What is an Affiliate Scam?
What is an Affiliate Scam?
March 26, 2015 // In Supplement Scams // By
We’ve all seen the ads before: “Chicago mom discovers weird trick to lose belly fat. Doctors are outraged!” Advertisers are always coming up with new and creative ways to get your money, while often ignoring ethics and even FTC regulations. So who’s behind these scams that are running rampant in the fitness industry?
First, we’ll need to take a look into a recent internet phenomenon called Affiliate Marketing.
What is Affiliate Marketing?
Affiliate marketing is the process of a person (the affiliate) earning a commission by selling someone elses’ (the merchant’s) products. Selling other people’s stuff for a commission has been around for ages, but the internet opened the floodgates for affiliates to scale exponentially while reducing upfront costs and risk to almost zero.
In most cases, the merchant takes care of everything, including manufacturing the product, warehousing, shipping, returns, credit card processing, affiliate payouts, etc. The affiliate does not carry any of these risky costs - they solely focus on marketing and sending the merchant customers. Nearly anyone can sign up as an affiliate and start earning money without investing a cent.
Why does Affiliate Marketing often lead to blatant scams?
When you have two entities that team up with questionable ethics and the common goal of making a profit, you end up seeing some pretty outrageous stuff. While not all merchants and affiliates are terrible people, the affiliate-merchant relationship is not typically set up to protect the consumer.
The barriers to entry for affiliates are incredibly low. Basically anyone over the age of 18 with a little computer know-how and $10 for a domain/hosting can get started. This has created a market that is saturated with self-taught advertisers, who are fiercely competing with one another for your attention and ultimately your money.
Merchants don’t take on any extra risk for each affiliate that joins their program. They only pay the affiliate when the customer actually pays them. So many affiliates don’t do a good job screening affiliates. A sale is a sale, right?
Let’s see this theory in action.
Here’s an example: (I’ve made up the story, but the websites are real)
Meet Lucifer, a 19-year old college student. He has some computer skills and wants to make some extra beer money by messing around on the internet in his spare time. He doesn’t want to invest any money or worry about manufacturing, warehousing or shipping physical products. He decides that affiliate marketingis the way to go.
Lucifer spends some time researching various “offers” in the supplement industry. He finds one called “Maximum Shred” (https://maximumshred.com) that will pay him $32 for every customer he sends. He signs up to their affiliate program, and they give him a unique affiliate link to start marketing, so they know which customers are a result of Lucifer’s efforts.
Lucifer creates a website and writes a blog post about Maximum Shred (http://www.strongmenmuscle.com/maximum-shred/). The post is guised as an “honest review”, but is really an underhanded attempt to get you to sign up to the “free trial”. Lucifer has never actually used the product. His post is sprinkled with his unique affiliate link so that he gets credit for any customers he refers to the Maximum Shred free trial. He adds big “Buy Maximum Shred Now” buttons to get you to click through.
Meet Stewie, a 41 year-old father of two who hasn’t had time to hit the gym in 10 years, and has since put on about 30lbs from his prime. He’s getting back into a workout routine, but wants to see results a little faster. He has heard of a product called “Maximum Shred” so he does a Google search for the product. He see’s Lucifer’s site in the search results and read’s his entire blog post.
Stewie clicks through to the Maximum Shred site, and is enticed by the product claims and the “free” trial where he only has to pay $5.99 Shipping and Handling. Money is tight right now so he figures that six bucks can’t hurt. He enters his credit card information, but doesn’t realized that he will be automatically billed $89.99 a month for a subscription after the 14-day trial expires.
Once the transaction goes through, Lucifer immediately earns $32. Two months later, Stewie sees that he was billed almost ninety bucks the last two months and is outraged! He contacts Maximum Shred and demands a refund. They tell him that they can cancel his subscription but they can’t refund his prior payments.
Stewie will never buy from Maximum Shred or trust Lucifer’s site again, and rightfully so. Maximum Shred and Lucifer don’t care. They’ve squeezed money out of Stewie and know that there will be other unsuspecting customers to lure in.
Does this mean that all affiliates are bad?
Absolutely not, but as I mentioned earlier, the agreements are often made in the best interest of the merchant and affiliate, and not the consumer. While selling for a commission can be an ethical and sustainable long-term business model, it is often an avenue for short-term profits.
Sadly, I’ve met many affiliate marketers over the years and see a recurring theme: they don’t respect their customers. I’ll ask them, point blank “Do you feel bad for promoting a Free Trial that profits from a backdoor recurring billing method?” I’ll get answers like “Well they should have read the fine print” or “If they are stupid enough to buy the product, it’s their own fault”. Here’s an example of an affiliate answering this question on an affiliate marketing forum: http://www.warriorforum.com/ad-networks-cpm-cpl-display-sem/647111-cant-ethically-do-some-cpa-offers.html#post6758126 - You can see that some affiliates have morals, but the ones that don’t can ruin it for the rest.
Clearly these guys aren’t looking to build lifeliong relationships with returning customers. They are trying to take money from some sucker and then move on to the next one.
Why don't the merchants do something about the shady affiliates?
Many merchants have “compliance” guidelines: a set of rules that affiliates must follow in order to get paid. These have varying levels of enforcement. If an affiliate is making you thousands of dollars of revenue a day, are you really going to want to sever their relationship because they are doing something a little bit questionable? Often times these guidelines are just there to protect the merchant in the event that an affiliate gets caught doing something against FTC guidelines.
Is the FTC supposed to be protecting us?
Yes, and they are making progress. Slowly. While the FTC does not monitor every blog, they will “investigate” complaints. They slap a handful of violators with fines and hope this will get the rest to follow the rules. Here’s some examples:
Endorsements: Any blogs with reviews must disclose their relationships with the product (https://www.ftc.gov/news-events/media-resources/truth-advertising/advertisement-endorsements)
Health claims cannot be false or unproven: (https://www.ftc.gov/news-events/media-resources/truth-advertising/health-claims)
How can I identify and avoid affiliate scams?
Affiliate scams give the supplement industry a bad reputation, and here at SupplementReviews.com, we are working to change that. Our short advice is to stick with the products and retailers that are highly reviewed on our site.
For a more detailed list, see our follow-up article: How to Identify and Avoid Affiliate Scams