The Association of National Advertisers (ANA) recently speculated that ad fraud will cost online advertisers an estimated $6.3 billion globally in 2015. ANA closely tracked several campaigns of active advertisers and discovered that 11% of bot fraud occurred through display traffic while an alarming 23% happened via video advertisements.
Anyone actively participating in online marketing knows that their campaigns are susceptible to fraud and that revenue generated via fraudulent activity cannot be recovered. However, while some people may shy away from boosting their sales via internet advertising, the Federal Trade Commission (FTC) and Interactive Advertising Bureau (IAB) have helped the affiliate marketing industry thrive through the implementation and enforcement of regulations created to fight deceptive and fraudulent marketing activity.
The IAB Self-Regulatory Program
The IAB Self-Regulatory Program Principles, which serve as guidelines for online advertising practices.
The IAB’s Self-Regulatory Program established the following principles:
1) Educational Principle – advertiser will educate themselves, partners and consumers on best practices for online marketing
2) Transparency Principle – advertiser will disclose intent of sharing consumer data with third party entities
3) Consumer Control Principle – advertiser will offer consumer the option to not allow sharing of their information to third party entities
4) Data Security Principle – advertiser will secure acquired consumer data with reasonable and necessary means
5) Material Changes Principle – advertiser will notify consumers and receive express consent prior to making material changes to their operational procedures and data sharing policies
6) Sensitive Data Principle – advertiser will be especially diligent with the protection of sensitive information including data acquired from minors as well as financial information, social security numbers and other data that requires privacy protection
7) Accountability Principle – advertiser will hold themselves, partners, consumers and competitors to the standards and best practices set in place by the IAB
The FTC Division of Marketing Practices
Since 1914, the FTC has made concrete efforts to protect consumer rights while not interfering with the normal lifecycle of legitimate business opportunities.
As online marketing and sales activity has increased rapidly over the past decade, the FTC established the following rules to prevent fraud and make ecommerce more secure for consumers:
1) Telemarketing Sales – prohibits deceptive sales calls and protects consumers from abusive telemarketing practices, including late-night and/or incessant calling
2) CAN-SPAM – requires advertisers to clearly label their emails as an advertisement or having adult content as well as giving the consumer a physical and electronic method for opt-out of future advertisements
3) Franchise and Business Opportunity – requires franchise and business opportunity sellers to clearly disclose the earnings structure to prospective buyers prior to purchase
4) 900 Number Rule – requires 900 Number (pay-per-call) sellers to disclose pricing for services, prohibits marketing to minors, and requires that advertisers give consumers a clear procedure for disputing accrued charges
5) Funeral Rule – requires that funeral directors disclose all costs related to services rendered
6) Magnuson-Moss Act – requires merchant to give consumers warranty information prior to the purchase of a product
In addition to the above rules, the FTC also established the Division of Marketing Practices, which developed the Internet Investigation Training program. This program regulates marketing practices for federal, state, local and international law agencies. The Division also holds regular symposia on current legal issues regarding emerging technologies and actively prosecutes companies and individuals who violate legislation.
Although fraud will continue to happen regardless of the instated rules and principles, the future of affiliate marketing is bright. Both advertisers and consumers have mostly cooperated with best practices to create a more efficient and secure ecommerce climate. As long as participants continue to educate themselves and implement the proper procedures put in place by organizations like the FTC and IAB, affiliate marketing will continue to be the most efficient means for brands to reach their ideal demographic online.