Ad fraud has a Chicken Little problem

The ad industry can’t shake its fraud problem. Bad guys are finding creative ways to profit from the labyrinthian ad tech ecosystem, and it’s costing the industry a pretty penny. Over 30 percent of all ads are fraudulent, according the most popular soundbite, accounting for $6 billion in lost revenue in the U.S alone.

Or at least that’s how some of the industry sees it. While talk about ad fraud borders on the hysterical these days, industry veterans with a more dispassionate eye will tell you there’s more to the ad fraud story — and the version you get depends on who’s telling it.

“This is an issue that regularly gets hyped up,” said Alex White, vp of product strategy at Sizmek. “There are those that are trying to capitalize on the issue, and those are typically the people that are putting forth the big numbers and fanning the flames.”

Following the money, as is so often the case, can be eye-opening. Often, the companies doing the ad fraud detection sell ad fraud-combating products, meaning, they have a very real stake in finding ad fraud everywhere they look. The Association of National Advertisers partner White Ops, which sells ad fraud detection services, is the original source behind the claim that ad fraud wastes $6 billion in U.S. advertiser dollars each year. And you can thank Solve Media, which makes CAPCHA technology, for pushing the notion that half of all Web traffic in the U.S. is from bots.

Those who don’t study their history are doomed to repeat it. Around four years ago, ad verification was all the rage. Verification vendors like AdSafe, DoubleVerify and MediaTrust rode the wave of ad placement paranoia by spooking brands with horror stories that their traffic was running on porn sites and alongside other dicey content. And only they could help solve the problem.

“You have to give credit to their sales and marketing teams, because a lot of the data and stats I’ve seen make it feel like a great marketing tactic,” said Craig Simmons, manager of product strategy and operations at Exponential. “For them to create this scary marketplace should work out better for them in the long run,” he said.

On one hand, you can argue that, if anyone knows the true nature of bot fraud, it’s the companies that are trying to fix it. On the other hand, many in the ad world say that overstating the fraud problem hurts the industry more than it helps.

The ad industry often mischaracterizes ad fraud as something akin to cancer: Ad fraud happens when bad actors on the margins behave badly. Instead, White argued that fraud always appears when a market creates the sort of environment that lets it thrive. Digital advertising, which is filled with middlemen and fueled by the power of plausible deniability, fits that bill just fine.

“It’s the advertisers’ responsibility to align themselves with the media or the sellers that they know are safe. It’s not like the tools to protect advertisers don’t exist. You just have to mitigate your exposure to the bad actors,” he said.

The problem is that advertisers often have a hard time separating what’s real and what’s fake even when dealing with their trusted partners. In May, online security company Telemetry examined a sample of 365,000 impressions of a Mercedez Benz campaign sold by Rocket Fuel and found that 57 percent of them were from bots. While Telemetry didn’t argue that Rocket Fuel intentionally sold fraudulent impressions, it still reflected poorly on Rocket Fuel, which is a public company that has worked with clients like Toshiba and Buick.

Rocket Fuel, however, pushed back with some analysis of its own. Using ad fraud detection vendor Forensiq, it analyzed the entire 40 million-impression Mercedes Benz campaign and determined that Telemetry’s 57 percent number was closer to 6 percent. While that number seems low, Rocket Fuel said it was higher than its usual suspected-bot-fraud numbers, which it said usually hover around 2 percent.

“Fraud is not a static problem,” said Ari Levenfeld, director of privacy and inventory quality at Rocket Fuel. “It’s something that is constantly evolving as bad actors change their methods or get through the fences. What might appear in the corner of one exchange one day could be gone the next.”

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