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Dodgy digital supply chain costs $8bn

News, 02 December 2015

NEW YORK: Fraudulent impressions, infringed content and malvertising cost the US digital marketing, advertising, and media industry $8.2bn a year according to a new study from the Interactive Advertising Bureau (IAB) and consulting firm EY.

And they say that money can be recouped if companies fix badly designed business processes and repair obvious flaws in the digital advertising supply chain.

The report, What Is An Untrustworthy Supply Chain Costing the Digital Advertising Industry?, was based on a study of studies, data analytics regarding supply chain costs, and a survey of 30 companies in the industry to provide qualitative and quantitative data.

This found that more than half the money wasted in the digital advertising ecosystem was down to non-human traffic. Ad fraud – fake advertising impressions that are neither generated by real advertisers nor received by actual consumers – accounted for $4.6bn of the total, with most of that (72%) coming on desktop.

At $2.4bn, infringed content – stolen video programming, music, and other editorial content that is illegally distributed on the web – represented the most significant share of lost revenue opportunity costs, the report said.

Some $2bn of that total is based on an estimate of approximately 21m US consumers' willingness to spend $8 per month on what is currently classified as infringed content. The additional $456m represents the loss of potential advertising dollars.

Combating malware-related activities came in at $1.1bn, with $781m of those losses being generated from ad blocking instigated due to consumers' security and malware concerns.

Costs associated with investigating, remediating, and documenting direct incidents of malicious advertising amounted to a further $204m.

"Improving some fundamental business practices is critical," said Nick Terlizzi, partner at Ernst & Young.

"Some basics include knowing your supply chain partners and investigating new potential relationships using address information, tax IDs, and background checks."

The report also encouraged industry-wide collaboration to build a trustworthy supply chain under the auspices of the Trustworthy Accountability Group (TAG) and other initiatives.

Data sourced from IAB; additional content by Warc staff