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Ad fraud claims third of spending

News, 23 October 2015

NEW YORK: Ad fraud is a major activity worth billions of dollars, and now accounts for one third of all digital ad spending in the US, a new study has said.

A report from online security firm Distil Networks surveyed 138 publishers and advertisers to identify the various types of fraud taking place.

Content theft, fake registrations, login attacks, click-impression fraud and skewed analytics featured prominently, Advertising Age reported.

All of these would cost the industry $18.5bn in 2015. And with the Interactive Advertising Bureau having just announced record digital ad spending figures of $27.5bn for the first half of the year, this equates to around 34% of annual digital expenditure.

The report pointed to programmatic buying and selling as one reason for the growth in ad fraud, with increased automation opening new opportunities for the unscrupulous.

Fake traffic, for example, has become a commodity, Bloomberg Businessweek noted recently, with counter-measures spawning counter-countermeasures so that "It's like a game of whack-a-mole," according to Fernando Arriola, vp/ media & integration at ConAgra Food.

This level of fraud means that around four in ten advertisers are now willing to pay a premium – of 11% or more – for certified, non-human traffic.

"Fraud thrives when advertisers measure the wrong events like page views, video views – those are events that both a human and a bot can do," noted Adam Epstein, COO of adMarketplace, a programmatic search advertising marketplace.

He argued that this meant ad networks had a reason to allow fake traffic to exist. But, "if advertisers are measuring things only humans can do, like pulling out a credit card and paying for something, then the ad networks are going to have every incentive to kick bot traffic out".

That means advertisers and agencies paying closer attention to their analytics, and, "scrubbing out the bad and useless stuff", added Augustine Fou, founder of Marketing Science Consulting Group.

This was making a noticeable dent in ad fraud, he said. "That same group is then adopting more advanced detection technologies to detect and mitigate the advanced bots."

Ad fraud may eventually turn into a manageable nuisance like shoplifting, Bloomberg said, "something that companies learn to control without ever eradicating".

Data sourced from Advertising Age, Bloomberg Businessweek; additional content by Warc staff