How Marketing Pro’s Tackle The $42 Bn Ad Fraud Industry In 2019

June 3, 2019

Ad fraud is a term used to describe one of two activities: The first referring to fraudsters consuming the marketing spend businesses put toward advertising and the second referring to advertisers selling fraudulent services or products. In the case of this post, ad fraud numbers being reported are in regards to marketers’ ad spend only. Fraudsters use a variety of tools to generate clicks, views, impressions and even fake leads (email addresses, phone numbers, names, etc.) that eat away at the online advertising budgets of marketing departments.

Over the past five years, ad fraud, which is a criminal enterprise, has seen returns shooting up to between 2500% and 4100%, and business are growing more and more concerned over the growth of this criminal industry.

Back in 2018, marketing losses in ad fraud were estimated to be around $19 billion, according to a Juniper Research report. At the time of this estimation, it was believed that ad fraud losses would reach $44 billion by 2023. Though, just one year later, the 2019 estimation of money lost to ad fraud is now at $42 billion. The new prediction for 2023: over $100 billion lost to ad fraud. In another year, the new 2023 prediction could more than double again, and why not? As new software is created to combat ad fraud, so too is new software created to bypass the newest of the anti-fraud programs. It’s a constant battle, and the good guys, the businesses trying to grow communities and make sales, they’re on the losing side.

What is the real cost of ad fraud to online ad spending?

In a paper about cybersecurity and ad fraud, Dr. Augustine Fou outlined the framework by which ad fraudsters are making their money. Bots are programmed to emulate human behavior which, in turn, drives down the ROI by inflating impressions, clicks, and views. This serves to either create income for the publishers of the ads or to drain revenue that might be made when advertisers use a competing publisher.

Currently, the majority of click fraud is performed by bots, and the Association of National Advertisers have estimated that these bots can represent up to 37% of the impressions in every ad. In terms of ROI, this boils down to a simple, yet horrifying truth for advertisers.

For every $3 spent on digital ads, $1 is lost to fraud.

The Future Digital Advertising: Artificial Intelligence & Advertising Fraud 2019-2023 has estimated that by 2023, the total cost of ad fraud could exceed $100 billion. The report claims fraudsters will start to rely on more advanced techniques, such as spoofing ad networks to falsify ad clicks, or exploiting the programmatic ad buying algorithms that online advertising relies on.

What is ROAS and how is it affected by ad fraud?

  • Be careful and critical of the numbers reported. Clicks and impressions are easy for fraudsters to fake, and is where the majority of fraud bot attention is being focused. Instead, consider looking at metrics which show real engagement and conversion, such as sales made or verified email sign-ups.

  • Measure, measure, measure, and keep an eye out for unusual spikes in activity. While this could mean an ad campaign is doing well, it could also mean a bot is corrupting the data. Analyze the sources of the click-throughs and blacklist any sites that send a lot of traffic but never converts.

  • Don’t forget to focus on organic traffic. Use blog posts, press releases, and social media platforms to drive real engagement. Instead of focusing exclusively on ads, the power of content should not be dismissed.

  • Find solid bot detectors which can filter out the negative traffic while still letting the good traffic come through.

While bot detectors can filter out some of the fake traffic that is skewing metrics and costs, it’s important to note that traditional bot software detection is currently not as high tech or easy to employ as one might hope - particularly in the fast-changing world of ad fraud.

Can ad fraud be thwarted completely?

When it comes to challenging the fraudsters, marketing technology company NOIZ is using interactive ad campaigns to fight ad fraud. NOIZ uses conversational marketing campaigns, so marketers can create ads, web pages, and landing pages that record and analyze time stamps, mouse movements, and more. This detects bot patterns from the typical patterns of a human user.

By then adding a principle of NOIZ credits, people can join the loyalty program once they have completed a KYC-level sign up process. Currently, this is one of the hardest processes for bots to pass, and complete.

XCHNG, on the other hand, is establishing an open and unified blockchain-based framework for advertising which makes fighting ad fraud much easier.

This is the kind of diligence that publishers need to exhibit in order to combat ad fraud. The kind of transparent open-source network of XCHNG, or the filtering process of NOIZ’s ad network means that publishers and advertisers can have trust in one another.

In order to beat the ad fraudsters, it’s vital that publishers, advertisers and consumers all work together to combat this huge criminal industry.

Parting Thoughts

Given the current landscape, one thing for certain is that ad fraud is going to be around until it is no longer profitable. It’s important, that instead of sticking their heads in the sand, publishers and advertisers look for progressive and more advanced ways to challenge this cyber crime.

This is an industry problem that needs addressing, and companies like NOIZ and XCHNG are doing their part to reduce the impact of advertising fraud.

However, if more businesses and organizations don’t join in, the 2023 estimate of $100 billion lost to fraud may do more than just double next year.

Leave a comment