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Ad fraud is out of control, and it’s only getting worse

The Association of National Advertisers (ANA) declared success in the war against ad fraud last year, but Metia’s Pete Morgan sees an industry out of control and B2B marketers de-risking their paid media campaigns.

Amid a flurry of PR outreach last May, the ANA claimed a significant victory in the battle against ad fraud. Citing a study of 50 companies over a two-month period in 2019, the ANA estimated global ad fraud at $5.8bn – an 11 percent reduction over two years. The ANA claimed that the war on ad fraud was succeeding, and a host of trade publishers took the bait. “Drop Dead, We’re Winning” ran the headline on MediaPost. It didn’t take long for the vultures to circle.

Criticism centered on the study’s small sample size and its sole focus on bot fraud, which is only a subset of ad fraud – a fast-moving and constantly growing landscape. Independent ad fraud researcher Dr. Augustine Fou took the ANA to task. “Conclusions about ad fraud based largely on the detection of bots, when bots are no longer the dominant form of ad fraud, is like drawing conclusions about murder rates based on the number of swords sold. It is outdated and irresponsible.” Fou went on, “Overwhelming evidence published by others, and the daily observations of ad ops practitioners show ad fraud is at its highest point ever – in rate, in dollar amount, and in sophistication.” 

Ad fraud is dead, long live ad fraud A few weeks after the ANA’s announcement, a study by the University of Baltimore and cybersecurity vendor CHEQ painted a different picture. ‘The Economic Cost of Bad Actors on the Internet’ predicted global ad fraud costing $23bn in 2019 – and rising to $30bn when indirect economic and social costs were included. The outlook is no less concerning. The same study predicted ad fraud to rise 13 percent in 2020, while the World Federation of Advertisers predicts that marketers could lose as much as $50bn a year by 2025.

The Financial Times concluded that ad fraud at this level, “would rank as one of the biggest sources of funds for criminal networks, even approaching the size of the market for some illegal drugs.” Ad fraud has been allowed to spread thanks to media buying systems that are complex and opaque. According to the University of Baltimore and CHEQ research, a single ad transaction involves as many as 20 or more players whose interests are rarely aligned.

Campaign Magazine described ad fraud as, “low-risk, high-profit, recurring-revenue crime.” It’s hard to detect and harder to prosecute, so it’s a soft target for fraudsters. Advertisers must ask themselves: Whose side is my agency on? The problem of ad fraud has been compounded by outdated compensation models, providing little incentive for the market to reform. Commission-based pricing means many media agencies are incentivized to spend money, and fast. Given media agency reporting has traditionally been limited to impressions and clicks, it’s made little difference to them whether traffic was legitimate. Few media agencies want to unravel this issue. Doing so might raise difficult questions about their behavior and ethics, if not today, then in the recent past. Staying silent is the simplest option for agencies, but it perpetuates the problem. 

The industry is stacked against marketers, who must reduce risk through their own actions Mitigating the risk of ad fraud starts with channel strategy, selecting a core set of channels you trust. When it comes to fraud – not to mention brand safety – programmatic advertising is inherently risky, as marketers cede much of the control around where ads are shown. Yet, programmatic advertising provides easy access to most markets and it is forecast by media agency Zenith to account for nearly 70 percent of ad spend in 2020. B2B marketers should run a thorough cost-benefit analysis before investing. Marketers must also reduce risk through data and technology. Benchmarking campaign data – across ad channels and website analytics – helps marketers to identify erroneous results that require further inspection.

Technology such as third-party verification helps to identify and block fraudulent advertising requests before ads are served. These approaches can only mitigate risk, however – it cannot be eliminated and that is important for marketers to understand. Most importantly, marketers should measure the success of their advertising by the outcomes that matter to their business. If you’re a B2B marketer using media to generate sales pipeline, then the number of impressions or clicks your ads generate is of incidental value. What matters to you is leads, and how these leads convert to revenue. Those metrics are far more important, and far less likely to be fraudulent.

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