Litagation: Inside The Programmatic Fraud System


As the world moves forward in the digital age, digital advertising continues to surge in value, with digital ad spending expected to exceed $571 billion in 2022 alone. However, with this significant increase in ad spending comes an increase in digital ad fraud, which is expected to exceed $80 billion in 2022. Well over 10% of all digital advertising inventory purchased by brands this year will never be seen by a consumer.

The programmatic advertising marketplace, where ads are placed through real-time bidding, can be a complex and confusing process. Brands submit their ad requests to ad agencies, who then use software called a demand-side platform (DSP) to set the parameters of the ad campaign. DSPs then connect to digital ad exchange platforms to match with publishers providing available ad inventory. Ad publishers also use their own software, called a supply-side platform (SSP), to manage their advertising inventory and connect with online ad exchange platforms.

This process, while efficient, is also ripe for arbitrage, where companies sell ad space with no intention of actually placing the ad, instead flipping it for a profit by purchasing placement of the ad from an exchange or other third party at a lower cost. This creates a complex chain of parties from the brand to the consumer, with many of the parties having contributed nothing more than getting paid to place an ad, and then hiring someone else to place that same ad at a lower cost.

The most common form of ad fraud is artificially inflating or completely fabricating ad inventory, resulting in parties paying for the placement of ads that were never actually viewed. Simple forms of ad fraud include ad stacking, where multiple banner ads are placed on the same area of one web page, with only the top ad being visible to the consumer. More sophisticated forms of ad fraud include ad spoofing, where fraudsters take cheaper ad traffic and alter it to appear as more expensive traffic.

Given the huge financial incentive and the complexity of the programmatic advertising marketplace, identifying the perpetrator of ad fraud can be extremely difficult. It is essential for those involved in digital ad fraud litigation to understand not only how the marketplace functions, but also how to identify digital ad fraud and establish culpability. The Complex Claims & Litigation Forum 2023 aims to help insurers prevent, prepare and prevail in adjudicating complex claims, negotiating settlements and winning cases.

As digital ad spending continues to rise, so does the threat of digital ad fraud.

It is crucial for those involved in the programmatic advertising marketplace to be aware of the potential for fraud and to take steps to prevent it. Additionally, for those involved in digital ad fraud litigation, understanding the inner workings of the marketplace and how to identify and establish culpability is essential. The Complex Claims & Litigation Forum 2023 is an excellent resource for those looking to stay ahead of the ever-evolving digital ad fraud landscape.

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