Morning Dough
To: Dough Readers

AFFILIATE MARKETING

The 8 Biggest Affiliate Marketing Fraud Legal Cases You Need to Know

Marketers are expected to lose $1.7 billion in 2021 due to affiliate marketing fraud, according to a study by CHEQ and the University of Baltimore. This is part of a wider $25 billion ad fraud that occurs across various different advertising marketing channels.

The Growth of Affiliate Marketing
The growth of fraud has occurred with the growth of affiliate marketing. In fact, it has been estimated that up to 15% of all digital media industry revenue comes from affiliate marketing. For many companies, particularly in the travel and retail space affiliate marketing has become their lifeblood, with brands offering big payouts, particularly for sales attributed to an affiliate partner.

Payouts (Per Sale) From Affiliate Marketing Ecommerce Websites
However at least 9% of all transactions across mobile, desktop and app attribution are affected by fraud, from cookie stuffing to attribution fraud and typo squatting. Bad actors exploit shortcomings in tracking and attribution to claim online commissions unfairly, damaging both the digital advertising metrics, and ultimately bottom line, in online advertising campaign. 

8 of the Biggest Affiliate Fraud Cases
Here are eight of the biggest affiliate fraud cases you need to know, revealing the way that affiliate fraud cases work:

  1. Brothers, Andrew Chiu and Allen J. Chiu (2012) were found guilty in the US of a scheme to defraud Nordstrom of more than $1.4 million in commissions and rebates.
  2. Two of eBay’s super-affiliates were caught and convicted of fraud (2013), sentenced to five months in federal prison for his role in defrauding eBay of an alleged $28 million in online marketing fee.
  3. Criteo dropped a fraud case in which it alleged that competitor SteelHouse counterfeited clicks to trick companies into attributing sales to its rival (2016)
  4. The Federal Trade Commission charge an online marketing operation for deceptive ad practices, driving users to their website via affiliate networks (2017).
  5. Police arrested Alexander Zhukov, an affiliate fraud “mastermind” alleged to have taken more than $7million from merchants (2018
  6. Google warned app developers of malicious SDKs being used for attribution fraud (2018). Google took again against Cheetah Mobile’s File Manager and the Kika Keyboard on the Play Store.
  7. Uber Fraud Case against AdTech companies claiming $70 million was subject to attribution fraud (2019). Former Uber head of performance marketing, Kevin Frisch says following an investigation, he turned off $100 million out of $150 annual spend on mobile app installations to get new drivers.
  8. Affiliate marketers behind My Online Business Education (MOBE) settled FTC charges by paying more than $4 million for deploying a fraudulent business coaching and investment scheme (2020).

Read more on each of the 8 fraud cases here.

Additional Link:

What is Click Fraud

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