How Does Programmatic Ad Fraud Work?

Online advertising has enormous potential to help businesses win new customers. With over 4.6 billion people actively using the internet in some way or form, it’s easy to see why online advertising would be an attractive option.

Programmatic advertising is an especially efficient form of online advertising that boasts an average cost-per-lead (CPL) of $38—this is a fraction of the cost of a lead under traditional advertising channels such as TV, Radio, and print, which have an average CPL of $619 (Source: Linchpin SEO).

This helps to explain why advertisers in the United States were projected to spend approximately $106 billion on digital display ads in 2021. However, with so much money at stake, it was inevitable that fraudsters would emerge to try to take advantage of those trying to run programmatic ads.

What is programmatic ad fraud? How does it work? More importantly, what can you do to protect your programmatic ads from fraud?

What Is Programmatic Advertising?

Before discussing how programmatic fraud works, it’s important to know what programmatic advertising is.

Programmatic advertising is a form of digital marketing that uses software to decide when and where to place ads in front of a specific audience.

The software may check a variety of rules and attributes when deciding which ads to place in front of them, such as:

• The user’s browsing history.
• How much the advertising merchant bid for the ad space through the demand-side platform (DSP).
• Keywords associated with the user’s browsing/recent search history and the website being browsed.

The basic goal is to put an appropriate ad in front of an interested audience at a time when they may be amenable to the service or product being advertised. Most programmatic ads take the form of banner display ads or videos on websites, but other forms of advertising are also possible.

What Is Programmatic Ad Fraud?

Programmatic fraud is a subset of ad fraud where fraudsters attempt to take advantage of programmatic advertising for their own financial gain.

The strategies that fraudsters employ will vary from one type of programmatic ad fraud campaign to the next. There are multiple ways to attack programmatic campaigns based on the different revenue models and the uneven levels of protection different ad networks may have for their programmatic ad platforms.

How Programmatic Fraud Works

There are many forms of programmatic ad fraud that target advertisers and even ad networks in different ways to defraud them of money. Many of these strategies leverage malware, bots, and even human fraud farms to help the fraudster make the most financial gain for the least amount of time and effort.

Some common programmatic fraud strategies include:

1. Spoofing Website Domains to Drive Up Bid Prices

Domain spoofing is a fraud strategy that often targets programmatic advertising networks to defraud them and, subsequently, their customers of money. The basic strategy is for the fraudster to take one website and try to disguise it as another, more valuable one, so they can charge more for advertising space.

For example, a fraudster might see that there’s a popular website that gets a lot of traffic called Wakerpedia.com and create a site that copies its look with a slightly different domain name like Wackerpedia.com or Wakerpedla.com and pass it off as the more popular site. Unsuspecting victims might pay a premium to have their ads appear on the site.

The worst part of this strategy is that it often does far more than just take money from ad networks and their customers. In many cases, the spoofed websites are filled with malware and spam—and any ads that appear on those sites may become associated with it. This can damage the reputation of the brands behind the ads.

2. Ad Stacking and Pixel Stuffing

Some fraudsters try to claim credit for “displaying” an ad when, in reality, they’ve done no such thing. Using strategies like ad stacking and pixel stuffing, fraudsters can claim credit for “showing” ads to website visitors when the visitor really had no chance of seeing or clicking on the ad.

Ad stacking is the practice of hiding ads on a page to maximize the number of impressions while saving on the site’s available “real estate.” The ads on the page are all stacked on top of one another, occupying the same spot. In this scenario, only the ad on top is visible, so it’s the only one with a chance of performing. Every other ad is buried below and can’t be clicked on, so they produce no results despite generating an impression.

Pixel stuffing is another way for fraudsters to put more ads on a webpage without them taking up a lot of space on the page. In this fraud technique, the display ad or video is shrunken down to a single pixel on the page. This is even worse for advertisers than ad stacking since with ad stacking, at least one ad is going to be visible. With pixel stuffing, there’s no chance for website visitors to see the ad and react to it.

3. Click Fraud

In programmatic campaigns that pay based on clicks instead of impressions, some fraudsters may employ bots or click farms to repeatedly click on the ad over and over to generate revenue.

A simple botnet doesn’t cost much to buy—allowing even a complete amateur to set up a network with dozens, hundreds, or even thousands of bots that can click on an ad from a wide variety of IP addresses.

Human fraud farms leverage large collections of real people—often working in overseas sweatshops—with a variety of digital devices who try to click on ads as fast as they can while switching between devices, browsers, or emulator tools. You might assume the cost of labor would be too high to make this approach affordable, but the workers in these farms make very little money.

How Much Does Programmatic Ad Fraud Cost?

So, how much does programmatic fraud cost you? The answer depends on how much you spend on programmatic advertising, what revenue model you use, and what protections you and your programmatic ad platform provider have in place.

The average online ad campaign has 25% fraud—programmatic campaigns often have 40% to 50% ad fraud rates. In other words, if you spend $100,000 on programmatic ads, you can expect to be giving $40k-$50k of that money to a fraudster for absolutely no return on investment.

Could you imagine buying any other major capital asset, signing an agreement, handing over hundreds of thousands of dollars, and 40%-50% of the assets you paid for were missing at the time of delivery? How much would that disrupt your operations?

This doesn’t even take into account the potential loss of momentum in your industry vertical as competitor ads reach your customers in place of your own ads or the loss of reputation from being associated with malware sites. It’s time to say enough is enough and put a stop to programmatic ad fraud.

How to Stop Programmatic Ad Fraud Cold

While there is no magic bullet that can stop 100% of all ad fraud, there are things you can do to protect your company and stop the vast majority of ad fraud cold. Stopping programmatic fraud, in particular, can be difficult because the fraud often happens on websites you don’t have control over.

However, there are some things you can do to stop programmatic fraud, such as:

• Checking the websites your ads are being placed on. 

  Look at the site’s registry data to verify that the owner/publisher’s name matches what it should for the domain given, check to see if that domain is even known to offer ad space to other organizations, and check the URL for any oddities that could indicate spoofing.
  
  

• Verifying the anti-fraud measures the real-time bidding (RTB) platform provider uses. 

  Do these measures have any industry certifications for fraud prevention from a reliable certification body such as the Trustworthy Accountability Group (TAG)? If so, check the TAG registry to verify that they’re actually listed there! Many platforms claim to have anti-fraud protection, only to be caught using less-than effective single-metric filters that don’t do a good job of actually stopping fraud.
  
  

• Checking your marketing performance for abnormalities. 

  For example, if you have a major upsurge in clicks, but aren’t generating any additional leads and customers, that could be indicative of ad fraud (or ineffective ad placements).
  
  

• Using an ad fraud solution for programmatic campaigns. 

  Instead of having to painstakingly review marketing data to try to identify patterns that indicate fraud, you can automate the process of programmatic fraud detection by leveraging an ad fraud solution. With a reliable ad fraud solution, you can protect against bad actors, improve your conversions in programmatic campaigns, and confront fraudsters with evidence of their malfeasance if needed.

Of the above fraud prevention measures, using an ad fraud solution is the simplest and best solution. It removes the need to manually analyze data (a process that often requires years of experience to accurately identify fraud). Instead, you can leave the ad fraud detection to the experts and focus on what really matters—your business!

Are you ready to put a stop to programmatic fraud so you can get more mileage from your ad budget? Start testing your campaigns with Anura today!