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7 min read

The Cost of Ad Fraud. The Billion-Dollar Problem

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Regardless of whether it’s perpetrated by malicious botnets or humans behind keyboards, fraud costs advertisers money. Botnets are cheap to rent, with some costing less than $9 an hour. For just more than $2,000, a bad actor can run an ad fraud campaign that lasts a month.

Mobile apps are cheap to create as well. With enough downloads, an army of mobile devices is out there working for illicit individuals to cash in. In fact, ad fraud is so profitable for criminals that it is expected to cost advertisers $100 billion this year.

Ad fraud can have a serious impact on any business. Not only can ad fraud eat your budget and water down ROI, but it can also suck up a lot of time, causing your business to incur hefty opportunity costs along the way.

Despite this toll on businesses, ad fraud remains a massive problem. Anura estimates, 25 percent of all paid traffic is fraudulent. In other words, businesses end up paying fraudsters one out of every four times an ad is clicked. Suffice it to say that’s not the most effective way to spend money.

The good news is that businesses are increasingly becoming savvy to ad fraud—as well as the solutions on the market designed to defeat it. But not every organization has unlimited resources, which means that marketers and advertisers need to consider ROI before deciding to invest in an ad fraud detection tool.

With that in mind, let’s weigh the costs and benefits you can expect to see from an ad fraud detection solution, as well as some additional considerations to keep in mind as you figure out how to solve your ad fraud problem.

How Much Does Ad Fraud Cost the Economy?

The economic impact of ad fraud is incredibly high. Estimates for the cost of ad fraud to the economy vary from one source to the next, but even the lower estimates rank the losses from ad fraud in the billions of dollars. Here are a few examples from different sources:

These three estimates were all for the year 2022, and ad fraud is projected to grow over time as more money is invested into digital advertising. This fact alone should demonstrate why identifying ad fraud and fighting it effectively is a necessity for modern marketing.

Why Ad Fraud Estimates Vary

You may have noticed that the global estimates listed above have a very wide range—the largest estimate is nearly double what the smallest estimate was. The question is “why do estimates of ad fraud vary so much?”

There are a number of reasons why some organizations might provide different estimates for the global cost of ad fraud than others. Some of the potential reasons include:

Different Data Sources. Different organizations might be pulling their data from separate sources. For example, one organization might base its estimate on a global corporate survey of different businesses. Then, they establish the average cost of ad fraud against the average online marketing spend for the companies surveyed and extrapolate that against the global spend for online ads. If another organization does the same thing with different companies, they might come up with a completely different number.

Not All Ad Fraud Gets Reported. Not every victim of ad fraud reports the event. In some cases, an organization might not want to report that they’ve fallen victim to a fraudster. Others might simply not know that they’ve been defrauded of their ad spend—assuming that the leads they’re getting are genuine. Whatever the reason, unreported ad fraud can bring down the estimated cost to the economy. So, any studies that don’t account for unreported ad fraud may undershoot the actual figure by a large margin.

The Cost Categories in the Report. Some estimates of ad fraud may use different cost factors when assessing the economic impact of such fraud. For example, one report might simply focus on the wasted ad spend alone. Meanwhile, another report might include labor time lost pursuing bad leads, the cost of increased spending for ads that aren’t actually working, TCPA violation fines, and projected loss of business from reputational damage or reduced customer conversion rates.

Any one of these factors could be a reason for two different estimates to have differing results.

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 the 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 show that ad fraud will cost organizations $100 billion this year.

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 for 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 an Ad Fraud Solution Will 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 Anura can help.

Anura helps to identify fake traffic in real-time using a database of over a decade of real-world data to parse the real traffic from the fraud. 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.

Consider the Benefits

Once you’ve wrapped your head around the costs that come along with an advertising fraud solution, it’s time to start thinking about the myriad benefits you can expect after deployment.

1. Optimizing Your Spend

The last thing you want to do is to spend money on online advertising only to have a hefty 25 percent of those funds flow into an unscrupulous actor’s pockets. 

With an ad fraud detection solution in place, you can reclaim the spend that is rightfully yours, ensuring you get a bigger bang for your buck and better, more accurate, and more lucrative results from your campaigns.

2. Increasing Your Budget

If 25 percent of your marketing efforts are for naught, your campaigns won’t produce the best possible results which can make decision-makers hesitant to pour more resources into online advertising campaigns. In this light, by optimizing your spend and protecting against “bad traffic,” ad fraud detection solutions can help your campaigns generate more favorable results. Over time, this positive data can then be used to make the case that you need to start spending more money on online advertising.

3. Improving Your Metrics

In the digital age, data matters more than ever before. More and more companies are using big data and analytics to remove the guesswork from the equation and figure out the best way forward.

With an ad fraud solution in place, you are taking a proactive approach to reduce fraud—which means you’ll end up with cleaner data down the road. And that data will help you determine your next moves, pointing you in a more precise direction.

The cleaner your data is, the easier it will be to continuously optimize your campaigns and drill down into the numbers to see what’s working and what isn’t. You’ll end up in a much better business position, where you can make more intelligent decisions about how you buy traffic online. 

When it becomes apparent that your online ad campaigns are translating into a serious uptick in sales, chances are the C-suite will not only be happy with your campaigns, they’ll want to double down on them.

4. Accelerating Growth and Revenue

Add it all up, and an ad fraud solution can drive rapid ROI in your ad campaigns while increasing client demand and accelerating company growth. With the right tools in place, you’ll see expansion in the metrics that matter, like revenue and conversions. And again, you’re keeping money out of bad actors’ hands. It’s a win-win scenario for your business.

Try Anura today for free and see the difference for yourself.

Are you tired of losing money to ad fraud and struggling to protect your advertising campaigns from malicious actors? Anura can help. Our cutting-edge fraud detection and prevention platform is designed to identify and prevent ad fraud in real time, giving you the confidence to invest in digital advertising without fear of fraud. With our advanced machine learning algorithms and powerful analytics tools, you can detect and prevent fraud before it impacts your campaigns, reducing the negative effects on your marketing budget and ROI.