Richard Kahn
If you’re playing the online ad game, odds are you’re a victim of fraud.
Ad fraud isn’t new; it’s been around almost as long as digital ads themselves, with early evidence that little could be done to detect it. Whether you’re an advertiser or a publisher, ad fraud will negatively impact your business’s bottom line. Fortunately, there are ways to reduce the risk to ad budgets while leveraging the advantages of digital marketing.
What is Ad Fraud?
Ad fraud is a broad term encompassing the practice of viewing, clicking, converting, or generating false interactions with any web asset for the sole purpose of earning money directly or indirectly. It can be perpetrated in any number of ways: by malware, bots, humans behind keyboards, or any combination.
How Much is Being Stolen?
Exactly how much advertisers lose to ad fraud is unclear, with estimates ranging between $68 billion to $120 billion annually. Anura estimates 25% of all paid traffic is fraudulent. This means that of all the impressions, clicks, or leads generated by digital ad campaigns, one out of four is fraudulent—the more money spent on online advertising, the higher the losses due to ad fraud.
With nearly $264 billion in digital spend in the U.S. alone, U.S. advertisers are set to lose almost $66 billion this year. And that’s just in direct ad fraud, not including the other associated costs we’ll get into later.
Who is Contributing to Ad Fraud?
The obvious answer to this question is the fraudsters themselves. While ad fraud is illegal, it’s relatively easy and inexpensive to get into “business.” While progress is being made to catch and prosecute the perpetrators, it isn’t easy to trace the fraud back to its source, which makes it an effective way to launder money.
Fraudsters purposely exploit the system for their own benefit, but they aren’t the only contributors to the problem of ad fraud. The very advertisers and publishers impacted by ad fraud also contribute to it because of how digital advertising is usually purchased and placed.
More than 90% of digital advertising in 2022 was placed programmatically, according to eMarketer. Programmatic advertising takes the buying and selling of online advertising out of the hands of humans, using automated technology and algorithms for media buys. This process is intended to make online placement easier, more targeted, and extend its reach. Still, it can also mean that advertisers don’t know exactly what sites their ads are running on, if the sites are legitimate or not, and what, if anything, is being done to prevent fraudulent traffic.
Anura has found that programmatic campaigns have fraud rates averaging 50%.
Advertisers know that fraud exists and that it impacts their budgets and campaign performance. But because they don’t know how to stop it—or, ironically, don’t have the budget to invest in prevention tools—many have accepted programmatic ad fraud as a cost of doing business.
Publishers face losses from ad fraud as well. Google has estimated that publishers, who rely on advertising revenue, lose $1.27 billion per year due to counterfeit inventory. They also risk losing trust in their advertisers—and potentially even more ad revenue—due to bots, which make up approximately 40% of web traffic.
About Those Other Associated Costs
In addition to lost ad dollars, the associated costs related to ad fraud include lower ROI, wasted staff resources, reduced employee morale, and brand reputation damage.
Brands don’t always know where their ads are being placed. If they end up placed next to inappropriate content, on websites known to spread misinformation or even worse disinformation, or on sites that conflict with an organization’s stated mission, your brand’s reputation will suffer. Consumers assume advertisers know where their ads are displayed. Forrester reports that many U.S. and U.K. adults don’t trust, and will not buy from, brands that advertise on misinformation sites.
And then there’s what may be the most significant cost: potential Telephone Consumer Protection Act (TCPA) violations and fines.
Who You Don’t Know Can Hurt You
You can’t tell who’s behind the keyboard. Human fraud farms can be hired for as little as $9 an hour. They fill out forms with legitimate information, likely scraped from the internet or stolen data. That form is passed on to your call center, where someone dials the number provided. Chances are, the call will go unanswered and you’ve just wasted time. But if the call is answered and the contact did not request a quote or otherwise give consent to be called by your company, you’ve just committed a TCPA violation.
Since they are based on the number of contacts, fines and legal fees from TCPA violations can quickly skyrocket into millions of dollars. Plus, you could be put at risk of facing a class-action lawsuit. The lawsuits and fines are intended to discourage fraudulent activity and help recover consumer losses. Unfortunately, companies that strive to do business the right way can still find themselves in legal trouble because they rely on others who may not always have their best interests at heart or who may have been deceived themselves.
What Can Be Done to Stop Ad Fraud?
Bad actors continue to get away with fraudulent activity because there is too much reliance on outdated technology, and they’re skilled at figuring out how to skirt around new advances in security. For example, automated bots continue to become increasingly sophisticated and can click on ads, manipulate website metrics, process credit card transactions, fill out forms, and the like. Even if you somehow prevented interference from all the bad bots, you’d still have a malware and human fraud problem. Fraudsters will always find a way!
What is the true cost of ad fraud? How does it impact your business? And is there anything you can do to prevent it and improve the effectiveness of your ad campaigns? Find out in our free eBook!
