Podcast Summary: Always Be Testing #94 – Fraud Protection: Lessons in Taking Down the Internet’s Biggest Fraudsters | Ben Edelman

Release Date: July 22, 2025

Introduction

In episode #94 of the Always Be Testing podcast, host Tye DeGrange engages in an insightful conversation with Ben Edelman, a renowned expert at the intersection of software, law, and economics. This episode delves deep into the often-overlooked realm of affiliate marketing fraud, exploring its nuances, detection strategies, and the broader implications for brands of all sizes.

Guest Background

Ben Edelman brings a wealth of experience to the table. With a history of consulting for litigation, serving as the chief economist at Microsoft, and holding a faculty position at Harvard Business School, Ben has positioned himself as a pivotal figure in understanding and combating affiliate marketing fraud. As Tye notes early in the conversation, Ben’s multifaceted expertise allows him to “combine a lot of data, uncover a lot of information, and analyze and explain it” (01:48).

Understanding Affiliate Marketing Fraud

Types of Fraud

Ben begins by sharing his focus areas in affiliate fraud detection. He emphasizes his expertise in adware and cookie stuffing, techniques he has honed over years of identifying and mitigating fraudulent activities. “I tend to focus on what I do distinctively, figuring other people do what they do distinctively” (02:15), Ben explains, highlighting his specialized approach compared to others in the field.

Prioritizing Fraud Risks

When asked about the most common forms of affiliate fraud, Ben introduces an analogy comparing fraud threats to household pests: “If there were a rat in my house, I'd take that a lot more seriously than a little bug” (03:59). He prioritizes fraud based on its business value and severity, emphasizing that high-stakes fraud involving significant payouts poses a greater threat than minor discrepancies.

Impact on Brands: Large vs. Small

Ben discusses how both large enterprises and smaller brands are vulnerable to affiliate fraud. “Smaller brands can certainly be targeted... the bigger brands are using networks that have pretty sophisticated systems to try to detect misconduct” (07:22). He underscores that while larger brands might have more resources to combat fraud, smaller brands are equally at risk and often require automated, cost-effective solutions to protect their interests.

Strategies for Fraud Detection

“Caught in the Act” Methodology

Ben advocates for a “caught in the act” approach, focusing on direct evidence of fraudulent activity rather than relying solely on metrics like click-through rates or earnings per click. “I use screen capture video, with packet logs, with proof of what's actually occurring” (08:43). This method ensures that accusations of fraud are based on concrete evidence rather than assumptions.

Automation and Efficiency

To make fraud detection accessible for all brands, especially smaller ones, Ben emphasizes the need for automation and efficiency. This ensures that services are “priced to sell” without compromising on effectiveness, allowing brands to manage fraud without exorbitant costs.

Legal Considerations: Structuring Contracts

Positive and Negative Clauses

Ben shares his approach to drafting affiliate contracts, which includes both affirmative (positive) and negative clauses. “I like to write these in the affirmative and in the negative” (11:03). Positive clauses clearly outline acceptable behaviors and methods, while negative clauses list prohibited actions. This dual approach not only sets clear expectations but also provides a framework for handling unauthorized activities.

Flexibility and Compliance

He further explains the importance of allowing affiliates to request approval for non-standard promotional methods, ensuring “a meeting of the minds” between merchants and affiliates. “This is sort of a CYA move for the merchant” (13:43), Ben remarks, highlighting how these contractual terms protect brands while fostering transparency.

Case Study: eBay's Affiliate Fraud Incidents

Ben recounts his involvement in high-profile fraud cases involving eBay. In these incidents, perpetrators used web-based cookie stuffing to illegitimately claim commissions on sales they did not directly generate. “They would drop eBay affiliate cookies to users who were merely viewing web pages and not even viewing the affiliates’ web pages” (15:52), Ben explains.

These actions led to significant financial losses, with figures reaching “eight digit sums” (15:42). The fallout prompted eBay to overhaul its affiliate program, bringing it “extremely talented in-house professionals” to manage and secure its affiliate operations moving forward.

Evolution of Affiliate Fraud

From Adware to Modern Tactics

Ben traces the evolution of affiliate fraud from the early days of adware on outdated platforms like Windows XP and IE6 to more sophisticated methods today, such as JavaScript-based cookie stuffing. “The JavaScript approach... can put cookies onto a user's browser claiming to have made a referral when you didn't” (06:40). He notes that while some fraud tactics have become less prevalent, new methods continually emerge, necessitating ongoing vigilance.

Prevalence and Detection Challenges

Reflecting on past experiences, Ben mentions instances where “nine out of the top ten affiliates were engaged in some kind of worthless traffic” (22:04). He underscores the importance of robust detection systems, especially as fraud techniques become more complex and harder to identify without direct evidence.

Current Controversies: Browser Extensions and Influencers

Browser Extensions like Honey and Rakuten

The conversation shifts to recent controversies surrounding browser extensions such as Honey and Rakuten. Ben discusses how these tools interact with affiliate marketing, emphasizing the importance of contractual agreements in determining acceptable behaviors. “There are contracts about every part of this... can you say the user click was the click that got the user to brand.com and not the click on a button activating an affiliate link?” (25:00), he questions, highlighting the challenges in delineating genuine affiliate actions from automated or misleading ones.

Influencer Dynamics

Ben also touches upon the role of influencers, advising that brands must “educate those like the influencers to understand” (27:38) how attribution works in multi-touch funnels. This ensures that both parties are aligned in recognizing who contributes to conversions and how commissions are fairly attributed.

Incentive Structures and Their Implications

Designing Effective Incentives

Ben delves into the significance of incentive structures in affiliate marketing. He cautions against models where networks earn a commission percentage based on affiliate payouts, as this can inadvertently encourage fraud. “Their incentive was to look the other way, to approve, to smile and nod” (32:00), he explains, pointing out how such structures can lead to unchecked fraudulent activities.

Management and Oversight

He further discusses how internal incentives within brands can impact fraud detection. Affiliate managers might be tempted to “smile and nod” to present growth figures, even if it means overlooking fraudulent activities. Ben advocates for a foundation of trust and authenticity, ensuring that management prioritizes long-term integrity over short-term gains.

Future Outlook: AI and Continuous Fraud Evolution

AI’s Dual Role

When addressing the future of affiliate fraud, Ben acknowledges that while AI presents new opportunities for fraudsters, it also offers enhanced tools for detection. “AI is an interesting beast... some of what we call AI today will just happen and there will be marketing integrated within it” (39:33). He believes that as AI evolves, so will fraud tactics, necessitating continual advancements in detection methodologies.

Evergreen Nature of Fraud

Ben emphasizes that affiliate fraud is a persistent issue, much like policing. “Cheaters are going to cheat... affiliate marketing is fundamentally a procurement function” (37:48). He anticipates that as long as there are financial incentives, fraud will continue to adapt and challenge the industry.

Personal Insights and Recommendations

Hobbies and Interests

Towards the end of the episode, Ben shares personal aspects of his life, including his passion for DIY projects and his enjoyment of spending time with his children. “I love to make things, fix things... I love to do this stuff myself” (44:20), he reveals, offering listeners a glimpse into his hands-on approach both professionally and personally.

Book Recommendations

Ben recommends “The Wright Brothers” by David McCullough, drawing parallels between the brothers’ innovative spirit and effective affiliate marketing. “It feels oddly similar to affiliate marketing” (41:56), he remarks, underscoring the importance of creativity and persistence.

Conclusion

In this episode, Ben Edelman provides a comprehensive exploration of affiliate marketing fraud, blending technical insights with practical strategies and legal considerations. His experiences, particularly with high-profile cases like eBay, offer invaluable lessons for brands aiming to safeguard their affiliate programs. As affiliate marketing continues to evolve, Ben’s expertise remains a crucial resource for navigating its complexities.

Connect with Ben Edelman: For more insights and information, visit benedelman.org.

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