Posted 6. April 2009, 08:52 by Emma Langan
Category : Home   Industry developments

Fraud:

Affiliate marketing has come under fire its potential fraud issues. This has developed as a consequence of some affiliates being accused of hijacking search engine results. The problem arises when affiliates aggressively pursue clicks by bidding on search terms that they believe will earn them high commission returns – some use underhand tactics in order to accomplish this, driving up the price for the marketers of official sites. Affiliates do this so that they rank higher on for example Google’s search terms. The effect of this is that consumers will click on these top search terms rather than entering the merchant’s actual site; therefore affiliates get in between the customer and the brand potentially affecting the customer-brand relationship.

Other affiliates develop websites that incorporate popular brands to suck in consumers and pass them onto the official site earning them commission in the process and leaves searchers believing they have entered the merchant’s site (Croft, 2007). Both of these cases are seen as cases of deception as the consumer could be oblivious to the fact that they have entered an affiliate site and earning them money as they have a lack of understanding in this area as it is still a fairly new concept. They believe they are on the company’s official site when in fact they are on an affiliate and then click through not knowing that by doing so they are earning that affiliate commission for the purchase they then make. Technically they are misleading consumers and stealing them away from official sites that consumers would have and wanted to enter and so this could be classed as fraud. These sites are classed as bad affiliates as they add no value to consumers.

Trust:

There is also the issue of trust that needs to be tackled by affiliate marketers. Some consumers feel that they are been coned by such sites as they do not have a full understanding of how and why they can receive cash back for doing nothing except clicking-through from one site onto another to make a purchase. They don’t grasp the concept of why the official site won’t offer them this incentive in the first place (obviously because there would be no need for the site to offer an incentive if the customer could navigate themselves to their site independently as they don’t need to drive them there) if another site will.

The implications of consumers being aware of affiliates and how they operate could be both good and bad at addressing issues of trust. If consumers learn and understand them will they stop using them or will they use them more? The problem with people using them more is the effect this could have on smaller businesses as when consumers become aware of affiliates then they may be deterred away from these smaller sites and go for the large companies that offer larger cash-back.

Government Regulation:

This then brings into question whether regulations will be brought into place by the government or self-regulation being introduced as the uptake on affiliate sites increases so as to no allow monopolies to erupt and get out of control. The ASA may also become involved as it is still unclear whether affiliate marketing is a form of advertising or not. There are arguments both for and against. On one hand technically affiliates aren’t actually selling anything through their sites but once someone clicks-through to the merchant site the affiliate will be paid on the basis of a transaction being carried out and the affiliate sites don’t necessarily inform consumers of this (bringing in the issue of fraud again).

These sites could be said to be misleading as they describe themselves as offering impartial information but this could be questioned as they only feature the websites of those companies that have signed up to their scheme. And probably will try to place the merchant’s advertising that they make the most from in the best places as they are looking after their own interests not necessarily what is best for the consumer and therefore this is not impartial. This then links into possible ethical issues surrounding affiliates (LINK TO EXISTING BLOG)

As yet no regulations have been enforced to counteract these problems by the internet advertising bureau (Croft, 2007). Although, recent anti-spam lawsuits and enforcement actions may inspire some companies to check their affiliate connections thoroughly as the worst offenders could find themselves faced with legal action if found guilty. Although spam is slightly different to affiliate marketing the principle is similar even if a third party is involved it is the merchant that is liable as it could be said that they took no action in preventing the fraud which may not be the case as it can be difficult to track which affiliate is abusing the system if there are many being used (Singel, 2005). Therefore affiliate marketing may seem to be a good method to use but is also easily abused.