The Dangers of Programmatic Fraud in the Ad Industry

A reporter found a copy of her story on a different website than expected. When searching Google to find the story that she had written just days earlier, she found her article on a different publication and blanketed with ads.

This isn't anything new. People have been scraping content from websites for years in order to re-shape it for "spammy" websites that would fool Google. However, over the past decade, as the programmatic industry has grown to attract billions of dollars of advertiser spending, these sites developed to blatantly scrape and re-publish content from news sites – for the sole purpose of serving ads.

Programmatic advertising, named such because it allows advertisers to "program" their campaign. Through an interface to the ad tech system, typically called the Server-Side Platform (SSP), advertisers set targeting parameters, campaign settings, budgets, upload creative and press play, allowing the Ad Tech network's programming to take over and distribute their ads to the target audience.

But the Ad Tech system that enables this split-second serving of targeted ads to users is also an unwieldy beast that provides little transparency, swallows budgets, and enables fraud at an estimated loss of between $7 billion and $23 billion a year.     

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The recent Programmatic Supply Chain Transparency Study from the Incorporated Society of British Advertisers found that half of advertiser budgets are swallowed up by the ad tech system before they even get to the publisher. Of that, 15% of budgets simply disappear without a trace, leading to the inevitable conclusion of a spectacular lack of transparency in the system.

The premise of ad fraud was tested by Uber, who spent $150 million a year on online advertising. They turned off $100 million out of the $150 million spend and saw no change! Similarly, smaller advertisers have seen their campaigns "optimized" from $1,200/day to $40/day with no noticeable difference in performance. 

Ad Fraud expert Dr. Augustine Fou states that "the chances of ad fraud affecting advertisers range between 1%-100%. There is always fraud: it is just a matter of how much there is." Fou lists the myriad of methods that fraudsters use at all levels of the Ad tech Spectrum. From apps that multiply impression counts, bots that mimic humans, malware that infects users, websites created just to display ads to bots, and websites that pretend to be legitimate publishers, the list goes on.

Often, fraud happens when advertisers simply cannot or do not distinguish human visits from bot visits. To make matters worse, many companies in the ad Tech space claim to offer verification but do it through very limited methods that disable their ability to see the full picture. Even worse, their solution does little to screen for bots that mimic humans.  

Between the lack of agreed terminology, lack of transparency, no reliable metrics, snake-oil security services – it's a wonder that the ad system produces any real results.  

However, it's not all doomsday alarms and bad news. Here's what you can do to mitigate your fraud losses as an advertiser. 

First, stop buying cut-rate and discounted ad inventory. If it is cheap inventory, then it's most likely bot traffic.    

Second, look at your data. Do your human visitors all click your ads between 2 AM and 4 AM? Do they visit websites such as 000011uudhdhhhoj9998yg.com to see your ads? Start looking at the easy to understand data and make decisions about the quality of websites where your ads are appearing.

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Third and probably the most crucial: pay more for better quality. Pay for higher quality networks and higher quality sites. Even better, buy ad space directly from the publishers. You'll pay more, but you'll secure actual human viewers, the publishers will get more money, and you'll both come out ahead.

According to Dr. Fou, "the more middlemen in the process, the more layers, the more is taken from your spend and the lower quality the traffic (bots). The closer you are to the direct publisher, the less the chances are that you will be affected by fraud."   

With the extinction of cookies as a tracking feature looming in the distance, it may be the catalyst needed to stop relying on cheap, inexpensive views. Instead, advertisers will have to focus on relationships and quality once again, reaching audiences with contextually-relevant ads. 

The constant changes in digital advertising, whether display or pay per click, make it essential for digital marketers to keep their skills sharp.  Simplilearn offers courses and programs like Advanced Mobile Marketing and Digital Marketing Specialist for refreshing digital marketing skills and adding new ones to your repertoire.