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US Senators’ letter may appear apocalyptic, but can regulators tackle the complexity of ad fraud?

Authorities in the US government appear to be paying closer attention to the ad tech sector, with the FTC reportedly poised to stomp out ad fraud, but how likely are the ‘powers that be’ there to make inroads to sophisticated, international crime gangs, as well as a system incentivised to resist change?

US Senate duo Mark Warner (Democratic representative from Virginia) and Chuck Schumer (also a Democrat representing New York) yesterday (11 July) penned a letter to the Federal Trade Commission (FTC), urging the consumer protection body to look further into ad fraud.

‘Nothing new to see here,” was the likely reaction of those in the know. Anyone who claims to have any degree of proficiency in the online advertising business, appreciates the industry is essentially plagued by the matter.

One study looking at the extent of the problem, predicts that the problem will reach such an extent within 10 years’ time, that ad fraud will cost advertisers up to $50m each year, with industry researchers, such as, openly calling into question the reported decline in such numbers posted by anti-fraud vendors.

However, with so much money at stake, I’d argue that the (valid) points raised by the two politicians is more an exercise in lip service, than a harbinger of things to come.

This is not to denigrate the pair – in fact New York-based Schumer is widely tipped to be the leader of the Democrat party in the chamber after the November mid-terms. Both make valid points when they point out that such fraudsters often distribute malicious malware (the dangers of which were discussed in a study posted by last week).

An additional thought worth countenancing is the fact that such fraudsters’ siphoning off money from their media budgets is affecting the profit margins on such brands, ergo consumers’ are effectively picking up the tab here (as opposed to ad fraud being far from a victimless crime).

Media reports citing the reports indicated that pone outfall of the investigation would be the potential of pro-active regulation of the online ad tech space by government itself.

However, how likely are authorities able to catch some of the leading online criminals (certain sources put ad fraud as second only to drug dealing when it comes to generating dollars for organised crime), as well as an industry incentivised into inertia?

Some years back I interviewed ad tech expert Thomas Servatius (then of ad tech outfit IPONWEB) who then laid bare the dynamics at play, which effectively mean the entire industry is incentivised to remain hush on the issue (including those at brands themselves.

For instance, if ad tech intermediaries (such as DSPs, and SSPs) are incentivised on media cost, then how likely are they to assist authorities in spotting the fraudsters that are proactively helping their investors achieve ROI?

Likewise, for the publicly-listed media buyers which are always optimised to seek ad impressions with a lower cost (bots can be programmed to meet certain campaign KPIs, and almost always come at a knock-down price) then what realistic chance would any such endeavour have?

Another point raised by Servatius was that even brand managers (at the advertisers themselves) are unlikely be incentivised to expose ad fraud, as their own internal machinations may mean they too could face the chop.

Again, not to denigrate the detective powers of representatives of one of the most powerful governments on the planet. Although, I think the chances of disrupting the activities of sophisticated, international-based crime outfits, as well as a (albeit legitimated) industry (but one that maybe not 100 per cent motivated) then I can’t see that much will change in the near future.

At such a juncture, it is worth pointing out that US trade body the IAB’s U.S. chapter has assembled its task force Traffic Authenticity Group (TAG) to better help bolster the fight against fraudsters, which has helped advertisers verify how effective their ant-fraud tools are.

This puts the trade body on the West Side of the Atlantic miles ahead of its US counterpart, where the trade body has yet to spur its members to band together, plus the Police Force is woefully under resourced when it comes to pursuing such criminals.

Speaking recently at a conference discussing the issue of click fraud, and brand safety was the IAB’s Steve Chester, who recalled a recent conversation between his outfit ad the police in terms of going after, and arresting fraudsters.

“They don’t have the money, but there is precedent in other industries such as the financial sector to fund the police in areas [to help them investigate against insurance fraud, etc.] where you have units of the police essentially funded by the industry, and that’s what we’re going to have to do,” he said.

Chester added: “We’re going to have to get the industry to collectively and fund this thing. To make a blunt point: we as an industry will have to stump up a lot more money. At present we virtually put in nothing in terms of protecting this industry”.

Again, I think the online advertising industry in the US would be similarly handicapped; the larger economies of scale there means a more fragmented ecosystem, meaning the conditions there are likely to allow click fraud to thrive.

By Ronan Shields, digital editor, The Drum

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