The global digital advertising industry loses about $51 million per day to ad fraud, says Manatt Phelps & Phillips partner Farnaz M. Alemi. She lays out techniques used by cybercriminals and strategies businesses can use to protect their brands.
Global digital advertising has grown to $390 billion annually, and cybercriminals want a piece of the action. Juniper Research estimates that the industry loses approximately $51 million per day due to ad fraud and that by 2023 that number will skyrocket to $100 billion annually.
This theft significantly impacts the bottom lines of all brands that allocate budget to online advertising. Brands expect their ads to reach an audience so they can demonstrate value and create brand loyalty, which ultimately results in engagement and sales.
Due to ad fraud, however, these ads may not ever be seen by a single human being. With companies facing budget constraints brought on by economic upheaval, this blatant theft is something that needs to be addressed and remediated.
Ad Fraud Techniques
Cybercriminals carry out ad fraud by mimicking human consumer behavior using robots (bots). The bots artificially drive up ad impressions to increase cybercriminals’ payout by making it appear as if digital ads displayed on websites or apps are getting human eyeballs or clicks when nothing of the sort is occurring. Some ad fraud techniques (there are over a dozen) include:
- Ad Stacking. This is where multiple ads (e.g., 50 or 100 ads) are stacked on top of each other but only the top ad can be viewed. All the underlying, non-viewable ads still count as impressions that brands pay for.
- Fake Apps. Fraudsters entice users to download their apps (e.g., flashlight app; alarm clock app) which then auto-load ads continuously in the background (e.g., 20 ads per minute) unbeknownst to the users.
- Pixel Stuffing. This scheme involves compressing countless ads into invisible 1×1 pixel frames on a page. The fraudster running the site can display these invisible ads repeatedly, garnering impressions that cannot be viewed.
Fighting Ad Fraud
The advertising industry has been combating ad fraud for several years. In 2015, the Association of National Advertisers (ANA), American Association of Advertising Agencies (4A’s), and the Interactive Advertising Bureau (IAB) developed the Trustworthy Accountability Group (TAG) to fight criminal activity like ad fraud.
Federal authorities also have ad fraud on their radar. In 2018, the Department of Justice and the Federal Bureau of Investigation shut down two global botnets, Methbot and 3ve, after uncovering tens of millions of dollars in losses from digital advertising fraud perpetrated by eight individuals overseas.
Methbot involved spoofing over 250,000 URLs to falsely represent legitimate sites, driving 200 million to 400 million video ad impressions daily; 3ve was even more sophisticated fabricating inventory to drive 3 billion to 12 billion ad impressions daily. Also, 3ve used bots and malware to take over user devices to perpetrate the massive theft.
On the civil side, Uber tackled fraud after turning off $100 million of its ad spend and observing no appreciable change to its user app installs. Uber had contracted to pay for ads based on click attribution: pay per each install of the app due to user-interaction with its ads.
Uber learned that the app installs were happening organically without the advertising, yet they were being marked as attribution installs. Lawsuits were filed in federal and state courts for fraud, negligence, and unfair competition. One lawsuit against a number of mobile ad networks allegedly involved in placing the ads and reporting the results is still being litigated today.
Strategies to Protect Brands
Simply put, ads are being used to carry out sophisticated crimes and the victim brands are unknowingly paying to perpetrate them. Thus, advertisers and brands need to arm themselves with strategies to protect their brand reputation and their budgets:
Seek Transparency. Brands and marketers should work with their agencies to seek more transparency, ensuring that brand safety and ad fraud issues are addressed at the outset and during the campaigns. There should be options for remediation when incidents of ad fraud come to light. According to the ANA, more than one-third of its advertisers have altered their contracts with their agencies in the past few years to demand more transparency.
Review Data and Reporting. There is a wealth of data and tools (e.g., data logs, reports, dashboards) to measure the effectiveness of campaigns and to block suspicious behavior. It is simply not fair to advertisers to hear that their data is black box or unattainable. Advertisers should be empowered to ask for detailed reports or access to those dashboards and should review the data to ensure the campaigns are running smoothly.
Engage in Assessments and Ongoing Monitoring. Advertisers also should rely on advertising fraud technology experts to conduct independent ad fraud assessments of past campaigns or ongoing campaigns to monitor for leakage and remediate where appropriate. While brands already may receive assurances of ad-fraud detection systems in place, it is worth checking to ensure the detection is working as intended.
Demand Accountability. Brands should expect that partners involved in the ad spend are providing value, trust, and ROI. Where those expectations fall short, advertisers should hold them accountable and demand more. After all, ad fraud is not just a monetary problem; it also impacts the relationship between the advertisers and their intended audience.
If advertisers cannot reach their audience and deliver value and brand loyalty, their audience will turn elsewhere.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.