Flying Under the Radar

Affiliate Fraud and Cybersquatting

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According to the New York Times, the most valuable traffic that a Web site can receive is from “people who arrive at a site by typing its Web address directly into their browsers or clicking on a bookmark”—in other words, traffic that arrives to a site through Direct Navigation¹. According to the article, “such visitors, who tend to be repeat customers, linger the longest, spend the most money, and are the most likely to ‘convert’ to buyer.”

People who use direct navigation, type in a brand, combinations of a brand and related products/services, or unbranded keywords into the browser address bar in hopes of finding the most relevant content. It is not uncommon for misspellings to occur when users enter domain names into the address bar. Taking these factors into account, there are an unlimited number of possible domain names that Internet users can type while searching for content.

Cybersquatters—those who register domain names, especially those identical or confusingly similar to existing trademarks, with the intention of reselling them at an inflated price or otherwise profiting from them in bad faith—have long known both the value of direct navigation traffic and the way that direct navigators seek content. Cybersquatters have used this knowledge to actively pursue and register domain names that naturally draw in such traffic.

In the last decade, cybersquatters’ traffic monetization tactic of choice was often to place pay-per-click (PPC) advertisements on landing pages for their domain names. PPC sites offer related sponsored advertisements based on the domain name itself or key terms in the domain name, giving users the ability to click through to the content they are looking for or to be directed to competing products and services. As a result, a domain name containing a variation of a brand name and one of its products/services can be used to host links to the brand’s content, content relevant to the brand’s services, or even content from the brand’s competitors:

Figure 1²: Screen capture of the domain capitalonerewards.com

Because users are often able to reach what they are looking for through PPC sites by selecting one of the ad links shown, the owners of these domains are able to generate revenue whenever visitors “click.” However, even when brand owners receive their rightful traffic through PPC sites, they must pay for this traffic since brands are charged each time a user clicks on their ad hoping to reach their content.

While PPC sites remain a large part of cybersquatting mechanics, there is another, little-known wave of massive-scale online infringement called affiliate fraud that is gathering steam on the Internet. Affiliate fraud earns cybersquatters 50-100 times the fee per action of pay-per-click (PPC) sites and targets brand owners–all undetected. FairWinds Partners, the Internet strategy consulting firm that co-founded CADNA and runs its daily operations, conducted this study to examine the practice of affiliate fraud.

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