Skimming Affiliate Commissions Is Still a Problem

As long as humans are human, affiliate skimming will be a problem.

The reason it will continue to be a problem is because it’s an easy way for business owners to reduce their marketing costs… and… it’s often hard to detect, even for the affiliates who are being ripped off.

In this article, I’m going to explain what affiliate skimming is, how it works, and a few simple ways to avoid it.

Affiliate Skimming Defined

Affiliate skimming is the practice of intentionally reducing affiliate commissions in order to pay them less than what they have actually earned.

It could be a percentage taken right off the top (like skimming cream off the top of fresh milk) — or it could be something more elaborate, as you’ll see below.

How Affiliate Skimming Works

Skimming affiliate commissions usually works one of three ways:

Method #1: Script Removes or Rotates the Affiliate Tracking Code from the Page that Registers the Sale

Most affiliate programs track referrals through cookies. The process looks like this:

Affiliate link >> Tracking cookie >> Commission registered on post-purchase “thank you” page

Usually, a small piece of code is placed on the final page after a purchase is made. This code checks to see if the sale was referred by an affiliate. If it was, a sale is credited to the affiliate.

Unscrupulous companies may use a script that only displays the tracking code at certain intervals — thereby robbing a certain percentage of affiliates of the commissions they should have rightfully earned.

Jon Hudghton details exactly how this sort of skimming can be perpetrated in this article — Is Affiliate Skimming Still an Issue in 2010?

In the article, Hudghton reveals how he discovered one particular merchant was skimming commissions. Probably the most shocking detail of the story — which most readers may overlook — is that the offending merchant was part of a reputable affiliate network.

This is what most affiliates don’t realize: Even if an affiliate program is part of a reputable affiliate network, they may still be stealing commissions from affiliates.

How is this possible? Hudghton writes:

Due to the nature of affiliate tracking in general, it’s very difficult to spot skimming on a modest scale which puts affiliates in a vastly inferior position when trying to hunt down and deal with any offending merchants.

This is one of the reasons I’ve created the Paid On Time Affiliate Trust Seal. The goal is to centralize affiliate feedback so that good affiliate programs are promoted and bad (or even criminal) affiliate programs are flagged so affiliates can avoid them.

Method #2: Merchant Uses Their Own Affiliate Link to Override Yours

Another form of affiliate skimming involves no special coding skills whatsoever. All it requires is an opt-in form that feeds to an email subscriber list. Here’s how it works…

The merchant sets up an opt-in page to collect prospects’ email addresses. To encourage people to opt-in, they give away some sort of free gift — like a PDF report or an MP3 interview.

Affiliates then promote the free gift that’s available by opting in instead of the product that’s for sale.

The idea behind this type of promotion is that the merchant can increase conversions — and increase your commissions — by using email follow-ups.

So you send your referrals to an opt-in page instead of a sales page. Your referrals get their free gift. Then your referrals receive follow-up emails from the merchant encouraging them to buy.

Now, here’s where the deception happens. When the merchant links back to the sales page and encourages all their new subscribers to buy, they don’t use a naked link straight to the sales page. Rather, they set up an affiliate link — for themselves — and push all the subscribers through THAT link.

Their affiliate link overrides any prior affiliate cookie. So anybody who clicks on the merchant’s affiliate link that’s been placed in the follow-up emails is then credited to the merchant instead of the affiliate who referred the person in the first place.

Method #3: Merchant Reverses Legitimate Sales to Reduce Your Commission

Last but not least, a merchant can “inflate” their refund rate by reversing legitimate sales.

For instance, let’s say a merchant is using a third-party affiliate management system that is NOT integrated with their shopping cart or merchant account.

It would be a simple matter to simply back out a few transactions and claim that the customer requested a refund. Reversing the transaction would have no effect on their shopping cart records… but it would erase an affiliate commission that had been rightfully earned.

Of course, most affiliates would never think to question a refund that reduced their commissions. After all, refunds are a routine part of business. It is not uncommon to “lose” commissions due to legitimate refunds.

How to Avoid Affiliate Programs That Practice Affiliate Skimming

At any given time, there may only be a small percentage of merchants who are actively engaged in affiliate skimming. But even if it is only 5%, it’s only a matter of time before your commissions are stolen from you.

What can do you do to avoid bad affiliate programs?

Here are a few suggestions:

  • Avoid programs that have unusually low conversion rates. If you notice that one program consistently converts at less than 1%, then it may be best to move on.
  • Avoid programs that have unusually high refund rates. If you notice a higher than normal number of refunds, ask the affiliate manager why. And if you don’t get a satisfactory answer, move on.
  • Search for feedback on affiliate programs you’re considering joining. If you find a lot of negative feedback, then steer clear.
  • Place test orders — or have a close friend place a test order on your behalf — to verify that commissions are being tracked properly. You may want to do this when you join an affiliate program or only after you’ve noticed that traffic isn’t converting as well as you think it should be.
  • Only join affiliate programs that have a good reputation and/or are certified by a third party. The programs who are certified by the Paid On Time affiliate trust seal have a reputation for treating affiliates right and paying them on time. You can browse the affiliate directory here.

Follow these five suggestions and you’ll do a much better job of avoiding the bad affiliate programs out there.

-Ryan M. Healy

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6 Responses to “Skimming Affiliate Commissions Is Still a Problem”

  1. DK April 27, 2011 at 4:14 pm #

    Hi Ryan,

    Yeah…I’ve heard that commissions theft actually happens more than people may know.

    I heard that Clickbank does something related to this. I haven’t verified to see if this is true, but I heard it from a reputable source. It’s not really commissions theft, either, but it’s sort of fishy, nonetheless.

    Basically, Clickbank is it’s own affiliate. So, if there’s a sale made, but there’s no affiliate, Clickbank is rewarded as the affiliate. You’d think that the merchant would get the affiliate commission, but rather, it’s CB, in addition to their normal fees.

    Again, I haven’t confirmed this for myself, but it’s something I heard.

  2. Will Bontrager April 27, 2011 at 4:46 pm #

    Yes, there are unscrupulous merchants. I think, though, that merchants who have their future business in mind sincerely want to pay affiliates all that is owed, perhaps even occasionally a surprise bonus. The more commissions paid, the more sales. There’s nothing like receiving money for getting affiliates on the stick and advertising more.

    If the conversion is low, promote products for a different merchant. While low conversion is likely to be the fault of the sales page rather than a cheating merchant, it really doesn’t matter that much. In either case, it’s time to promote a different merchant.

    For affiliate links in PDFs, on JV web sites, and at other locations where the link can not easily be changed, use shortened URL software or a service where the destination URL can be changed. If a merchant flakes out, select another merchant and change the short URL’s destination to the new affiliate link. Suddenly, clicking on links in PDFs etc redirect the browser to the new affiliate link.

    Don’t use a free URL shortening service for this, even if they allow you to change the destination URL. They might not be around as long as you need them.

    Instead, pay for a nice service or buy software to install on your domain. Even paid for service can go out of business or raise rates to exorbitant levels.

    Software running on your server is the only way I know of to eliminate reliance on other people’s link services for your income. Search for “short URL software” and you’ll find a number of titles.

    Will

  3. Jonathan Boettcher April 27, 2011 at 5:19 pm #

    @ DK actually Clickbank doesn’t pocket the affiliate’s commission in the case you’ve mentioned; that just gets passed along to the product owner / merchant.

    That being said, on some of my products that are on Clickbank I’ve seen ridiculously high percentages of sales that have no affiliates tracked… upwards of 70% in some months.

    I don’t send any of my own traffic to my Clickbank offers, but rather use my own in-house program, so therefore I know that any sales that come via Clickbank are from affiliates, not myself. Therefore when I see as many as 70% of these come through with no affiliate tagged on, I get extremely suspicious.

    Of course that’s nice for me short short short term – I make a few extra bucks, but taking a SLIGHTLY longer perspective of say, a week, I know that the affiliate sending those sales is going to stop promoting me because they’re not seeing anything on their end, and rightfully so. So it really hurts me as the merchant in the end, and it drives me nutz.

    I’ve no idea what causes this…

    • Will Bontrager April 27, 2011 at 9:51 pm #

      70% is more than a minor click count discrepancy. Whoa! And, unless it is a niche where most have cookies turned off, 70% seems to be way out of line.

      Perhaps the first thing to look into is how people arrive at your sales page.

      Someone clicks on an affiliate link, the browser goes through ClickBank (where they set a cookie) and is then redirected to your page. The URL in the browser’s address bar at your sales page will have “?hop=AffiliateID” appended.

      Someone arrives at your page via some other means, from a SERPs page for example, no ClickBank cookie is set and there is no “?hop=AffiliateID” appended to the URL.

      Keep a log of the two. As well as the referring URLs. The number of visitors arriving through an affiliate link compared to those arriving through other means, and where they are coming from, should become clear.

      If interested in knowing which affiliates send you the most traffic, the log can also contain the affiliate ID of each arrival that comes through an affiliate link. Don’t know whether or not ClickBank provides contact information to merchants with only the Affiliate ID as reference, but if yes the best performers may receive a personal thank-you from you.

      If the after sale thank-you page is on the same domain as the sales page, a cookie can be set at the sales page to be read at the thank-you page. The cookie can be used to obtain a ratio of conversion of traffic from affiliate links and from other sources. Also the conversion percentage of each affiliate ID that sends traffic.

      Will

      • PaidOnTime.net Team April 27, 2011 at 9:57 pm #

        It could be that one or more affiliates have used improper links to send traffic to you… or perhaps somebody has just linked to you without using an affiliate link.

        Just a guess.

        Or maybe traffic is coming through the ClickBank product catalog and buying your product — therefore, there’s no affiliate referral.

        ClickBank actually provides fairly detailed analytics, so you can easily see who is sending you traffic and how many clicks/sales they’ve generated.

        You could compare ClickBank’s data to your own traffic logs (or the data in Google Analytics) to see if the numbers match up. If they’re similar, then you probably don’t have a problem. But if you notice big disparities, then maybe you can pinpoint the issue that way.

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    [...] example, I’ve discovered well-documented cases of affiliate skimming (where commissions are “skimmed” off the top of an affiliate’s earnings), as well [...]

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