China’s ad fraud problem is 'on another scale' and requires a bespoke approach

China's ad fraud problem is much bigger than elsewhere in the world

Over the Western world’s Christmas break the ad fraud problem in digital advertising peaked in terms of media attention. A report detailing a singular ad fraud operation called Methbot helped drive awareness of the issue, though the incident was largely confined to the US.

Further East, China’s $27bn digital ad industry is seeing fraud rates of almost 40% regularly, according to eMarketer research, making China the ad fraud elephant in the room.

China operates at another scale entirely

Michael Greene, VP of product strategy at AudienceScience, said: “From our experience, ad fraud is a significant issue in the Chinese market and affects both programmatic as well as traditional, hand-sold buys. While non-human traffic is certainly present in all markets globally, China operates at another scale entirely. To point, the eMarketer data from Admaster [a China-based audience measurement company] showed Chinese fraud rates as ranging from 20%-40%. By comparison, Integral Ad Science generally cites ad fraud rates in the single digits for other markets. This is completely consistent with our experience in the market. In fact, we have even had days where we’ve been suspicious of upwards of 70%-80% of incoming traffic to our Chinese servers.”

The stark difference between the programmatic market in China, compared to elsewhere in the world, has been noted before. This is a reason why verification businesses like Integral Ad Science have been slow to launch in the country.

Niall Hogan, managing director of Integral Ad Science in South East Asia, said: “China requires a completely bespoke approach for ad fraud detection. China has a unique internet infrastructure and nobody in the industry currently has a complete understanding of the scope or depth of ad fraud in China, including how much there is and how it is happening.

"Verification and anti-fraud companies like ourselves, have only recently started to look at China as a market place and we recognize we need to adapt our approach to address the unique challenge of ad fraud in China. We see some obvious things immediately, and it is going to require a cooperative approach for advertisers, agencies, and publishers to address the fraud issues in this country,” he said.

Decisions based on relationships

The key problem in China is the power of publishers and a lack of regulation, as well as a culture of forging deals based off of existing relationships.

Of the issues with publishers, Mahdi Shariff, chief strategy officer, SVP at Chinese ad tech firm Sunteng, said education would help brands to circumnavigate these issues.

“The publishers have significant strength and influence with less regulation and pressure to change, so concede less third party tracking or audit of their activities. The maturity of the market is lower so industry education for both agencies and clients is still developing, making it challenging to assess vendors. Business culture also means some decisions are based on relationship rather than always on a commercial basis or a technical competency, which means some vendors won’t fully invest in developing their technology.

It is an issue for brands and requires stronger knowledge of how the ecosystem works and making more informed diligence of their vendors – not just those with ‘Guanxi’ (relationship). Its an opportunity those for partners that run a technology-centric transparent model and third party vendors, however the demand from clients for this needs to increase and become the default before the industry can change significantly,” he explained.

A three-party effort to tackle fraud

However, it’s not quite a wild, wild east as with so much ad spend at stake, industry groups are already uniting to look at the ad fraud problem in China.

Hylink, a large Chinese digital agency with offices in LA, is working with the Chinese IAB and the China Media Ratings Council (CMRC) on initiatives to address the issue.

Humphrey Ho, managing director of US at Hylink, said: “The Chinese IAB and CMRC are actively addressing these issues, because it's costing not only advertisers money but also advertising agencies money. The effects are dissatisfied clients, extensive human costs to monitor and enforce media buy agreements, and obviously, poor customer experiences.”

Ho’s advice is that other businesses join in industry initiatives, helping to create a more holistic solution to the problem: “This is a three-party effort between brands who demand it, agencies who need it, and publishers who see the benefit in reduced ad-fraud on their own platforms.”

Always-on monitoring

Hogan also offered three ways that brands in China could avoid ad fraud. He suggested that ad fraud detection solutions should be used throughout the whole campaign. The second piece of advice was to make sure that there was an ‘always-on’ approach to monitoring, as some publishers can act ‘clean’ when they know they are being watched but revert to non-human traffic outside of this period. Lastly, he agreed with Ho and said that collaboration was key to improving the situation for the industry quickly.

“We have seen the positive ways that organisations like the IAB and TAG have galvanised a response in other markets. The lessons learnt from these successful initiatives could be well employed in China too. We are currently engaging broadly with the industry and would welcome further dialogue with any interested parties,” he said.

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