As crimes go, committing digital fraud is pretty easy; you don't even need to leave your house. If you know what you are doing, the likelihood of getting caught is pretty slim. And you can make a lot of money.
Related: How Ad Fraud Ruins the Internet
Earlier this year, a group of Russian hackers made between $3 million and $5 million a day with an elaborate digital ad fraud scheme called Methbot, according to White Ops, a digital advertising security company. The criminals created phony domains that looked like reputable publisher sites. They tricked ad exchanges into serving video ads on their fake pages and then used an army of bots to click and view the ads so they racked up income.
That sure beats robbing a bank.
As entrepreneurs, we have to be aware of digital ad fraud so we can spend our hard-earned ad dollars wisely, and securely. Many companies use affiliate marketing in that they pay sites to help them generate leads, traffic or even sales. Used properly, affiliate marketing can be very successful. In fact, more than 80 percent of brands use it, according to this infographic from Acceleration Partners.
While most affiliate partners are above board, there are seedy players who will resort to shady tactics to make more money. Those dubious tactics are wasting entrepreneurs' time and money and affecting the validity of the leads they are purchasing. Affiliates are paid a set fee for every filled-out form they generate. Sometimes, fraudsters fill out those forms using real contact info they find easily online, e.g., the Yellow Pages, White Pages, websites, social media, etc. The contact info is legit, but the person didn't actually fill it out and isn't interested in the offer.
To protect themselves, many businesses send leads to lead-validation companies before calling on them. These vendors help clients sift through their leads, to determine what is worth pursuing. Often, validation companies don't catch this type of fraud. They simply verify that the data is correct, but they don't check to see if it was actually entered by the person with whom the data is associated.
Based on my experience working with marketers and the Leads Council, an average of 20 to 30 percent of leads that clear the validation process are actually fake. Sometimes, it can even be much more.
Insult to injury
As if wasting your money purchasing and validating a phony lead weren't bad enough, the damage for business owners doesn't stop there. Because the validation company thinks the lead is legitimate, marketers' next step is to call the person. There is nothing consumers like more than intrusive, irrelevant phone calls, right?. What a way to make a lasting brand impression...
Calling people who didn't submit their information also opens advertisers up to Telephone Consumer Protection Act (TCPA) compliance issues, which can result in time-consuming lawsuits and hefty fines. The TCPA is intended to protect consumers' privacy by regulating how marketers can reach out to them. Even if a business uses a third party for its marketing outreach, it is still liable should that third party break the law.
For business owners, the first step in protecting themselves from lead fraud is awareness. Many simply don't realize how prevalent digital fraud is, or they rely solely on lead verification companies to protect them. Adopting the following important two-step process can provide additional protection:
Verifying contact information isn't enough. Companies need to dive into the analytics and try to understand the environment in which a user's information was shared. Consider factors like the location of the IP address and the behavior of the user before filling out the form. There are sophisticated analytic tools that can help, such as Mouseflow or you can work with a partner.
Savvy marketers are constantly analyzing and optimizing their marketing tactics, trying to spend more on what is working and less on what is not. When phony leads make their way through the process, marketers' campaign optimization efforts can be compromised. Dollars end up going to these fraudulent, nefarious channels rather than where they would have done the most good.
You need to spot these fake leads, trace them back to their sources and revise your affiliate network accordingly. Are certain partners generating mostly fraudulent leads? Stop working with them. Where things get tricky is when a source is generating a healthy mix of legitimate and illegitimate leads.
Many businesses need all the leads they can get. Rather than removing the traffic source completely, they proceed to validate each individual lead and weed out the faulty ones. This is a complicated solution, but it is possible these businesses -- or you, if you're doing this -- have a solid system in place for analyzing your leads.
The right approach depends on your business and your resources, but it is paramount that all entrepreneurs understand the lead-fraud problem and take steps to protect themselves. You aren't just wasting ad dollars, you are risking legal action and potentially alienating your prospects with unsolicited phone calls.