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How to face ad fraud and protect your advertising spend

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Key points

  • Ad fraud costs online retailers more and more each year, with an estimated $44 billion lost to digital advertising fraud worldwide by 2022.
  • For every $3 spent on digital ads, $1 is lost to ad fraud.
  • Review fraud — the illegal practice of a business posting fake reviews to build up their product, brand or service — cost one retailer over $12 million in fines and fees.

What is ad fraud? Ad fraud is a silent killer for retail leaders. It eats up advertising budgets and leaves them with next to nothing to show for all they’ve invested in marketing and promotions strategy.

Advertising strategy is disrupted through digital attacks including basic ad fraud, click fraud and review fraud. At their worst, these fraud schemes mean retailers lose out on valuable visibility to each client. For every bot that intercepts a digital ad view, that’s one fewer real person that could have seen the ad. 

Losses from ad fraud add up quickly. Juniper Research found that ad fraud cost advertisers $19 billion in 2018. With billions of dollars and customer loyalty at risk, retail leaders must understand how ad fraud hurts their advertising. Let’s take a closer look at how to prevent ad fraud and study some tips on how to operate without fear of losing ad revenue to fraud.

Ad fraud losses add up to billions for retailers

Digital advertising can be a tough nut to crack, even for experts in paid search marketing. It’s very easy for a thief to engineer an account takeover attack to target digital ads. And since every page, app, video and social media feed we see each day features at least one ad on the page, it’s harder to track down and eliminate a fraudulent ad versus identifying and shutting down a compromised account.

The damage is also harder to limit. Fraudsters steal ad revenue by creating fake avenues including traffic, clicks and app installs that allow them to intercept traffic and money from the intended target. A common ad fraud scheme is when fraudsters hijack digital ads to retarget ad traffic to bots instead of humans. Victims of ad fraud are targeted by bad actors looking to set a data or tracking trap for large group of users and steal data or carry out other nefarious plots. 

In June 2018, fraud detection firm Pixalate exposed an ad retargeting scheme that was initially thought to generate $75 million per year in stolen ad revenue — all from a single app. After publishing its findings, Pixalate received an email from an anonymous person connected to the scheme who claimed the stolen revenue was closer to 10 times the suspected amount. The person also said the operation was so effective because it works “with the biggest partners [in digital advertising] to ensure the ongoing flow of advertisers and money.”

Click fraud is a subtype of digital ad fraud. Fraudsters pull off this trick by placing a human or bot to click ads repeatedly to either generate revenue for publishers or drain revenue from a competing advertiser. According to the Association of National Advertisers, bots can represent up to 37% of an advertiser’s impressions. The study also estimated that ad fraud created by bots cost advertisers $7.2 billion in 2016.

There’s a lot at stake with ad fraud detection in ecommerce. It’s important for retail advertising leaders to understand why ad fraud is so prevalent, as a first step to building an effective anti-fraud strategy against ad scammers.

How scammers get ahead

Scammers specializing in mobile ad fraud make their money by exploiting mobile advertising technology. Statista released a report in August that outlined how the digital advertising environment is partially responsible for the rise in ad fraud, specifically in programmatic ad service. Their research found that in early 2017, close to 40% of ad impressions served programmatically in the United States were fraudulent. 

As ecommerce and mobile shopping grow, so do fraud opportunities. Mobile measurement company Adjust reported in May 2018 on how mobile ad fraud almost doubled between 2017 and 2018. The article also picked out a key metric for paid installs: only 7.3% of all paid installs — user downloads triggered by paid advertising — were rejected as fakes by Adjust’s fraud prevention tools. It’s hard to believe that such a small number of fraudulent apps would be responsible for the enormous and growing scams on the digital advertising scene.

This shows how hard it is to sniff out the bad actors and fraudulent apps and bots. Ad fraud flourishes because there are no best practices or governance to stop it. Without effective fraud tracking tools and oversight for online ad publishing, ad fraud will only increase for advertisers and media buyers.

Fight ad fraud at the source

Advertisers can take their power back from fraudsters. The Native Advertising Institute has a few suggestions to get started with ad friendly fraud prevention:

  • Be cautious about making ROI decisions based on clicks and impressions that can be easily faked by bots to inflate the numbers. Focus on real metrics that move the needle: as sign-ups, sales and other conversions that are meaningful to the bottom line.
  • Monitor measurement data and pay attention to anything unusual, such as spikes in number of clicks and clickthrough rates, and what seems to be driving them. Based on this analysis, blacklist low-quality sites that are driving traffic without corresponding conversions.
  • Don’t discount organic traffic. Continue to post blogs, write press releases and engage with social media to drive quality traffic and interest to your site.
  • Don’t participate in review fraud. Ever. It can cost your business millions in penalties and permanently damage your brand reputation.

With more knowledge of how and why ad fraud happens and a strategy to fight the fraudsters, retail leaders can help save their companies millions in lost revenue and resources. Stay vigilant against all kinds of fraud to protect your sales funnel. Ad fraud protection doesn’t have to be a mysterious fight any longer.

photo courtesy of iStock Photo

Don’t lose revenue to a leaky sales funnel. Contact Signifyd to discuss your needs for ecommerce fraud protection and revenue optimization.

Chris Martinez

Chris Martinez

Chris is a content strategist at Signifyd.