OPINION - The issues with ad fraud
Weird numbers, misaligned incentives and general confusion
I hope you all had a lovely weekend. If you haven’t noticed it yet, I have decided to change this blog from My Two Cents on Programmatic to The AdPod and also host my podcast there. I felt it was easier to navigate if all in one place. You can find opinions, news and podcasts all saved at www.theadpod.com.
I also love it when people provide feedback on my articles or podcasts, I’m always looking to learn and hear different views - so feel free to share.
There was a bit of industry debacle last week after ANA took down some content from their site which said up to $120bn of US digital ad spend per year was fraudulent. They supposedly took this down because the number was from 2019 reports and not representative of current times.
To add context to the number:
Estimated US ad spend for all media is $300bn according to Magna
Digital ad spend is estimated to be 57% of that according to a Magna prediction late last year
So $120bn of ad fraud vs $171bn of digital ad spend, means that 70% of digital ad spend is fraudulent
It’s worth keeping in mind this isn’t just programmatically transacted media, this is across all digital media (search, social, CTV, display etc.)
There was a really good post from Omar Oakes from The Media Leader on Monday this week entitled ‘Yes, we get ad fraud is a huge problem. We just don’t care’. The post covers the importance of leaning into this issue.
However, I’m not sure I agree that advertisers & others don’t care. For example, if we take a snapshot at a leading third-party ad fraud prevention company, Double Verify, who are publicly listed, their advertiser revenue is growing (significantly). Albeit they don’t only offer fraud-prevention, but it’s a telling sign if they’re growing that advertisers are leaning in, in general.
It’s also worth noting that the digital ad industry is also growing at significant rate and is expected to be 74.9% of all ad spend by 2025, so this problem is one worth resolving.
In short – things are being done, but it isn’t enough.
There are three main things to consider when approaching the ad fraud challenge.
1 – Difference between fraud and suitability
It’s quite common when reading articles about ad fraud to see the suitability of content conflated with outright fraud. There’s a difference between the two clearly. Fraud is where people/companies deceive buyers and sellers through nefarious means for financial gains. Examples include stacked ads behind one another, click hijacking or the use of non-human devices to render ads. Suitability is where ads appear against different types of content – regardless of who owns the content.
There are many third-party companies and industry initiatives trying to solve for both.
2 – Incentives
I was once told “in a marketplace of equities, it’s all about incentives”. What this means is that every stakeholder in the industry makes money in some way and it’s important to know what they are incentivized by. The reality is that a lot of the ad industry makes money by spending money (i.e. a % of cost is taken) or by serving ads (i.e. a CPM fee) – there are pros and cons to these models, but in general it doesn’t incentivize great behaviors to combat fraud.
3 – Fraud is priced in
The final point is that every industry encounters fraud in some way and it’s priced in. If you own a shop, you price in the cost of shop-lifting. If you work in investment you price in that money goes missing. This doesn’t make it right by any means, and in an ideal world fraud would never exist, but it is expected.
If the cost of preventing fraud is $1 vs a fraudster taking $0.50 in theory (as it’s hard to really know what clears in a fraudsters bank account), you may as well run ‘as is’ on a soulless level (i.e. if you don’t care about what fraudsters might do with the money). Also, some fraud is inadvertent – i.e. headerless browsers running tests, it isn’t entirely nefarious.
I recorded a podcast with the brilliant Founder & CEO at Method Media Intelligence, Shailin Dhar, which covers how ad impressions work. Check it out here.
Therefore, we see advertisers and buyers in particular take varying approaches to ad fraud prevention and suitability, sometimes because it might not be worth the cost.
So, what now?
Honestly, we’ll continue to see extreme headlines and articles about the costs of ad fraud and at the same time see the juxtaposition of digital ad growth for many years to come. The reality is fraud will always exist, the numbers will wildly vary and we’ll never get to a fraud-free industry. Cue continued frustration from certain industry stakeholders.
What can be done though?
Better & consistent implementation of fraud preventing techniques by Buyers
Better & consistent implementation of fraud preventing techniques by AdTech / Platforms
Better & consistent implementation of fraud preventing techniques by Publishers
I’m not being facetious by giving the same answer three times with just the stakeholder changing, but it really is an industry effort to lower the exposure to fraud for all concerned - there isn’t one single silver bullet to this problem (I would prefer to see some regulation to penalize malpractice and mandatory auditing introduced though).
There are groups (IAB, TAG, ANA etc.) which support education to a myriad of industry stakeholders and it’s important everyone continues to lean in and increase overall accountability - not just by pointing fingers & throwing random stats around.
Take a long hard look at the exposure to fraud you may encounter by running an ad fraud and suitability audit (for all parts of the industry) and then review where you may be able to instill a better approach, a) because it’s better for the world if money goes into the right hands and b) it’ll have significant impact on campaigns you run and content you create. Don’t sit there waiting for a single answer or solution.
Long live digital advertising.