Why Won't Ad Fraud Go Away?

Everyone talks about it and the industry is fighting it. So why can’t we find a way to stop it?

It seems that almost every week a new tool is introduced to combat ad fraud. But why, despite efforts to end the practice, does ad fraud persist?

Ad fraud is a type of scam in which phony online advertising impressions, clicks, conversions or engagements are characterized as authentic to generate revenue, despite the ads not being truly viewed or intentionally engaged with. While most ad fraud is thought of as nonhuman traffic created by “bots” (computer programs created to automatically click on a website or app simulating a human interaction), a significant percentage is generated by humans, intentionally or by lack of proper ad placements and tracking.

How big an impact does ad fraud have?

While estimates about the impact vary, it is believed that marketers are expected to lose approximately $16.4 billion to ad fraud in 2017. Incidents of fraud are reported worldwide with the majority of ad fraud taking place in the United States which has the largest advertising market and highest pricing for CPM (cost-per-mille) and CPC (cost-per-click), and now CPE or (cost-per-engagement).

How does it happen?

The digital medium is an ever-growing media channel, which creates new avenues to place ads as quickly as people can think them up and create a website, blog or app. Unfortunately, due to this seemingly endless expanse of digital ad options, attention to detail is often usurped by the drive to sell more ads and expand the current model. The “Fraud” happens when an advertiser is paying for an ad placement for a business, and the ad is either not seen, not seen long enough to create an impact, viewed on a site out of context for the product, delivered to the wrong potential demographic group, or only viewed by a “bot” set up to create false click through rates automatically.

Why does ad fraud persist?

There are many reasons that ad fraud continues to be a problem. One of the main reasons is the way in which ad success has been and continues to be measured.

Advertisers have been measuring their ad success since the first mobile ad was placed in 1994. While there are many tools available, advertisers have been relying on click-through-rates (CTR) and time-spent-on-page (TSP) as their primary metrics for ad success. Unfortunately, both CTR and TSP are easily replicated by bots and bot farms, making ad fraud a perfect target for criminals to cash in.

Ad fraud offers the prospect of high payouts with relatively little effort and a minimal risk of prosecution compared to other criminal pursuits. Also, the crime itself resides in a gray area of jurisdiction, making it difficult for law enforcement to prosecute. Combine those factors with the lack the technological know-how or resources of law enforcement to monitor, prevent or prosecute ad fraud, it makes it an attractive activity for cyber criminals.

One of the most surprising obstacles to eliminating ad fraud, however, is the disincentive from within the advertising industry itself to fix the problem. Though it would provide better performance results, eliminating fraud would result in fewer delivered impressions, which would as a result reduce ad profits. In addition, eliminating ad fraud could result in higher media prices and less inventory, making it more difficult and costly for small businesses to afford online advertising. So, fraud, in some ways, appears to “help” the industry, but in reality, it does not!

Not only is there a disincentive within the ad industry to eliminate ad fraud, industry insiders themselves have been caught taking advantage of the opaque monitoring systems by committing these acts. According to a Buzzfeed, a CEO of an ad platform and digital marketing agency was the owner of 12 websites that served as a network to defraud advertisers. Experts say that millions of dollars were stolen from over 100 brands including P&G, Unilever, Hershey’s, Johnson & Johnson, Ford, and MGM.

With so few internal ad industry incentives to do away with fraud, it is expected that at least half of the growing $72-billion-a-year digital marketing industry will remain fraudulent. Despite the prediction, some in the advertising industry remain vigilant to put in place strategies and measurement services to combat and minimize fraud.

“There are many preventative measures to stop ad fraud before it happens,” said Frank Gussoni President of A3. “Fighting ad fraud is an essential part of our obligation to protect our client’s money as if it were our own.”