What You Really Need to Know About Online Ad Fraud
Online ad fraud is a topic that can quickly get people in marketing agitated. I've recently spoken with many people in the industry--advertisers, agencies, technology companies--about online ads, and fraud was one of the generally stated assumed problems. The theory is that between bots, sites cramming too many ads per page, faked page views, ads being out of the browser's viewable area, and more, advertisers lose significant value.
The issue for entrepreneurs is whether online ads are effective and if the price is right. So fraud should be a concern. However, some people have begun to question whether the concern about fraud is overblown. But as it happens, even if so, it inadvertently shows how much of a bargain you can get in online advertising.
Alex White, vice president of product strategy at ad technology company Sizmek, recently suggested that fraud concerns are overblown.
The bigger issue is that the coverage to date has been hyperbolic, overstating the issue to the point of mass paranoia. Fraud is nowhere near as large as they would have you believe, and the current spotlight is a result of sensationalist coverage and a score of new or pivoting tech providers trying to cash in on that coverage. It's time to kill the fraud frenzy.
White says there are reasonable questions about the numbers that people purport to be the size of the fraud problem. He points to the media's use of old and incompletely cited statistics, for one--like the focus on an old ComScore estimate that 36 percent of all Web traffic is fake, when the original source offered a range, with 36 percent on the high side and 4 percent on the low. Or an often-cited figure that online ad fraud costs advertisers $6 billion a year, although the source is a company that addresses ad fraud and so potentially has a motivation to make it sound as high as possible.
White went on to quote a Wall Street Journal article that states Verizon supposedly found $1 million in online ad fraud but that the amount was a drop in the company's total $1.2 billion ad spend the same year.
White is not the first to point out that statistics can be fickle intellectual companions. I can remember years ago investigating a claim that one out of 11 laptops or so were stolen every year. However, no law enforcement agency or insurance company tracked computers as a separate category. It turned out that the number of writers and editors used as revealed truth was an estimate based on the experience of a single company that--bias warning--insured laptops against damage or theft. In fact, the numbers were for loss, not necessarily theft, and presumably people buying insurance might have been in a self-selected high-risk group.
Even White's reference to Verizon has potential issues, as the Journal compared online ad fraud with total ad budget, which would include print and broadcast, rather than looking at the online portion only. The result is to make the fraud seem smaller in proportion than it might have been.
So, do you need to worry about ad fraud? Well, you want to keep an eye on the issue, but according to the agencies and advertisers I've spoken with, the market may have taken care of the problem. The pricing for online ads includes an effective discount for fraud. So, if anything, any overstating of fraud helps keep prices low for you.
ERIK SHERMAN | Columnist
Erik Sherman's work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, and Fortune. He also blogs for CBS MoneyWatch.