As an aside, that very talent for spotting statistical anomalies would be extremely useful in spotting and preventing fraud, and keeping the affiliate networks honest.
Build links to any page at except for search-result pages. (For those, use the Link to Search Results tool above.)Enter the URL
Name Your Link
Example: [amazon.com...]
Hint: Open another browser, search for the page you want to link to, and paste the URL in the field above.
I realize that you're pursing another solution to avoid the problem, but you still owe it to yourself and other affiliates to get to the bottom of things. I think you said that you're just a few miles from the merchant. Go in and sit down with them. Let them know that you're not going to stop until you're satisfied. Research specific missing orders until you're confident that you understand the reasons that they're missing. Then you'll know. Some may be valid reasons. Some may be technical issues yet undiscovered. Some may be deliberate fraud (although I doubt it). That's all I'm saying. There are many other potential reasons for the discrepancies that are far more likely than fraud.
Like you've done, I've worked closely with merchants on two of the three largest networks to verify sales separately from the network tracking. I've found technical problems several times and got them resolved, but I've never found fraud.
You're understanding the rebate sites much better now. Yes, they function through standard affiliate programs. For instance, with CJ they would use the SID parameter to pass the customer id. Sales don't show up for customers on the rebate site until the affiliate network reports the sales. With a normal site, the affiliate has no clue if something doesn't track. With a rebate site, the customer is expecting their order to show up. When it doesn't, they complain to the rebate site. I, too, would be interested in hearing feedback from rebate sites on this issue. I'm not sure that any frequent WW.
For those who question my intentions, let you tell you more about myself. I'm very connected in the affiliate industry. I'm a very successful full-time affiliate marketer. I don't work for a network or a merchant and never have. I talk to and have a good working relationship with many merchants and other affiliates. I'm a computer programmer and am intimately familiar with the inner workings on affiliate networks, cookies, and the various tracking techniques used by different networks and merchants. I've become that familiar for similar reasons as you have. I want to make sure I'm paid what I'm owed.
When I hear, "100 million dollars" I think "class action lawsuit". The lawyers would be all over it if you proposed it...
Actually, that's a perfectly good idea, and I will do just that. It's such an obvious solution that as I read I found myself thinking 'why haven't I done that?' Maybe they'll stonewall me but at the least I should try.
"You're understanding the rebate sites much better now..."
Actually, if this is the way they function, than seeing a rebate site for a particular merchant would be very encouraging that that particular merchant isn't generally fraudulent. That's not to say there couldn't still be fraud, but it's much less likely. I'm keen on learning more about this business model. If no rebate sites webmasters frequent this forum, maybe I'll do a bit of research, uncover a few sites, and write to the webmasters (assuming there's a contact email) and ask. Thanks for bringing this to my attention.
"For those who question my intentions, let you tell you more about myself..."
I never thought you were anything else, and I apologize for the flip comment about being an affiliate rep; I meant it only as a joke (I'm not a 10 yr old kid on his father's computer either :)
HughMungus: Actually, we've worked very hard *not* to get backed into a corner and have to come out with the heavy guns. We're not afraid we'd lose; we're afraid we'd win. We want to keep the merchant intact (though at this point, with the bad treatment we've gotten from the affiliate network, I would be much happier if the merchant left the network and moved someplace else or just went it alone). The merchant is extremely keen to not let it get to the class action lawsuit either. If they had to pay reparations to hundreds of affiliates for years of missing cookie sales, it would be devastating to them, and I'm not sure they'd survive. All I care about as far as the cookie goes is that the timeframe is fixed, and it now appears to be. The merchant has offered us reparations, and my partner is negotiating with them on an amount, but ultimately we want to continue to do profitable business with this merchant, and forcing them to make reparations to every affiliate just isn't feasible. You're right though, in some ways it's a lawyer's wet dream.
I challenge that. I know that one of the aff network with which our company involved get a revenue share. I heard that the others also get a set up fee and monthly threshold for fees, too.So, the more revenue generated by affs, the more the network makes.
I never said they don't get a revenue share. I said that's the least profitable part of their business model. Their main objective is to get and keep as many merchants in their network as possible of which they charge a monthly fee for just being a part of the network. Basically, when commissions aren't tracked properly the publisher is the big loser. The networks and advertiser will still make money regardless.
To put it in perspective, let's say no publisher cares if ANY of their commissions are tracked properly. In that scenario, the networks can stop reporting commissions through the network entirely and the advertisers would be VERY happy because they are getting free advertising and sales from the publishers (without having to pay a commission) which justifies the high monthly fees the network charges the advertisers whether they make any sales through the network or not. The networks can then get and keep a much larger number of advertisers for which they charge high monthly fees for just being a part of the network.
This is exactly what happens, but only on a smaller scale.
The only reason the merchant is being nice to him over the phone is because they don't want him to leave their program because he is generating a whole lot of sales for them and they don't want him to take their links down. The network on the other hand doesn't give a flying flip how good of an affiliate he is because to them it's quantity over quality.
Look at their promotional pieces for advertisers. It's all about how LARGE the network is... how MANY publishers they have. They don't say for instance... "We have the top 5 sales producing affiliates in your industry."
With them, it's not about quality it's about quantity because they know merchants don't go from network to network trying to follow the best publishers. When they want a really good publisher they do it inhouse since it's more profitable that way for the both of them by cutting out the middle man. However, nonproducting affiliates can actually cost you money in time, support, paperwork, and bandwidth.
Why do you think smart merchants have an inhouse affiliate program but go out to the networks too? Free advertising. When they find really good affiliates through the network, they then invite them to their in house program with a higher commisssion and better sales tracking.
If those sites were experiencing the same type of tracking/reporting problems you seem to be, they would be inundated with customer support issues. They aren't.
Actually they are. Talk to any merchant that deals with ebates or any other big time rebate site through the big network in question and they will tell you it's a huge hassle. Those sites don't put up with the bad tracking because they are legally bound to rebate their customer for sales placed through their links whether they are tracked or not.
That's why on affiliate applications a lot of merchants ask you "do you offer customer incentives". Many won't accept you if you do and explicity state that before you even sign up. With the number of sales these types of sites generate, tracking problems must be a REALLY big problem if it's enough to make them not even want to deal with you.
Content Site Guy: You're way off base there.
Look at CJ, for instance. Their network fee is 30% of the paid commissions with a $0.30 minimum per transaction and a $500 per month minimum, plus a $250 per year maintenance fee. For merchants under the minimum, they're getting $6250 per year. With almost 1200 advertisers in their network, that's about $7.5 million per year.
Now, look at just the one merchant Jon is talking about. Assuming $1 billion a year in sales with 20% coming from affiliates, 7.5% in commissions, and a network fee equivalent to 30% of commissions paid, they're paying about $4.5 million per year to the network. That's just one merchant out of 1200.
Why would a network be happy getting just the minimum monthly fee when they can get a considerably larger amount just by tracking sales?
Look at it another way. With an average of 7.5% in commissions, a network fee equivalent to 30% of commissions paid, and a monthly minimum network fee of $500, a program only has to generate $22,000 in sales (and $1700 in commissions) per month to surpass the monthly minimum.
If I were a network, I would be looking for the big fish. I would rather have a few dozen merchants paying me a million a year or more than to have thousands of merchants paying the minimum.
Interesting that people mention CJ.
#1 - On network based fees:
As of this posting date, there is a $3000 nonrefundable deposit, $2250 network access fee, $250 monthly maintenance fee, and 500 monthly minimum.
You left off the $3000 and $2250 fees. They get those whether you get any sales through them or not.
If you don't believe me then check the numbers here:
[cj.com...]
Also while according to you they may only CURRENTLY have 1200 merchants, there are many other merchants during a years time who paid these fees, lost money, and then left with more coming in EVERY day. You can check for yourself in your affiliate login their daily "new advertisers" list. Your year calculation based on the current number don't account for these at all.
Plus they sell them other monthly services like sponsored listings, email marketing ads to their list of affiliates, and consulting services... both to those who remain with the program and are profitable with it and to those who aren't to try to get them there.
#2 - On Commission based fees:
We all know most merchants in CJ don't make a billion dollars a year in sales. First of all, how many companies in the entire world make billions of dollars a year? Most don't even make millions. Even fewer are in the USA. Fewer than that have affiliate programs. Fewer than even that number use CJ for their affiliate program let alone make sales through it. That merchant is in the very top percent.
For example, Internet Explorer can have 100 million users and it can be only 1 of 1200 browsers in the world. So based on that, how many people in the world use the internet? Well, it would still be darn close to 100 million people.
#3 - Overall:
The end result is that your numbers severely understates the money they are making on network fees and misleads on the amount they are likely making on commission based fees.
Why would a network be happy getting just the minimum monthly fee when they can get a considerably larger amount just by tracking sales?
Because tracking sales costs time and money in server hardware, support issues, service, software, etc. Signing somebody up to a program for thousands of dollars with no guarantees is just a whole lot more highly profitable.
Same reason there's spam in the search engines.. it's just a whole lot less effort that way to make money than building a content site. Sooner or later though, it will catch up to you and is therefore not a good and lasting business model. There used to be lots of porn spam in regular search results until people complained. Same thing with affiliate fraud.
I excluded the one-time $2250 network access fee because it's not an ongoing charge. Consider 500 new merchants per year (which is probably a little high) and that just adds another $1 million. It's still a drop in the bucket compared with the percentages they get.
I realize that most companies don't make a billion a year. In fact, I made that exact same point to Jon in this thread. But take a closer look at my numbers. They only need to hit $22,000 per month (or about $250,000 per year) before the networks make more from their cut than the minimum. That's extremely doable. I think most merchants would consider their affiliate programs an utter failure if they weren't bringing in several times that much in sales.
CJ is a part of a public company. I'll try to find some public numbers later to show what percent of their money comes from the monthly minimums. I highly doubt that it's more than 20% of their revenues.
Your arguments just don't hold water.
The $3000 deposit goes towards commissions, so that's not valid to consider. Even if they never post a sale, that is used up within 6 months just from the monthly minimum network access fees.
Exactly. Which is why I say the networks turn a blind eye. They'll get their money regardless if the merchant posts a sale to the network or not. And from the merchants side, you are not realizing that if the merchant does not POST a tracked sale that a publisher should have gotten credit for then they are still making money. Only they won't have to pay CJ or the affiliate for the commission so they still get paid too. The $500 a month for the monthly minimum is only a drop in the bucket for all the free sales, advertising, and branding. So who's not getting paid and losing out? Only the publisher/affiliate.
I excluded the one-time $2250 network access fee because it's not an ongoing charge. Consider 500 new merchants per year (which is probably a little high) and that just adds another $1 million. It's still a drop in the bucket compared with the percentages they get.
Looking in my affiliate account at the "New Daily Advertisers" I usually see an average of about three new advertisers per day. 3 times 365 days in a year is well over 1000. Your number is well low rather than high.
I realize that most companies don't make a billion a year. In fact, I made that exact same point to Jon in this thread. But take a closer look at my numbers. They only need to hit $22,000 per month (or about $250,000 per year) before the networks make more from their cut than the minimum. That's extremely doable. I think most merchants would consider their affiliate programs an utter failure if they weren't bringing in several times that much in sales.
It's not a failure if you are actually getting sales but not reporting them. It's actually MORE profitable for the merchant. And I didn't even get to your 7.5% "average" commission figure in that calculation or your 20% of their business coming from affiliates. Step outside of the online world for a sec and you'll see that any company even approaching a billion dollars wasn't built 20% through affiliate programs.
CJ is a part of a public company. I'll try to find some public numbers later to show what percent of their money comes from the monthly minimums. I highly doubt that it's more than 20% of their revenues.
I hope you do find and report the revenue figures. Let us know. But I really hope you find the real numbers we need, which is their percentage of PROFITS. In my previous posts, I stated it was more PROFITABLE to focus on getting and keeping merchants rather than tracking sales correctly and I stated why. So even if the revenue figures are higher for commission fees (which I doubt) then you still have to figure in all the expenses involved with tracking sales correctly which severely cuts into the profit margin, while getting merchants to join the network with nonrefundable deposits, fees, and monthly charges is darn near a gold mine.
You do understand the difference between raw revenue and profitability right?
Your arguments just don't hold water.
Have you talked to any merchants with extremely low EPC who stay with this network? You should try it sometime and you'd be amazed at the response if they're frank wih you. Here's a tip, come at them as a search engine marketing expert wanting to help them improve their EPC.
As a disclaimer, I wasn't originally referring to any particular network. YOU brought up CJ. In fact, I do better overall with CJ than any other network because of the advertisers they have that aren't at other networks. I also absolutely love their interface. I'm just saying that with the big 3 networks at least, the business model is set up so that if sales don't get tracked back to the affiliate correctly they still win and the merchant still wins and only the affiliate/publisher loses out.
Looking in my affiliate account at the "New Daily Advertisers" I usually see an average of about three new advertisers per day. 3 times 365 days in a year is well over 1000. Your number is well low rather than high.
No, I'm quite sure that my number is low. Looking at CJ, they've had 20 new merchants in the past 25 days. At that rate, it's 292 per year. It may be more or less than that, but I'm fairly confident that it's less than 500 per year. Sure, there are some days with 3 new merchants, but there are many with none.
Step outside of the online world for a sec and you'll see that any company even approaching a billion dollars wasn't built 20% through affiliate programs.
Overstock.com will be doing about $800 million in sales this year, and around 20% of their sales come through their affiliate program.
I'm confident that 20% is a low number in many cases. I know of many merchants that generate considerably more than that from their affiliate programs.
I found a quote from Shawn Collins, a respected authority in the affiliate community, saying "The consensus among affiliate managers is that affiliate programs drive between 10% and 35% of sales for merchants."
I hope you do find and report the revenue figures. Let us know.
CJ is owned by ValueClick. They're reporting an estimated $54 million in revenues from their affiliate networks in 2004. Unfortunately, that includes both CJ and BeFree. They don't split it out. If we assume half of that is from CJ, that's $27 million. If they were just making the minimum monthly plus network fees, it would be just $5.5 million. That's almost exactly the 20% of revenues number that I had guessed.
You do understand the difference between raw revenue and profitability right?
Of course. Don't insult my intelligence.
If you're looking for the most profitable part of an affiliate network, it's probably the "$250 annual maintenance fee". It's pure profit. They don't have to do anything to keep a merchant listed.
The profitability doesn't really matter. I think what matters most is where they get most of their money. Surely you can't think that a network would be better off with 100 merchants at $500 per month of pure profit ($600,000 per year grand total) than having some merchants generating $1,000,000 or more in network fees based on commissions to affiliates?
Have you talked to any merchants with extremely low EPC who stay with this network? You should try it sometime and you'd be amazed at the response if they're frank wih you.
No, I really don't work with low EPC merchants. I work with merchants who want me to generate a significant amount of sales. There are tons of those out there. I look at monthly minimums as a "weeding out" feature of networks.
YOU brought up CJ.
CJ's an easy example because everything is very public with them. That's the only reason I keep using them in my examples.
I'm just saying that with the big 3 networks at least, the business model is set up so that if sales don't get tracked back to the affiliate correctly they still win and the merchant still wins and only the affiliate/publisher loses out.
Not true. Let's go back to Jon's original example. If a merchant is doing $1 billion in sales, 20% comes from affiliates, affiliates earn 7.5%, and the network gets a fee equal to 30% of affiliate commissions, we're back to the $4.5 million level for network fees. If 30% doesn't track, that's well over $1 million that the network loses.
The merchant wins (in the short term), but if they have significant problems, they'll drive off affiliates. If a merchant doesn't convert for me, I stop promoting them. If they convert well, I promote them more. I'm sure most big affiliates do the same.
If you have such a negative view of affiliate marketing, what in the world are you doing in this industry?
You know, I thought about going point by point and breaking down the fallacies once again but I see it is useless because you obviously have it made up in your mind that there is no such thing as merchant fraud in the affiliate industry and that sales are always tracked to the affiliate correctly.
Anyone else here believes that?
Jonstark brought up irrefutable proof a case of fraud in his situation and you deny it. What is your objective or do you just believe this because it hasn't personally happened to you? Then again, you would never know unless you investigated it like jonstark has done and I have done.
If you have such a negative view of affiliate marketing, what in the world are you doing in this industry?
I don't have a negative view of affiliate marketing overall at all. It's what I do full time as a living and I love it! However, I'm not naive becaue I've dealt with excellent merchants and I've unfortunately dealt with what I found out were shady merchants. Fraud exists and for affiliate marketing to continue as a viable business model it must always be confronted, not denied. Remember back when the big question was "does this or that merchant pay?" Seems strange now that people accepted not getting paid even when the reporting showed they were owed money. Even big established companies were at fault for this just a couple of years ago. It was like they were doing us a favor. Affiliates got no respect back then.
You are trying to legitimize why you don't think fraud exists is because it's not a good business practice in the economic sense but the fact is that fraud exists because of greed, not because of good business practices. It's the quick buck factor without thinking about the long term consequences. In fact, that's why fraud exists in ANY situation. Things are better now, but to deny problems don't still exist is just not facing reality.
Your original argument was that networks don't care whether merchants report sales or not because the overwhelming majority of their profits come from monthly minimums. I feel that I've shown very clearly that the overwhelming majority of their profits come from network fees that are based on tracked sales. When merchants don't track properly, the networks feel the impact too.
Jon brought up discrepancies that could be a result of a variety of different things and jumped to the conclusion that it was fraud. It may be, but more research is needed. I think he's convinced now that he needs to go through the steps to determine exactly what happened. I anxiously look forward to hearing what he finds.
I've been a full time affiliate marketer since before the dot com bust. I know what the industry has been through. Nearly half of the merchants I worked with five years ago are no longer in business. I've collected pennies on the dollar from bankrupt companies. I've seen payments shift from quarterly to monthly. I've seen quicker payments become mainstream. I've seen PPC become a major factor. I've seen networks become more accountable. Threats to the industry have come and gone. The strong players adapt and survive.
I don't believe there has ever been a threat of network fraud. Negligence and incompetence, perhaps. But I've never seen evidence of outright fraud.
The threat of merchant fraud is shrinking. Networks provide more information. Affiliate message boards provide warnings. Quicker payment times reduce the exposure. It's much easier to weed out the bad merchants now.
The biggest threat that the affiliate industry is currently facing is from stealware/adware/parasiteware. Our links and cookies are increasingly being attacked. Networks turn a blind eye because it siphons more sales into the affiliate channel. Merchants turn a blind eye because many of their affiliate managers are compensated based on affiliate sales. This currently dwarfs any merchant fraud.
Today I had 4 times the number of sales I had yesterday. Also, a large percentage of my sales that I entered today are not showing in my stats with the affiliate company.
Something is definitly wrong somewhere.
-qwik
Another possibility is that the cookies are being stolen by another affiliate through malicious spyware(Cookie hijacking). It has been reported that the number of cookie jacking is increasing sharply.
Either way, the merchants will get the same sales and may not notice any different in sales. Problem is who is going to get paid? The real affiliates? or lost commissions due to tracking issues.
Also, I don't want to give the impression I'm only concerned with merchant/aff network fraud. I do believe the implanted spyware/adware/stealing of cookies is a tremendous problem as well. Does anyone have any thoughts on how best to counter this problem, or even detect if it's happening? It seems to me that the method I suggested of becoming a reseller rather than sending others to the affiliate site, and having people buy from you and then rebuying through your own affiliate links would stop this, but there could be some angle I'm not seeing.
I think MovingOnUp made a good point about rebate sites, and I was hoping they would provide some sort of litmus test indicator of honest merchants. But ContentSiteGuy also makes a great point - every affiliate application I've ever filled out asks if your method of promotion is as an incentive site, and I believe most will outright reject incentive sites, while even those that do will know your manner of business, therefore I'm not sure it isn't apples and oranges as incentive sites will be known as such, and tracked and treated differently than ordinary affiliates.
As for anti-spyware programs destroying cookies, I can see that happening for sure. Sort of a damned if you do, damned if you don't. If the customer doesn't use anti-spyware regularly, then your cookies could get be replaced by someone elses, but if he does than your cookies could be deleted altogether. Either way, you'd lose the sale and the merchant wouldn't give a flip because he's still getting the sale. Again, unless I'm missing something the method of buying through your own links instead of sending the customer through them should counter this.
Here's the hook, I found a software organization which, has both a affiliate and reseller program. The reseller program appears to have alot of participants, all linking back to the software organization. The affiliates are told to sell the product for $297 plus shipping. They get 10% commission. Now the software site also sells the product, for $100 less than the suggested affiliate price. The software seller shows #1 for the software name when a search is conducted for the product. Looks like the software organization is using the affliate program to build backlinks. Anybody with 3 brain cells is going to a price check will easily find the cheaper price.
When I asked for wholesale prices they responded with send all your information and we will send a reseller contract. I responded with "lets not put the cart before the horse" and asked 15 questions about packageing, delivery, support, wholesale prices, etc.
I get most of my questions answered and my wholesale price is 10% off of suggested retail (affiliate price). Last night, I wrote back with a link to thier page with the product $70 less than my wholesale price and asked Whats up with this? Should be interesting..
