Global digital advertising fraud is expected to grow from $42 billion in 2019 to $100 billion in 2023, according to Juniper Research 

With the rise of automation and other digital processes, the risk of fraud is increasing exponentially. Bad actors threaten and industry based on pay per clicks and pay per impressions. How can advertisers know what impact their efforts have in the midst of trickery and shenanigans? 

Fraud prevention methods are woefully behind hackers and fraudsters who intercept feedback to increase ad revenue. When the bulk of advertising is served to fraudulent actors rather than real customers, the landscape becomes even murkier. That's why it's important for digital advertisers to understand what their up against and how to hedge against fraud and fraud attempts. 

Is Digital Advertising Important? 

Digital advertising encompasses all the promotional material published through search engines, websites social media and digital platforms. Advertisers have to go to where the public is, which is on the Internet. Whether you have an e-commerce business or a brick and mortar storefront, if you want to reach your customers you have to meet them online. 

What Makes Digital Advertising Effective?

Digital advertising can leverage popular sites such as YouTube, Yelp, Google search and Facebook to reach target audiences. Through the Internet, advertisers can reach broad swaths of targeted customers and clients. They can also customize ads for very small niches. 

This is a powerful tool for anyone in advertising and marketing and much more effective than traditional print media. When you advertise online, you support the platform your customers go to and create lasting impressions. However, this freedom and power come at a cost. 

Cost of Ad Fraud

Estimates on the true cost and scope of ad fraud differ significantly. That's due to the difficulty of pinning down the number of invalid downloads and traffic. However, eMarketer estimates that the cost ranges from $6.5 billion to $19 billion. Even the high end of this scale could be missing significant activity. Given that the low end is frightening enough, it's imperative that advertisers remain on their guard and combat ad fraud to the best of their ability. 

The World Federation of Advertisers prognosticated in 2016 that ad fraud and fake traffic schemes would include criminal activity such as drug trade. A conservative estimate set the level of involvement at $50 billion by 2025. That's 10% of the total digital ad value online. 

Unfortunately, digital ad fraud is not hard to commit. It also delivers huge revenue streams for criminals who decide to take the easy route to making money online. Law enforcement has not caught up to the sophistication of online malefactors. This leaves advertisers and marketers on their own when it comes to avoiding, detecting and eliminating these crimes. 

Adobe revealed that 28% of web traffic came from bots, malware and human fraud. This study included thousands of websites and highlighted the sheer scope of ad fraud. Based on this finding, the total cost of ad fraud may exceed $66 billion. No matter which estimate you go with, that money comes out of the pockets of legitimate businesses. 

To understand how ad fraud works, you first must understand how digital advertising works. 

How Display Advertising Works

When advertising online began, advertisers tried to negotiate ad displays directly. Advertisers paid a price point for a total number of impressions. Impressions were defined as putting the advertisement in front of users in a significant way that encouraged them to read it and click on it. Now, most digital advertising is based on cost per click or cost per thousand displays. 

Cost Per Click (CPC). This is also called pay per click. In pricing model, advertisers pay the publisher every time someone clicks on the ad. For example, a publisher may charge $0.10 per click and a particular ad could get 4,000 clicks. The advertiser would pay $400 to the publisher as a result. 

Cost Per Thousand (CPM). In this model, publishers set the price on the number of impressions and advertisers pay per set of 1,000 impressions. Let's say a publisher charges $0.50 per 1,000 views and a display ad gets 6,000 views. The advertiser would pay $3 for the impressions. 

Types of Ad Fraud 

According to Forbes, there are dozens of different ways people can commit ad fraud. However, it's better to narrow this down into a meaningful framework. There are two basic forms of digital ad fraud. And then there are different techniques people use to commit them. CPM and CPC fraud are committed by sophisticated, savvy criminals who leach away ad budgets and trick website administrators. 

Fraud by Impressions and Clicks 

Looking at digital ad fraud within this scope helps with understanding this complex problem. The largest buckets of advertising include just two revenue models, CPM, which is cost per thousand impressions, and CPC, which is cost per click. Fraudsters deploy bots, malware and human fraud to do exactly what a legitimate client would do. 

If an ad is based on CPM, fraudsters generate false impressions to jack up the price for advertisers. Since ads are paid based on every thousand impressions, fraudsters simply create false impressions. For ads that are based on the number of clicks, fraudsters create false clicks so that publishers can make more money. This is done programmatically by hackers working for the publishers or third parties. 

Techniques Used in CPM and CPC Fraud 

Let's talk about how they do it. Those committing fraud use a number of techniques, following this basic pattern: 

1) Exaggerate quantity 

2) Earn higher prices 

3) Eliminate the evidence 

If someone committing fraud wanted to generate a huge volume of ad impressions, they could do so programmatically with a bot. The bot keeps reloading webpages, which refreshes ad slots. They can also stuff ads into unseen iframes through data centers. Another popular method entails using a mobile app to load webpages containing the ad continuously in background mode. The user would never see the ad, but the publisher would receive credit for showing it. 

Getting paid more for CPM's is an enticing motive as well. This is accomplished by spoofing popular pages and impersonating an iOS device (which marketers associate with wealthier clients). Those committing fraud also pass fake locations so that advertisers will pay them by geolocation targeting. Fraudsters also pretend to be doctors and other affluent targets that pharma companies will pay more money to reach. In another type of scheme, data center traffic is disguised with residential proxies to make advertisers believe they are reaching people at home. 

Measurement technology can also be tricked. Invalid traffic can be marked as valid and unseen content can be marked as viewed. Some fraudsters do it the old-fashioned way. They pay people to click on ads from real devices. From hijacking clicks to tricking attribution technology, digital ad fraud has evolved into an entire industry. 

How Can You Avoid Ad Fraud?

Now that you understand what you're up against, it's important to find solutions that reduce ad fraud. When you want results, you want Anura. An industry leader with over two decades of software development practice, trillions of impressions processed, a client list comprising some of the largest names in the game, and tools no one else can rival, Anura is the best in the business for fraud – guaranteed. 

Anura utilizes best-in-class resources to dig deeper, combining accuracy with analytics to help optimize campaign performance for unparalleled protection. With expertly curated insights that specifically target fraudulent traffic, Anura is able to increase campaign returns and improve ROI by eliminating wasted spending for good. Get in touch with us today to eliminate ad fraud in your marketing endeavors. 

This article has been republished with new information.