How Much do Companies Lose in Digital Ad Fraud Each Year?

April 7, 2020 Brittney Ihrig Essentials of Mobile Ad Fraud

Reading Time: 4 minutes

In a November 2019 ad fraud report, Statistica.com stated that between 2018 to 2022, global digital ad fraud would witness an exponential growth from $19bn to $44bn. Is it already high time for all stakeholders to take this phenomenon seriously? We certainly believe so. However, to fully comprehend the magnitude of digital advertising fraud, we first need to know what it actually is.

What is Ad Fraud?

Digital ad fraud is the act of intentionally fabricating and changing the outcome of online advertisements with the primary goal of generating revenue. This online ad fraud; It can be done in a number of ways – from creating fake impressions to changing the click-through rate (CTR), to implementing bad bots in order to drain a publisher’s advertisement resources or adversely affect marketing campaigns.

Types of Ad Fraud:

The common types of digital ad fraud are:

Traffic sourcing: Using bots that pretend to be actual human traffic, fraudsters sell bulk impressions to publishers at low costs. Bot fraud in digital advertising is one of the most used types of ad fraud.
Ghost sites: Using fake websites as primary hosts on programmatic ad exchange platforms, fraudsters get money by generating fake impressions via click fraud.
SDK spoofing – Software Development Kit (SDK) spoofing involves the creation of bots in an app that sends fake clicks and installs to the respective MMP (mobile measurement partner) which counts them as genuine.
Domain spoofing: This is when a low-quality website is misinterpreted as a high-quality platform to gain substantial programmatic bids. By forging the actual value of the website, fraudsters get away with higher CPM (cost-per-mille) than what it’s really worth.
Ad stacking: By placing multiple ads on top of one another, this is a technique used by fraudsters to create multiple fake impressions on a single page view. Although only the ad at the top is in readable form, the fraudster gets away with significant monetary gains as all underlying ads are also counted as impressions.
Pixel stuffing: The fraudster deliberately increases the number of ads that can be shown on a website. By forcefully stuffing an ad into a single or a few pixels on the screen, it becomes unreadable to humans but it is counted as an ad.
Ad injection: Here the fraudsters generate money by injecting ads in a website without the publisher having any idea about the activity. This type of ad usually covers or at times even replaces existing ads.

Cost of Ad Fraud

With the ever-increasing digital buying and selling worldwide, it is quite understandable that global ad fraud costs have also gone up. Having said that, there is a variation as far as these estimates are concerned – mainly due to the complexities involved in identifying the actual numbers.

In May 2019, a report from White Ops and the Association of National Advertisers (ANA) showed some positive signs in global ad fraud trends. According to their analysis of 27 billion ad impressions of 50 digital ad marketers, the ad fraud 2019 costs were estimated at $5.8 billion. Compared to the $6.5 billion reported in total ad fraud cost in 2017, this was an 11% decline within a period of two years. Considering the fact that global digital ad spending witnessed an upward trend of 25% between the same time period (2017-2019), this can be deemed as an impressive finding.

On the contrary, Juniper Research reported a figure that was almost nine times larger than the claim made by White Ops and ANA. According to them, $42 billion will be lost to global ad frauds – mostly from mobile and in-app platforms. This accounts for half of total programmatic ad spend within the same time period – about $84 billion.

Furthermore, another report by cybersecurity company, Cheq, claimed that advertisers will face losses of more than $23 billion in 2019. According to them, for every digital ad dollar spent online, around 10-15% goes towards companies that work tirelessly to protect marketers from being victimized by ad fraud attempts.

So why the huge variance in these numbers? – The major factor that contributes to this disparity is the fact that a number of tech companies and vendors are reluctant to share their data, even for research purposes. Companies like Cheq, White Ops, ANA, and eMarketer do not always have complete visibility of actual on-the-ground realities. Whereas, mobile ad companies have to see the threats. Ad fraud detection companies like Interceptd can help you with this.

Secondly, it is imperative to understand that there is no definitive way to identify whether an ad impression is genuine or not. The techniques and methodologies used do not have 100% accuracy, mainly due to the ever-changing tactics scammers and fraudsters can frequently come up with. Technological advancements and upgrades is a good thing, yes, however, it also creates more opportunities for fraudsters to bypass security layers, and checks and systems that are in place to combat fraud. In short, the reports and analysis conducted by any research company is a best guess, and not an accurate picture of what could be going on in the digital and mobile ad fraud context.

Also, it is important to understand the various digital sources from where these fraudulent activities take place. Below is a breakdown of 3 major digital sources where most of the money is being lost.

Source: https://www.businessofapps.com/ads/ad-fraud/research/ad-fraud-statistics/#7

According to a prediction by the World Federation of Advertisers in 2016, digital ad fraud would become the world’s second biggest market for organized crime – the first being the drug trade.

As far as mobile app fraud is concerned, the numbers are alarming there, too. In a world where over 5 billion people own a mobile phone, more than 3.5-4 billion rely on smartphones. According to Andreas Naumann, Head of Fraud at Adjust, 90% of individual campaigns get affected by mobile ad fraud. In his findings, he reported that in 2018, the fraudulent attempts cost the world mobile industry more than $5 billion.

Conclusion:

Whether its mobile app fraud, click fraud or other programmatic fraudulent acts, digital marketers need to use a proactive approach in order to effectively combat global digital advertising fraud schemes.

Regardless of what report they look at from any research organization, billions of dollars are being taken away by these fraudsters each year that directly impacts the future of mobile marketing in a number of different ways. Publishers and advertisers and all other relevant stakeholders in the digital realm face massive monetary and non-monetary pressures due to their advertising budget taking a hit. Yes, there have been numerous awareness programs and educational material in addition to all the detection algorithms, software and methodologies in place – there are still a lot of loopholes and opportunities for fraudsters to make significant financial impacts on global digital ad spending. The vulnerabilities can only be narrowed down through a collective effort that involves data sharing and effective algorithms using all the AI and ML techniques.

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