What can happen when affiliates or agencies go rogue

A giant institution finds something they don’t like about your affiliate advertising and picks a fight. It must be every marketers nightmare, and it happened to a company I worked for. The dust is long settled so I thought it could be a good example of how affiliates can be an asset and a risk, often at the same time.

Background

Around 2010, I went to work with a marketing company who sold “health and wellbeing” supplements. They knew me from my time at a leading affiliate network and as they were growing fast they asked me to help scale up some of their operations and improve their ability to accept and process payments.

I am not going to write the name of the business because they are still a going concern and it wouldn’t be fair if this article ranked for their brand name in search engines. The name is mentioned in the audio clip embedded below.

So what was the product? Don’t laugh… but it was teabags. Diet teabags. Not just a few teabags either; they were shifting millions of pounds worth of teabags every month from a tent in the MDs garden.

In typical ‘nutra’ marketing fashion the teabags were sold as a freemium product linked to a subscription plan. Customers were tempted in by the generous free trial and paid a subscription if they didn’t cancel. The model relied on a majority of customers who forgot or chose not to cancel.

The business model was directly imported from a successful operation in the US, and was as an ‘affiliate first model’ – 100% of their sales came from from affiliates. I can’t say I believed in the product, but I was passionate about not starving to death so I took the job.

I was shocked at how much they were selling. The key to their success was their choice of marketing partner. They had flirted with most of the well known UK affiliate networks without much success before one specific partner took off in spectacular fashion.

Consumers were so motivated by receiving a free product that being dishonest simply wasn’t necessary. Warnings and descriptions of the subscription model were emblazoned across the entire website and uniformly ignored. On the flip side, it was hard to cancel the free trial, and a lot of unhappy customers received subscription charges they were not expecting, despite the prominent messages.

I want to point out that at the time this company was no better or worse than many others in the same space. Accusations like “they hide it in the small print” were not true. ‘Nutra’ is still very much a large slice of the affiliate and performance marketing industry. It would not take much searching to find people doing exactly the same thing today.

I hasten to add that I was not managing this affiliate program – I was working on rolling out new payment options as their “chief techy”.

A Bad Day.

On a lovely sunny afternoon I was called into the MDs office. “Steve, can you record a BBC Radio Show on the computer thingy?”. Erm, yes, probably. But why?… “let’s just listen to it first”…

I wasn’t concerned. A competitor had recently caused a stir with a front-page newspaper advert that blurred the lines between advert and editorial content so I thought it would be mainly about them. Sadly not. The BBC had somehow decided that our humble teabag company was a bunch of Gangsters, organised criminals no less, and dedicated a serious amount of effort to make sure everyone knew.

Want to listen? Here it is. It was the first segment on the hour long “You and Yours” show on BBC radio 4. It lasts about 10 minutes.

If you don’t have time to listen here are some highlights:

This was news to us. We just sold teabags. You can imagine how we felt in the office. It got worse:

Just in case listeners hadn’t got the message:

This was the most damaging statement in my opinion. Without any chance to reply, a senior Police officer had just said “no doubt about it, they are guilty”. Wow. It went on and on and on. At this point I was mentally updating my CV (best case) and wondering how a pretty boy like me would survive in prison (worst case).

They even advised existing and previous customers to call Action Fraud because their credit card details were at risk. Apparently we weren’t just doing some risky marketing, we were actively stealing payment details for criminal purposes. In 10 minutes, equipped with incorrect information and a bit of self righteousness they tried very hard to ruin the business.

So what actually happened?

You have probably guessed by now, but the merchant wasn’t really a criminal enterprise and we weren’t all Gangsters. The offending ads came was an affiliate. Or to be accurate, several affiliates. The floodgates had opened and affiliates were using all sorts of tricks to promote the program.

One publisher had purchased millions of pop-up and pop-under adverts displaying a fake web page that was a blatant copy of the BBC Health website. They had broken every rule that had been set for them prohibiting doctors recommendations, fake endorsements and more. Someone from the BBC saw one of these ads, and the rest is history.

As the radio show notes, the affiliate subtly changed the “BBC” logo to “BBG”, but that didn’t make the site any less illegal. The actual content on the page contained glowing recommendations and promises of massive weight loss, all verified by a legion of fictional doctors.

The BBC had spotted one advert but we soon realised that the entire affiliate program had become lawless. Most sales came from incredibly aggressive, misleading and risky paid media activity and disposable sites. Pop-unders, malware, false claims, misleading content… if it could be used to promote the product then someone somewhere was probably doing it.

All this was made possible because we used a blind affiliate network. When you use a blind network you don’t know who is promoting you. You simply purchase traffic and sales from the network. The network is responsible for policing the affiliates and making sure they follow the rules. The BBC identified that the publisher or at least their website was based in California – that was actually more than we knew about them. It did make sense based on what we learned later.

The reason it went so badly was because the terms of the affiliate program were so lucrative. The program was built to scale, but there wasn’t enough oversight or control to do it safely.

Affiliates could earn up to £80 in commission for referring a single customer to receive a “free” product. When the program was identified as a valuable opportunity the American owners of the network took a closer interest. The floodgates opened. More aggressive publishers were recruited to increase performance further. They even shipped a new team of account managers across the pond to replace the more cautious UK based team.

It attracted a lot of affiliates and encouraged the network to let them do whatever they wanted. You see the same effect on lower quality affiliate networks like Clickbank – top performing affiliate offers can be worth millions of dollars, so affiliates resort to more and more dubious methods to get a slice of the pie. Sadly it does work, and a lot of publishers have become very wealthy from bending the rules.

The network had definitely been told what the boundaries were. They were to avoid fake testimonials, fake brand names, fake endorsements (like the BBC) and especially claims like “verified by doctors”. While I wasn’t directly involved with the affiliate management, I definitely let them know when I spotted problematic content, as did all of my colleagues.

Later that afternoon…

As Aunty Beeb promised, the domain name and web hosting for the website were suspended at the same time the radio show went live. This is another example of overreach – since when did law enforcement cooperate with the media to time their actions?

I got everything back online within two hours. That is one of the strengths of the affiliate model – when nearly 100% of the traffic comes from affiliates it can be directed anywhere.

I simply published a staging website using a spare domain name, issued a new SSL certificate, and asked the affiliate network to update their links to point to the new website address. Soon all the banners and links sprang back to to life and the sales machine carried on. It was actually quite a good day for sales. In this respect we were quite lucky – websites are easy to replace and I had a backup. If they had attacked the payment and banking facilities that would have been much harder to restore.

Was that the right thing to do? In hindsight, perhaps not. Not because it risked upsetting the BBC – we were still furious, so we were quite pleased to stick one to them. However, it also meant continuing to work with the network and affiliates who had caused the issue in the first place.

After I got everything back online we were called back into the office. The MD actually seemed quite pleased. “Great news chaps, we don’t need to sell teabags any more. We’re going to sue the BBC.”

Shortly after, I resigned.

The Fallout

• The recording of the radio show was scrubbed from the BBC archives pretty quickly, along with all mention of the segment in the summaries and descriptions of the episode. The promised follow up never happened.
  
• The company didn’t get taken down. To the best of my knowledge the threats of prosecution never really materialised.
  
• The focus quickly moved from the BBC and the police to the role the blind affiliate network played. They were responsible for managing and encouraging the rogue affiliates and had really let the merchant down.
  
• The blind network ceased trading soon afterwards.
  
• Changing the domain name for the brand had very little impact. The temporary domain name I activated 15 years ago is still in use as the main url for the business.

I think it is safe to say that eventually the merchant ‘won’, whatever that means. The police and the BBC backed off, the slanderous radio show was removed from from publication, and I didn’t spend my 30th birthday in the clink.

The company changed direction. Luckily all the negative attention didn’t end the business completely, but their main source of customers was now gone and they had to start from scratch.

One benefit of all the frenetic affiliate coverage was that it drove customers to established websites like Boots or Holland and Barrett to research the product. One retailer in particular was receiving thousands of searches every day, despite not even selling the product. Good retailers do monitor internal search terms, and they soon got in touch to talk about stocking the product. Checking in a year later, everything had changed. The freemium subscription model had been scrapped the product range had expanded to include coffee and diet pills, and their products were now available in popular high street stores. They were even winning ‘health product of the year’ awards.

Since then I believe the business has changed ownership at least once and remains retail focussed. The prices are still very high though.

Things I don’t know

As you would expect the lawyers got involved and legal broadsides were fired in a range of directions. I don’t know all the legal ramifications because by that point I had left the business.

Pretty soon afterwards the blind network (Epic Advertising) closed down. I have bumped into a few of their ex-employees over the years and they told me the network simply declared bankruptcy to avoid responsibility and resumed operating under a new name with their best staff and most lucrative clients.

To the best of my knowledge the individual publishers were not held accountable. They probably lost any unpaid commission from pending unpaid sales, but that is usually the extent of the punishment. Networks which encourage such practices tend to pay very regularly – weekly or even daily, so it is unlikely that the culprits felt too much pain.

There have been some instances where large brands like ebay or Amazon prosecuted fraudulent affiliates but Amazon and ebay run their own affiliate/partner platforms. It is rare and even less likely when third party networks are involved.

Whose fault was it?

In my opinion most of the buck stops with the executors of the affiliate program – the blind network – but there was a lot of blame to go around.

• The police / BBC got it very wrong. The researcher in particular did not do the sort of due-diligence you would expect from the BBC, and whoever approved the story to be published on the radio so quickly really didn’t do them any favours. Ironically, while the naughty affiliates felt the BBC name carried weight and authority, the Metropolitan Police fell into the same trap and did not do their own common-sense checks.
  
• The affiliate network quite simply encouraged the activity to make as much money as possible. The level of disrespect for their client (the merchant) and the customers was simply staggering.
  
• The merchant was quite happy accepting the sales. While they didn’t know exactly what was happening, they knew their business model skirted the fringe of legitimacy – indeed that is why it was so lucrative. ‘Freemium’ business plans often tread the thin line between following the rules to the letter and making pots of money.
  They could have monitored the network more, but that is hard to justify when money is just flooding in.

You can decide who was responsible yourself, but the whole situation happened because everyone – the merchant, network and affiliates – benefited, until it went pear-shaped. The group who ultimately paid the price were the customers, who were often mis-sold expensive products.

Thoughts and learnings

Nowadays I firmly stay in the mainstream affiliate market, but that doesn’t mean dodgy publishers will stay in their lane. You need to be aware that a lot of affiliates are happy to bend or break the rules if they think they can get away with it. Blind networks or subnetworks make that much easier.

As soon as you give up control or visibility the risk increases exponentially.

• The average layman, even general “fraud specialists” and the police just don’t know what affiliates are. They are likely to hold the merchant responsible for whatever they see.
  
• There just wasn’t enough control over the program. The sector we are talking about has always had quite a flexible relationship with the rules, but in this case they relinquished control completely.
  
• ‘Blind’ networks can enable and amplify this sort of risk. You could even say they encourage and thrive off it.
  
• Professionals, even tech professionals, might not be digital natives. The BBC fraud expert simply didn’t understand digital advertising marketing and jumped to all the wrong conclusions.
  
• Knowledge of the local market is key. The blind network was led from the US, which has different standards and conventions. The US team should have understood you don’t mess with the BBC, and the UK merchant should have understood the lengths a blind US network was prepared to go to for a quick buck.
  
• Don’t use paid sources for testimonials for your product or site. While the idea of purchasing testimonials is to protect you from harm and provide positive social-proof, they often do the opposite. The BBC picked up on it and they were dead right – the reviews for the brand were nonsense, although they didn’t really understand why.
  
• Dodgy actors often think they are being clever by doing things like changing the “BBC” logo to “BBG”. Silly things like this just make it easier to identify and catch them. Long may it continue…
  

The most important thing in e-commerce is the ability to sell your product and receive the money.

Instead of attacking the website and domain name, what if the BBC or the police had managed to freeze the bank accounts or asked VISA and Mastercard to block future payments?

I was able to restore the website in short order, but I can’t pull new banking facilities out of a hat. If they had attacked our ability to accept money from customers it have been game over. They probably didn’t go this route because it requires a higher level of evidence, but it is always a risk.

It might not feel like something an affiliate manager should worry about, but if you can’t make sales everything will grind to a halt. A rogue affiliate can easily risk your entire business.