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  1. #1
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    Detect affiliate frauds
    I am sure a few people has asked this quesion before. I am a newbie with SAS, just start a affiliate program. I choose the option to approve each applicants.
    Any suggestions, from fraud prevention standpoint, on how can I weed out the bad applicants.
    I plan to sell in the US and canada only, should I decline all overseas application? I also see some site only has tons of affiliate links but no content.. yellow flag for frauds? MLM sites, OK?

    In brief, I am looking for your experience on how to detect the bad apples.

    Thanks

  2. #2
    2005 Linkshare Golden Link Award Winner  ecomcity's Avatar
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    Just skip the freebie and incentive affiliate sites.
    Webmaster's... Mike and Charlie

    "What have you done today to put real value into a referral click...from a shoppers viewpoint!"

  3. #3
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    Just another newbie question.
    What are "incentive sites"? Sites give x % reβates to the customers if they purchasing thru the links on the site? Why are these potential problem sites?

    How about MLM, I saw even this forum does not allow MLM advertising, something I need to know about potential problem of MLM.

    Thanks

  4. #4
    2005 Linkshare Golden Link Award Winner  ecomcity's Avatar
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    Every evil imposed or shoe horned into affiliate marketing comes from "incentive" type affiliates..... period! Why not Google incentive advertising and become self educated why the tricksters need bait on their hooks other then the time consuming merchant product promotions.
    Webmaster's... Mike and Charlie

    "What have you done today to put real value into a referral click...from a shoppers viewpoint!"

  5. #5
    ABW Ambassador Greg Rice's Avatar
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    The answer to this could fill a book. Basically, look at sites that you believe will add value to what you're selling. The Google toolbar and the Alexa toolbar can give you some guidance on how respected a site is. They are not the end all though but only a guide. A scam site can have a good PR and a high Alexa rank so don't go by these alone. Incentive sites tend to be parasitic in nature. A good rule is if you are in doubt, do a search for them here at ABW. Chances are if they are parasites they've been noticed and discussed here. Kellie and Ben Edelman are both good at tracking and reporting on parasites.

    MLM programs aren't usually considered "legitimate" as their model exists merely to get more members (suckers) to join up. They don't really have much to offer but the hope one can make money by finding more members like themselves. Where's the value and what's the product or service? You, as a merchant, selling actual products shouldn't be too concerned with MLM sites but they may not be good places for your name to appear.

    When you look at a site, first ask yourself "Would I buy from this site?". Then "Do I want my name on this site?". Your answers will give you a major clue whether they "should" be an affiliate or not. Avoid affiliates who don't sell from their site but instead use downloadable software to sell. The majority of them are considered parasites as they don't really add value to the selling process but rather feed off traffic from legitimate site owners. On their own they can't sustain sales, they need other people's sites to survive.

    As for banner farms, they don't likely convert well or get much traffic. I wouldn't say they're doing something wrong, necessarily, it's just they're not doing it "right". Again, as a shopper, would you buy from one of those sites? The site doesn't have to be expertly designed but it does need to look professional and like a business site, unless it's a type of hobby site.

    Hope this helps.
    Greg Rice Affiliate Program Management
    www.gocmc.com info(AT)gocmc.com | 330-259-1223

    Join us! - MiNeeds.com | DiscountCandleShop/CheeseSupply | Feng Shui Plaza

  6. #6
    2005 Linkshare Golden Link Award Winner  ecomcity's Avatar
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    Well my site doesn't meet all those requirements. I therefore make my shoppers ( average 4.3 page views) endure the pretty page loads before they click to a recommended merchants. Makes even my sites traffic pre-qualified by choice.
    Webmaster's... Mike and Charlie

    "What have you done today to put real value into a referral click...from a shoppers viewpoint!"

  7. #7
    Member ntjock's Avatar
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    We've been thinking about the program we set up. I'd like to know what is more desirable:

    1) 11% tier 1, 3% tier 2, and 90 day cookie
    2) 12% Tier 1, 180 day cookie.

    We've initially gone with option 1. I don't have any tier 2 affiliates yet. I was just curious if the tier 2 thing helps or not.

  8. #8
    2005 Linkshare Golden Link Award Winner  ecomcity's Avatar
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    Quote Originally Posted by ntjock
    We've been thinking about the program we set up. I'd like to know what is more desirable:

    1) 11% tier 1, 3% tier 2, and 90 day cookie
    2) 12% Tier 1, 180 day cookie.

    We've initially gone with option 1. I don't have any tier 2 affiliates yet. I was just curious if the tier 2 thing helps or not.
    The latter will work best for you as it's unlikely you'll get anything but junk traffic from the 2nd tier.
    Webmaster's... Mike and Charlie

    "What have you done today to put real value into a referral click...from a shoppers viewpoint!"

  9. #9
    Member ntjock's Avatar
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    Is it common for programs to put commission caps in place? i.e. commission on a sale up to $x

    In our case we're thinking about limiting commission the first $3000 of a sale. We only have a handful of orders that get above that level. I just wanted to find out if it was something that others do before we did it.

  10. #10
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    greg, ecomcity,
    Many thanks for your insights and advices. Very helpful.
    Someone told me there are some bad folks purchase goods thru affiliate links solely for getting the commission, not the products. They would either charge back or return the goods later and pocket the commission. How can I prevent this type of fraud?

  11. #11
    Resident Genius and Staunch Capitalist Leader's Avatar
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    I also see some site only has tons of affiliate links but no content.. yellow flag for frauds?
    Nah, probably just a n00b, provided you're thinking of the same type of site I am. The meaning of "no content" sometimes varies depending on who's saying it. But the ones that are *nothing* but lists of links tend to get no hits and no sales, from what I've seen.

    On the other hand, one of the biggest mistake merchants make, is to think that a certain type of site CANNOT sell anything. I drew a CJ compliance check way back when (which came out just fine), just because at the time I started, merchants didn't realize that a page with nothing but a sales pitch and a few links will vastly outperform info-c*ntent, conversion-ratio wise!

    Soon after I started as an aff, one merchant in particular got a hard education on the matter, from me. He had offered $40 commission. And a great special offer. So of course, I put up an ad-page for his item and pitched his special offer (which was then unmatched [now the whole category has matched or exceeded his deal]). 1/7 or so, Conversion Ratio. So needless to say, I aimed PPC traffic at that page full-throttle, and banged in the hits!! I think I wiped out his budget in about 2 months.

    He ended up on another network paying something like 20c/lead

    Which brings up another point--only offer commissions you can really afford! Somebody out there just may convert like mad!

    When you look at a site, first ask yourself "Would I buy from this site?".
    I disagree, for the most part. Some sites have "stylistic" differences which would keep me from ever shopping on them. But, it's foolish to turn down orders from those who WOULD like shopping on them! Also, some of these differently-styled sites do well. One person's whacked-out scrawling is the next guy's Picasso...

    Also, a beautiful site with no traffic isn't as good as an ugly site with plenty. SE algos don't rank based on asthetics.

    It's important to distinguish between a site that's just got a different style (an " *I* wouldn't shop there" site), and a bad site.

    Is it common for programs to put commission caps in place? i.e. commission on a sale up to $x
    No, most programs like to have affiliates! Affs who have sense, that is. The n00bs who'd accept caps, also are going to be more likely to not have a clue as to how to sell things, IMO. Anyone with sense realizes that it's a ripoff to be capped, and that a sale for $1000 worth of stuff is WORTH 10x more than a sale for $100 worth of stuff--therefore they'll want to be paid commissions on ALL of it!

    In our case we're thinking about limiting commission the first $3000 of a sale. We only have a handful of orders that get above that level.
    That "handful" is bringing you more money. It's bogus if affs don't get more commissions for them, in recognition of that fact.
    There is no knowledge that is not power. ~Hemingway

  12. #12
    Member ntjock's Avatar
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    Quote Originally Posted by Leader
    No, most programs like to have affiliates! Affs who have sense, that is. The n00bs who'd accept caps, also are going to be more likely to not have a clue as to how to sell things, IMO. Anyone with sense realizes that it's a ripoff to be capped, and that a sale for $1000 worth of stuff is WORTH 10x more than a sale for $100 worth of stuff--therefore they'll want to be paid commissions on ALL of it!

    That "handful" is bringing you more money. It's bogus if affs don't get more commissions for them, in recognition of that fact.
    Hmm, good comments. Our goal was to allow most affiliates to make money. in our case we sell t-shirts. Most orders are small or moderate and have good margins and we can pay good commissions (80% or more of the orders fit this profile). A few orders get larger (say 15% of our orders), but we can still afford to pay a good commission. Our concern is that when someone refers a sale with more then 2303 shirts it creates a conflict between our discount model and the affiliate commission model.

    The core issue is that margins get slimmer on very large orders. I think that's common in any business. What we wanted to do was make sure we had a win/win situation for us and the affiliate. We thought that paying commission on any sale up to $3000 would be a fair compromise. Meaning that even on a large (high quantity) order the affiliate would get commission on the order.

    What's really lacking in SAS' program is a commission level structure by which you say:
    We pay X for orders up to $1000
    We pay Y for orders of 1001 to 2500
    We pay Z for order of 2501 or more.

    That would actually solve this problem.

    How do others address this type of issue?

  13. #13
    ABW Ambassador Greg Rice's Avatar
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    Quote Originally Posted by printer ink
    greg, ecomcity,
    Many thanks for your insights and advices. Very helpful.
    Someone told me there are some bad folks purchase goods thru affiliate links solely for getting the commission, not the products. They would either charge back or return the goods later and pocket the commission. How can I prevent this type of fraud?
    If you pay for the phone call, I'll throw in some time for free and answer your questions to help you get started on the right foot. Give me a call on Tuesday.

    Some sites have "stylistic" differences which would keep me from ever shopping on them.
    Leader, I'm not talking about stylistic differences, I'm talking about trust. I've had some downright ugly sites perfrom well but apparently people trusted them. When in doubt you can always talk to the site's owner.
    Greg Rice Affiliate Program Management
    www.gocmc.com info(AT)gocmc.com | 330-259-1223

    Join us! - MiNeeds.com | DiscountCandleShop/CheeseSupply | Feng Shui Plaza

  14. #14
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    Question Slimmer margain? Please explain
    Please explain how a large order gives you a smaller margain. A large order of shirts would be packaged and shipped together rather than separate packaging and shipping for smaller orders. Some stores charge less shipping for larger orders. If anything, commission should be higher for bringing you a large sale.

  15. #15
    Member ntjock's Avatar
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    margins and order size.
    It's really simple. Our market covers retail and wholesale customers. Just like most industries, when you buy in bulk you save because the margin is less. Shipping is actually a constant in t-shirts. It varies by shirt (i.e. longsleeve vs. short sleeve). But the weight is fairly constant.

    Making a long and irrelevant story short. The collective comments caused me to phone Share-A-Sale. Michael was terrific and explained that we can do tiered commissions which solves this problem completely.

    It appears that SAS is flexible enough to allow merchants to code the commission at the point of sale. Again, Thanks Michael @ SAS. I'm not sure if they want the parameters out there so I'll let them be the ones that post it or give it out.

  16. #16
    Affiliate Manager
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    Fraud detection... It really depends on how much you are really to risk. The more you risk, the more chances you run into "bad apple" affiliates trying to fraud you. However, too much prevention you might lose out on some people that can bring results.

    Of course, parasites are bad to have overall. They are worst, since it looks like they are doing something, but in fact they aren't on their own.


    Anyways... interesting affiliate program description.

  17. #17
    Member ntjock's Avatar
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    Quote Originally Posted by dpl882
    Please explain how a large order gives you a smaller margain. A large order of shirts would be packaged and shipped together rather than separate packaging and shipping for smaller orders. Some stores charge less shipping for larger orders. If anything, commission should be higher for bringing you a large sale.
    Apparel weighs an average of 8 ounces per unit. On a large order its about 25 cents a shirt to ship. It's also usually free to the customer. People hate to pay shipping.

    I can tell you it's about a $200K/yr expense though.... so I hate paying it too...

    Quantity and Margin are inverse pairs in most industries and ours is no exception.

  18. #18
    Newbie Cygnus's Avatar
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    Also take into account the fact that you don't cash a profit margin at the bank...you cash profits.

    Given the choice, smart businesses would rather get 5% of 10,000 than 10% of 1,000 -- in the supply/demand environment, affiliates will request a bigger share for providing the volume and affiliate managers will usually agree...it's a good situation that makes both parties money and furthers that relationship.

    Relationships...that's the key thing for me in the affiliate world. Affiliate managers talk to each other and affiliates talk to each other; given the choice, an affiliate manager would prefer to work with an affiliate in his/her "network" than one that isn't -- making places like Abestweb vital for those seeking a career in the affiliate game.

    Cygnus

  19. #19
    Member ntjock's Avatar
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    I tend to agree with your part about 5% of 10K vs 10% of 1K. And that's why we drop margin to bring in the bigger orders.

    I started a new thread on this and it's been a fun discussion.

    For the relationships part... I want to see if I understand you right.

    Your saying affiliates work with Afilliate Managers to find merchants?

    That in effect would make the AM a sort of tier 2 person right? or am I wrong on this?

    The AM's are really this sort of nebulous thing that I see references to but no real data on. Without the data (performance and cost) it's difficult to decide if they are right to involve in our program. Is there a sort of AM's 101 that I could read and learn about what the "standards" for AMs are?

  20. #20
    Full Member ADesertRose's Avatar
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    Quote Originally Posted by ecomcity
    Just skip the freebie and incentive affiliate sites.
    Well, that is just wrong to generalize and lump together those two groups of sites and to push for merchants not to approve such affiliates.
    I run a freebie site and do have legitimate sales from that site as well as using the site to promote my other content based sites that are not freebie related. So if someone sees my first and main site is a freebie site and turns us down, then they are being fairly short-sighted and narrow minded...
    I can see how PPC programs may want to avoid those sites that just encourage clicks to earn your way to a product but you never purchase from the merchant, but my freebie site and most other freebie sites I know are not like this; yes, people like to get something for nothing and we provide links to samples and such, but all my visitors are still consumers who make purchases just like everyone else.

  21. #21
    Sinclair Oil Lurker Jones's Avatar
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    Yeah, just listen to mike
    Quote Originally Posted by ecomcity
    Just skip the freebie and incentive affiliate sites.
    He knows everything about everything. He got the LinkShare award for having the biggest mouth. Take a peek at his "online mall" and his coupon page and that should help you to understand the meaning of "the pot calling the kettle black" - har!
    [B][COLOR=Red]I look forward to Google's demise[/COLOR][/B]
    Look who is suing Google - [URL=http://www.google.com/search?hl=en&q=google+gets+sued]click here[/URL] and [URL=http://search.msn.com/results.aspx?q=google+gets+sued&FORM=MSNH&srch_type=0]here[/URL] and [URL=http://search.yahoo.com/search?p=google+gets+sued&fr=FP-tab-web-t&toggle=1&cop=&ei=UTF-8]here[/URL]

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