Right now if you go to the URL e-toro.com, you will be taken through a series of links before finally being dumped on to the eToro homepage. But if you check the topline URL then you can see that you have been ‘sent’ there by an affiliate, most likely called Forex Zone.
This is in effect a kind of marketing fraud. The affiliate is taking organic traffic from eToro, redirecting it through a bunch of URLs, and then making it look like they sent you there.
Consequently, eToro ends up in a situation where they may be paying affiliate fees for traffic that they would have otherwise obtained themselves.
Brokers are not unique in being targeted by ad fraudsters. For example, several years ago, Uber switched off $100m of their total $150m ad spend budget. They saw zero drop in app downloads afterwards.
Uber’s example is an interesting one because they operated marketing campaigns that were structured in a similar way to those brokers use.
In simple terms, they would only pay if someone actually clicked, downloaded the app, and started paying to use it, much as brokers will often only pay out to affiliates if a person deposits and makes a certain number of trades.
The reason that Uber saw no decline in app downloads was ultimately because of the same sort of fraud that the eToro link above is attempting to achieve – attribution fraud. Uber’s ads were reaching the intended target audience anyway, it was just their ‘partners’ were making it look like they were the ones responsible for it.
From speaking to executives at different brokers, it seems this is ultimately the most common problem that they face. And it also appears to happen very frequently.
In fact, the day before I sat down to write this, I sent a screenshot of a Google search ad to the team at prop trading firm PipFarm, because it had a spelling mistake in it. It turned out it was actually one of their marketing ‘partners’ trying to make it look like it was PipFarm posting the ad.
“If you are a broker affiliate, you do not have to refer that many people for it to become very lucrative,” William Burnham, Global Head of Digital Marketing at Capital.com told me. “The cost of attempting attribution fraud is usually negligible as well. So you have a strong incentive structure for it to happen and it’s a battle we are constantly having to fight as a consequence.”
My sense is that for some brokers this is not a problem because they don’t actually have the structures in place to offer marketing partnerships that can be gamed.
However, increasingly I believe that many firms are being targeted but aren’t even aware that it’s happening. Much as abusive traders tend to find more success at smaller firms, with fewer and less experienced dealing desk employees, so too can ad fraudsters enjoy more leeway at firms where people aren’t aware of what they are doing.
“Ultimately you need a lot of experience and the ability to analyse your marketing data to manage ad fraud risks,” said Iskandar Nsier, Head of Business Development at broker PrimeXBT. “We have a very strong marketing data team but if you did not have that, I do not see how you could manage this problem properly – it would just not be possible.”
Some tools do exist to manage ad fraud by automatically identifying it. For example, the firms that I spoke to seemed to mainly use AppsFlyer. eToro and at least one other major industry player use a company called Konnecto.
These do not appear to be sufficient though. No one I spoke to said that the fraud problem was ‘solved’ because they had used a third-party tool. To go back to the dealing desk analogy, risk management tools may be useful to help with hedging strategies but they can’t do everything for you.
For the most part, it seems that fraud becomes apparent only – as Nsier said – by looking at anomalies in marketing data.
An executive at one firm noted that, after entering a new market with several partners, they were seeing almost all their affiliate traffic go back to just one firm. Ultimately it transpired that this partner was stealing attribution for almost all of their affiliate traffic.
The downside of this is obvious. Partners who could be referring strong traffic end up feeling like they are being played by the broker, and then end up losing their business. Alternatively you end up in a situation like Uber – you are paying for traffic that you’d be getting anyway.
“Probably the most common warning sign is that you start to see a flip in paid vs organic,” said Burnham. “There is no overall increase in app downloads from those two channels but you start to see a rise in affiliate downloads, versus organic downloads. If that’s happening then you’ll need to start looking at where the affiliate downloads are actually coming from.”
What’s also striking about a lot of the fraud you see is how ‘smart’ but also completely unsophisticated it actually is. Just as a lot of internet fraud is ultimately achieved by very simple phishing emails, so too are the methods used by fraudsters targeting brokers.
For example, all it takes for the e-toro example to work is to buy the URL and set up a redirect. Alternatively you do a simple cost analysis by bidding on ad keywords. All you have to do is make sure the cost of doing so ends up being less than you are earning from affiliate fees.
Even app marketing is not that ‘smart’. In most cases, fraudsters appear to just do fake clicks within an app. This then makes it look like they were ‘responsible’ for the lead generated, even though it would have come organically or from another party. Some are even more basic.
“We had one IB that just got his friends to sign up with us,” said the Chief Marketing Officer at one MENA-based firm. “They made no deposit, didn’t do anything, and he was asking for rebates. You think ‘come on, at least try and do something intelligent.’”
The reality is that this is not going to go away. As Burnham noted, the incentive structure is ultimately the driving force here. If you are in the UK, you could probably live – not necessarily that well but still – by referring eToro or Plus500 three to five clients per month. The odds are this would be even more extreme if you are dealing with an IB agreement, where rebates are based on continual trading volume.
So long as these structures are in place, ad fraud isn’t going anywhere. Brokers are going to have keep dealing with it.
