Ad fraud was a $19 billion problem for digital advertisers last year, effectively wasting 9% of total advertising spend. A long-standing lack of transparency in the industry, paired with the rise of increasingly sophisticated advertising scams, has created a perfect storm of bot traffic, bad ad placements, and fraudulent websites that cannibalize ad revenue with frightening efficiency.
In programmatic ad buying, for example, advertisers entrust a third-party network to place ads on a publisher’s website. Through that third party, the publisher is compensated by the advertiser based on the number of clicks, impressions, or conversions an ad generated. Scammers are taking advantage of the lack of transparency in this process in a number of ways: by faking engagement using bots, hiding ads while still reporting impressions, or deploying malware to hijack ad slots and user clicks.
Fraud like this, in some cases, is massive in scale: In November 2018, in federal court, the United States Department of Justice (DOJ) unsealed a 13-count indictment against eight individuals involved in two international cybercriminal rings that used botnets, or controlled networks of malware-infected computers, to load ads onto their own fabricated webpages and collect the revenue. According to the DOJ, legitimate businesses were collectively charged for billions of ad clicks that were simulated by compromised datacenter servers.
The Brand Safety Impact
Beyond wasting ad dollars, ad fraud also adversely impacts brand reputation. When ads are served on fraudulent websites, they often appear next to violent images, hate speech, or other forms of inappropriate content. Ad injection, in which ads are fraudulently placed on legitimate websites, can lead to similar issues: For instance, an ad for a family-friendly product could end up next to an injected ad for an adult entertainment site.
Accordingly, concern about brand safety has increased dramatically in the past few years. A recent survey found that all but 3% of advertisers have developed new ad buying strategies to prevent their advertising from appearing near inappropriate content, such as working with premium publishers and enacting more granular targeting.
Quality Over Quantity
One of the most stunning moves to prevent ad fraud came from JPMorgan Chase in 2017. That year, the financial services giant reportedly slashed the number of sites it advertised on each month from 400,000 to 5,000 pre-approved domains. According to JPMorgan Chase CMO Kristin Lemkau, who spoke to The New Year Times, the company saw little impact on both ad visibility and the cost of impressions in the days following the change.
The outcome of JPMorgan Chase’s ad buying experiment threw cold water on the notion that cheaply targeting thousands of users across the web based on browsing behavior is more effective than buying ads on fewer, more carefully selected sites. It’s no surprise then that advertisers are reducing the number of vendors they interact with, as well as making more direct agreements with those vendors.
An Industry-Wide Move Toward Transparency
The industry as a whole is also coming together to fight fraud. The Trustworthy Accountability Group (TAG), an advertising industry initiative to fight criminal activity in digital advertising, has seen great success in reducing ad fraud with a certification program that requires publishers to make paid sourced traffic disclosures and publicly report their authorized digital sellers, among other requirements. In fact, TAG certified distribution channels see 94 percent less fraud than the wider industry average.
The program’s success hinges on the establishment of a clean digital marketing supply chain, from agencies to ad tech providers and every service in between. And with the Interactive Advertising Bureau (IAB) and huge advertisers like Procter & Gamble now requiring TAG certification, the industry is one step closer to stamping out bad actors.
There is also a push among advertisers to reduce reliance on “walled garden” platforms — such as Facebook and Google — that hold onto or restrict the flow of advertising data.
The Future of Ad Fraud
Despite the efforts of groups like TAG, ad fraud is expected to cost the industry $44 billion by 2022. Ad fraud management platform Pixalate reports that while marketers are ramping up ad spend in over-the-top (OTT) video, nearly 19% of the traffic in those channels is fraudulent. Additionally, last year, mobile advertisers fell prey to a multi-million dollar scam involving more than 125 apps and websites — and will likely face similar challenges in 2019.
In order to ensure a brighter future for digital advertising, brands, ad networks, and agencies must continue to work together to create more transparent practices. In the short term, closely monitoring campaigns and pre-qualifying publishers can go a long way in boosting the return your digital advertising investment.