What is ad fraud and how can advertisers fight against it?

According to HP Enterprise’s Business of Hacking report, ad fraud is the easiest and most lucrative form of cybercrime, above activities such as credit card fraud, payment fraud and bank fraud. Luke Taylor, COO and Founder of TrafficGuard, explains why businesses should do what they can to detect and prevent it.

What is ad fraud?

Invalid traffic, which encompasses advertising fraud, is any advertising engagement that is not the result of genuine interest in the advertised offering. This could be fake clicks generated by malware, competitors clicking ads in order to drain your ad spend, or users clicking ads by accident. Ad fraud is a subset of invalid traffic, characterized by its malicious intentions, and has been around for as long as digital advertising.

Every time a consumer sees or clicks on an advertisement, the company advertising pays the website for that displayed ad, as well as any number of adtech vendors and traffic brokers that facilitate the process such as ad networks and exchanges. The more advertising engagement, the more money goes to the pockets of these vendors. Some genuinely grow their audiences, while others use trickery to get non-genuine human engagement or fake bot engagements.

Ad fraud and other forms of invalid traffic can cost up to 30% of an advertiser’s budget. Due to a lack of solutions, many advertisers have become complacent with this aggressive attrition to their ad campaigns, considering it an additional cost of online advertising. In 2018, advertisers lost $44 million of advertising spend per day to fraudulent traffic in North America alone. It’s anticipated to reach $100 million a day by 2023.

The reality is the advertising ecosystem is quite complex, making it difficult for businesses to see whether ad fraud is impacting them. As a result, businesses aren’t taking steps to check their risk, let alone seek protection.

How common is this form of cybercrime and does it affect everyone equally?

Wherever there is money in digital advertising, there is invalid traffic. All digital channels, all geographies and all players in the advertising ecosystem. Every advertiser is aware that ad fraud exists, however, most reject the idea that it is happening to them, because it’s difficult to detect without the proper tools. However, just because one chooses not to see the problem, doesn’t mean it’s not there – advertising fraud makes its way into every campaign (CPM, PPC, install campaigns) and every stage of the advertising journey (impressions, clicks, installs, events).

With fraud mitigation and ad quality assurance tools, businesses could achieve big improvements to their advertising performance. The average company now spends 16% of its IT budget on cybersecurity protection measures, yet the issue of ad fraud goes unaddressed, as security decision makers remain oblivious to this challenge. From fake mobile display traffic to bots, ad fraudsters are undercutting businesses’ marketing and customer acquisition efforts.

How do these fraudsters operate, what’s in it for them and how much money are they “collecting” from businesses’ advertising budgets?

Ad fraud is both easier to commit and more costly to businesses than other forms of fraudulent activity. Sophisticated criminal organizations are making billions from ad fraud. The reality is that it’s nearly impossible to pinpoint their exact origins given how complex the digital advertising ecosystem is. Like any successful business, fraudsters are adapting and diversifying in the pursuit profit. The more funds that flow to fraud, the more attractive and formidable this type of cybercrime will become. The more money that flows to fraud perpetrators, the less effective the whole digital advertising ecosystem will be.

What are its consequences on businesses’ bottom line and intelligence?

In addition to drained advertising budgets, there are several other negatives consequences coming from ad fraud that limit businesses’ bottom lines, intelligence and ability to grow.

Ad fraud, and other forms of invalid traffic skew advertising performance data. This is quite detrimental to marketing efforts, affecting everything from future budgeting to campaign optimization. The impact doesn’t just stop at advertising. Product, user experience and website design teams rely on data to improve the customer experience. If their baseline data is skewed, their efforts can be spent in the wrong areas.

Fraudulent advertising activity also reduces the effectiveness of the digital advertising ecosystem for everyone. Advertising intermediaries, the companies who connect advertisements to traffic sources, must spend time and money to address ad fraud. This reduces their ability to scale advertising to the best quality sources of traffic – limiting growth for all advertisers.

How can business protect their digital ad campaigns from this illicit activity?

The cost of ad fraud is much bigger than just the wasted media spend, which is why it is imperative to evade. Preventative, transparent tools which stop fraud at the source are the most effective. This prevents wasted media spend, polluted data and the time-consuming process of manual volume reconciliations.

Optimization is significantly more effective when based on verified traffic data, enabling you to safely and confidently scale your advertising. Some anti-fraud tools occur in a black box, where you’re asked to trust that it works. Businesses should have access to reporting that shows you how fraud prevention is helping your business overall. Transparency is essential to be able to see clear and defendable reasons for each invalidation.