
The big, ugly affiliate marketing scam - PhilipA
http://venturebeat.com/2013/08/12/the-big-ugly-affiliate-marketing-scam/
======
iopq
You have a discount code at your checkout? So basically instead of capturing
the sale you're ASKING the buyer to google for discount codes.

Think of a sneakier way to give people discount codes that doesn't show it
RIGHT THERE ON THE FORM. It makes me feel like I'm getting ripped off when I
see discount code and I don't have one.

~~~
liquidcool
Honest question: when you go to a grocery or department store and they ask if
you have any coupons or a rewards card, do you feel like you're getting ripped
off? I may feel like I've missed out, but never "ripped off." When I've
reached the checkout page it implies this was the best deal I could find.

I do appreciate discounts, but don't feel entitled to them, especially if I'm
a first time customer (or opted out of marketing emails). But maybe I'm an
outlier and a sense of entitlement is the norm these days.

~~~
ry0ohki
Yes I do. In that case it's a little harder to turn back but I can't help but
feel a little like a chump.

~~~
TeddyLondon
I feel like a bit of a naughty schoolboy when I go off and find vouchers, it
just feels a little bit wrong (but I still do it)

------
rwhitman
No shit. This is why you create a page on your site called "Discount Codes".
You put in an email signup and offer a small discount coupon. You get the
email address in case they abandon and you can re-market to them, and the
discount so that they won't abandon, because they found what they were looking
for and will complete the transaction. Google will rank you high because its
_your_ page and you catch at least some of the search traffic, and you give
them what they want with the discount code and they will shop with you. Any
retailer worth their salt knows this. Just because coupon sites can game SEO
doesn't mean its a scam, it means they're just capitalizing on the fact that
you're blind to your customers' behavior

~~~
Maxious
Which is exactly what Kogan did and it's now the #2 result when you search for
Kogan coupons

www.kogan.com/au/kogan-discount-codes/‎

> Regular customers of Kogan know that our products are ALWAYS discounted.
> Very rarely do we release a Kogan Discount Code or a Kogan Discount Coupon

The #1 result? A scammy looking site but don't worry because "59 people have
used this today!" (unsuccessfully of course)

~~~
chmars
[http://www.kogan.com/au/kogan-discount-codes/](http://www.kogan.com/au/kogan-
discount-codes/) doesn't exist (anymore?):

'Sorry, we can't find the page you're looking for'

Screenshot: [http://i.imgur.com/LSvh9Av.jpg](http://i.imgur.com/LSvh9Av.jpg)

You get, however, annoying pop-up window if you access this URL …

~~~
Maxious
Remove the trailing slash (which reappears when the page loads - 304?). I
guess there's multiple URLs and some rewrite magic to get to this page for
maximum SEO.

~~~
chmars
Interesting, thanks!

------
epoxyhockey
I was expecting to read about click fraud, but it was just a newbie's
experience with running an affiliate program.

Kogan had some wild expectation that the majority of affiliate traffic would
be first-time visitors to his site. When he uses _google analytics_ to
estimate that only 1.6% of referrals were new customers, he trashes affiliate
marketing as a business.

Unfortunately, he spent no time thinking about how to optimize his campaign to
reward affiliates for first-time customers, among other things.

~~~
bigiain
To his credit, he'd already established that changing commissions from 10% to
5% to 1% made almost no difference to the affiliate schemes behaviour. It
seems reasonable to assume that "optimising his campaign to reward affiliates"
for any particular behaviour is unlikely to be worthwhile, if 50% and 90%
reductions in payouts dosn't motivate them to change anything...

Perhaps an "experienced affiliate marketing user" might get different results,
but if you're suggesting that a business who'll mislead you and rip you off
happily unless you're a sophisticated-enough user of their service deserves a
"trashing" any less than used car salesmen deserve _their_ reputation – I
think you're wrong. If _you_ come to me knowing your proposal involves you
taking 10% commission on sales - where 98.4% of those sales were mine already,
I'd call you out as a thief.

~~~
epoxyhockey
If someone chooses to learn the affiliate marketing business through trial and
error, more power to them, and I hope they have a lot of cash to burn. There
is a lot more to affiliate marketing than giving X% commission for referrals.
As I eluded to in my first comment, it is common to pay near 0% commission for
return customers and a hefty % for first-time customers. This is a basic
scheme that wasn't even attempted before trashing the industry.

I am sure that Kogan has been in business long enough to know not to take what
a low-level sales person preaches as fact. Just like Kogan, the sales person
also didn't seem to have a clue about affiliate marketing. And, why should he
if he can sign new clients who will drop $40K out of the gate?

~~~
bigiain
Thanks for the good reply.

A question though, from someone who's inexperienced but very cynical about
affiliate marketing – it that sort of option/complexity; to offer very low
commissions for return visitors but large commissions for first-timers,
actually available through the sort of "affiliate networks" you'd find by
searching online?

~~~
epoxyhockey
Yes, you define exactly what kind of referrals you want to pay for and for how
much.

------
martin-adams
"So basically, the affiliates are claiming commission on a sale that was going
to happen anyway"

You have someone in your checkout process. Why on earth would you give them a
reason to leave that process and go search for a discount code if you know
they won't find any? Assuming they will come back doesn't feel right. What if
their search for a discount code didn't prove there wasn't one, but did prove
a competitor was going to be a) cheaper, b) a better service, c) offering
discount codes, or they got distracted by cat videos on YouTube.

And maybe I'm naive here, but since adding affiliate marketing, if the revenue
was going to be guaranteed anyway, wouldn't there be a drop in $200,000 from
the regular revenue?

~~~
brorfred
isn't having a form field for discount codes at checkout a very common
approach? I'd say that 90-95% of the websites I normally buy stuff from use
it. Amazon does...

~~~
johnward
Being common doesn't mean it's working. Every single time I see a coupon box I
_have_ to search for a code. Then sometimes I get pissed if I can't find a
discount and go somewhere else.

------
eps
I don't follow.

Where did the extra $200K in sales come from and why is he not happy about it?
It sounds like there is a pool of customers that will not finish the purchase
unless they can google "kogan coupon" and hit few coupon sites beforehand
(even if to leave these sites emptyhanded). So the affiliates appear to help
convincing on-the-fence visitors and push sales to completion. If anything,
it's a clever hack. Not sure why he's so pissed.

~~~
gkoberger
There is no extra $200k (which should have been the first sign -- "we're
making $200k less, but the affiliates are making $200k more!").

And since they don't actually give out a coupon, it's doubtful it helps anyone
but the affiliates.

~~~
avalaunch
But he never says that. He doesn't indicate whether revenue increased,
decreased, or stayed the same - something that would have been really nice to
know.

------
joosters
If you visit the site, put stuff in your cart and get all the way to the
checkout page, you must know by that point who sent them to your site. If the
customer then goes away and googles for voucher codes, it shouldn't change the
source. When (if?) they return, you should know they are the same person, from
the same original source.

How did the affiliates manage to steal these customers? It seems to me like
your referral tracking is massively broken.

~~~
dangrossman
Affiliate networks require you put their code on the "thank you" page shown
after checkout. Conditionally removing that code would be seen as an attempt
to scam the network and get out of paying commissions owed. What you're
proposing doesn't work anyway -- you don't know that they didn't come through
an affiliate link a week prior; the cookie isn't on your domain, but you owe a
commission for that referral.

~~~
endymi0n
Correct. There's a "blind" tracking pixel at the checkout page that will
usually catch the sale in a "last cookie wins" fashion. So on top of the
advertisers, anyone actually facilitating the sale by advertising is ripped
off by the coupon sites. It's a major pain for the industry - the only
surefire way to protect yourself is to get rid of drop either affiliate
marketing or coupon codes.

------
unclebucknasty
This article is so bad. I mean, there is a lot wrong with the affiliate world.
Believe me. And, it attracts more than its fair share of shady characters.
But, this guy is reckless and woefully uneducated.

I was all settled in for a sordid tale of intrigue or some yarn about a clever
heist. I could spin a few of those stories myself.

But, of all the things this guy picked on, it's that his traffic is searching
for discount codes and coming back with an affiliate tag? This is not a scam.
It's perfectly legal and anyone wading into affiliate marketing should do his
research and understand how it works. It's not just activating a magical
digital sales force. Like any other marketing, it needs to be understood,
researched, and applied to the business properly (or decided that it is not a
good fit for the business).

The first tell-tale sign is that he didn't even know who his affiliates were.
He just blindly flipped the switch. He could (and clearly should) have hand-
picked his affiliates and worked with them to cultivate the activity he
desired. It's ridiculous to blindly open the flood gates and complain about
what comes floating in, then declare the whole affiliate marketing space one
tremendous scam.

Even now, this is so easily fixable and could really be used to his advantage.
His customers are telling him exactly what they want. He also knows where they
are going to search for discounts. One supremely simple step would be to start
creating and marketing the codes himself to his current customers. Let them
know that the best codes are sent to their appreciated customers. Another step
would be to cull his affiliate partner list to those where his users (and
presumably others like them) are actually going to find his codes. He should
also start by working with his account manager on the network (assuming he
sprung for one) to devise a strategy around his goals. For instance, on all
major networks, he can explicitly indicate that his affiliates cannot engage
in keyword bidding or search engine marketing.

There's not enough space here to get into it. I understand his frustration,
but he is being irresponsible and reckless in making the generalized
statements he's making.

~~~
jeremybencken
"woefully uneducated" indeed. why didn't he tell the affiliate network "no
coupon sites, no trademark bidding, and approval required for all new
affiliates."

Those are three of the most utterly basic things any new affiliate program
would do.

His real complaints should be that he lacks knowledge in this area, didn't
hire people who have it, and got poor customer service from his affiliate
program.

~~~
unclebucknasty
Well (and concisely) put.

He could've easily shut down all of that activity or even experimented with it
in a controlled fashion with select affiliates, getting near-immediate
feedback and optimizing (or then deciding against it).

------
retube
Kogan.com itself seems pretty scammy. An auto-loading give-me-your-email pop-
up that doesn't appear to have a close button. Nice.

------
endymi0n
Welcome to the wonderful world of brandbidding - and yes, you facilitated the
scam by using coupon codes (hint: by 2013, they do you a major UX disservice
for the reasons everyone is mentioning). It's been out there for a decade, but
networks still do a horrible job at explaining the situation for you, as
they're cashing in as well. Affiliate marketing is no more of a "free lunch"
than all the other marketing methods out there. You got to either know your
shit to protect yourself from fraud or pay someone to do it for you. Either
way, you need to actively manage your publishers and watch out for the metrics
you presented for all of the channels you're employing. If you're handing out
free money without looking after what you are getting out of it, be sure that
there will be someone to claim it. Wisely used and managed, affiliate
marketing can definitely be another valuable tool in your marketing chain, but
the total costs will be comparable to anything else.

------
Destitute
There's a lot wrong with this article and it stinks that this person paints
the entire affiliate canvas with a poop-colored brush. The fact that they
continuously pushed the commission all the way down to 0% is also terrible for
affiliates. As people in the comments stated, this was a poorly run affiliate
campaign and is no fault but their own. There's "shysters" in every business,
and the fact that they pushed down the commission to 0% for all of their
affiliates and not just ones taking advantage the coupon code entry field to
base their affiliate site on makes me label Kogan.com as "shysters" moreso
than all of the affiliates they tried to portary in that light.

Manually approve affiliates that will add value, remove affiliates or don't
approve affiliates who are going to advertise non-existent coupon codes. The
end, don't treat an affiliate campaign as an easy money button.

edit: And they also seem perplexed that affiliates kept sending $200,000 in
sales no matter the commission. True evidence they had no knowledge of how
affiliate sites work. If they're performing well, webmasters can essentially
set them and forget them. It's not like they're actively working 8 hours a day
pushing sales, it can be a static website that never changes as long as the
revenue is steady for the affiliate.

~~~
johnward
I want to know what kind of network would keep an advertiser that pays
nothing.

------
psycr
So it sounds like there's an opportunity for someone here. If you read to the
end of the article, you'll note that the actual scam is in spinning up
discount code sites.

We need a Rapgenius for online discount codes. Right now, it's full of scummy,
crappy sites (just like lyric sites), but could be easily improved with a
simple interface, minimal advertising, and collaboratively sourced content.

~~~
scottrblock
You mean [http://www.retailmenot.com/](http://www.retailmenot.com/)?

~~~
eclipxe
Retailmenot has gotten much more scammy over the last few years.

~~~
ry0ohki
It's actually gotten more legit. Most of the coupons are seeded there by
vendors themselves these days. Which is how they just IPOed for a billion
dollars.

~~~
ceejayoz
The original point was to get discount codes that weren't given out willy-
nilly by the vendors, so I'd say that makes it less useful/legit, not more.

------
dangrossman
There are over 600 sites purporting to offer "Improvely coupon codes" despite
there never being any kind of coupon code box on my signup form. It's a bit
ridiculous, especially since none of these sites are being paid an affiliate
commission for their fake coupons.

~~~
prawn
For their fake coupons to your site, that is. If someone ultimately clicks
through to another site, the affiliate may still get their commission.

------
trg2
While the OP did run into some interesting problems that many of us in
Internet Marketing face, I was very thrown off by the direction this post
took. There was a pretty substantial lack of understanding of cookie tracking
and first-click/last-click attribution.

The affiliates didn't do anything wrong here, which was ironic, because I've
met affiliate marketers at conferences in Vegas, and there's PLENTY of shady
stuff that some of them do. That said, none of that is taking place here.

Ranking for _" name of company I'm an affiliate for" discount code_ is
practically step 1 on the affiliate SEO checklist. This post was almost
comically misleading, to be candid.

~~~
johnward
"and there's PLENTY of shady stuff that some of them do". I assume you are
talking about things like cookie stuffing and fraudulent purchases. In that
case yes it is a scam, but this author is crazy to just flat out say all
affiliates are scammers. I bet he sent $400 to nigeria and never got his $2.3
million royalty back.

------
troels
So where did the 200K come from? Or did the sales just remain at status quo,
while the affiliate claimed an increase in sales? In which case, why didn't
the alarm bells ho off right that second?

~~~
cgman
Person doing the advising was obviously clueless. What happened should have
raised a red flag right away.

------
robryan
Yeah, I think everyone running an ecommerce site and an affiliate marketing
campaign has seen this. I don't think Kogans stats on the new customer percent
are really an outlier. I have yet to see a coupon site that I could see
actually provided us with any value to have as an affiliate.

We also a long time back went down the road of paying a network a lot of money
based on their promises of the type of affiliate sales they could provide. The
traffic was horrible, generated a ton of fraud when there actually were sales
and the program was canned after probably only 100 sales. So definitely would
stay away from any major investment with an affiliate network.

That being said there are good affiliates out there (like to think I have been
one myself promoting products rather than ecommerce brands) that will deliver
great customers. Likely though you will have to do the leg work to find them,
they won't just join your program.

------
megfitz
The major red flag for me in this article was the line "He couldn’t really
answer the questions, but I agreed to run a small trial. Based on our results,
that marketing consultant is no longer with us." It really colored the rest of
the article for me - making me incredibly skeptical of the manager and his
instinct, opinions and judgement. It was no surprise then when the reason he
was "scammed" was because his checkout process had the form equivalent of a
big red call to action saying "leave my site" in the discount code box. I
_always_ Google for discount codes when I see those boxes.

If anything, this should be read as an educational piece for consumers about
who is really making money when you search for discount codes online, rather
than outrage at the affiliate marketing world.

~~~
ScottWhigham
_The major red flag for me in this article was the line "He couldn’t really
answer the questions, but I agreed to run a small trial. Based on our results,
that marketing consultant is no longer with us." It really colored the rest of
the article for me - making me incredibly skeptical of the manager and his
instinct, opinions and judgement._

That's interesting. Here's an article by someone you don't know and, within
the first paragraph, you are "incredibly skeptical". I think most people's
normal reaction would be to give the guy the benefit of the doubt - after all,
it's the first paragraph and that person knows a lot more details about
_their_ business than the first paragraph will give away. I think most of us
would read that line in the beginning, file it away for verification/thinking
as we read the article, then revisit that after we've been presented much more
of the article. For you to color your view so easily and quickly is
interesting - it's almost akin to someone walking around "looking for a
fight".

~~~
cruise02
> ...file it away for verification/thinking as we read the article, then
> revisit that after we've been presented much more of the article.

That's exactly what _skeptical_ means.

------
lmm
So when someone makes a reasonable suggestion that doesn't work out, you fire
them? Yeah, that sounds like a company I'd want to work for.

------
jotm
These guys really need a good affiliate manager. On most networks you are
allowed to specify the rules - no coupon code sites if you so wish, and all
affiliates using it can have their commissions revoked and get banned.

Affiliate marketing can be a great way to make sales - think about it this
way: you pay the network, which in turn pays the affiliates say 20%. These
affiliates then use their own methods (their own sites, Facebook ads, AdWords,
forum posts, a lot of stuff that you'd normally never think of) to drive
traffic. They do all the marketing and you make sales - the only thing they
don't do is manage your brand, if you are worried about that you're better off
without affiliates online.

------
AznHisoka
This is not a scam, but simply unawareness by Kogan. Affiliates want to make
money - they're rational people. They'll do anything to make money as long as
you don't take action.

The funny thing is if you forbid affiliates to have discount codes/coupons,
affiliate marketing is not worth it at all. It's only the loopholes that keep
affiliate marketing as profitable as it is right now. I mean who in their
right mind would want to exert effort to bring traffic where .01% of it
converts just for a measly 5% commission? No. You have to cheat a little to
make it worthwhile.

------
jyu
If you aren't experienced / competent, and you try to outsource it, you're
going to get taken. In this case it was marketing, but you could easily be
talking about outsourced development, buying a car, seeing a new dentist, etc.

The proper way to introduce affiliate campaigns to your product / service is
to succeed using paid advertising in-house. You need to establish your typical
CTR, EPC, CPA, LTV, bounce rate, for different channels. Restrict the channels
that affiliates use. Once you have your baseline, you can look at the numbers
for each individual affiliate to determine their numbers stack up against your
baseline. There are a lot more details that can't fit into an HN comment made
on my way to work heh.

One concrete example, so it's more tangible. If you don't explicitly restrict
pop up traffic, affiliates can pop and drop their cookie when someone with
adware installed visits your domain.

Edit: This story is very one sided. Sure the marketing consultant was probably
sleazy, and the affiliate marketing tricks were unethical, but the op did not
even do basic due diligence. If I were the op, I would at least look at how
the affiliate marketing programs of other mature ecommerce sites were set up.
Amazon for instance has an affiliate fee of 4% on electronics. Paying 10%
instead of 4% as affiliate fees is a red flag. Amazon payouts are made 60 days
after the marketing period, where they can conduct their fraud analysis. Also
you should be paying very close attention to their operating agreement which
outline what does and does not earn you an affiliate fee.

------
uts_
We're working on a solution to allow merchants to get users to unlock coupon
codes directly on their site (without having to go via an affiliate).

Seeing stellar results so far with plenty of feedback for improvement (we're
in beta). If anyone is interested in helping us test the concept further, hit
me up!

[https://gleam.io/app/rewards](https://gleam.io/app/rewards)

------
the_ed
Even though it seems like your setup is not really good, (as others have
remarked here) I think the central question you posed here still holds up to
some extend: "where do they get their traffic from?".

When getting involved with aff-networks I have noticed that there are quite a
lot of 'low quality' (of course depending on your needs) networks around that
basically lure people into visiting your site, other than referring truly
interesting people to you. That seems like business 1-0-1, but it really
amazed me how many large networks use shady landingpages with obscure
lotteries and other 'prizes'. (This was a about 2-3 years ago, but still..)

Always do a small run first, track what's happening and why and always be
suspicious about people 'selling' you other people's data/attention (data-
pushers, is what I used to call them) because that's basically what is is, to
some extend.

~~~
megfitz
But I think that's the point - the traffic is effective the merchant's own.
They're not driving spammy visitors or buying false visits; they're just
redirecting the customers who would have already been browsing the site back
to the checkout funnel - they'd just get the benefit of the affiliate tracking
code added to the order.

~~~
the_ed
In this case: yes. (Or for the most part.)

------
alohahacker
I'm suprised Retailmenot doesn't get called out for this link baiting more
often. I've studied their practices for years now and they do alot of shady
stuff.

I remember posting coupon codes to their site and having them being taken down
constantly because they weren't getting commission on them. They were original
company specials so no affiliate was getting paid (including me) but I posted
them merely for the people who were searching could save money. They gave
users 50% off hosting and the links on the retailmenot page were simply
regular links to the products page disguised as specials.

When I emailed them asking why they keep deleting my posted coupon they said
that any specials need to be run through them and they need a way to track aka
put their affiliate id on them.

Left a bad taste in my mouth.

------
damian2000
When I saw Ruslan Kogan listed at the top, I thought the story was about him
... same guy who launched the IE tax publicity stunt - got to wonder if this
is more of the same.

~~~
georgiecasey
good spot. i was thinking the same myself. he just got a do-follow link from a
PR7 blog for this post, so it was definitely worth it.

------
hollerith
This story would have been just as informative without the words "ugly",
"shocked", "shyster" and "scam".

------
blackdogie
This is another reason why you should rank for [your brand name] + coupons /
discount. Read Zappo's take on coupons [http://www.zappos.com/truth-about-
zappos-coupons](http://www.zappos.com/truth-about-zappos-coupons) . If people
know they can save 5-10% by a simple search they will at least try a quick
search.

~~~
johnward
Zappos understands that coupons are bad for all sides of the equation. Just
give customers the best possible price. Then you don't have to worry about
people hijacking your checkout process (which you are pretty much responsible
for causing if you use coupon codes).

------
joeblau
The user flow issue that Ruslan is describing was probably already happening
before he signed up for an affiliate program. The only thing that the
affiliate programs did was expose that he may want to rethink the way he
offers coupons on his site. Like most others have said, whenever I see a
"Discount Code" box, I go search for the code.

------
Eduard
Lessons learned: only pay affiliates whose customers forwards lead to a new
shopping session, not an existing shopping session.

------
conductr
Sounds like the bigger problem is showing the user a discount code field when
not utilizing discount codes.

Remove the field, not the affiliates

------
ochekurishvili
What about limiting affiliates with advertising a Kogan related keywords and
even some traffic sources? I've seen such limitations for many of brands
represented in the affiliate networks.

If managed properly affiliate marketing definitely works and yes, it's worth
expanding to.

------
mnml_
Of course a lot of people are trying to leech revenues in Affiliate marketing,
that why affiliate need to be reviewed and monitored. It's not a scam you just
accepted to do business with people without checking where their traffic comes
from.

------
Killah911
How the hell did he not notice his overall sales not being affected by
$200k/wk. I figure you'd be able to tell right away if your sales went up that
much.

------
infinitone
On the topic of networks- anyone know a good affiliate network for startups?

------
mathattack
This is more than a scam, it's outright theft.

~~~
johnward
It's not theft. You put a coupon code box on your checkout. How can you NOT
expect people to go look for coupon codes?

~~~
mathattack
My interpretation of the article is they charge the company for a referral
even if a coupon isn't found or used. That's theft. Or did I misread? It's not
just looking for coupon codes (which isn't bad) but mischarging. (It's not the
customer that's stealing, it's the referral service)

------
powertower
I don't quite get it.

Was there sales _growth_ of 200K or not? Yes/No - it's that simple.

It seems like this would be the main thing to look at.

But instead the post goes into hypothesis - almost like either:

A) The answer is so blatantly No that it does not need addressing.

B) He's trying to sweep the above question away because he dislikes the idea
of Affiliates driving _previous visitors_ back for more business.

------
cgman
It's called cookie stuffing. Your company should have done your research
before doing affiliate marketing and taken steps to prevent this kind of
fraud.

~~~
dangrossman
Cookie stuffing is something different; that usually refers to outright
trickery like embedding affiliate links in images or malware. This is just
affiliates taking advantage of the fact that if you put a coupon code box on a
checkout form, people will search for coupons right before checking out. Run a
coupon site, put a "click here to activate coupon" link on it, and suddenly
you're being paid for sales the merchant was already going to get.

