Flying Under the Radar

Discussion

In order to ascertain the overall prevalence of affiliate fraud, FairWinds conducted analysis to determine the number of domains that resolved and contain an affiliate ID versus the number that resolved and did not contain an affiliate ID. FairWinds then segmented out the domains without an affiliate ID to determine what types of Web sites were being hosted.

Figure 4

Figure 5

Figure 5 represents the domain names that did not have an affiliate ID in their URL based on the content found on their Web sites. “Logical brand site” refers to domain names that resolve to Web sites pertaining to that domain name—for example, a domain name that contains a typo of a brand and resolves to a Web site that contains that brand’s content would be classified under this category (Ex. abonshop.co.uk). We are as baffled as you are about why an infringer would resolve a domain to the appropriate brand site with no apparent scheme to monetize the use. If a domain name “does not resolve,” this means that the domain name does not resolve to a Web site with any content. Domains that are “parked by a registrar” resolve to Web sites that advertise that registrar’s services and those that fall under the “domains for sale” category resolve to Web sites that offer the option to purchase that domain.

Considering the fact that PPC sites are often thought to be the most popular tool for monetizing sites (a 2008 CADNA study concluded that 87% of cybersquatting domains are used for PPC), it is significant that just 8% of the total number of examined sites pointed to PPC sites while 55% contained an affiliate ID. While we examined the portfolio of a cybersquatter that is known to conduct affiliate fraud, these percentages suggest that affiliate fraud has a significant, and potentially growing, presence as a monetization tool in the domain name space. As mentioned above, affiliate fraud provides a cybersquatter with the opportunity to earn significantly more than they would earn with a PPC site. Let’s again use COMCASFT.COM as our example.

To calculate the revenue that affiliate fraud on COMCASFT.COM can generate for a cybersquatter, we can look at the affiliate fee that the brand offers, the number of visitors the domain name receives per year, and a conservative estimate of how many of those visitors are likely to convert to a sale:

(Affiliate fee) x (2% conversion) x (yearly traffic) = ($35) x (2% conversion) x (560 visitors) = $392.00 per year

To calculate the revenue that this same domain name could generate if it hosted a PPC site, we can just substitute the click fee for the affiliate fee and we would get the following:

(Revenue per click) x (27% conversion) x (traffic)= (0.50) x (27% conversion) x (560 visitors) = $75.60 per year

Affiliate fraud on COMCASFT.COM is generating 5.6 times the revenue that a PPC site would on that same domain name. We can take a look at another name on the list—CARBKONITE.COM—to see the metrics involved in affiliate fraud with Carbonite. The following formulas were calculated using Carbonite’s annual subscription fee of $55.95 for its online backup service.

Affiliate fraud:

(40% of sale) x (2% conversion) x (traffic) = ($22) x (2% conversion) x (245 visitors) = $107.80 per year

PPC Site:

(Revenue per click) x (27% conversion) x (traffic) = (0.50) x (27% conversion) x (245 visitors) = $33.08 per year

The affiliate fraud site on CARBKONITE.COM is bringing in three times the revenue that a PPC site would if it were hosted on that same domain.

Domain names containing infringements of top retailers vary in value. Those containing common misspellings of the brand or an intuitive combination of the brand and its services or products will garner high levels of traffic, sometimes as many as half a million visitors annually; those that contain unlikely typos will receive minimal traffic. If the traffic across all infringements that plague a top retailer is averaged, each domain name gets about 20,000 visitors annually. Considering this same retailer’s average order size ($100) and the average affiliate commission that such a retailer offers (5%), the typical typo infringement will cost the brand $100,000 in annual commission payments. It is important to note that infringements exist in a spectrum; there are usually only a few prime, heavily trafficked domain names among a multitude that receive little (if any) traffic. The online harm that is incurred through infringement is limited to a very small number of domains and a proper domain name enforcement strategy can enable companies to prioritize these infringements according to which are the most harmful and then pursue them where appropriate.

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