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7 Types of Digital Ad Fraud (+How Much They Cost You)

February 24, 2021

Digital advertising has opened up many new revenue opportunities for businesses in the decades since the popularization of the internet. When used effectively, online advertising can put companies in front of a massive audience and help build the business.

Spending on online advertising is enormous. According to Statista, in 2019, “search advertising spending stood at 104.8 billion U.S. dollars worldwide. This amount is projected to grow to about 137 billion U.S. dollars by 2022.” Meanwhile, display advertising spend reached over $160 billion U.S. in 2019. This enormous ad spend has attracted the attention of criminals looking to make easy money by defrauding marketers and merchants of their advertising budgets.

This ad fraud has become a major issue for businesses of all sizes and industries. And, the more companies spend on advertising, the more they stand to lose to ad fraud.

What is ad fraud? How does advertising fraud work? How can it ruin a company’s bottom line? Most importantly: What can you do to prevent it?

7 Types of Digital Ad Fraud That Marketers Should Know

Ad fraud is when criminals attempt to defraud businesses of money from their advertising efforts. This fraud can take many forms depending on the tools the fraudster uses and the type of ad campaign being defrauded.

Some of the key types of ad fraud marketers and business owners need to know about include:

1. Domain Spoofing

In ad fraud, domain spoofing is the practice of disguising one website as a different, more valuable website. By spoofing a domain, cybercriminals can trick advertisers into paying more for advertising space on the spoofed website than they should.

Some warning signs of domain spoofing include traffic from the spoofed domain not matching what the website should be getting, a cost per mille (CPM) that is too low for a high-value site, the domain in question not normally running ads, the publisher not selling ad space in a real-time bidding (RTB) auction, and a suspicious email being listed as the domain owner.

2. Click Injection

This is an ad fraud strategy where cybercriminals put malware on user devices. The malware will then generate clicks on ads, such as Facebook ads or website banner ads, to falsely inflate spending on those ads. Infected devices may be referred to as botnets.

As noted in a Tech Crunch article: “Developers create junk or easy-to-make apps which get downloaded millions of times, while in the background they’re clicking on invisible ads without the user’s knowledge.” In the article, Facebook had brought a lawsuit against two app developers who were accused of this practice.

Bad bots spread by malicious software in mobile device apps can cause billions of dollars in losses. Anura once identified and isolated two apps as containing bad bots meant to rack up clicks – Lovely Rose and Oriental Beauty. After installing the two apps on a mobile device and leaving that device in sleep mode for a full 24 hours, our team logged that the device had generated 3,061 requests for an ad and 169 successful clicks.

Imagine how these bots could impact ad spend when applied across a million devices running for months or even years.

3. Cookie Stuffing

Advertisers with affiliate marketing programs often use cookies (small files that store text in a web browser) to track which affiliates are responsible for referring a particular website visitor. Cookie stuffing is a type of fraud where the fraudster applies numerous affiliate tracking cookies to a website visitor’s browser at the same time just in case they happen to go to a website with an affiliate program later on.

Because their browser has an affiliate tracking cookie, the merchant’s affiliate marketing program gives credit for the visit to the cookie stuffer—even if the fraudster never actually promoted the site. This misattribution can consume ad spend and hurt honest affiliates since the fraudster is stealing credit for leads and sales from them.

4. Pixel Stuffing

Pixel stuffing is a form of ad fraud where a fraudster creates a tiny, typically 1 x 1 pixel area, advertising display that a normal person would never see. This fraudulent ad technique is designed to take advantage of marketing programs that base their ad spend on impressions.

Using pixel stuffing, a criminal can display dozens or even hundreds of ads on a single webpage and get credit for impressions. However, these single-pixel ads do not generate results since viewers will never even realize that they “saw” an ad.

5. Geo Masking

Some ad campaigns may have different ad spend for different regions of the world (referred to as geo-targeting). For example, a company might set up a paid ad campaign that pays at a higher rate for leads coming from the U.S., a slightly lower rate for leads from Mexico and Canada, and then not trigger for leads from overseas locations not available for North and Central American ground shipping.

Geo masking in advertising is when a fraudster hides the location of the leads they generate. This involves spoofing the IP addresses of the leads they generate to make them look more valuable so they can charge advertisers more for the “leads” they provide.

6. Ad Stacking

The goal of ad stacking is similar to the goal of pixel stuffing: To put more ads in front of website visitors to inflate impressions. Where ad stacking differs from pixel stuffing is that instead of creating “invisible” ads that are only one pixel across, multiple ads are “stacked” one on top of the other in the web browser.

For example, if five ads are all stacked on top of one another, the fraudster can claim credit for all five impressions, even though the “top” ad is the only one website visitors actually see. This can also contribute to cookie stuffing, as each ad can put a cookie on the visitor’s web browser.

7. Ad Injection

Ad injection is a fraud strategy where criminals use browser extensions, plugins, and malware to put ads where they shouldn’t appear or replace the ads on a website with different ads. When people click on these misplaced ads, the fraudster gets credit for a click—even though they don’t own the website the person is clicking on.

Because fraudulent ads are inserted into websites without the site owner’s permission, it can potentially lead to legal trouble. The victimized websites lose out on the ad revenue they should have made because their own ads have been replaced with ones that they cannot earn money from. So, they may try to recover those losses with legal action.

6 Ways Digital Ad Fraud Can Ruin Your Bottom Line

How can the different forms of ad fraud affect a company’s bottom line? Here are a few of the potential impacts of advertising fraud:

  • Wasting Advertising Budget.The biggest impact of most forms of ad fraud is that it consumes advertising budget without producing results. Many forms of ad fraud either claim credit for coincidental site visits (cookie stuffing, pixel stuffing, and ad stacking), create false clicks and impressions (click injection, geo masking with human fraud, etc.), or artificially increase the cost of impressions or clicks on low-quality sites (domain spoofing). Estimates from organizations like Juniper Research show that ad fraud cost organizations $42 billion in 2019, and they project that the cost will increase to $100 billion by 2023.

  • Wasting Time Pursuing Bad Leads.To produce revenue quickly and consistently, the sales team needs to focus on high-quality leads. Ad fraud tends to generate low-quality or entirely fake leads that have no intention of doing business. This causes a lot of wasted time by the sales department. Sales team members may even miss out on genuine, high-quality leads by spending too much time on low-quality leads from fraudulent sources.

  • Harming the Brand’s Reputation.Reputational damages can have a significant impact on a company’s bottom line as potential customers, business partners, and investors avoid the company. Being associated with ad injection fraud can be hurtful to a company’s reputation in the long term. Also, ads appearing on sites not suitable for the brand can cause damage to that brand’s image. Finally, if a company calls enough fake leads, people will start caring more about where companies got their information than they will about the products or services on offer. This can give potential customers the idea that their data is being stolen by the company, which can make the organization look really bad to its target audience.

  • Legal Fees.Recovering money from fraudsters is not a quick or easy process. Bringing a lawsuit against a person or organization that has committed fraud will require extensive (and often expensive) legal aid after a lengthy investigation. Worse yet, some fraudsters may dump their assets in offshore accounts to limit their available funds and effectively render themselves “judgment proof” so it will be harder to recoup financial losses from them.

  • Fines for TCPA Noncompliance.The Telephone Consumer Protection Act (TCPA) can be a major issue for companies that try to follow up with fake leads over the phone. Any follow-up with a “lead” that didn’t give consent to call can lead to TCPA compliance issues that result in fines of $1,500 per call. So, if a fraudster fills in someone’s real contact info into ad campaigns without consent, there could be large fines for the company relying on those leads.

  • Skewed Metrics Affecting Future Marketing Campaigns.Another one of the problems with ad fraud is that certain forms of ad fraud can create an erroneous impression of what works in a company’s advertising. With skewed marketing metrics, companies may end up wasting a lot of money on marketing campaigns that aren’t likely to work, targeting a demographic that isn’t a good fit for their products and services or won’t close deals. This leads to more wasted ad budget.

How Much Money Are You Losing to Digital Ad Fraud?

So, how much is ad fraud costing your business? The answer to this question can vary depending on factors like how your company purchases traffic (leads, clicks, impressions, or a combination of ways), the number of leads/clicks/impressions purchased per month, and how many bad leads you get from your ad campaigns.

For example, say your company pays for 20 million impressions per month, with 25% of those impressions being bad (the industry standard bad impression rate), and pays $5 per thousand impressions. In this case, you might be losing $25,000 per month to ad fraud.

This doesn’t include the cost of time wasted in pursuing bad leads or any of the long-term impacts of fraud.

Wondering How Much Ad Fraud Is Costing Your Business? Try the Anura Ad Fraud Calculator

How Ad Fraud Solutions Save Your Revenue

One of the best things that a company can do to protect itself against the costs of ad fraud is to detect fraud early and put a stop to it as soon as possible. This is where ad fraud solutions like Anura can help.

Anura helps to identify fake leads in real time using a database of over a decade of real-world data to parse the real traffic from the frauds. In addition to powerful and accurate fraud detection, Anura comes with world-class support so you can make the most out of your ad fraud solution!

Instead of having to manually review mountains of data, you can let Anura tackle the difficult task of identifying fraud. This helps free up your time to focus on more value-added tasks that help improve your business’ revenue.

Do you need to stop ad fraud in its tracks? Request a trial now! You can also learn more about how to protect your business against affiliate marketing fraud by downloading The Rise of Affiliate Marketing Fraud whitepaper at the link below: 

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