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$6 Billion Lost to Ad Fraud

03 Feb 2016

Advertisers waste over $6 billion a year in fraudulent advertising spend. Fraudulent accounts are abundant, and with good reasons: there are no rules, no consequences, and no regulations for their actions. They've figured out unique and relentless ways to exploit advertising dollars, disclosed in a report from eZanga, with Emerging Insider Communications.

The report says that fraudulent behaviour in programmatic ad buying is common, as marketers are reportedly spending anywhere from 30 per cent to 70 per cent of their digital budgets on fake impressions and clicks. Adexchanger says that 78 per cent of high-level decision makers are using programmatic technologies across their campaigns, while 47 per cent of marketers in the US and UK found that fraud was inhibiting programmatic usage.

77 per cent of marketers do not fully understand programmatic and the application process of it, says the report. The Association of National Advertisers, with Forrester, finds that:

• 12 per cent are completely unaware
• 29 per cent have heard the term but don't have a clear understanding of it
• 26 per cent understand the concept but needs to learn how to apply it
• 10 per cent understand but have not used it
• 23 per cent understand and use it to execute campaigns

With 67 per cent of online bot traffic originating from residential IP addresses, the report focuses on where ad fraud is found, and why the method of execution is popular with fraudsters. About 36 per cent of all web traffic is considered to be bot-traffic.

Publishers (From SunTrust Robinson Humphrey and Distil Networks)

• Up to 50 per cent of publisher traffic is considered to be bot activity
• More than 50 per cent of traffic from third parties claiming to lift publishers' traffic numbers comes from bots
• 40 per cent of publishers can identify and police traffic from humans, good bots and bad bots
• 53 per cent of publishers had content stolen by unauthorized data aggregators and web scrappers
• 56 per cent of publishers are losing ad dollars to fraud
• 56 per cent of publishers are unable to investigate fraud issues or present their own findings

One of the largest subsets of online advertising fraud is search ad fraud or click fraud, says the report. It takes place when a person or bot performs the functions and patterns of a legitimate user, with the purpose of generating a click without having any interest in the result of that click. It's usually prevalent in a pay per click program where the advertiser is paying for performance, with the end goal to be a converting click. When a bot is present, they generally don't convert and add no intrinsic value to the advertising, but costs advertisers an average of $6-10 billion in wasted ad spend each year.

Search ad fraud, or click fraud, has become particularly popular because it can infiltrate the smallest of publishers, and the largest of brands, says the report. In a recent report by the Association of National Advertisers (ANA), 52 per cent of traffic from premium publishers who were previously believed to be unaffected by fraud, were found to be fraudulent. The use of a third party traffic scoring system does help mitigate the damage, but click fraud will remain abundant until all third party systems can agree on what are fraudulent traffic signals and what are not.

In the display sector, advertisers pay by the view or by the number of impressions it has left with a viewer, but if the ad is never actually viewed the debate on viewability asks, can the user see the ad or video, and if so, what is an acceptable amount of time for a user to see the ad or video and have it considered ‘viewed?'

The Media Rating Council (MRC) has adopted the standard of desktop display ads to be considered viewable if 50 per cent of their pixels are in view for at least one second (two seconds for desktop videos), says the report. For fraudsters, this simply set a minimum expectation of which to achieve by circumventing the system. Some examples include:

• Video fraud: Often stacked, layered, or invisible (e.g. one pixel by one pixel), it's lucrative, with payouts often upwards of ten times that of a banner ad
• Paid impression fraud: Advertisers paying for additional traffic to their website, but get traffic from known bots. These may go undetected without the use of a third party traffic scoring solution
• Ad retargeting: Bots replicate highly engaged user behaviors, like someone looking for a refrigerator for their home. The ad retargeting company, who is a bot, picks up on these engaged users, and serves retargeted refrigerators to the ‘user.' They make money off the impression, which was never viewed by an actual engaged user
• Hidden ad impressions: Hiding small ads within an ad to get the viewable impression from one or more hidden ads
• Fake sites: Sites that are built for the sole purpose of serving ads and have no content that a user would actually want to see

Additional fraudulent ad methods shared in the report, include:

Domain Spoofing

Separately from taking the content of your site and duplicating it, fraudsters also take over your URL's. By simply introducing a line of code, says the report, they're able to make advertisers think their fakes are worthy, reputable entities.

Content Fraud

The content on a website is what helps a brand from a trusting relationship with a customer. For fraudsters, it's quite the opposite: it's the opportunity to capitalize on a working formula to swindle traffic into their site. A recent study of content fraud showed at least 1 in 5 sites are affected by site scraping . Fraudsters scrape your entire site in an effort to get advertising on their site, says the report.

Cookie Stuffing or Affiliate Fraud

A popular form of fraud with affiliates that goes seemingly undetected. A user views a website and receives a third party cookie, not from the site they viewed, but rather an entirely different site. It's affiliate fraud since affiliates are usually paid when there is proof (e.g. cookies) that trail from an affiliate through the user's purchase process.

Embeded Video

Ad injections are advertisements that get inserted into an advertisers site without approval of the advertiser. This happens when a user downloads a browser extension or app that is bundled with software that injects the user experience with unwanted ads. Ad injections aren't limited to just online advertising. AT&T has recently been accused of intercepting WiFi and injecting it with ads, in essence monetizing its WiFi access, says the report.

"Ad fraud won't go away so long as people are advertising online and users are looking for information at their fingertips," concludes the report.

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