Big Fraud behind Big Data

Digital ad reliance has cash sinkholes

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Are you getting what you pay for with your digital ad dollar? Or a you innocently paying for the nearly $6 billion US in global fraud that is projected for 2019 as one study reports?

Let’s face it: all over the world the use of data has increased exponentially largely due to the ease with which information is captured, converted to digital format, stored and analyzed for the extraction of knowledge, according to the Measuring investment in data, databases and data science: Conceptual framework report just published by Statistics Canada.

In the 1930s and 1940s, the report notes, the first computers were rudimentary, slow, expensive and cumbersome with little memory or storage capacity. Today, after many decades of innovation, they are fast, cheap and miniaturized with enormous memory and storage capabilities and capable of executing complex algorithms. These developments have both enabled and encouraged a rapid growth in the collection, digital storage and usage of a wide variety of types of data.

So, we arrive at today, where paid website traffic acquisition, aka traffic sourcing, is an ordinary part of promoting a site to reach a larger audience, according to the series of annual Bot Baseline reports from White Ops, an internet human traffic verification company and ANA (Association of National Advertisers). It is not inherently bad, they say, but not all sources of traffic are equal. “When a real website has a big bot audience, the bots are showing up because they were paid for. Behind every big bot problem, someone is paying a traffic source.

“We observed 3.6 times as much fraud coming from sourced than non-sourced traffic. Publishers paying handsomely for legitimate search traffic are competing against publishers paying much less for bot traffic, and the tools used by most marketers cannot tell the difference. Botty traffic vendors may defeat detection, but they never have a credible explanation for why they are able to deliver high volumes of visitors.

“When a publisher finds a source of traffic for $0.01 per visit that gets scored as viewable and ‘high quality,’ some might call that a gold mine. We would call it a gap in bot detection.”

In its white paper, 3 Truths That Help Confront the Digital Ad Fraud Crisis, the Alliance for Audited Media (AAM), digital advertising fraud is said to truly be a huge industry problem. “Fraud estimates range from $6 billion to $16 billion annually, and the current supply chain structure makes it easy and attractive to commit ad fraud with little chance of retribution.

“Marketers, agencies, publishers and technology suppliers are frustrated. Trust is at an all-time low. The industry is nearing crisis stage as marketers are seriously questioning, rethinking and redoing their digital investments.”

The three truths that can help us confront the ad fraud crisis, according to AAM, are:

1. Fraud occurs on both fake and legitimate websites.

2. Illegitimate traffic sourcing is the main cause of fraud.

3. Ad fraud measurement is used to transact but does not minimize ad fraud.

To its first point, AAM says that marketers’ ads are placed on fraudulent websites with content that is pirated, fake or non-existent, and displayed to bots.

This occurs when the fraudster creates a bogus website, plugs into programmatic exchanges, buys traffic for the site, sells and displays the ad impressions, and collects the money for doing so. The fraudster steals ad dollars that were supposed to go to real publishers — just like counterfeit handbags or watches take the dollars meant for legitimate brands.

But marketers’ ads are also placed on legitimate websites with real content and displayed to bots. This occurs most often when a legitimate publisher’s organic audience is supplemented with third-party traffic to fulfill demand. Often this is completed through the purchase of traffic that may appear to be human but is in fact illegitimate bot traffic, says AAM.

Although tracking technology is designed to weed out fraudsters, the Bot Baseline reports state that it’s still too hard to know what you’re buying. “The ability to hold all ad spending to the same high level of validatability should be one of marketers’ top concerns in 2019. The time has come for marketers to stop tolerating — and stop paying for — outdated media formats that cannot support the highest levels of third-party validation.

“By selling media under conditions that do not support high third-party validation, even trustworthy media companies are essentially part of the problem, since the vast sea of good but low-transparency inventory provides cover for the fake inventory sold under the same formats.” It adds that fraud detection and prevention are only as good as their implementation.

In one case study mentioned in 2018-2019 edition of Bot Baseline, a century-old non-profit organization thought it was getting its money’s worth when it purchased impressions from a third party to mine for donations. Of the 5.8 million display impressions, just 22 percent were valid at the highest level. This means the organization paid 78 percent over what it should have done.

However, there is some good news emerging. In the five years since the first Bot Baseline study, ad spending in the categories most vulnerable to fraud — video and display advertising across desktop and mobile devices — has more than doubled, but losses to ad fraud have not. The latest study reports that increased awareness of the problem among marketers raised the priority of dealing with it, and leaders throughout the industry have risen to the challenge. “First, this slowed the growth of ad fraud. Now, for the first time, we are projecting losses this year to be smaller than in the first year of our study.”

The White Ops/ANA’s latest study reveals that there are five reasons that ad fraud has dropped in the last year. These reasons might even resemble a template for marketers:

1. Advertisers are directing more of their money through buying channels with dedicated, independent fraud prevention measures, an option that wasn’t available five years ago.

2. Buying bot traffic has become harder. Many bot traffic vendors have been driven out of business or gone underground, reducing the once-prevalent availability of bot traffic sold on the open web to anyone with a credit card.

3. Buying bot traffic has become more expensive. The market price for sophisticated bot traffic has risen, limiting the arbitrage opportunity for buying visitors and showing them enough ad units to make a profit.

4. Initiatives like ads.txt have helped to reduce desktop spoofing, with 78 percent of the top volume domains in the study using ads.txt files to prevent their inventory from being successfully spoofed.

5. Consequences are changing the incentives for perpetrating fraud. The business of committing ad fraud has become significantly riskier, as shown by a number of arrests in the last year — something that nobody would have dreamed would happen just a few years ago.

Cybersecurity companies, industry experts, and governments have come together to dismantle fraud infrastructure and take down botnets and their operators, the latest Bot Baseline study says.

Despite this optimism, Juniper Research noted in the same month of latest Bot Baseline study that advertisers will lose $42 billion US of ad spend this year across online, mobile and in-app channels, almost nine times larger than White Ops/ANA figures. Given the estimates of the size of programmatic ad spend this year — about $84 billion worldwide, according to Zenith — Juniper’s estimate represents about half of programmatic display dollars going to fraud.

A few factors contribute to this huge disparity in figures, according to eMarketer. It explains that there is currently no one way to detect whether an ad impression is fraudulent or not, and anti-fraud vendors rely on different methodologies and verification technologies for their work. Depending on what methodology is used, a vendor may say an ad impression is fraudulent or they may not. Firms also use technologies proprietary to them, and no identical results are being produced across the industry.

“Anyone who is detecting fraud is still only detecting the types of fraud that they’ve figured out how to detect,” said eMarketer principal analyst Nicole Perrin.

On the advertiser’s end, eMarketer reports, not all marketers are getting all their impressions verified. For companies that can afford to do so, they may only be checking a percentage of impressions and then that gets extrapolated into a larger picture. Smaller advertisers don’t have the budget to use verification services, so those numbers are not captured at all, it adds.

For fraud impressions that are captured, there’s no standardized way to translate that into a dollar figure, as impressions are all priced differently. “You have to make assumptions and estimates,” Perrin said. “Is the average fraudulent impression the same price as the average real impression? Does it cost more or less? There are many reasons why the answer could be any of those things.”

The takeaway for marketers is that no matter which ad fraud estimates they look at, according to eMarketer, billions of dollars are still being lost every year. If an individual marketer is using verification services, it explains, they can feel confident that they’re doing everything they can to stay safe, but the reality is that not all marketers are doing the same.

“Even with the most optimistic interpretation, marketers are throwing billions of dollars away,” Perrin said.

“So, any marketer should be concerned about that—or at least concerned enough to really think about, ‘Am I pushing my agency to buy impossibly cheap inventory? Am I asking for a media plan that can only be fulfilled with fraud?'”

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