Richard Kahn
Here’s How We Fight Fraud in 2024
Have you ever watched a lottery drawing? Numbered balls bounce around until the randomly selected winning numbers roll down a tube. Your odds of winning are about one in 300 million, but when the jackpot grows, many are willing to take their chances. What’s a couple of bucks when you could wake up a billionaire?
The Digital Ad Fraud Jackpot Grows as Ad Spend Rises
Digital advertising is a lot like playing the lottery. A lot of seemingly random numbers get batted about when it comes to estimated digital ad spend and losses attributed to ad fraud. While there’s no one universally agreed upon figure, everyone predicts that worldwide digital advertising budgets will continue to grow this year, fueled in part by the Paris Olympics and the U.S. presidential election. Fraudsters follow the money, so it stands to reason that as digital ad spend goes up, so does advertising fraud.
Based on the data we collected in 2023 and the $601.84 billion that was spent on global digital advertising, Anura calculates last year a minimum of $125 billion in direct losses can be attributed to fraud, a significantly higher figure than the more commonly reported $84 billion that mostly focuses on U.S. losses. Our estimate takes into account historical data, our increasing collection of data identifying invalid traffic, and digital advertising growth trends that continue to come to fruition.
This shocking loss in 2023 only serves to highlight the need going forward for more sophisticated detection methods to combat the increasing threat of ad fraud. The question then also becomes “What is the real cost of ad fraud?” And more importantly, what can advertisers do to reduce their losses and maximize the ROI of their online ads?
What Is the REAL Cost of Ad Fraud?
There are a lot of seemingly random guesses about how much marketers will lose to ad fraud this year. Some say you can’t argue with the numbers, but what about when the numbers don’t jibe? Numbers tell a story; there can be many sides to a story, and some details may be left out of the big picture.
The ad fraud rate as a percentage of budget for any one advertiser can vary for many reasons. Certain industries and channels are more susceptible to click fraud than others. These and other factors can help explain some of the different projections for both spend and loss.
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Most projected ad fraud losses include only the hard costs: the money spent to buy the advertising space and the money lost to fraudulent leads that result mostly from sophisticated invalid traffic (SIVT). Soft costs, such as the time and money spent on creating advertising campaigns and developing brand reputation, are likely missing from these projections.
Another critical piece missing from these cost projections is the lost opportunity cost. In this instance, legitimate customers are erroneously identified as fraudulent, leading to lost leads or even actual sales. The costs can go beyond the one-time occurrence; prospective customers are not likely to return because of a previous poor experience.
Lost opportunity costs are real and expensive. Clients who have come to us after using other fraud detection tools tell us that they had experienced false positive rates averaging 15%. Many ad fraud solutions rely on one or two basic data points, such as an IP address, to identify invalid traffic; these simple moves often aren’t enough to keep the bad guys away. What can be even worse is when ad fraud solutions go so far as to block specific public IP addresses in an attempt to stop invalid traffic. Unfortunately, that step can lead to many false positives and a significant loss of revenue.
What are you actually paying in ad fraud costs? You might be surprised!
How Can Advertisers Improve Their Odds of Avoiding Ad Fraud?
No matter how tempting the jackpot, common sense prevents you from throwing away a significant percentage of your hard-earned money on tickets. In that vein, the only way to completely avoid the bad actors of ad fraud is to stop running digital ads. That’s not realistic or smart. Done right, online advertising can be a cost-effective way to increase brand awareness, collect first-party data, and grow revenue.
It’s important to use good judgment in spending (and protecting) your ad budget. Just as you measure campaign results, you need to consider overall losses, which can add up even if you have an ad fraud solution in place. You do that by totaling:
- Campaign Ad Budget (placement costs)
- Cost of inferior ad fraud solution
- 25% - 50% lost to actual ad fraud
- 10% - 15% lost to traffic misidentified as fraudulent
A superior ad fraud solution proven to detect and block SIVT may cost more than a less effective solution on the front end. However, by investing in a solution that works, you can eliminate the costs of ad fraud and lost opportunities.
In the end, it doesn’t really matter what the experts—including Anura—say about projected ad fraud costs. The only thing that matters is how much ad fraud you’re experiencing today, how you can prevent it in the future, and how much your results can improve.
For more on the full impact of what you lose to ad fraud, request our eBook: What Is the Cost of Ad Fraud and How Does It Impact Your Business?
