• Follow us

Social Media

Fraud Siphons Billions of Ad Cash Into Digital Hole

By Jack M. Germain Jun 11, 2019 3:03 AM PT

Fraudsters have been stealing online advertisers blind -- to the tune of US$23 billion, based on the latest industry report from Cheq.

"The Economic Cost of Bad Actors on the Internet, Ad Fraud 2019" conservatively places the direct global economic costs of ad fraud at $23 billion, and suggests that indirect economic and social costs might increase the total to $30 billion.

Marketers have been wasting billions of dollars on digital ads that never reach buyers' eyes. Up to 30 percent of ads are impacted by fraud that affects 21 trillion online ads each year, according to the report.

Cheq, a military-grade cybersecurity company, commissioned the study of the full extent of online ad fraud. Economist Roberto Cavazos, a professor at the University of Baltimore, conducted the study using the latest economic analysis tools, proprietary Cheq data and expert interviews.

Cavazos, who has studied the economic costs of fraud in many sectors for decades, was stunned by the scale of fraud in online advertising. The online advertising ecosystem has created a situation in which the interests of more than 20 parties are not aligned. There is little regulation or connectedness, and few disincentives against fraud.

"Solving this problem will require honest and robust methods to confront the realities and tackle this challenge," he said.

This research was an effort to address the lack of understanding about the scale of online ad fraud, with wildly different numbers attributed to the problem, and very little real independent research into its complexities, according to Cheq spokesperson Jonathan Marciano.

"The report does argue that ad fraud needs to be recognized as serious and not a 'victimless' crime," he told the E-Commerce Times. "Just understanding its scale and the damage it is doing is a huge step to change."

Worse Before Better

The fraud situation will worsen, Cheq warned. The direct cost to advertisers could hit $26 billion in 2020, $29 billion in 2021, and $32 billion in 2022. The cost burden of ad fraud will fall disproportionately on small firms that have fewer resources than established brands.

"Our experience suggests that higher-end campaigns through well-known, reputable advertisers are subject to a five percent fraud rate," the report says. "Lower-end campaigns experience a much higher rate of ad fraud, potentially up to 50 percent."

Spending on online advertising now overtakes traditional media like TV, radio, outdoor and print. It is wishful thinking to believe that fraudsters will not continue to be creative and innovative in targeting online advertising dollars, said Cheq CEO Guy Tytunovich.

"Every day we are seeing growing sophistication and frequency of attacks against online ad campaigns," he said. "The problem is exacerbated by the number of participants in a complex system, and the unique circumstances allowing bad actors to thrive."

Report Highlights

While direct global economic costs of ad fraud are conservatively placed at $23 billion, indirect economic and social costs may increase the total to $30 billion, according to the report.

The research considered ad fraud within the context of other fraud-fueled industries. It also took into account indirect costs that previously had not been factored in, Cheq's Marciano said.

Ultimately, marketers are the big losers from ad fraud, with big brands spending billions of dollars globally on ads that are never viewed. Marketers lose at least 20 percent return on investment on advertising campaigns, he added.

"Consumers also suffer," he said, "as with more money diverted to fraud, this threatens a free Internet, which relies on efficient online advertising."

Not all instances cost the same, and in many cases, fraud disproportionately affects low-level campaigns with cheaper CPM (cost per thousand), according to the report. It found that a 7.5 percent composite rate of total ad spend lost to ad fraud reflects a mix of both lower-end and higher-end ad campaigns. Combined losses totaled $23.7 billion in 2019.

Causal Factors

One obvious cause of the growing attacks on online advertising is the lack of regulations -- either by government agencies or the ad industry itself.

Two other factors feed the revenue frenzy. One is the complexity of the online advertising ecosystem; the second is a lack of transparency. Both contribute to creating a growing incentive for fraudsters to hijack the $316 billion global digital advertising budget.

Online advertising is uniquely susceptible to fraud compared to other sectors such as finance or health, the report says. The lack of oversight or transparency and the failure to achieve high-profile prosecutions continue to make online advertising a high-value target for bad actors.

Current cost estimates actually might be higher if researchers could calculate indirect and opportunity costs. These two numbers refer to the losses and opportunity costs on society as a result of systematic fraud. Such indirect costs include less trust, reduced innovation, and disinclination to spend on online advertising, explained the report author.

More Current View

The Cheq report's findings differ from other industry reports with respect to ad fraud intensity. The Cheq report foretells a far worsening problem.

Cheq applied a different strategy that broadened the extent of its research. The Cheq report accounts for the indirect costs of ad fraud, not just the immediate financial loss for advertisers.

Other studies pin the cost of ad fraud at about $7.2 billion per year, but they fail to capture the full extent of the damage, according to Cheq.

Other studies often extrapolate from limited samples, analyzing only 27 billion out of 70 trillion total annual ad impressions, for example. Other studies on online ad fraud also restrict the scope of their research to botnets, which are only one source of ad fraud.

"Where studies have shown that ad fraud is lower or even declining, we think this particularly unlikely," the Cheq report states. "Digital ad marketing is growing at a high rate and thus is an attractor for increased fraudulent activity."

The Pain Point

Ultimately, it is the brands who shoulder the brunt of the losses. They end up paying for the fraud or the verification tools to stop it, observed Warren Zenna, president of Americas of Location Sciences.

"It is possible to combat fraud through a combination of verification platforms, but the ad tech value chain makes it difficult, because everyone is paid on a per impression basis. This means that cutting fraud reduces impressions and impacts ad spend," he told the E-Commerce Times.

with currently established types of fraud, such as viewability, the brands, agencies and publishers in the U.S. are blocking out a lot. Still, it has required some time for that to take root, Zenna explained.

"The industry is economically incentivized to ignore the issue until the brands start demanding oversight," he added.

Ad fraud hurts pretty much everyone, said Rob Friedman, executive vice president of Digital Element. Advertisers especially are hurt because they are not getting what they pay for.

Publishers are hurt because it drives ad rates down and gives advertisers lower confidence in advertising, meaning they will pay less, he told the E-Commerce Times. Also, spoofing premium sites can steal or redirect ad traffic to lower-quality sites. The publisher's reputation also suffers.

Consumers get hurt as well, because if sites can not monetize as well through advertising, it may drive them to charge more for content and apps, Friedman pointed out.

Need for Change

To protect all parties on major advertising platforms, a stronger initial process on the creation of business advertising accounts is needed, urged Nick Shackelford, a founding member of Structured Social.

"When a business is getting up and running, they should and would have legal documents showing that they have formed a legitimate entity, selling legitimate products or services," he told the E-Commerce Times, "and if unable to provide such documents, they are then prohibited from selling on such major advertising platforms."

Innocent advertisers often are caught up in overblown shutdown campaigns. Once the advertising platform executives get wind of such fraudulent advertisements, they take swift action to eliminate the fraudulent ads on their platforms.

"What this results in is large sweeps against similar advertisers, whether or not they are a fraudulent advertiser. Think guilt by association," said Shackelford.

Misplaced Trust

Part of the problem is that advertisers trust the same company that serves the ads to report on their effectiveness. Therefore, incentives in the big online advertising giants are naturally toward creating metrics that obfuscate the true effectiveness of the ads they serve so that they can sell more of them, suggested Phil Nottingham, director of marketing at Wistia.

"The assumed nature of an 'impression' is that a real human being has at least observed the ad in passing, but this latest report -- and others like it -- shows that too often this isn't really the case," he told the E-Commerce Times.

Advertisers should worry not only whether they actually got what they think they paid for, but also whether their purchase actually delivers the expected results, he added.

"The whole thing is a virtual hallucination. You are using an ad platform's tools to manage an ad campaign and verify results," said Samuel Bucholtz, cofounder of Casaba Security.

If that platform is systematically overcounting ad impressions or under- or over-reporting views, the buyer would never know. It is all about trust, he told the E-Commerce Times.

Taking Action

Cheq's aim is to spotlight the need to stem the increasing fraud rates. Greater resources and actions are needed, including better use of technology to deal with the problem of ad fraud, noted Marciano.

It's critical to "recognize the reality of fraud in online advertising and that cash follows the money," he said.

Toward that end, Cheq offers some basic advice for online advertisers:

Create a unique identification for your traffic sources. Ascribe a unique identification to your traffic sources to monitor the amount of traffic and its sources; then look for anomalies.

If for example, you suddenly find you are buying a very large number of impressions on a particular site, this suggests fake bot traffic. Be wary of small sites getting lots of impressions, said Marciano.

Another flag to look for is if a small site is suddenly getting you lots of impressions in your campaign, or if a very niche site in a country is suddenly getting you lots of global impressions.

"This is highly suspect and points to location fraud," he said.

Employ an ad-verification solution that performs deep analysis. Probe vendors of services, asking questions such as these: How many parameters do they have to uncover bots? Do they rely on simplistic fake IP lists? What techniques do they use to investigate the evolving threat? Do they merely report on fraud, and can they block ad fraud in real-time? Fighting Back

Digital advertising is growing, and a career in online ad fraud is both profitable and relatively non-risky, Cheq's Marciano said.

"To really counter this, the technology must be on a par with the growing sophistication of the threat, which is why cybersecurity and AI advances have been adapted and tailored to stop the threat of online criminals who are defrauding brands of advertising dollars," he noted.

Online advertising today is a big cat-and-mouse game between the criminals and the tech companies, but the individual companies -- the ad buyers -- do not have any real control over it, noted Chris Weber, cofounder of Casaba Security.

"There is some recourse to be had with service level agreements, in which the ad buyer could request a guarantee that a certain percentage of clicks won't be charged, in order to offset the risk of click fraud, such as about 15 percent," he told the E-Commerce Times.

Ad platforms could address this by integrating advertising capabilities directly inside the Web browser code itself, rather that leaving it up to the things that run inside the browser, like HTML and JavaScript, he suggested.

That is what the Brave browser does to maintain user privacy, Weber said. At the same time, it offers an advertising platform that is based on integrity, promising that audiences and views are 100 percent authentic and guaranteed.

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open source technologies. He has written numerous reviews of Linux distros and other open source software. Email Jack.

Read More

Leave A Comment

More News

TechCrunch » Social

Twitter tests a new way to label replies 2019-07-19 10:56:43Twitter is testing a new way to make conversation threads easier to follow, with the launch of a new test that labels notable replies with special ico

Twitter to attempt to address conversation gaps caused 2019-07-19 10:45:55Twitter’s self-service tool for blocking content you don’t want to see (as well as a growing tendency for users to delete a lot of the con

Instagram will now warn you before your account 2019-07-18 15:03:46Instagram this morning announced several changes to its moderation policy, the most significant of which is that it will now warn users if their accou

Facebook accused of contradicting itself on claims about 2019-07-18 11:29:20Prepare your best * unsurprised face *: Facebook is being accused of contradicting itself in separate testimonies made on both sides of the Atlantic.

Instagram will now hide likes in 6 more 2019-07-17 17:00:58Would the internet be a better place if we all paid a little less attention to fake internet points? Instagram is still trying to figure it out. Just

Twitter launches the ‘Hide Replies’ feature, in hopes 2019-07-17 16:33:36Twitter today is beginning its test of a radical and controversial change to its service with the launch of a new “Hide Replies” feature.

Social chat app Capture launches to take a 2019-07-16 14:00:36At first glance launching a new social app may seem as sensible a startup idea as plunging headfirst into shark-infested waters. But with even infamou

Daily Crunch: Facebook and Libra go to Washington 2019-07-16 13:41:01The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox ever

Highlights from Facebook’s Libra Senate hearing 2019-07-16 11:25:36Facebook will only build its own Calibra cryptocurrency wallet into Messenger and WhatsApp, and will refuse to embed competing wallets, the head of Ca

Snap turns to search giant Baidu to court 2019-07-16 03:14:02Two years have passed since Snap Inc. first struck a deal with Baidu that authorized China’s largest search engine to be a reseller of Snapchat

Facebook snags former Vine GM to run product 2019-07-15 16:25:10Is Facebook preparing to launch a serious competitor to TikTok? If so, the company just picked up some key talent to make that happen. Last week, Face

Twitter.com launches its big redesign with simpler navigation 2019-07-15 13:00:42Twitter’s website is getting a major overhaul. The company has been testing a new version of its desktop website since the beginning of the year


Best laptop and tablet deals this week: Shop New! 2019-07-22 14:11:06Just because Prime Day week is officially over doesn't mean the deals are. In fact, there are still sales and discounts aplenty — and to keep u

Tesla driver kills pedestrian with Getaround rental New! 2019-07-22 14:10:49Getting behind the wheel of a Tesla rented through Getaround's car-sharing app is a breeze — perhaps too much so.  On Sunday, a 22-year-ol

Slash $100 off a lifetime subscription to Rosetta New! 2019-07-22 12:37:22TL;DR: Get lifetime access to a comprehensive Rosetta Stone language course for $199, normally priced at $299.  There are lots of things you migh

Screwed by Equifax? Apply to get some of New! 2019-07-22 12:37:17Equifax, one of the largest credit bureaus in the United States, agreed to pay up to $700 million for a 2017 data breach that affected nearly 150 mill

The logo for Marvel's new 'Loki' series gets New! 2019-07-22 12:29:27Graphic design is not always Marvel's passion.  Marvel Studios kicked off MCU Phase 4 during San Diego Comic Con this weekend, revealing new pro

Best TV deals for the week of July New! 2019-07-22 12:24:33Comic-Con went down this past weekend and the MCU was very blessed. Marvel announced a crop of new movies and TV shows to usher in Phase 4 of the fran

Charge your iPhone and Apple Watch at the New! 2019-07-22 12:22:06TL;DR: The powerful BatteryPro portable charger is $89 (a savings of 10%) for a limited time in the Mashable Shop. Batteries are the Achilles heel of

Microsoft dumps $1 billion into 'artificial general intelligence' New! 2019-07-22 12:09:50Microsoft announced a $1 billion investment in OpenAI, a lab co-founded by Elon Musk to develop "artificial general intelligence." The investment is

15 extremely controversial thoughts about cheese New! 2019-07-22 12:00:00Mashable bites into a creamy, nutty, gooey, and sometimes stinky world during our first-ever Cheese Week. I like pretty much every type of cheese imag

The Dyson Airwrap is back in stock — New! 2019-07-22 11:58:14TL;DR: The cult-favorite Dyson Airwrap is back in stock — get it for $549. If you follow the beauty tech industry at all, you know that the Dyso

Scientists built a robot octopus that moves its New! 2019-07-22 11:50:44Researchers at London's Queen Mary University built a robot octopus that mimics the way real-life octopuses move. As explained in their paper, "Bio-

This Dell Inspiron 24 3000 Touch monitor is New! 2019-07-22 11:02:10TL;DR: This productivity-boosting touchscreen Dell Inspiron 24 3480 monitor is on sale for $749.99, saving you nearly $170 or 20%. The end of July can

The Next Web

No, you don’t own your apps — here’s New! 2019-07-22 13:42:16Possessions are going out of fashion. An endless stream of media reports claim millennials – that amorphous mass of people born in the 1980s and

Dota 2 International prize pool surpasses $30M, becomes New! 2019-07-22 13:24:05In case anyone still needed convincing that esports is truly massive, the Dota 2 tournament to be held next month just accrued over $30 million in pri

Pixel 4 leaks show the notch will be New! 2019-07-22 13:10:21By now the Pixel 3 XL’s giant notch has become something of a meme in the tech world. The most egregious example of an unfortunate design trend,

Watch someone play GoldenEye with a piano as New! 2019-07-22 12:55:05Few third-party Nintendo 64 titles have managed to maintain as fond memories as Goldeneye 007, a title that was many a 90s kid’s first FPS game.

Indian government ban on ‘non-sovereign’ cryptocurrency would see New! 2019-07-22 12:49:11A government panel in India has issued a recommendation to ban all “cryptocurrencies created by non-sovereigns,” a step which could be app

Watch the first episode of ‘Hash It Out’ New! 2019-07-22 11:20:54Today, we’re wrapped to present our new cryptocurrency and blockchain video series, Hash It Out — where infl

Five reasons future space travel should explore asteroids New! 2019-07-22 10:14:21On the same day that the Earth survived an expected near-miss with asteroid 367943 Duende, Russian dashcams unexpectedly captured footage of a differe

UK MP on Libra: Facebook’s almost trying to New! 2019-07-22 09:35:41Facebook‘s ‘cryptocurrency‘ Libra is ruffling feathers among UK politicians amid concerns that the technology giant’s entry in

The Jour mindfulness app helps you build a New! 2019-07-22 09:19:01Mental health problems are one of the leading causes of disease burden worldwide, and major depression is the second leading cause of disability globa

CHEAP: Bose’s bizarre SoundWear Companion wearable speaker is New! 2019-07-22 09:11:14Welcome to CHEAP, our series about things that are good, but most of all, cheap. CHEAP! Most of us have a pair of headphones and speakers, right? In t

Moonday Morning: South Korea lost $2.3 billion to New! 2019-07-22 04:04:09Welcome to Monday, and welcome to another Moonday Mornings, Hard Fork’s wrap-up of the weekend’s top cryptocurrency and blockchain headlin

How to watch India’s Chandrayaan-2 lunar mission launch New! 2019-07-22 03:16:24Events celebrating the 50th year of Apollo 11 Moon landing are underway, but India is gearing up for its own second mission to the moon. Dubbed Chandr


How This Entrepreneur Scaled a Summer Camp Funnel New! 2019-07-22 13:30:00Want to grow your business? These three marketing tips can help.

Entrepreneur Chris Dufey on Why You Have to New! 2019-07-22 13:00:00For a life worth living, set intentions and remember: Life comes in seasons.

This 110-Year-Old Seersucker Suit Business Is Led by New! 2019-07-22 12:00:00The Haspel family's namesake clothing company, founded in 1909, continues to evolve while maintaining tradition.

7 Ways to Say 'No' Without Sounding Like New! 2019-07-22 11:40:00It is important to recognize when someone else's opportunity will become your distraction.

Why Time Management Is an Indispensable Element to New! 2019-07-22 10:30:00Many aspects of your life will improve when you begin managing your time more efficiently.

5 Essential Cannabis Trends You Can't Afford to New! 2019-07-22 10:08:00New research indicates these events will drive the global cannabis market.

These Headphones are Designed to Help You Fall New! 2019-07-22 09:30:00The Bedphones Wireless Sleep Headphones are headphones specially designed to ship you off to dreamland.

These Women Entrepreneurs Have Created a Multimillion-Dollar Business New! 2019-07-22 09:00:00The co-founders of Sorbabes emphasize educating consumers about how their product is different than what they're used to.

10 Easy Steps for Making Social Media a New! 2019-07-22 08:45:00Follow these quick tips, and you'll soon be honing in on the affluent prospects you've been seeking.

This Drybar Entrepreneur Stresses How Important Good Culture New! 2019-07-22 08:30:00A great work environment feeds progress tremendously for a company, big or small.

How to Make Career Decisions That You Will New! 2019-07-22 08:00:00Plot your career as a journey full of lessons and you will never regret a choice you make.

10 Effective Ways Intelligent People Deal With Rude New! 2019-07-22 07:30:00Maybe they aren't really a rude person, maybe they are stressed person who is being rude.

E-Commerce Times

Workers' Prime Day Strike Could Pose a Problem 2019-07-09 13:18:12Amazon workers at a Minnesota, fulfillment center plan to strike for six hours on July 15, the first day of Amazon's Prime Day sales event. The strik

How to Run a Profitable Business on Amazon 2019-07-06 08:00:00Selling on Amazon can be an extremely profitable business all on its own. Third-party sellers like small business owners and authors on Amazon's mark

The Threat of a Deepfake Fiasco 2019-07-05 08:00:00An AI technology called "deepfake" may be the next big threat we face as a society. Consider a recent video clip of Facebook CEO Marc Zuckerberg say

5 Effective Ways to Reduce E-Commerce Churn 2019-07-02 08:00:00The subscription model forms the backbone of the revenue streams of many SaaS companies. In fact, more than 90 percent of software providers expected

The Growing Menace of Weaponized Deepfakes 2019-06-27 13:19:14The U.S. House Intelligence Committee recently heard expert testimony on the growing threat posed by "deepfakes" -- altered videos and other AI-gene

Oracle Advances Its Two-Pronged Cloud Strategy 2019-06-26 14:40:27Oracle has announced plans to combine its more than 18 related analytics products under a single banner, Oracle Analytics, making it easier for custom

LinkedIn Tweaks Its Algorithms to Skew Feeds to 2019-06-26 06:07:16LinkedIn has disclosed algorithm changes designed to favor conversations catering to niche professional interests. The criteria for posts showing up i

Technology Tools and Customer Engagement: It's Complicated 2019-06-25 14:38:16The most successful brands today are those that have created engaged audiences and an exceptional customer experience. They have managed to humanize t

The Greening of E-Commerce 2019-06-24 16:02:16E-commerce by its nature involves a lot of packaging and shipping, and e-commerce companies can't always control how their products get sent. There a

Oracle Does OK - Surprised? 2019-06-22 08:00:00To all the geniuses who advised selling Oracle shares ahead of this week's earnings call: You might want to recheck your calculations. On your slide

What Shifting Data Use Means for Pay-TV and 2019-06-21 13:16:12For many, Netflix was the first wake-up call that a new-generation of online or technology companies could have a significant impact on pay-TV busines

Plot Thickens With Dish's Interest in Sprint, T-Mobile 2019-06-20 11:58:01The merger between T-Mobile and Sprint has been dragging on for quite a long time, but it finally may be in the home stretch. To get the deal approved

Social News Daily

Man Reportedly Used Scissors To Cut Off Pecker 2019-07-17 12:58:23A man from Florida is in custody for purportedly using a pair of scissors to snip off the willy of a man he accused of sleeping with his wife. Alex Bo

What Data Do Map Apps Collect On You? 2019-07-17 08:00:21“In 500 feet, turn right.” We all know that familiar navigation voice guiding us to our next destination, but what if we also heard things

A Man Was Shot Dead After Attempting To 2019-07-16 18:45:34A man was gunned down after attempting to enter Area 51, the top-secret military base in the US, a document from the NNSS divulges. The news is coming

You’d Be Surprised What Rappers Are Doing Now 2019-07-16 08:00:07In today’s music industry, having talent is not enough. Anyone with dope lyrics and sick beats can create a hip-hop track in a couple of hours.

A Woman Was Residing With Her Deceased Mother 2019-07-15 18:27:53A 47-year-old woman has been arrested after police found out she and her daughter had been residing in a house with her mom’s corpse, cops said.

Colorado Veterinarians Claim Pot-Laced Human Turds Getting Dogs 2019-07-12 18:36:46Roaring Fork Valley dogs have discovered an interesting way to get their buzz on: They are consuming human poop blemished with marijuana. Dr. Scott Do

Lady Joins Tinder To Get A Date And 2019-07-12 10:09:36Emily – better known as Gianna Dior – dumped her former life and is now working as a porn star full time, earning roughly $941 per hour an

‘Fortnite’ Makes Its Case as the New Social 2019-07-11 06:29:08When talking about the best social media platform, it wouldn’t be surprising to hear people say Facebook, Twitter, Instagram, Snapchat, and YouT

Church Considering A Ban On Blessing Weapons Of 2019-07-10 19:21:46A Russian Orthodox Church commission on ecclesiastical law propose that clergy focus on blessing soldiers, as opposed to weapons. “One can talk

6 Proven Techniques for Strengthening Your Brand’s Social 2019-07-10 00:19:08Businesses cannot compete effectively without a social media presence. But strengthening your brand’s presence requires more than just creating

Cops Hunting For iPhone Thief Who Posted Selfie 2019-07-09 18:17:48A so-called thief who heisted an iPhone is now being sought by law enforcement after he shared a selfie to his dupe’s Instagram account. Kearny

Managing Security Threats for Your Online Business in 2019-07-08 22:39:48Social media is a tried and tested strategy for business growth. They spread the word fast, much more than the standard website can do, and they allow

Disclaimer and Notice:WorldProNews.com is not responsible of these news or any information published on this website.