Exploiting Online Referral Schemes

Apr 21 2014, 3:38pm CDT | by

Recently I wrote about Google’s attempts to increase paying customers of its Google Apps service by paying a referral fee. While I was vaguely dismissive of the concept, one aspect I hadn’t really considered was the opportunity for people to game the system. In the online world, every initiative seemingly opens up the chance for opportunistic individuals or organizations to use the program for their own gains. Reading a blog post over at BrandVerity, it seems that the Google referral program is no different.

BrandVerity explained that with online referrals, companies rely on URL systems that can easily be gamed. These users exploit referral programs by locating their unique referral link and then running pay per click ads through it. Whenever a visitor comes through that link and completes some sort of action (signs up for an account, places an order, makes a booking), the referring account gets a reward. This usually comes in the form of account credit or a discount, but can also be cash. Writes BrandVerity:

In order to push a significant amount of PPC traffic through their referral link, these users tend to engage in brand bidding—poaching traffic from their target company’s branded keywords. This helps them ensure a high conversion rate and a relatively cheap cost-per-click, allowing them to turn a profit in the process. Furthermore, since the referrer’s ads always land on the brand’s domain, they can also displace the brand’s own ads. This makes this tactic nearly identical to affiliate ad hijacking

After Google made its announcement, BrandVerity set up some monitoring and found numerous examples of a Google Apps referrer pretending to be Google in paid search. Basically, the referrer is bidding on Google’s brand terms, masquerading as Google in their ads, and then sending the traffic through their referral link. This gives the referrer credit (and thus $15 a pop) for each new user that signs up through this pathway.

Now it could be argued that everyone here is happy – users signup for the service they want, the service vendor gets paying customers and the dodgy referral agent gets a cut. There is however a potential economic cost – Google pays $15 for a signup but potentially the signup comes from traffic that the referrer has “poached” from those that Google would have received anyway.

It’s also worth considering what effect these ads can have on a company’s brand. With messaging being left in the hands of many autonomous referrers, each with their own set of incentives, there are many opportunities for inconsistent or even deliberately misleading communication.

BrandVerity gave the example of an ad targeting Dropbox that seems to offer 16 gigabytes of free space. According to the plans on Dropbox’s pricing page, users start with only 2 gigabytes of free space. Although users can increase their free allotment to 18 gigabytes (by referring new users, amusingly enough), this isn’t the base offering. The ad therefore omits to mention the true details of the offer – and in doing so potentially causes Dropbox a negative brand impact.

There are even more impactful examples of this behavior. Exclusive fashion brand site Gilt, has an attractive referral scheme. The company promises a $25 discount to both the referrer and referred user, with poached referrals, Gilt could potentially pay $50. Given that Gilt places its own ads and advertises on its branded keywords, referring ads could displace Gilt’s own ads, and drive up their cost per click as well.

BrandVerity has uncovered this sort of activity over a number of different brands including Uber, Evernote, Vitacost, Hulu Plus and FreeAgent. While this sort of activity won’t be likely to end vendors use of referral scheme, they’re certainly something to take into consideration and to factor into the calculations that vendors make about potential schemes.

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Britain to repay part of First World War debt
London, Oct 31 (IANS) British Chancellor of the Exchequer George Osborne Friday announced that the British government will pay off part of the country's First World War debt as part of the redemption of bonds stretching as far back as the 18th century.
 
 
UN-Habitat presents the first World Cities Day
Shanghai, Oct 31 (IANS/EFE) The UN Human Settlements Programme (UN-Habitat), headed by former Barcelona mayor Joan Clos, Friday launched its first World Cities Day in China, to be held every Oct 31 to promote sustainable development.
 
 
Finnish scientists identify new type of black hole
Helsinki, Oct 31 (IANS) Finnish researchers have discovered a new type of low-mass black hole, which is a bright celestial body that emits X-ray, the University of Turku has said.
 
 
Union Carbide ex-chief Warren Anderson is dead
Washington, Oct 31 (IANS) Warren Anderson, former chief executive officer of the Union Carbide Corporation, is dead, a media report said Friday. He was 92.
 
 
 

Latest from the Network

How Paul Walker would've reacted to 'Furious 7' trailer
Los Angeles, Oct 31 (IANS) Actress Michelle Rodriguez believes that late actor Paul Walker would have been amazed after watching the "Furious 7" trailer. "He would gaze with his beautiful blue eyes and that wonderful...
Read more on Celebrity Balla
 
Bahrain on alert over jihadi threat to school teachers
Manama, Oct 31 (IANS) A security alert has been issued by the US Navy warning of jihadi calls to attack Western school teachers in Bahrain. Drawing attention to the danger, the Naval Support Activity Bahrain in an...
Read more on Politics Balla
 
Britain to repay part of First World War debt
London, Oct 31 (IANS) British Chancellor of the Exchequer George Osborne Friday announced that the British government will pay off part of the country's First World War debt as part of the redemption of bonds...
Read more on Business Balla
 
North Korea denounces South Korea for delaying OPCON takeover
Pyongyang, Oct 31 (IANS) North Korea has denounced South Korea for delaying retaking wartime operational control (OPCON) of troops from the US, saying the move has taken the Korean Peninsula "to the brink of war". The...
Read more on Politics Balla
 
UN-Habitat presents the first World Cities Day
Shanghai, Oct 31 (IANS/EFE) The UN Human Settlements Programme (UN-Habitat), headed by former Barcelona mayor Joan Clos, Friday launched its first World Cities Day in China, to be held every Oct 31 to promote...
Read more on Business Balla
 
Asian integration could boost organised crime: UN
Bangkok, Oct 31 (IANS/EFE) The UN Friday called on Southeast Asian countries to take measures to prevent the current increase in trade and migratory flows from causing the expansion of organized crime. According to...
Read more on Politics Balla
 
Julia Stiles and Ray Liotta cast in Go With Me
Julia Stiles and Ray Liotta have been added to the cast of Anthony Hopkins' new film 'Go With Me'. The action-drama, which will begin shooting in mid-November, tells the story of a young woman who returns to her home...
Read more on Movie Balla
 
Seth Rogen to star in Steve Jobs biopic
Seth Rogen is in talks to star in Sony's Steve Jobs biopic. The 'Bad Neighbours' star is in negotiations with the studio to take on the role of Apple co-founder Steve Wozniak - who created the Apple I computer and co-...
Read more on Movie Balla
 
Jennifer Lopez has struggled to love herself
Jennifer Lopez say she's spent much of her life beating herself up for not being good enough. The 'Dance Again' hitmaker, who has six-year-old twins Max and Emme with her third ex-husband, Marc Anthony, puts a lot of...
Read more on Celebrity Balla
 
Julianne Hough's teary tribute to sister
Julianne Hough broke down in tears while praising her older sister. The 26-year-old singer/songwriter made an emotional speech in which she praised her older sister, Sharee Wise, admitting her sibling inspired her to...
Read more on Celebrity Balla