eBay’s $35 Million Mess

The Business Insider reports on eBay's two most successful affiliate partners, and why both ended up pleading guilty to wire fraud.

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Jim Edwards of The Business Insider has a long, fascinating piece on eBay’s top two affiliates — one earned $28 million in commissions for sending customers to the auction site, the other $7 million — and how eBay eventually concluded that they were defrauding the company:

Affiliate marketers place ads or links for eBay on their own networks, or on other people’s sites, and they collect a cut of any sale the online auction company generates from them. eBay has about 26,000 of them, or more, at any one time, feeding traffic to its auctions.

But recently Hogan had fallen out with eBay, and the company had sued him, accusing him of fraud. eBay had also been cooperating with the FBI since June 2006 to root out affiliate marketers whose success was a bit too good to be true. The company had even created a piece of software to monitor Hogan’s internet traffic — an online sting operation the company named “Trip Wire.”

eBay alleged that what Hogan did to earn the sting operation and the knock at his door by the FBI was to rig eBay’s system so that it falsely credited him for sales he did not generate. He did it by seeding unknowing users with hundreds of thousands of bits of tracking code, or “cookies.” If any of those people bought something on eBay, the code signaled to eBay that Hogan should get a cut of the sale — even though he had done nothing to promote eBay.

The sting also netted Brian Dunning, eBay’s second biggest affiliate marketer. The company had paid Hogan and Dunning a combined $35 million in commissions over the years, court papers say. Both men have since pleaded guilty to wire fraud.

It’s a great read.


Ebay may have caught the fraud way earlier as recently many bots and automated software have been flooded in the market claiming fake clicks and all on affiliate links...

notLostInSpace 1 Like

I don't advocate fraud or theft, but have trouble feeling sorry for Ebay.  They make big money. They took a great idea and turned it into a selfish money machine.  The sellers that used to be there were like the worlds largest unique flea market.  They have been driven away and largely replaced by businesses that are mass marketing new stuff (from China etc.).  The rules and the fees have become too much for the little guy.  The rating system has been neutered to the point of "why bother?".   They pretty much force you to use paypal (an ebay company), which derives them more fees of course.   I used to sell a lot there and got fed up with it, and the hours I used to spend browsing and buying have ended because I don't want much new stuff from China. It is a great place to find CD's, NFL jerseys and so forth (probably not legal sellers).


There is a simple and easy way to stop all fraud..deregulation...

(I kid!)


@StephenGrange  Dear Lord, I saw your comment at the bottom of my screen and nearly passed out.  Then I scrolled down and saw the "I kid" and my heartrate returned to normal.


What is ebay thinking? D: they should arrange all this mess and they should avoid that this mess would lead to people being retrenched or something like that. Author of the 5-Star Business Networks Vivek Sood just mentioned on his blog that innovation is important and so is the employees.

Eliatcoachdaddy 1 Like

Where there's a way to make money, there's fraud. Just think what people like this could do if they used their powers for good, not evil.