Avoiding Web-Advertising Scams

By , August 2, 2009

Today, a web publisher posted a message on the ABestWeb forum, complaining about a specific advertiser who’d defaulted on a payment promise of $40,000.  This isn’t new, nor is it unique to online advertising: advertisers default on payment promises every single day. However, there are some strategies that web publishers can use to evaluate an advertiser.

Upfront Payment: Obviously, the best possible arrangement is demanding up-front payment from the advertiser, and refusing to run any advertising until the payment has “cleared.”  Unfortunately, since the advertiser is also uncertain about whether the publisher can deliver on its promises, it’s difficult to convince any advertisers to pay in advance.

Escrow Funds: Some affiliate networks require that advertisers pay in advance into a fund which is used to pay publishers. These are not true “escrow” arrangements, and there is always a risk that the network might default. But this arrangement does provide a reasonable level of assurance to publishers: ShareASale actually disables advertising links if the advertiser’s account is depleted.  Unfortunately, some networks claim to require pre-payment, yet allow advertisers to continue even after funds are depleted — in effect, these networks are extending credit to the advertiser on behalf of the publisher. Today’s post involved Commission Junction, which has often informed publishers after the fact that an advertiser’s account was depleted weeks earlier, leaving no funds to pay the publisher.

Trusted Intermediary: Of course, using a “trusted intermediary” (like an ad network or affiliate network) does create some additional “security,” even in the absence of prepayment or “escrowed” funds.  An unethical advertiser might choose to default on promises made directly to individual publishers, but they’re less likely to “burn their bridges” with an entire network.

Network Promises Payment: In a few cases, ad networks actually pay for advertising even if the advertiser defaults. Google’s AdSense program doesn’t withhold payments to publishers, even if an advertiser defaults on its payment promises. Of course, there’s a price — these networks take a larger percentage of gross advertising revenue, and Google especially is not transparent about its revenue-sharing (as a publisher, you don’t really know if you’re getting 10% or 50% or 80% of the amounts actually paid to Google for advertising that appears on your site).

Due Diligence: Before you “extend credit” by carrying advertising, do some basic homework. Go to the advertiser’s web site, and see if there is meaningful information: does the advertiser display a privacy policy, an “about us” page, and a “contact us” page? Does the web site disclose a physical address (other than a “mail drop” address)? Telephone number? Names of the company’s principals (CEO, President, etc.)?  Try calling the phone number — if it’s not answered during regular business hours, you should be concerned.

Do you clearly understand who you are extending credit to? (Is it a corporation or LLC, or an individual, or perhaps there is no indication about what kind of business it is?) One strategy is to request a signed advertising contract, or at least a written letter signed by a specific person (whose contact information is included).

If It Sounds Too Good to Be True, It Is! Not “probably” — if it sounds too good to be true, it simply isn’t true.  The publisher who posted on ABestWeb today indicated that he was promised $16 for each “free trial” enrollment for an MP3 music subscription service. That’s ridiculous; when I researched, I found a current offer by the advertiser promising a maximum of $14 per paid subscription, which seems fair for a $10 per month subscription service.

Link: DADA.net Owes Me $40,640 And CJ Is Doing Nothing To Help” (ABestWeb discussion thread)

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