Fraud is defined as “deliberate deception, trickery or cheating intended to gain an advantage” and exists in almost every corner of life.
One in five job seekers lies on their CV; in 2014 credit and debit card fraud totalled £479m. Hollywood has a love hate relationship with fraud; stories of fraudsters prove to be box office hits as filmgoers revel in the lucrative, scam-filled, glamorous lives of Frank Abagnale Jr. (Catch Me If You Can) and Jordan Belfort, aka “The Wolf of Wall Street”. However, the UK audio-visual industries are losing £500m a year due to copyright theft, which equates to a total economic loss of £1.2bn.
The FIFA corruption scandal is perhaps the most recent high-profile fraud case that impacted advertisers with several high profile brands reportedly withdrawing their sponsorship. However, a different type of fraud affects advertisers online every single day.
Advertising is the lifeblood of the internet and online publishing, providing a scalable source of income to publishers so they can continue to produce content for consumers. Other ways of monetising publishers’ online efforts, such as creating a paid-for subscriber only environment, offer limited income and are not scalable. Secondly, the traditional way of buying online ads directly from publishers has become obsolete. It is simply not as effective in terms of targeting and price, and also, given the vast amounts of ad inventory available today, there is simply not enough human resource available to trade every available impression, regardless of how inefficient this would be. Step forward, the advertising exchange, a marketplace where the buying and selling of advertising inventory is automated.
Sadly, with revenue gained from online advertising now reaching billions globally, fraudsters are chasing a slice of the lucrative pie. These criminals populate the online advertising marketplaces with non-viewable impressions and generate non-human systems that are capable of generating ad clicks – all designed to redirect investment from genuine ad sellers. This fraudulent activity creates issues when it comes to marketplace quality that plagues both the supply side and the buy side of online ad trading.
However, it’s not all bad news; ExchangeWire Research’s findings show that while marketers’ believe that the current level of ad fraud is 27 per cent, the reality is that ad fraud actually only makes up between four per cent and 17per cent of the online advertising industry, according to Integral Ad Science. The more than generous level of publicity awarded to stories of fraud by the media is one hypothesis of why marketer’s perception is so distorted.
Yet, despite the perceptions around fraud, marketplace quality issues are not harming marketers’ perceptions of value when it comes to programmatic buying - 95 per cent of marketers surveyed by ExchangeWire Research said they thought programmatic advertising offered good value for money.
The findings also showed that marketers are prepared to tolerate up to five per cent fraudulent traffic and 98% believe that the sell side (publishers, SSPs and exchanges) should take responsibility for marketplace quality. The fact that marketers are prepared to tolerate fraud to any extent is in itself an interesting finding and most likely a reflection that they accept fraudsters will always try to cheat the system. The Media Investor provides a good summary of various estimates of the total size of the ad fraud market but in reality, we will never know the true figure.
There’s good news – as reported by the BBC earlier this week – that the war on cybercrime has evolved and no longer seeks criminals as individuals who are almost impossible to locate. Instead it focuses on identifying and tracking down the infrastructure; the compromised servers and computers that are being used knowingly or unknowingly to carry out the cybercrime. This new approach combined with increased international cooperation should take down more cybercriminals and help win the fight against online fraud once and for all.
Rebecca Muir is head of research and analysis at ExchangeWire.