Why the ad fraud conundrum won’t be ending anytime soon

When reading headlines about digital ad fraud, you’d have to conclude the sky is falling. But the reality? Advertisers aren’t really freaking out about digital ad fraud to the tune of $7bn, or not nearly as much as the echo chamber would have you believe.

Of course nonhuman traffic and other forms of deception are shameful, but are key industry stakeholders really that bothered about it? The dirty little secret is that there are too many stakeholders in the digital ecosystem making money for it to significantly improve anytime soon. Especially within programmatic, where fraudulent traffic is still bought on a massive scale, the platforms and exchanges are still making millions in transactional fees and the 3rd-party verification products have built lucrative businesses on the back of it. There’s just too much money being made for a fraud-free digital advertising ecosystem to be achieved in it’s current form. Think about it, why would a business that is built off detecting fraud want to actually eliminate the very thing that justifies its existence?

There is actually historical context to this tacit acceptance of ad fraud as an unpleasant but unavoidable part of the marketplace. Think of the old Wanamaker quote about how 50% of my advertising is wasted and not knowing which half. Or think about how long the TV industry has put up with the increasingly antiquated methods Nielsen got away with so long in measuring viewership.

Or think about how the Yellow Pages business—one of the oldest forms of modern advertising— operated for decades. YP often calculated its ad rates off the number of phonebooks distributed, not actual phonebook usage, yet, while YP advertising doesn’t generate the pre-digital results it once did, businesses still allocate budget, and the YP companies, while ad revenues are shrinking, still maintain healthy profits.

There seems to be this Faustian pact that the industry has made over the decades that advertising effectiveness is an often nebulous and a far-from-exact endeavor and that waste and inefficiency is just a cost of doing business. After all, advertising budgets are exploding and mostly in the programmatic landscape with a handful of buying platforms where media buyers and planners tend to spend their budgets.

If advertisers were really concerned about ad fraud they would stop insisting on paying lower and lower CPMs through the open exchanges, rather than do the extra work to form direct deals with the publishers and sellers that actually own or control the inventory. They’d also question audience extension programs, which are essentially media arbitrage models with the goal of spending a budget at all costs. It's this thirst for scale from all levels that perpetuates fraud across the industry.

Instead, everyone seems to be making money regardless. Brands give money to agencies to purchase digital advertising. Agency money ends up with the exchanges, platforms and ad networks who give millions to 3rd-party verification services. The exchanges then turn fraud detection into a profit center by forcing the services to their sellers and charging a premium. We are still a long way from getting fraud numbers down to a negligible level while exchanges, publishers, fraud detection firms, trade desks, DSPs, agencies and ad networks all continue to make money.

What’s really interesting is that clients and their agencies haven’t exactly clamored for a unified fraud measurement standard. The reason being is that having multiple vendors with different methodologies that generate sometimes wildly different results gives brands, agencies and buyers the cover to choose the vendor that makes their buy seem the most efficient. Thus, there is no real incentive for intellectual transparency in fraud measurement. It’s a dynamic that encourages a certain level of gamesmanship, which the fraud detection vendors exploit to line their own pockets. This herein, is the ultimate conundrum of the ad fraud landscape. We’ve charged the very companies that profit from ad fraud to eliminate the reason for their existence.

I’m not pooh-poohing the impact of ad fraud and it’s not my intention to discourage the industry-wide attempts to find working solutions. My intention here is to point out the hypocrisy that exists in many quarters when it comes to ad fraud and maybe to suggest a new approach that looks at the cause rather than treating the symptoms.

Matt Brummett is the COO of Answer Media

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