On fixing digital ad fraud: If not now, when?

At the end of December 2014, the Association of National Advertisers and White Ops released their first Bot Baseline Report, a study surveying the digital advertising landscape. The results weren't good. They projected 6.3 billion loss to bot traffic in 2015, explained that "Bot traffickers remotely control home computers to generate ad fraud profits, and pointed out that due to the success of bot traffic being "targeted," that it defeated the purpose of actual user targeting. For the second Bot Baseline study, the projected loss due to fraudulent digital advertising on a global scale rose to 7.2 billion. According to their third Bot Baseline study, study the Association of National Advertisers and White Ops, now see a faint glimmer of hope. Digital ad fraud has declined 10% this year compared with 2016. While that's great news, the numbers are still staggering. Economic losses due to ad fraud will equal 6.5 billion compared with 7.2 billion last year. According to the key findings in their third Bot Baseline Report:

Traffic sourcing is still the major risk factor for fraud. Traffic sourcing, or the process of purchasing traffic from inorganic sources, was again a large source of fraudulent activity. The report said 3.6 times as much ad fraud came from sourced than non-sourced traffic. Nine percent of desktop display and 22 percent of video spending was fraudulent. This was a decline from the previous year when display advertising fraud was reported at 11 percent and the fraud rate for desktop video was 23 percent. Mobile fraud was found to be considerably lower than expected. Overall, participants saw less than two percent of fraudulent activity in app environments and mobile web display buys. However, this does not include fraud in mobile web video and pay-per-click fraud which remain high and problematic. Fraud in programmatic media buys is no longer riskier than general market buys as media agencies have improved filtration processes and controls.

The Bot Baseline Report's recommendations are what one would expect: demand transparency, refuse payment on non-human traffic, encourage third party fraud detection. These are the same recommendations we've heard for years. Perhaps even more disturbing is the fact that the data is incomplete. Since the ANA and White Ops only have three years to go by, we can only speculate the amount of money lost to ad fraud. But if we assume the numbers have been more or less consistent on a year over year basis than we might have lost somewhere between $40-45 billion since 2010. It wouldn't be that hard to extrapolate data even anecdotally. For instance, back in 2013, Heineken USA held a company conference in which they found that only 20 percent of the campaign’s ad impressions were seen by real people, and the other 80% were fake. It is hard to argue that this isn't an astronomical amount of money to lose. It's also hard to argue that the ad networks aren't culpable for enabling this with their point-the-finger-elsewhere policy. Now it seems that policy is starting to change. Google, who is increasingly becoming known less for its doodles and more for being an Antitrust robber baron, or an evil monopoly who needs serious government regulation, is finally issuing refunds for ads bought through its systems that ran on websites with fake traffic. As the Wall Street Journal reported, Google was only going to issue 7%-10% of the total ad spend, which was a "platform fee," advertisers pay to Google to use their ad-buying services. But now, Google is offering full refunds. On the google property Doubelclick, a blog post called Working with the industry towards a fraud-free media supply chain goes into further detail.

Advertising fraud is a complex challenge, but one that we are working to simplify for our partners. That’s why we’ve developed sophisticated systems, including over 180 automated filters and detection algorithms, to prevent invalid traffic from impacting our clients. For years, we’ve used these technologies to protect Google-owned media properties from invalid traffic and now we’re working to expand them to help the rest of the ecosystem. Today we’d like to highlight three areas we are investing in, for DoubleClick Bid Manager, to help our partners build trust in the advertising supply chain. Automating refunds for invalid traffic In the coming months, we’ll be implementing new infrastructure to further automate the refund process for invalid traffic. Supply partners like AppNexus, Index Exchange, OpenX, Teads, Telaria and DoubleClick Ad Exchange have been very supportive of these changes and have committed to provide advertisers with refunds for invalid traffic detected up to 30-days after monthly billing. These commitments, along with others, cover over 90% of the available inventory in DoubleClick Bid Manager. Soon, we’ll identify in Bid Manager which supply partners provide refunds for invalid traffic and offer advertisers the option to buy only from those sources. This will make it easier for our customers to collect refunds for invalid activity.

The title of the post suggests a work-in-progress of course because like all systems born out of the permissionless innovation philosophy, such things as security and transparency always come second when it comes to revenue. Er, innovation. In a New York Times article from April, entitled "Is it time to break up Google?" Jonathan Taplin suggests "We are going to have to decide fairly soon whether Google, Facebook and Amazon are the kinds of natural monopolies that need to be regulated, or whether we allow the status quo to continue, pretending that unfettered monoliths don’t inflict damage on our privacy and democracy." Google is facing increased pressure from the EU when it comes to violating antitrust laws. Perhaps it's time for the ad industry and their clients to start applying pressure, too. Here's a solution: Start by removing the 6.5 billion dollars you'd lose this year to fraudulent traffic from the ad exchange networks. Refuse to invest in this broken system until it gets fixed. Let Google lose money for a change, and see how quickly they fix the issue.