How Fraudsters Steal Millions From Amazon and eBay

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The highest profile affiliate fraudster to date is Shawn Hogan. He stole — hold your breath — $28 million from eBay before they shut him down in 2008. This post reveals how modern Hogans pull off similar scams with Amazon, eBay, and other sites with affiliate programs.

How It Works

Cookie stuffing means precisely what it suggests: stuffing browsers with affiliate cookies. The tried and tested way to do so is with Flash-based ads and widgets that generate hidden forced clicks to your tracking URLs. Serve the ad to cheap traffic and voilà. It’s so rampant you can even buy ready-made cookie stuffing scripts in black hat spheres. Or the other way around. But it’s not the only way to game affiliate programs. And fraudsters excel at staying under the radar.

Some don’t, though. We documented Vitaly Popov’s referral spam in a recent post. If you’ve ever seen e.g. hulfingtonpost.com or darodar.com spam in your site’s stats, you’re a victim of how Mr. Popov is abusing the Google Analytics API. If you’ve clicked the links to see what’s up and later purchased something from Amazon or eBay, he got a commission for his trouble. What took us by surprise is how open he is about it. And seeing his various sites’ stats on SimilarWeb, we can only assume he has yet to get shut down.

In another post, we documented how fraudsters use AdWare — from toolbars and malware — to inject their affiliate links directly on your site. Because, you see, nothing converts better than a lead that is trying to click your Buy Now button. Throw in a bogus referrer and the odds are good you’ll never know what’s happening.

How It Scales

You may be thinking this only affects affiliate programs that pay millions of dollars per month or that big fraudsters are easy to catch. You’d be wrong.

Mr. Hogan arose suspicion because he was generating 15% of eBay’s payouts alone. Fraudsters know better now and keep a low profile.

The scams we identify seldom go from zero to six-figure commissions in no time like this six-figure per month video ad fraud. Rather, they follow a pattern of growing slowly but surely — like a successful affiliate would do. The magic of compound growth then kicks in. If you’re losing $600 to fraudsters this month, and you let them increase that by 30% per month, you’ll be staring at a $14k payout and a $58k total loss by year end.

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And you won’t notice. What you’ll be seeing isn’t one but many affiliates — each small and growing, and claiming commissions for increasing numbers of sales they had nothing to do with. Small scale fraud can degenerate into large scale fraud indeed.

Where It Hurts You Most

The worst part of these scams isn’t the financial loss. That’s costly, but it’s nowhere near as costly as losing the goodwill of your genuine partners.

Things are simple when you’re an affiliate marketer: if your site converts more than your competitors’, you stay; if it doesn’t, you go elsewhere. So don’t let fraudsters run loose and claim a third of their commissions. It’s a surefire way to see your partners churn.

Luckily, there is something you can do. As it happens we help digital marketers increase their ROI by revealing the ad and affiliate fraudsters that steal from them. You can learn more about our fraud detection services on our site.

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