The Silent Drain: What is Ad Fraud?

Imagine launching a digital ad campaign, anticipating a surge in customer engagement and sales. Instead, your budget drains away, siphoned off by invisible forces before your ads ever reach a real person.

This is ad fraud.

Ad fraud encompasses a range of deceptive practices that fraudsters use to siphon off billions of dollars from digital advertising budgets each year. It’s an elusive enemy, often going unnoticed until it’s too late, as it skews data, wastes resources, and distorts marketing strategies.

Understanding ad fraud is your best defense against the silent drain.

Ad Fraud Meaning

Digital advertising transformed the way marketers could connect with consumers. But with these new touchpoints also came new opportunities for fraudsters seeking out financial gain.

It’s likely that click fraud emerged as soon as digital ads became widely available. By the turn of the century, other sophisticated types of digital ad fraud were already being recorded. As digital ad budgets increased so did ad fraud.

Ad fraud spans from bots impersonating human traffic and sites that stack ads where only one should be to publishers who inflate their ad performance metrics to gain higher revenues.

However, regardless of the type of ad fraud, the result is the same: The fake traffic inflates the number of impressions or clicks advertisers pay for. This effectively increased advertising costs while lowering campaign performance.

The Complex Cost of Ad Fraud

Ad fraud is a billion-dollar business.

Many sources estimate that ad fraud cost U.S. businesses $84 billion a year. However, this is a conservative number. According to Anura’s calculations, a minimum of $125 billion in direct losses can be attributed to fraud in 2023 alone. This includes everything from the ad dollars lost to actual fraud to lost traffic that is misidentified as fraudulent.

As digital channels continue to dominate total media ad spend, fraudulent traffic will also increase. Fraudsters follow the money. The more businesses spend on digital ads, the more bad actors will be trying to siphon off dollars for their own gain.

Not only is ad fraud profitable, but it’s also easy to implement. Botnets, for example, are cheap to rent by the hour. Bad actors can run an ad fraud campaign for months for only a few thousand dollars.

The Hidden Costs

The direct cost of ad fraud is shocking enough, but it doesn’t account for the indirect costs that can damage your business in the long run. For instance, fraud directly impacts the reliability of data analytics businesses depend on to make informed decisions. When analytics are distorted by fraudulent activities such as fake clicks, impressions, and engagements, it can lead to misguided interpretations of campaign performance.

The effort and resources that businesses invest in identifying, addressing, and mitigating ad fraud represent a significant indirect cost. When these efforts are futile, it’s a direct waste of resources. Similarly, time and money spent tracking down false leads rather than real users adds up over time.

We also can’t forget the impact this has on your consumers. When inefficient ad fraud solutions block real people instead of fake traffic, they’re going to spend their dollars elsewhere.

So, the question remains, how much can you afford to lose to ad fraud? This constant drain of resources will eventually catch up to many businesses.

Types of Ad Fraud

Ad fraud occurs in many forms, which is why it can be difficult for marketers to properly identify and put a stop to the silent drain. Some of the most common forms of this fraud that we cover in more detail throughout this guide include:

• Click Fraud: This type involves generating illegitimate clicks on pay-per-click (PPC) advertisements to inflate advertising costs for competitors or increase revenue for website owners hosting the ads. Click fraud can be manually done by people clicking repeatedly on ads, or more commonly, through automated bots and scripts.
• Mobile Ad Fraud: Mobile ad spending represents nearly two-thirds of digital ad dollars spent in the U.S. The most spending takes place on apps, which have become a lucrative platform for fraudsters. They can participate in app install fraud where fraudulent apps or devices simulate app installations and usage to trigger advertising payout. Mobile click injection is another avenue where fraudulent clicks are inserted into legitimate mobile advertising processes.
• Digital Ad Fraud: This broader category encompasses any fraudulent activity in digital advertising, including the manipulation of traffic, ad impressions, and user engagement metrics through various means.

Common Ad Fraud Examples

The above examples are just the tip of the iceberg that is ad fraud. There are many ways bad actors can carry out these types of ad fraud. Here are just a handful of examples that impact different facets of digital marketing:

• Bot Traffic: By far the most common example of ad fraud since it is the easiest to implement on a large scale. Automated scripts simulate human activity by clicking on ads, watching videos, or browsing sites to generate fake traffic and ad engagements.
• Pixel Stuffing: In this scam, an entire ad is stuffed into a single pixel on a webpage that’s unnoticeable to the human eye, but still counts as a view each time the page is loaded.
• Ad Stacking: Here, multiple ads are layered on top of each other in a single ad placement, but only the top ad is visible, causing advertisers to pay for unseen ads.
• Domain Spoofing: Fraudsters misrepresent low-quality websites as more reputable ones to sell ad space at a premium rate. This deceives advertisers about where their ads are actually being displayed.

Each type of fraud involves different complexities and challenges, but they all aim to drain ad budgets. As digital advertising continues to evolve, so do the tactics used by fraudsters. It’s essential to continue to learn about the nuances of ad fraud, including the latest tools and strategies for detection and prevention.

We encourage you to read more of this guide to gain a deeper understanding of ad fraud and how to prevent it. Experience the power of Anura and discover just how much fraud you have with a free trial.