Ad fraud is something that every online ad publisher needs to be familiar with these days. According to Adobe research relayed by The Wall Street Journal, 28 percent of all online traffic is fraudulent.
This number carries over into the world of digital advertising as well. When you consider the fact that eMarketer predicts that global online ad spend will total $375 billion by 2021, the amount of money lost to fraud comes in just above $100 billion. That is quite a bit of money for any online ad publisher to be throwing away.
Yet before going any further, it’s important to start by understanding what ad fraud is. The most basic definition of ad fraud is a scam that fools online ad publishers into paying for falsified engagements. Some of the most common types of ad fraud are:
- Click fraud, in which pay-per-click advertisements are fraudulently clicked using bots or human click farms
- Affiliate fraud, in which fraudsters employ techniques to fake interactions with affiliate marketing that result in a payout for the fraudster
- Impression fraud, in which publishers falsify ad impressions on their site
- Lead fraud, in which the criminal fills out forms or provides other information that results in a false lead
- E-commerce fraud, which falsifies a complete purchase using stolen payment information—this results in not only a payout for the criminal but also a charge-back to the merchant affected
What Every Online Ad Publisher Needs to Know About Ad Fraud
Now that you know what ad fraud is, it’s time to take a closer look. As an online ad publisher, you need to have a solid foundation in this topic so you can best fight back.
Remember, 28 percent of your digital advertising budget may be compromised due to ad fraud. If you can reduce that amount, you are going to see a better return on your investment. Not only that, but reducing illegitimate activity will also provide you with cleaner data so that your metrics can measure your progress more accurately.
So let’s dive in ...
1. Ad fraud is cybercrime
Although it is not quite as sexy as hackers in hoodies stealing intellectual property, large caches of financial records, or other types of data, make no mistake; ad fraud is cybercrime.
In fact, online ad publishers that fight back against ad fraud see that the perpetrators use the same tactics as other types of cybercriminals. Malware is commonly installed on zombie computers that make up botnets. These infected computers then report back to a command-and-control server that gives the bots, or zombies, their instructions.
In the case of ad fraud, the instructions may be to go out and click on ads or drive up ad impressions. Basically, anything the command-and-control server is programmed to tell the botnet, the infected computers will go out and do.
2. Ad fraud uses humans to bypass most prevention systems
Just like with other types of cybercrime, there are technical solutions that try to stop ad fraud. However, the criminals know that not many of these solutions are able to stop human fraud. Because fraudulent behavior conducted by actual human beings is harder to detect, the bad guys rely on human fraud farms.
Human fraud farms are basically groups of actual people who are paid to carry out fraudulent activity. It may be conducting click fraud, affiliate fraud, or even e-commerce fraud. The key point to know is that you can’t rely on prevention solutions that stop only bots and malware; you need to address human fraud as well.
3. Ad fraud affects data and metrics
Online ad publishers live by data and metrics. They tell us if a campaign is successful or not. They tell us what is working and what isn’t. Without data, everything is a wild guess.
Anyone who has ever worked with data knows the old adage, “garbage in, garbage out.” Well, fraudulent clicks, leads, and impressions, and any other activity that is illegitimate, will pollute your data. If left unchecked, fraud will affect your testing, and you’ll be basing your decisions on shaky metrics.
4. Ad fraud hurts your ROI
Earlier, we saw just how much ad fraud is expected to cost the digital advertising industry as a whole. That $100 billion-plus number is just an estimate as well. As fraudsters grow more sophisticated with their methods, the amount of money lost will continue to go up.
Think about how much you spend per month on digital advertising. Now take 28 percent of that away, and you can immediately picture how much ad fraud hurts. For a more comprehensive look, try this Ad Fraud Calculator to see just how much ad fraud affects your campaigns.
Ad fraud hurts your ROI more than just money spent on bad clicks. Think about how much time is spent following up on fraudulent leads, or what it may cost if you have to deal with Telephone Consumer Protection Act (TCPA) compliance issues stemming from calls made to people who did not fill out the form..
5. Ad fraud disrupts e-commerce
When ad fraud surrounds e-commerce, you may face charge-backs. On the surface, a charge-back costs money, between $20-$100 per incident. However, there are other costs incurred when you are hit by e-commerce fraud.
To begin with, your reputation is damaged. People don’t want to do business with a company that is associated with financial fraud. Secondly, you run the risk of having to deal with compliance and regulatory discipline under the Payment Card Industry Security Standards Council (PCI DSS). This may result in fines, legal fees, or even the loss of your merchant account if the levels of fraud are too high.
Fighting back poses a problem as well. With most solutions geared toward stopping activity they believe to be fraudulent, some legitimate transactions may be hampered. This, too, will hurt your business if people can’t buy from you because your fraud detection won’t let them. It is important to know that any fraud detection solution you use has a way to investigate e-commerce fraud and eliminate false positives.
6. Ad fraud is cheap
Well, let's say that it’s cheap for the bad guys, not for the online ad publishers. Botnets cost less than $9 per hour to rent. Even for a daylong campaign, it costs the fraudster less than $70 while costing the online ad publisher multiple times that amount.
Even when fraudsters use human fraud farms, they are still turning a solid profit; otherwise, they wouldn’t be in the ad fraud business.
7. Fraudulent ads drive no business
As online ad publishers, sometimes we get hung up on metrics that make things look good. Vanity metrics, those that provide little value but look great in a report, often blind us to the problem of ad fraud. Because these metrics go sky-high when we are the victims of fraud, we tend to celebrate success rather than looking into the illegitimate activity.
Vanity metrics also give us a false sense of security. When we see solid numbers in vanity metrics, we feel confident that what we are doing is working. However, that house of cards comes down quickly when there is no business coming in as a result.
8. Ad fraud can be stopped
It may seem as if the fight against ad fraud is hopeless. However, smart online ad publishers know that the right ad fraud solution is capable of combating malicious activity from both botnets and human fraud farms alike.
Not only does a sophisticated ad fraud solution help you stop illicit activity from wasting your money, but it also eliminates false positives. You can be assured that the bad is being blocked while legitimate activity is still helping drive business growth.
Anura’s ad fraud solutions help protect you against the techniques that criminals use against you and your digital advertising. Built by advertisers to stop the fraud they were seeing within their own campaigns, Anura’s solutions block malicious activity using hundreds of data points to identify ad fraud from both botnets and human fraud farms alike. Because Anura knows how important it is to allow legitimate activity to happen, its solutions eliminate the false positives that would otherwise slow your business down.
Find out how Anura can help you defend against the costly problem of ad fraud. Request a demo to see Anura in action for your organization.