Why So Much Fraud in Online Advertising?

I’ve been tracking down fraudsters for quite a bit, first for the US Secret Service, and then in the advertising industry in my publications. Nothing really irks me so much as fraud — especially when it’s played by some of the largest industry players in the land.

The fraud not only makes our entire industry look worse, but makes it harder for legit, honorable companies to break-through when the “Titans” of industry are taking advantage of everyone.

This problem has been exacerbated in recent years by the rise of programmatic advertising which replaced the old network-publisher relationship business with a more automated approach where machine-based ad exchanges control the ad placement process without human oversight.

This led to a massive drop in price and quality.

Now an estimated 70% of online adverts are never seen by humans.

To show how useless programmatic display is, Dr. Augustine Fou bought 1 billion ad impressions, and despite a million clicks, didn’t get a single conversions. I want you to think about this – supposedly one million people clicked on their ads, a billion people saw the ads, but not a single person converted.

According to Dr Fou: “As more ad inventory is bought and sold programmatically on ad exchanges, bad guys are finding it far easier to commit fraud because few agencies and advertisers actually check in detail the hundreds of thousands of sites on which the ads are run. It’s easier to hide in a far larger haystack.

If this makes no sense to you, join the club of experts, because it’s obvious fraud, but the network’s “fraud detection” didn’t catch anything, even though a third grader could tell you something was extremely fishy.

“Fraud goes to zero when every deal is sold directly, whether it’s through an IO or [guaranteed] programmatic,” said Matt Prohaska, CEO and principal of Prohaska Consulting  in Digiday. “It’s the SSPs who are doing an awful job sheltering and allowing criminals to just set up shop.”

Yes, some of the SSPs are helping the fraudsters commit fraud. 

So you’d think the advertisers and brands had a solution, right? Nope! In a recent survey of advertising decision makers, 43% said that they could not estimate how much of the suspicious traffic on their websites was originating from sophisticated bots, and had no solution internally to even stop it.


So why is this happening? Why is there so much fraud? I have more than a few ideas why, but here are some of my most prevalent theories.


1) Everyone is looking for a deal, and this promotes fraud. Still to this day, many agencies look to lower the effective CPM or provide more eyeballs to make it seem like they are providing their clients more inventory and father reach. However, often these “deals” are nothing more than junk inventory that no one will see, let alone convert. There is no doubt in my mind many of the agencies either look the other way or just plain ignorant.

2) Many Fraud Detection Companies are USELESS. Minus a few exceptions, most of these companies that claim they can prevent fraud through a complex algorithm that sniffs out the worst offenders and prevents them from defrauding your company but do little or nothing. The sad fact is that most of these companies are not used to prevent fraud, but to make advertisers feel better about their buying decisions. Worse, almost none of the fraud systems have a straight definition of fraud and allow their clients to “move the fraud slider” to allow as much fraud or little fraud they want.

3) Programmatic Networks Don’t Want to Solve Fraud. Here’s a hard thought to stomach: some of the largest ad networks really don’t care about fraud, and only do enough to make it seem like a “hearty effort.” Everyone is looking for billions and billions of advertising impressions now, and there is no way you can buy that much without significant fraud. Now the networks like Gannett, to fill these orders, are allowing ads to be shown anywhere. There is no way that any new “large” networks are anything but reselling junk.

4. Vanity Metrics are Junk Sciencerr. In werewrewreworder to keep the money coming, more and more networks are creating new metrics that have very little real-world value. Many of these strategies are based on pseudo-science and little regards to data-driven testing, measuring, and learning – it’s a poorly crafted pastiche of buzzwords from hasty collected client inputs.  It’s almost all meaningless dribble. Any campaign should have some metrics that can prove that people are real, such as popping a survey up once in a while.

I think we need to make this clear: this has gone from “occasional mistakes” made by some large networks, to what seems to be a clear cut case of some networks and technology partners working together to defraud advertisers to the tune of billions of dollars.

 If this continues, expect the FTC and perhaps event federal law enforcement to start investigating some ad firms as nothing more than crime syndicates. 

Pesach Lattin
Pesach Lattinhttp://pacevegas.com
Pesach "Pace" Lattin is one of the top experts in interactive advertising, affiliate marketing. Pace Lattin is known for his dedication to ethics in marketing, and focus on compliance and fraud in the industry, and has written numerous articles for publications from MediaPost, ClickZ, ADOTAS and his own blogs.

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