Imagine you are a media buyer. You want to advertise in People magazine. You find out there is an extremely high number of readers per copy, and it is very inexpensive to place an ad. This is an almost perfect situation for an advertiser!
Then, you find out the magazine you thought was People is fake. It calls itself People and appears to have readers, but it actually is a poor quality magazine with few readers. All the numbers have been made up and this magazine exists only to trick advertisers so the creator can make some money off of "advertising."
It'd be quite sad. Source
This seems pretty absurd, and it probably would never happen. It would be pretty obvious to find out that a magazine doesn't exist, and media buyers generally require that a copy of a magazine be sent to the agency to prove the correct ad actually ran.
However, online, and especially using a programmatic buying method, fraud like the above situation tends to happen often. In fact, one source says that 30-70% of digital budgets are based on fake impressions and clicks. In a programmatic exchange, many publishers of websites can enter the auction without disclosing their names or sites. This means advertisers can bid on ad space on sites that may not actually exist.
Types of Fraud
URL masking occurs when a low-quality website pretends to have a domain name that is more reputable (such as the People example above). While the ads placed on these sites may actually have human eyeballs seeing them, the traffic on these sites are often low-quality and ad space is priced much higher than it should be. This is fraud.
It's not quite who you thought it was, huh? Source
Some sites may bring in high amounts of traffic that actually turn out to be "bots" online. They pass this traffic off as real people. This is fraud.
And even though it is more like "soft fraud", some marketers may not fully understand their reports and think their programmatic campaign is working, when in fact it is the results from other digital campaigns that are carrying the campaign that are buried deeper in their data. This is another drawback to the programmatic model.
Why Does this Happen?
With programmatic, direct relationships between a publisher and an advertiser do not necessarily exist. Dishonest publisher sites in an ad exchange can easily hide their identities. An unknown publisher may put a site not driven by human traffic in an ad exchange simply to make money in a fraudulent way. These dishonest publishers often gravitate toward larger markets to make more money; thus fraud may be more prevalent in the United States than in some smaller markets using programmatic.
Exposing fraud is a lose-lose. Those who expose it are not rewarded. Fraudulent clicks are often cost-effective and have what appear to be high engagement metrics. When removing fraudulent clicks, metrics like reach and traffic go down, costs go up, and one must answer for why these dishonest sites were being bought anyway.
Ad tech companies that charge based on impressions may lose revenue by reporting that most of these impressions are false. And some believe that having millions of impressions, even if they are fake, doesn't matter if you are actually converting and having success with real people. So fraudulent impressions should just be accepted if the site is actually converting users.
Furthermore, fraud makes marketers more wary of programmatic buying, meaning a pushback against the technology, meaning one may not want to bring up these issues and discredit the programmatic method.
Most of the time, bad actors are not caught. If identified, their sites are simply put on blacklists and the creator of the fraudulent site may be able to create a new dishonest website.
A Solution?
Companies are cropping up that solely focus on fighting programmatic fraud. Xaxis is promising "humans are viewing 95 percent of online ads, or your money back." The American Association of Advertising Agencies, along with the Association of National Advertisers and the Interactive Advertising Bureau have recently formed the Trustworthy Accountability Group (TAG) to assist in fighting fraud and creating transparency between "who is getting paid and who is doing the paying." I and several other marketers believe that fraud can be stopped at the source.
Marketers ultimately are the ones who are hurt by fraud. They spend money on fake metrics that are supposed to help sell products and provide insights for their business. Marketers need to step up and insist that the impressions they are buying are of quality. They also need to demand metrics that are transparent and do not easily hide fraud in a bundle of numbers and percents.
In addition, Andrew Casale of Advertising Age suggests that barriers to entry be put in place in the programmatic ecosystem; suppliers should offer their name of their site and the human's name that will be placed on the check written by marketers. In this way, cons can be deterred from using the programmatic space in such a dishonest manner and, if they are found to be fraudulent, the creator can easily be identified.
Do you think programmatic fraud is a problem? Have you experienced it, and do you have any further solutions to stop it?
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