Facing up to fraud:
How ad fraud is eating up your marketing dollars

In the late 1800s, John Wanamaker famously quipped that “half the money I spend on advertising is wasted; I just don’t know which half”. More than a century later, today’s marketers face a similar – if more complicated – conundrum. Businesses are burning through billions of dollars in wasted digital advertising, and it’s not always easy to spot when it happens.

As the global digital advertising market value accelerates, the problem is only getting worse. Almost two-thirds of ad spending is now digital, rising from 48 per cent in 2017 to a projected 68% in 2024. Data costs have simultaneously skyrocketed as well. Meta’s CPM has increased by 61% year-over-year, while Google’s programmatic display CPM has risen to 75%. The potential losses are catastrophic.

And while you might be inclined to assume that bigger brands with even bigger dollars are the victims, smaller and medium-sized businesses that outsource to ad agencies also face staggering losses.

Marketers can no longer afford to turn a blind eye to ad fraud. Experts predict that the cost of ad fraud will hit $68 bn this year. In order to prevent it from happening to you, it’s important to understand the scale of the issue, recognise common online fraud tactics, and identify your own vulnerabilities.

Let’s dig a little deeper into how fraudsters can attack and affect your business.

How can fraudsters target your digital marketing campaigns?

Ad fraud covers a broad range of malicious activities and affects up to 60% of all types of digital advertising. Today’s cyber criminals don’t just act alone either, they usually work for large-scale, sophisticated operations. They might even be one of your competitors.

A few of the most common types of ad fraud include:

  1. Domain spoofing: A common form of phishing where an attacker impersonates your company domain to trick users into interacting with malicious emails or phishing sites. Criminals might steal a user’s personal and financial details or trick advertisers into paying for ads shown on another website.
  2. Cookie stuffing: A method used by fraudulent affiliates to trick websites into thinking they have sent them traffic. This means that websites pay for a service it hasn’t received and other affiliates lose out. According to TrackAd, cookie stuffing accounted for 62% of affiliate fraud in 2018.
  1. Click injection: A sophisticated form of click-spamming that encourages users to download seemingly innocuous apps. This, largely Android, phenomenon means that fraudsters can hijack a device to create ad clicks that appear legitimate.
  1. Ad stacking: A form of mobile fraud where multiple ads are layered on a single ad placement. Only the top advert is visible to the user, but a click or impression is registered for every ad in the stack.
  1. Illegal bots: Malicious bots that mimic human interactions and make it seem like an ad is getting impressions, when it is simply being scanned by a bot. Fake online users account for as much as 40% of all web traffic.

How could fraud impact your business?

Ad fraud costs you money – and a lot at that. Every day, countless marketing dollars are wasted on fraudulent impressions and clicks that never amount to any real leads or results.

The cost of fraud on your business depends on how much budget you spend on digital advertising and the types of ads you run. According to ad fraud solution provider Anura, if your company pays for 20 million impressions per month at $5 per thousand impressions and 25% of those are fraudulent, you could be losing as much as $25,000 per month to ad fraud.

There have been countless high-profile cases that confirm these eye-watering losses. For instance, in 2019, Uber filed a lawsuit against five ad companies, claiming that $100 million had been wasted in ad spending. They won their case.

Digital ad fraud also costs you more than lost revenue, it can also harm your brand reputation. Ads that drive negative associations or support irresponsible and harmful causes can cost you customers. If a company gains a reputation for contacting people without their consent, customers are unlikely to visit your site again.

What can you do to stop digital advertising fraud?

 The dark world of ad fraud is complex and fast-changing. However, there are a two immediate things you can do as a marketer to mitigate its far-reaching effects, beyond signing up for reputable ad fraud detection solution:

  • Prevent it: The best way to fight ad fraud is to prevent it. That means keeping an eye on your data and watching out for sudden spikes in traffic without cause. Understanding your traffic sources is essential, so make sure you have a good understanding of where your ads are running and how users are interacting with them. Keeping your CPC at a reasonable rate is another good way to prevent ad fraud: low CPC encourages low-quality traffic and is more susceptible to fraud.
  • Detect it early: Ad fraud can happen to anyone, so it’s important to be able to identify the warning signs before it’s too late. Low viewability is an easy indicator. Average ad viewability should be 40-60%. If it’s any lower, there could be a chance your traffic is coming from fraudulent sources. Unusual traffic sources from outdated browsers and unpopular devices could also indicate fraud, as well as repeat visits from the same IP addresses. Substantial spikes in visits without conversions are another good indicator of ad fraud.

Time to wise up against fraud

 As brands shift more of their budgets over from traditional to digital advertising, the problem is only getting worse. According to recent research, the US and Canada ranks as the region with the highest ad fraud rate in 2021 at 2.1%, but Europe is close behind, followed by the Middle East and Africa. It’s time to be aware of the problem, and time to look more closely into your campaigns to ensure you are well positioned to avoid falling victim.

Posted inContent Marketing Posted on
written by

Alex Ionides Managing Director, Silx