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Why Ad Fraud is a big challenge for Digital Advertising

(Foto: JD Hancock, Lizenz: CC BY-SA 2.0)
(Foto: JD Hancock, Lizenz: CC BY-SA 2.0)

Current hot topic in public discussions are ad blockers and how they seize the business models of digital media companies. However, the digital advertising value chain has a more dangerous enemy, that doesn’t only eliminate revenues, but generates expenses without any counter value: Ad Fraud.

Ad Fraud refers to miscellaneous activities which only simulate ad displays or banner clicks. In fact, automated bots execute these actions without generating any counter value. The monetary loss produced by these fraudulent services is only vaguely perceptible. According to a study from the Interactive Advertising Bureau (IAB), the ad-fraud problem is held responsible for a loss of 8.2 billion USD on the US-market. About half of it is attributable to non-human-traffic; that is simulated ad impressions being paid for by advertisers, although no human being will ever see them. On top of that, 169 million USD are annually spent for the battle against ad fraud.

Even programmatic media buying couldn’t stop the fraudulent activities; the automated processes led to an increase in efficiency and accuracy, on the contrary, however, it warmly welcomes “fraudsters”. With the automation, human controlling authorities became redundant; in consequence, they don’t need to be eliminated anymore. The rather intransparent value chain additionally fosters ad fraud, as neither advertisers nor publishers are in full control. Whatever happens between the creation of advertising material and the execution in the publisher’s inventory, is not visible. A black box emerges, consisting of Agency Trading Desks (ATDs), Demand Side Platforms (DSP), Value Adds (e.g. data enrichment, targeting, reporting, verification), and Ad-Exchange-Platforms. What happens in the nirvana of the value chain, stays in the nirvana.

Ad Fraud is not only bot-traffic

Non-human-traffic is the most popular part of ad fraud, however, further types of ad fraud exist. Online banners loaded by accessing web pages, have the size of only one pixel so they are hardly recognizable. For the ad tracking however, one pixel is already enough. Another technique is banner stuffing. Multiple banners are simultaneously loaded and stuffed on one banner space. The consumer can only see the one that is randomly placed on top.

The great amount of bot-traffic which is activated via virus-infected devices complements the picture. Most of the times, users don’t recognize any of this as the bots are operating intelligently in the dark grounds of the internet. This is not the only factor making them intelligent. Bots already exist that can mimic human behavior almost authentically. Due to their complex programming they can click on videos, submit forms, and even trigger buying processes. The latter is usually canceled but this cancellation is already irrelevant for the tracking process.

Depending on the definition, ad fraud also includes the display of ads in particularly created websites that are only visited by bots. The booking of premium inventory, which in fact is not premium at all, also belongs to that category of ad fraud.

How advertisers can fight ad fraud

First of all, it is important to know that the ad-fraud problem really exists. Advertisers will not be able to solve this problem on their own, as they need to influence the above mentioned black box first. They could start with transitioning traditional CPI/CPM- campaigns to up-to-date CPA-campaigns, which no longer count ad impressions or clicks, but the defined call-to-actions. Indeed, even in these areas ad fraud is present, however, the hurdles are a lot higher. If a critically defined target audience is added on top, it’ll make the “fraudsters’” lives a lot harder.

It is even more powerful to completely avoid the black box. Advertisers would need to negotiate their ad deals directly with the publishers. Although, theoretically, this all sounds quite easy, practically, expert knowledge, negotiating skills, and the understanding of and cooperation with the publishers are needed. Once achieved, both sides can highly benefit from it.

SAP XM not only offers an end-to-end connection of advertisers and publishers, but also supports fraud detection thanks to its transparency approach. Therefore, you're only paying for the ads that are actually displayed.

About the author

Social Media & Content Specialist.

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