Affiliate fraud cybersquatting model more lucrative than pay-per-click

While pay-per-click (PPC) sites remain a large part of the cybersquatting business model, there is another wave of massive-scale online infringement monetization called affiliate fraud that often goes undetected.

FairWinds Partners analyzed this monetization practice, which can garner 5.6 times the revenue than that of a pay-per-click model on the same Web site. An average typo used to pull off this sort of affiliate fraud against a top Internet retailer’s brand generates $100,000 in cost to the brand annually.

Some companies offer legitimate affiliate programs that allow third-party Web site owners to post links and banners with the company’s branded content on their site or to send traffic to the company’s site directly through domain forwards. In return, the owner of the site hosting the link receives a commission for every click-through that results in a purchase. This lucrative commission structure has enticed cybercriminals to take advantage of affiliate programs by registering typo domains that redirect to legitimate content and enable them to collect affiliate referral fees.

Since most instances of affiliate fraud result in the infringing domain resolving to the expected brand site, it is extremely difficult to distinguish the domains that are illegitimate. Moreover, it is nearly impossible, not to mention highly impractical, for companies to purchase every possible variation of their domains.

Identifying the domains that are the most intuitive to Internet users and the most valuable for fraudsters can help prioritize which domains companies should register or pursue for recovery. Proper prioritization can only be achieved through an in-depth understanding of consumer behavior; how infringers select domain names and conduct domain abuse; and what avenues are available for recourse.

Knowing that affiliate fraud provides a lucrative opportunity for cybersquatters and understanding that the practice may gain popularity allows brand owners to take proactive steps to protect their brands and reduce payment of illegitimately acquired affiliate fees.