AVALANCHE OF AD FRAUD 

In previous newsletters we have discussed the alarming growth of fraud in the advertising business - particularly in online advertising.

According to the World Federation of Advertisers (WFA) there are 4 basic types of online ad fraud: 

1. Impression fraud
2. Click fraud
3. Conversion fraud
4. Data fraud

What most advertisers don't understand is that the reports they get on impressions, clicks, conversions and data are false. These reports contend that visitors are real but they are not. As the WFA says, "...reporting validates a visitor to be authentic, but it is actually fraudulent."

The frightening part is that no one knows the extent of fraud in online advertising. It has been estimated as high as 90%. 

One question I am frequently asked is why it is so hard to detect ad fraud. The answer is, I don't know. But apparently the bad guys are way ahead of the good guys. The bad guys are making piles of money and the good guys are trying to play defense. As James Harden will tell you, there's a lot more money in offense than in defense.

A frequently quoted estimate from the U.S. Association of National Advertisers (ANA)  maintains that fraud will cost advertisers 7.5 billion dollars this year. But again, everyone is guessing. The WFA says "..it’s easy to produce scenarios where ad fraud revenues equate to $150 billion per annum" within 10 years.

Ad fraud presents a golden opportunity for crooks. It is as close to risk-free as you can get. There have been almost no prosecutions. As the chart below illustrates, it is by far the easiest and most lucrative form of online crime.

Oddly, not all ad fraud is revenue producing. In addition to all the crooks stealing billions, there are also malicious hackers just out to make trouble.

Ad agencies have been particularly negligent in educating their clients about how much they may be losing to ad fraud. Online advertising spending will surpass TV in the next few years. No one wants to disturb that golden goose.

Meanwhile naive advertisers, seduced by the unrelenting hype and bullshit about the miracle of online advertising, can't get enough of the stuff.

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QUOTES:

Here are some direct quotes from the WFA's report on ad fraud:

      "Ad fraud is likely to represent in excess of $50 billion by 2025, even on a conservative basis."

      "Virtually any programmatic buy can be exposed to ad fraud. Claims to the contrary should be treated with caution."

      "Advertisers lose out entirely from ad fraud, and unless effective action is taken, the issues related to this threat will continue to grow in magnitude and complexity.".

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All previous newsletters can be found here.    Sign up to receive newsletters here.

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