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Are Coupon Browser Extensions Committing Affiliate Program Fraud?

New Data on How Coupon Extensions Like Honey Falsely Claim Credit and Artificially Boost Affiliate Fees for Sales They Didn’t Influence

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Introduction

Affiliate program fraud has long been a major pain point for ecommerce merchants using affiliate programs as part of their overall marketing strategy. And while most merchants are familiar with the concept of affiliate fraud, many are not as familiar with another related issue relating to how coupon extensions like Honey and CapitalOne Shopping claim attribution for sales they did not generate, often resulting in misattributed affiliate fees and a distorted view of marketing performance.

The way that coupon affiliates - and affiliate marketing platforms - use cookies to claim credit for sales regardless of what the original source of the visitor sessions is, and regardless of whether they were successfully able to apply a coupon at checkout - raises important questions about the ethics behind these practices. 

In this paper, we explore the question of whether this behavior by coupon affiliates constitutes affiliate fraud, or if it falls into the gray area of “questionable practices.” And regardless of how it is classified, we share data on how this behavior is impacting merchants both quantitatively (in terms of affiliate fees and margin erosion) and qualitatively (in terms of performance marketing inefficiencies driven by skewed attribution reporting).

Read on to learn more about how each part in the process works, or jump straight to the section that is of the most interest to you.

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Affiliate Marketing Basics

What is Affiliate Marketing?

Affiliate marketing networks aggregate publisher websites and use them to advertise products and drive visits to ecommerce websites. It is a performance-based marketing model that allows ecommerce retailers to only pay (via affiliate fees that are a percentage commission) for leads that turn into sales.

Ultimately, the idea of affiliate marketing is to provide retailers with a pay-for-performance marketing solution that guarantees they won’t need to pay a commission unless a sale is made. 

Sounds like a win-win, right?

 

Key Benefits of Affiliate Marketing

Some of the key reasons online retailers choose to engage with affiliate programs include:

  • Increased traffic and sales through performance marketing, presumably with little to no up-front cost to the merchant.
  • Low cost to implement: Affiliate marketers come up with their own marketing plans in order to promote your products on their websites, with the bulk of the initial effort required on the part of retailers being vetting and selecting affiliates.
  • Low risk: Payments to affiliates are only made when there is a completed sale attributed directly to the efforts of the affiliates.
  • Higher ROI: The affiliates in the network typically target a very specific audience that will benefit from your product, leading to higher conversion rates and higher ROI. 

How Affiliate Marketing Works

As brands grow, many marketing teams rely heavily on affiliate marketing programs to manage all aspects of their affiliate marketing, as it becomes increasingly difficult to manage manually. Programs like ShareASale, Impact and PepperJam purport to provide full-service management, to handle all tracking, reporting and payments, in addition to giving brands access to a larger network of affiliates to tap. 

Affiliate platforms use cookies to track visitor information, and using a last-click attribution model, charge merchants whenever they determine that a sale was completed by a visitor sourced by the affiliate network.

In theory, this approach allows the affiliate platforms to accurately identify when the affiliate is responsible for a sale and therefore qualifies for a commission. But the model isn’t perfect, and when it comes to coupon extensions (which themselves are also affiliates), can lead to retailers paying overinflated affiliate fees to coupon affiliates that didn’t actually influence sales.

Coupon Browser Extension Basics

What are Coupon Browser Extensions?

Coupon extensions are browser extensions that shoppers can install in their web browsers (e.g. Google Chrome), and that allows them to discover and automatically apply coupons to shopping carts on the ecommerce websites they visit. As of this writing, about one-third of US shoppers have a browser extension installed.

There are upwards of 15 different coupon extensions that shoppers can choose from, with the most popular ones being Honey and CapitalOne Shopping.

 

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How Coupon Browser Extensions Work

Let’s dive in with a visual to help show the flow of how coupon extensions work, and how they use cookies to claim credit for ecommerce sales:

Extensions identify and catalog coupons in three ways:

    1. They scrape them from the code of an ecommerce site when an extension's user manually types the code in at checkout, or scrape them from other areas of the web;
    2. Users can directly submit coupon codes to the extension so they can be shared with other users; and
    3. Some merchants may choose to partner with the extension and create coupons specifically for them (usually in an effort to prevent extensions from scraping larger codes, but rarely does this change the ultimate code chosen for the sale).

Here are the steps a shopper must take to activate a coupon extension:

  • They download a free extension to their website browser (ex. Chrome, Safari or Firefox) and accept the terms of service.
  • The extension will collect data on currently available coupon codes across a variety of ecommerce websites.
  • When the shopper puts items in their cart on an ecommerce site and arrives at checkout, the extension will pop up in their browser and ask the shopper if they would like the extension to test to see if it can get them a discount. If they accept, the extension will automatically inject discount codes into the promo code field at check out and will apply the largest valid coupon code available to the shopper’s cart, or, if no valid codes are found, it will simply present a pop-up list of recently used promo codes and a message saying that the user already has the best deal.

While they can benefit shoppers by saving them money, coupon extensions can cause problems for ecommerce merchants by:

      1. Allowing for the use of unauthorized coupons: Shoppers who may not have completed a required act to earn a discount (ex. subscribing to a newsletter) will have access to it via the coupon extension and can use it to significantly reduce the value of their cart (without delivering any added value to the merchant).
      2. Eroding coupon strategy: Most ecommerce merchants use coupons very strategically to encourage purchases without overly eroding their margins. Coupon extensions eliminate merchants' ability to control their discount strategy by allowing the rampant use of unauthorized coupons.
      3. Reducing profit margins: The combined effects of unauthorized coupon usage and lack of merchant control over their own discount strategy results in decreased profit margins. 
      4. Misleading marketing attribution data: Many ecommerce merchants rely on discount or promo codes to track the effectiveness of their marketing campaigns (ex. a special code might be mentioned as part of a podcast ad as a way to track how many of that podcast's listeners make a purchase). By scraping and making limited use codes available to any user, coupon extensions eliminate the merchant's ability to rely on that data to evaluate marketing ROI.

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What is Affiliate Program Fraud?

Affiliate program fraud occurs whenever affiliate network commissions are earned through fraudulent means. There are a number of ways affiliates can claim credit for sales they didn’t actually drive, causing merchants to be charged false commissions.

Types of Affiliate Program Fraud

Some of the most common types of affiliate program fraud include:

  • Cookie Stuffing Affiliate Fraud: This type of fraud involves affiliates placing a third party cookie on a user’s computer to track their activity, and then falsely taking credit for purchases that visitor makes on websites that use the affiliate program. Essentially, the affiliate is following the user around the internet and taking credit for sales they didn’t actually drive.
  • App Install Attribution Fraud: This particular case is similar to the previous example, in which affiliates take credit for app installs they didn’t actually drive, typically by tricking platforms into switching credit from another source.
  • URL Redirect Fraud (sometimes referred to “Typo Squatting”): In these cases, an affiliate may purchase domain names similar to merchant website names in the hope that users will misspell the domain name. They will then redirect the visitor to the real website, crediting the affiliate with driving a sale, despite the fact that they never went to the affiliate site.
  • Malicious Software: Sometimes affiliates will trick users into installing software on their computers, often under the guise of being part of a “loyalty” program. This software will cause any visits to merchant websites to be redirected through the affiliate website (invisibly to the user), thus claiming credit for sales driven by those users, even though the visitor never actually visited the affiliate site.

Affiliate Program Misattribution Through Coupon Browser Extensions

Coupon extensions like Honey and Capital One Shopping belong to many of the most popular affiliate networks like ShareASale, Impact, and PepperJam. This means that if Honey or CapitalOne Shopping source a sale on your website, and if you use an affiliate program, you will be charged a fee for that sale. 

This makes sense on the surface. 

If Honey sources the sale, then there should be no reason not to pay them a commission. In this case, the affiliate program worked exactly as intended.

But in many cases, this is far from what is actually happening behind the scenes. In fact, because coupon browser extensions like Honey are installed by shoppers, and operate on the browser level, they have an elevated level of permissions to run scripts and inject cookies that hold the potential to fundamentally alter affiliate attribution data, and artificially inflate commission payments. 

How Does it Happen?

Let’s see how the use of Honey, when used by a shopper on a site that is part of an affiliate program, adjusts the flow from earlier in this whitepaper:

 

 

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When a visitor arrives at your website (through any channel), here are the following steps that occur:

  • The buyer navigates through your website and adds items to their cart.
  • Honey, or other browser extensions, will pop-up and offer the user the option to test discount codes that Honey has in its database.
  • If the user interacts with the extension in any way, then Honey will drop a 30 year, first party cookie, using something very similar to the “cookie stuffing” affiliate program fraud method discussed earlier, that triggers the affiliate platform (e.g. ShareASale) to mark the user as “referred by Honey.”
    • This happens regardless of the fact that the user actually arrived at your website through some other channel like Google search, paid advertising, email marketing, or social media.
  • When the user checks out, Honey will attempt to give them a discount. If it finds a valid promo code, it will automatically apply it at checkout, thereby providing a discount to the buyer.
  • If it does not find a valid discount code, it will display a message saying something along the lines of “Congratulations! You already have the best deal.”
  • Following the close of checkout, you, the merchant, are charged a fee through your affiliate program for Honey having “referred” the user.

At the end of this chain of events, you as the online retailer will have potentially paid many times over for this sale, driving up your customer acquisition cost (CAC) and ultimately, reducing your profit margins. 

Just take a look:

  1. You have paid for whatever medium delivered the user to your website in the first place. This payment could be in either direct dollars (for example, via a Facebook ad) or your own hard work ( effort you put into your SEO strategy and content that drove your rankings for their search term that landed them on your site).
  2. You may have sacrificed margins with a coupon the user wasn’t authorized to use in the first place. Learn more about how coupon extensions allow access to unauthorized coupons in this detailed article. In most cases, the user would have bought with or without the coupon, meaning the coupon did nothing to drive incremental revenue.
  3. You paid Honey an affiliate program commission. At the end of the day, you then paid Honey a commission for driving a sale (which they didn’t really drive) - and this payment is on top of the cost you paid to acquire that user in the first place.

What is ultimately happening here is this: You are paying twice for buyers who were driven to your website, and you are paying Honey to give those buyers discounts they don’t even need.

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How Big is the Problem?

Our research shows that this is happening all the time and across all channels.

For one cleanCART customer, we found in just 14 days, Honey attempted this process 211 times. For this particular customer, Honey was charging a 12% commission through ShareASale, while the ShareASale network itself also charged an additional 2.4% commision. 

Ultimately, a $100 sale ends up looking something like this.

 

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On all 211 attempts, cleanCART was able to prevent this misattribution and save the merchant the hefty 14.4% of gross sales they would have had to pay to Honey and ShareASale. 

Across the network of websites currently using our Affiliate Guard product, we’ve seen Honey attempt to claim an average of 4.88% of total gross revenue and ShareASale attempt to claim an average of 0.98% of total gross revenue.

In addition, this customer saw Honey claim attribution for sales that actually originated from at least 8 other sources, including organic search, paid advertising, social media, and more.

This is just one example of a problem that is happening on a massive scale, to thousands of ecommerce retailers.

Perpetual Cookies

To add to this, our research even shows that Honey may execute a series of steps resulting in visitors being marked as “referred by Honey” in the affiliate platform for 30+ years, even if the user arrived at the store organically, via email marketing, or otherwise.

It does this by dropping a 30 year, first-party cookie in the user’s browser. 

This means even if a visitor doesn’t purchase immediately, and they come back again in the future, Honey will still find a way to claim credit for the sale and charge an affiliate commission … for up to 30 years.

Attribution Fraud or Not?

Earlier, we posed the question “are coupon browser extensions committing affiliate program fraud?”

While the answer on that is not clear, what is evident is that whether what coupon extensions are doing is legal, or even permissible, is irrelevant. The fact is that in many cases, they are claiming credit - and getting paid - for sales that they did nothing to drive. 

At a time when online retailers are under tremendous pressure from supply chain shortages, and CAC is rising due to a more challenging Facebook ads environment, paying an unearned affiliate fee on top of other marketing acquisition costs can be the difference between losing or making money.

Retailers looking to protect their margins and maximize profitability should determine whether this behavior is happening on their websites, measure the extent of the financial impact, and take steps to put a stop to it.

Stop Coupon Extension Affiliate Attribution Problems in their Tracks

Ultimately when your store suffers from these issues with affiliate programs and coupon extensions, you end up with:

  • Margins that suffer
  • Reduced customer lifetime value
  • The inability to make decisions on where your marketing dollars are actually working

So, how do you stop these problems in their tracks? 

Simple. 

The answer is cleanCART Affiliate Guard. cleanCART Affiliate Guard not only prevents Honey, and other coupon browser extensions, from injecting unauthorized coupon codes at checkout, it also protects you from affiliate misattribution issues. cleanCART prevents affiliates from dropping cookies that claim credit for sales that didn’t actually originate from their efforts.

Learn more about cleanCART Affiliate Guard

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