Cookie stuffing

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On the World Wide Web, cookie stuffing is a deceptive technique employed in affiliate marketing, where individuals (affiliates) illegitimately set third-party cookies on users' web browsers to falsely claim credit for sales. In the typical affiliate marketing model, affiliates are compensated for driving sales through specially crafted URLs that set cookies on users' browsers. However, with cookie stuffing, affiliates use techniques like HTTP redirects, hidden iframes, or embedded Javascript code that discreetly sets cookies without the user's awareness.

Contents

Affiliate marketing programs widely prohibit the practice of cookie stuffing, and it can be considered fraud. The practice harms legitimate affiliates, and the loss of revenue for the retail company may cause increased prices, harming shoppers in general. Shawn Hogan, who was previously the top performer in eBay's affiliate program and earned over $28 million in commissions from the site, was found guilty of fraud for cookie stuffing in 2014 and was sentenced to five months in federal prison. [1] Despite multiple high-profile cases, cookie stuffing is practiced by a relatively small number of rogue affiliates and regular users do not commonly encounter cookie stuffing.

Background

Affiliate marketing is a strategy employed by online giants like GoDaddy, Amazon, and eBay to amplify website traffic. [2] In this framework, third-party entities, or affiliates, receive compensation for promoting the retailer's products, aiming to draw in a more targeted audience and drive sales. The compensation model is predominantly performance-based, operating on a cost-per-sale (CPS) structure where affiliates are paid only upon the successful purchase of the advertised product. This method, requiring payment only after a confirmed sale, serves as a safeguard against potential fraud. [3] [4]

The distinct advantage of this payment model lies in its perceived reduction of fraud risk compared to alternative advertising models. Notably, the entry barrier for affiliates is very low, making it an accessible revenue model for those establishing a website without significant assets or brand recognition. However, the efficacy of risk reduction hinges on the affiliate's ability to robustly track sales. [3] In reality, tracking by affiliates often falls short, paving the way for deceptive practices such as cookie stuffing. [2] [4]

Mechanism

A demonstration of how a cookie stuffing attack can steal sales from legitimate affiliates Cookie stuffing explainer.svg
A demonstration of how a cookie stuffing attack can steal sales from legitimate affiliates

Retailers use third-party cookies to track purchases driven by affiliates. Affiliates place advertisements on their website that contain specially crafted URLs. When users click this link, a cookie is stored on the user's browser. Later, if the user continues with a purchase from the retailer, the merchant reads this cookie to identify which affiliate will receive commission for the sale. [3]

Cookie stuffing works by tricking the browser into setting this cookie without the user clicking an affiliate link. This can be done with an iframe or a pop-up ad. Later, if the user happens to make a purchase on that retailer's website, the retailer will pay a commission for the sale due to the presence of the cookie, even though the affiliate did not actually drive a sale. [5] [6]

Techniques

Fraudulent affiliate marketers use multiple techniques to perform cookie stuffing. In a 2015 study covering 11,700 domains that had engaged in cookie stuffing, Chachra et al. found that over 91% of websites used redirects. [4] This was manifested in the form of HTTP redirects (i.e., the use of the 302 and 301 status codes to redirect users to a different domain) or the use of Flash or Javascript to redirect users. Other techniques used by fraudulent affiliates include using iframes to embed the online marketer's website in the code and using scripts and image tags to request specific resources that would set the cookie for the affiliate on the destination website. [4] [2]

In the same study, Chachra et al. also found that over 84% of cookies set by fraudulent marketers employed referrer obfuscation to hide their activities from retail websites. By redirecting the user through several innocuous-looking domains, the fraudulent marketer can obscure the domain from which the request was sent. This evades detection since instead of an illegitimate website, a third-party website makes the last request, tricking browsers into believing that the third-party website was the originator of the request. [4]

Another technique used by some malicious actors includes hijacking or publishing malicious browser extensions on the Chrome and Firefox extension stores. By modifying requests sent to online retailers and setting cookies or redirecting users to affiliate websites on startup, the malicious extension can trick online marketers into thinking that the user legitimately clicked on an affiliate link to navigate to their marketplace. [7]

Fraud

Most affiliate marketing programs widely prohibit cookie stuffing because it tends to undermine genuine product advertising efforts. [3] In the United States, the Federal Trade Commission (FTC) has laid out advertising guidelines mandating the clear disclosure of financial relationships between advertisers and retailers. Cookie stuffing deliberately operates in an opaque manner for users, conflicting with these guidelines that emphasize transparency to the user in such arrangements. [4]

In certain cases, cookie stuffing has been considered a form of wire fraud. In 2006, when eBay collaborated with the Federal Bureau of Investigation (FBI) in a sting operation targeting top affiliate marketers, Shawn Hogan, eBay's largest affiliate marketer, was found to have engaged in cookie stuffing. [8] His strategy involved modifying his website to load resources from eBay's servers, thereby setting affiliate cookies on users' browsers. This technique falsely attributed subsequent eBay purchases to Hogan's site. [3] Despite Hogan making over $28 million through eBay's affiliate commissions, [4] it was determined that Hogan's activities did not contribute any substantial revenue to eBay. [3] In the subsequent legal proceedings, Hogan pleaded guilty to a single wire fraud charge, leading to a five-month federal prison sentence and a $25,000 fine. [9]

Around the same time, another incident involved eBay's second most prolific affiliate marketer, Brian Dunning, who employed similar tactics to defraud eBay of over $5 million during 2006–2007. Dunning's fraudulent activities came to light as he utilized methods akin to Shawn Hogan's cookie-stuffing scheme. [8] During the legal proceedings, Dunning admitted to collaborating with Hogan in executing the fraud, offering to teach him key techniques. However, Hogan denied this claim, alleging that Dunning ripped off his techniques. Dunning further alleged that he paid an account manager at an affiliate management networks CJ Affiliates, for insider knowledge of how the affiliate network operated, although this claim was not officially confirmed. [3] Dunning, like Hogan, pleaded guilty to a single wire fraud charge and was sentenced to 15 months in prison, followed by three years of supervision. [1]

Impact

Despite several high-profile cases, a small number of users encounter cookie stuffing in the wild. This has led researchers to infer that the practice of cookie stuffing is confined to a very small group of affiliates. [4] Additionally, cookie stuffing and other forms of affiliate marketing fraud disproportionately impact larger affiliate marketing networks that oversee numerous affiliate marketing programs, as opposed to smaller in-house programs. [2] This is because smaller in-house affiliate programs are motivated by their parent companies to eradicate fraud, given its direct impact on their revenue. On the other hand, larger affiliate marketing networks, which earn a commission only when a transaction occurs between an affiliate and an online marketer, are incentivized not to actively police their programs and to avoid detecting fraudulent practices. [4] [3] In certain cases, this behavioral practice has led to online marketers severing ties with affiliate marketing networks. [3]

Cookie stuffing also has adverse effects on both end users and legitimate affiliates. [3] For end users, a loss of revenue for the parent online retail company in the form of fraudulent affiliate commission payouts could result in items that would otherwise have been sold at a discount being listed at higher prices to offset the losses incurred by online marketers. Similarly, a decrease in the amount of traffic for an online marketing firm could lead to lower demand and, subsequently, higher prices for items. [2] Legitimate affiliates, who employ advertising to attract consumers, also suffer from the impact of cookie stuffing, as they lose out on conversions from affiliate sales that were manipulated due to the use of cookie stuffing to override legitimate affiliate cookies. [4]

Related Research Articles

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Affiliate marketing is a marketing arrangement in which affiliates receive a commission for each visit, signup or sale they generate for a merchant. This arrangement allows businesses to outsource part of the sales process. It is a form of performance-based marketing where the commission acts as an incentive for the affiliate; this commission is usually a percentage of the price of the product being sold, but can also be a flat rate per referral.

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References

  1. 1 2 "Northern District of California | Laguna Niguel Man Receives Fifteen-Month Prison Term For Defrauding eBay | United States Department of Justice". www.justice.gov. 18 November 2014. Retrieved 26 February 2024.
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  3. 1 2 3 4 5 6 7 8 9 10 Edelman, Benjamin G.; Brandi, Wesley (2013). "Risk, Information and Incentives in Online Affiliate Marketing". SSRN Electronic Journal. doi:10.2139/ssrn.2358110. ISSN   1556-5068.
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  8. 1 2 Edwards, Jim. "How eBay Worked With The FBI To Put Its Top Affiliate Marketers In Prison". Business Insider. Retrieved 25 February 2024.
  9. Edwards, Jim. "eBay's Top Affiliate Marketer Was Just Sentenced To Federal Prison". Business Insider. Retrieved 26 February 2024.