We have often written about the challenges faced by app marketers and how referral program have helped them in scaling growth. Mobile apps like Airbnb, UBER, Lyft and many others have successfully integrated referral marketing within their app.

Why do app referral programs work?

Since they emerge out of a user’s own network, they are valuable to both-the referrer and the app in question. Unfortunately, sometimes app referral program may fall prey to malicious intent, leading to fraud.

What Is A Referral Fraud?

In the online space, we commonly associate the term ‘fraud’ with phishing scams. Such frauds generally lead to password compromise, identity thefts or other modes of data infringement. However, a referral fraud falls in a different category.

Referral fraud is a way in which user try to ‘hack’ the algorithm/process/terms and conditions of In-app referrals. This gives them an ability to leverage, In-app referrals for their own benefit.

Most app referrals work with meaty referral incentives. Here’s an example

If an individual refers 20 people and even if 10 people take a ride, he will be able to make $200 in credits. The amount can increase substantially depending on the number of people referred by an individual in a legit way.

Why Should Referral Fraud Matter To App Marketers/Developers?

Blake Jared made headlines when he earned $50,000 worth of credits from UBER! That’s lifetime free rides. Unfortunately, his account was flagged, and credits canceled since they were achieved via systems and practices that were not allowed by UBER.

The amount of incentives that one can make surely excites a few to indulge in malpractices. While we cannot put a number to the losses incurred due to referral frauds, we can, at least, state they are sizable, given the above example.

But that’s not where it stops.

In-app referrals are a legit and organic way of growing an app. However, a series of these frauds may shake the faith of loyal app users and also malign the brand image of the app. The irony of such frauds is that they impact genuine users as well. Given that such referrals codes are hugely shared on social channels, unsatisfied users may choose a similar platform to vent displeasure, thereby deepening the impact.

@Uber_Support I had around 2500 credits in my Uber Account earned by referrals. They have been removed. #Fraud #Referral Scheme from #Uber.

— Arpan Gupta (@RavenClaw29) June 7, 2015

 

7 Ways In Which Fraud Can Impact An App Referral Program

It’s great to believe that your app referral program is risk and fraud free. However, believing that fraud can never strike your app equates day dreaming! It is always wise, therefore, to understand the types and way in which such frauds can hit your app referral program.

In a fraudster’s eye, a lot of it will depend on the segment that an app falls in along with incentive that it offers. Here’s a list of 5 frauds that have been commonly witnessed the app ecosystem.

1) Self-Referral

One of the most common ways of executing fraud in an app referrals is when users try and self-refer themselves. This is most commonly seen when existing users try to “fake refer” themselves and take advantage of the program.

2) Multiple Account Creation

Creating multiple accounts is an ingenious hack, but when it comes to app referral program, it is considered a fraud. This type of fraud is commonly seen in ride-sharing apps when users desperately try to seek free rides via the first time promo code by creating multiple email ids or submitting different phone numbers.

3) Using The Same Device For Multiple Accounts

Another subset of multiple account creation is when users try to use the same mobile device or IP address and gain from a referral program.  Most app referral program have set up processes to detect this type of fraud. If yours is an app which is entering the referral waters for the first time, it is advisable to give priority to this kind of fraud.

4) Message Broadcasting

Even though social media is the preferred platform for sharing referral codes, most app-referral programs do not encourage broadcasting the same on coupon sites or other such miscellaneous platforms. Mass emailer with referral codes is also a strict no. Here’s a quick image that highlights the way users share coupon codes on Reddit. In most cases this isn’t a valid way of sharing codes.

5) Re-Cycling

In an ideal scenario referral incentives should be released only when the referrals are thoroughly checked. A lot of times users may take undue advantage and delete the app immediately after they receive the incentive. This strategy is usually followed by creating new accounts and gaming the referral program.

6) Changing Device Parameters

Though your referrals program may be robust enough to identify re-installs, self- referrals, and all the above possible scenarios, there are few unstoppable intelligent ways of committing fraud. One example is by changing device parameters like Device ID, IMEI, Advertising ID, Device IP, etc.

Unfortunately, Android allows users to change almost all the parameters, and there are many apps out there on playstore which would help the fraudsters to change parameters, with a single click. 

7) Using Emulators

Using emulators in place of real devices is another way in which your app referral program may be targeted. Users try to gain access to your referral program using emulators on a laptop/desktop and manipulate your referrals and gain rewards as if they are real users on a real device.

Fraud Prevention Strategy

While fraud prevention may feel like an uphill task for many app marketers and developers, certain quality checks can prevent the magnitude of loss. Fraud prevention thus requires a holistic strategy. This strategy should include regular quality  audits, tools, and an effective response, in case such an issue may arise.

We have elaborated the above points at length below:

 Regular Quality Audits

Even before an app referral program is launched, app developers should weigh its pros and cons and explicitly list the goals associated with it. They should also be able to align these goals with meaningful conversions. This is relevant in times when users rip a referral system due to inadequate planning from the app’s end. A good example here is when users get paid even before the cooling period, or in cases with inadequate verification.

The terms and conditions of the app referral program should be tight and should be able to discourage fraud at the onset. As app marketers, one should keep a vigilant eye on relevant data metrics surge such as invites, clicks, installs, LTV and device parameters. It is also crucial to evaluate the frequency of users hitting your referral program. In a nutshell, it requires a fair bit of human intervention.

Though AppVirality offers a strong fraud detection logic, we always recommend our customers to implement One Time Password (OTP) to prevent cases that bypass the norm.

Tools

It is practically impossible to monitor large -scale app referral program, especially when they become the backbone of the app. While a few apps may afford to build an in-house mechanism, it may not be always feasible to monitor it aggressively. In such scenarios, it is best to automate the process or rely on a tool along with periodically reviewing the referral program.

AppVirality offers its customers with granular analytics and intelligent analysis of data like invites, clicks, installs, revenues, suspicious users, frequency of rewards, top influencers, and other significant metrics that help in identifying referral frauds.

AppVirality detects frauds and keeps the app developers updated with fraud metrics, reason behind putting the reward in suspicious status and also offers the liberty to approve or reject a particular reward.

Effective Response

We’ve mentioned earlier how fraud can dissuade loyal users from participating in an app referral program. It is,therefore, necessary to investigate and suspend the ones that may have breach the line of conduct. The intensity of action may vary from credit deletion, permanent banning or reward reversal, and the app should have complete rights in doing so.

Over To You!

App referral programs are pure gold and have the ability to elevate revenue and growth. While gaming such programs have become the norm of the day, strong fraud detection methods can curb this problem.

While executing In-app referrals, it is advisable to invest in a tool that has strong fraud detection features. Fraud hampers the growth of apps since they tend to question the safety of data and create a sense of disbelief in the mind of the user. Having a clean system should, therefore, be the priority of app developers and marketers.

Let’s Growth Hack, Together! Book a demo with AppVirality today and prevent you app referral program from frauds.