Ad Fraud: Whose responsibility is it anyway?

Ad fraud is set to become a hotly debated topic in 2017. Thanks, in part, to the White Ops report on ‘Methbot’. The Ad fraud operation which they claim was netting as much as $5M a day through billions of fraudulent ad impressions, or was it?

Whatever the facts about the Methbot case, and the intentions of the White ops team, the bigger question the story raised which wasn’t making the headlines was the lack of incentive for ad fraud to be reported.

Numerous reports of the story made claims suggesting there was nothing that could be done to stamp it out, or no way to bring the culprits to justice. Of course this is absolutely false. If the appropriate details are provided then the law enforcement in the appropriate countries can bring these fraudsters to justice. They can get details of sites, payment details and addresses from the advertising providers. They can speak to website hosts and find details if they have the appropriate warrants; and they could do a lot to try and track these people down.

Only they aren’t, because nobody reported a crime. And when you look into the people who could, and the supply chain of programmatic advertising then you can see why a supposed huge fraud, isn’t becoming a criminal case.

Let’s look at the people involved, their ability to spot ad fraud, and their motivations to prevent it.

The agency

Of course the agency wants to prevent fraud. Their competitive advantage hinges around being able to control their client’s ad campaigns and also provide assurances around brand safety and performance. Any fraud drives up their costs without generating sales or leads and so if they are to perform they need to weed out the fraudsters. They have the technology and the data to identify and stop fraud.

However their commitments extend to their set of clients alone. So they generate their own blacklists of IP addresses or domains where they spot suspicious activity and apply them to their client’s campaigns. They secure refunds where they can provide fraudulent activity and protect their client’s budgets. However the fraudsters remain free to continue on other advertiser’s activity and this works in the agencies favour. Other people’s campaigns suffering generates new business opportunities!

So they keep their blacklists as intellectual property and ensure they aren’t affected but aren’t incentivised to do anything more.

The advertiser

Advertiser awareness of fraud varies massively.  Smaller advertisers will largely be unaware that there could be fraudulent activity taking place on their campaigns and are unlikely to have the technology in place to identify it themselves. Larger advertisers will be more aware and likely more vigilant to fraud either acting for themselves or via an agency.

However, much the same as the agency; the advertiser wants to remove fraud but they are only concerned about their activity. Fraudulent activity eating up their competitor’s budgets means there is less competition for the better quality inventory they are hunting.

Their incentive therefore to eradicate fraud does not extend beyond their own activity.

The DSP or advertising provider

Here we are moving into the people making money directly through fraudulent activity. Of course all DSP’s know about the importance of fraud. They know their reputations rely on their ability to combat it and they have to be seen to be speaking out about it but ultimately they are taking a share of the profit. One ach impression served or click made they are earning profit.

And we also have to consider their focus. Even Google’s reported 100+ strong ad fraud team is a meagre size compared to their business. So they have to focus their efforts. They have to focus on bringing down the big bot networks and identifying patterns and trends which could be costing advertisers millions. Their focus is not on whether a specific site has generated a few thousand fraudulent ad impressions.

Publisher

Fraudulent or not, more impressions means more advertising revenue for the publisher. So there is no real incentive for publishers to report any potential fraud on their own sites.

Competition may mean if they believed their competitors were defrauding advertisers then they would be quick to report them to any parties involved. But rarely would this become a criminal case as it could involve high costs and a long drawn out process. We have also seen in the Criteo vs Steelhouse case that it can bring an unwanted amount of scrutiny onto both parties.

So who is really incentivised to bring the fraudsters to justice?

Well in real terms, nobody.  Everybody has a collective interest to eradicate fraud, but nobody individually is completely invested in doing so. Even to a certain degree the third party verification partners. Of course they want to eradicate fraud for the people who subscribe to their services, but if they got rid of it all together then who would they sell their wares too?

And then there is the issue of standards

One of the contributing factors in the lack of progress on the fraud front is the metrics which we consider ‘good’ for both display advertising and digital advertising as a whole.

Current market averages for click through rate (CTR) on a display campaign are 0.07%. Once you have generated a click, and depending on the industry you are operating in, you may expect a conversion rate between 1% and 5%.

These low figures are contributing to the fraud problem as they mean warning signs are not necessarily available for when fraud is concerned.

At a 0.07% CTR and a 1% conversion rate you would be serving 150,000 impressions before you expected a click through conversion. And even if you served this many impressions and didn’t get a conversion, you may be tempted to wait as if two come along at once, you are back on track. So there is the opportunity to be the victim of hundreds of thousands of fraudulent impressions before you even realise your campaign is not performing and start to investigate why. Or more likely, just remove the publisher from your activity and move on.

Multiply this issue across thousands of advertisers and you can see the opportunity for fraudsters to cash in before their activity even gets looked at.

How do we stop Ad Fraud?

With nobody really incentivised to bring criminal charges or to remove fraud outside of their own selfish domain it is difficult to see how it is stopped. The only real solution is for parties to come together as a collective to stamp out fraud for the benefit of the industry.

Trade bodies such as the IAB are engaged in initiatives, however to date that has culminated in definitions around what constitutes fraud. And of course they themselves can do little without the buy in of the major advertisers, agencies and technology providers. These are the key data holders and without them on board, industry wide initiatives are unlikely to take off.

What is clear is we as an industry need to get our house in order.  Continued concern and scrutiny over fraud and ad quality need addressing in 2017 before they become critical to the future of display advertising.