“This is the biggest advertising story of the decade, and it’s being buried", says Ad Contrarian Bob Hoffman.
In December 2014, a problem that advertising insiders kept close to their vests was thrust into the public domain after the ANA conducted the first large-scale study on digital advertising fraud – an offense that they determined would cost unsuspecting advertisers a projected 6.2 billion dollars this year.
In the aftermath of the study findings, a few things happened: savvy tech entrepreneurs saw an opportunity to raise capital for an apparent gap in the industry, and fraudsters have gotten smarter.
Says Mathew Ingram in his recent Fortune article, "Half of all online ads are never seen by a human being, huge amounts of traffic and clicks come from bot networks, and fraud is rampant."
And Sam Scott lists the three main allegations in his recent Moz article:
- Half or more of the paid online display advertisements that ad networks, media buyers, and ad agencies have knowingly been selling to clients over the years have never appeared in front of live human beings.
- Agencies have been receiving kickbacks and indirect payments from ad networks under the guise of “volume discounts” for serving as the middlemen between the networks and the clients who were knowingly sold the fraudulent ad impressions.
- Ad networks knowingly sell bot traffic to publishers and publishers knowingly buy the bot traffic because the resulting ad impressions earn both of them money--at the expense of the clients who are paying for the impressions.
Defusing the Ticking Time Bomb
One digital advertising fraud detection company, Grey Cloak Tech, invested over 2 and a half years – including documentation of thousands of marketing campaigns – to overcome the multi-billion-dollar problem. Now in business, they noticed a curious trend in their fraud detection analyses:
"On first analysis, virtually all of our clients show varying degrees of bot fraud – depending on the industry and their traffic sources, the fraudulent traffic is between 30-100%. But sometimes something peculiar happens – the same metrics show a dramatic and unprecedented decline in fraud rates. What's happening is that our clients are passing our data along to their agencies, some of which then look for ways to bypass the system,"says Joshua Silver, VP of Sales and Marketing of Grey Cloak.
Outsourcing Ad Fraud
According to Silver, one tactic offenders pursue is to hire real people, often in other countries for very little money, to click on campaigns:
"It's a sort of fraud outsourcing. When real people click on ads, it's harder for software programs to detect because it follows a trajectory of authentic human behavior, but it's still damaging because these people have no intention of purchasing the advertised products."
Silver, who has been in the digital advertising space for several years, drew from his history in the space to create a software that stays ahead of this evolving click fraud.
"Fortunately, having roots in digital advertising gave me insight on this problem. I know what traffic companies do when they're being watched, and we built our system to evolve as fraudsters evolve."
Not only does the subscription-based service engage an advanced set of metrics to measure subtle indicators of more than 100 permutations of digital advertising fraud, but the company also employs a team to analyze the data and look for troubling nuances, and they update their database regularly to stay ahead of the curve.
Unlike Google filters and other no-cost analytics software, Grey Cloak's technology is laser focused on removing fraudulent activity from campaigns, an important distinction when considering the high percentage of fraudulent traffic that appears across virtually all types of campaigns.
Silver notes: "Because fraud is evolving so rapidly, and perpetrators are engaging both real people and technology to beat software, there was a need to create a sophisticated fraud detection technology on behalf of our customers to give our clients back control of their marketing campaigns."
Coming to Your Mobile Phone: More Ad Fraud
What's worse, the problem of digital ad fraud continues to evolve. According to Robert Hof in his recent Forbes article:
Now, the fraudsters have started moving to mobile phones. Using a technique that one ad fraud detection company calls mobile device hijacking, the scammers use mobile apps such as games that run as many as 20 ads a minute, then simulate random clicks. Forensiq, a New York firm that provides ad fraud detection and prevention, today is releasing one of the first studies to look at the relatively new technique.
Already, the company says, more than 12 million devices have been infected-about 1% of devices Forensiq observed in the U.S. and 2% to 3% in Europe andAsia. Forensiq figures that the hijacking affects some 13% of all in-app advertising impressions.
The cost to advertisers is adding up quickly, Forensiq founder and CEO David Sendroff said in an interview. He projects that in-app ad fraud, which the company estimated at $857 million last year, will pass $1 billion worldwide this year.
Ad Fraud Is Complicated Even Further with Programmatic Media Buying
And if that weren't enough to give you pause before your next digital advertising campaign, consider that in their first ever published estimates, eMarketer disclosed that US programmatic ad spend topped $10 billion in 2014 and is projected to double to more than $20 billion by 2016. This represents 63% of total digital display advertising. Lauren Fisher, analyst for eMarketer says, “2014 has proven a pivotal year, and with the majority of infrastructure now laid and testing well in progress, we’ll see programmatic ad spending explode from 2015 into 2016.” With this kind of dominance, there’s little question that programmatic advertising is here to stay (see related article, "Problematic Programmatic Media Buying").
Bottom Line: Find A Partner to Protect Yourself Against Digital Ad Fraud
Unless you are looking to dig deep into this problem yourself, the best course of action is to find a partner who can protect you from digital ad fraud. Look to companies like Grey Cloak Tech, to ensure you aren't losing your advertising budget to digital ad fraud.