Advertising fraud might sound like a technical term to name an issue that bears no relevance to the lives of ordinary people, but anybody who is a consumer of media content has their stakes in it. To put it simply, ad fraud is a scheme that stops ads from being delivered to the audiences or the places brands intended them for. Apart from advertisers, who are the most obvious victims of ad fraud as their ads do not generate the awareness, traffic, leads, or sales they were meant to generate, it is also digital media that suffer the consequences. Very few online publishers can call themselves lucky enough to base their businesses on subscriptions, so ad-based solutions are the most common practice. However, ad fraudsters suppress the value of the ads and drive online media revenues down. That is the reason why even the most respectable online publishers seem to give up more and more of their web space to ads.
Scope of ad fraud
Losses caused by advertising fraud are as difficult to calculate as those of any illicit activities, but industry sources agree that they are substantial. The 2021
cost of digital ad fraud worldwide was estimated at 65 billion U.S. dollars. That is approximately half of what is spent on digital advertising in the United States annually, or the entire annual revenue of Walt Disney Company, or gross domestic product (GDP) of Croatia. It is also double the
value of fraudulent transactions made by payment cards worldwide. It is also worth mentioning that bad bots are responsible for nearly 18 percent of
internet traffic in the marketing industry. Unsurprisingly, the world’s largest ad markets – the United States, China, and the United Kingdom - also record the
largest economic losses due to ad fraud. However,
ad fraud rates are highest in India and Colombia.
Industry’s reaction
Increasing levels of ad fraud have been recognized as one of the
major challenges facing the digital media industry, alongside
third-party cookie deprecation or
fake news. It is also one of the top
reasons why an advertiser would downgrade or pause cooperation with an ad partner. Ad fraud was born before the beginning of the current millennium, and the industry has been racing fraudsters head-to-head ever since, developing more and more sophisticated tools to protect itself from more and more elaborate scams, such as bots, software development kit (SDK) spoofing, or click injection, to name but a few. In a prominent 2020 case, Uber reported losing two-thirds of its online ad spend to fraudsters. A recent report has shown that proper ad fraud protection can lower
fraud rates from 13 percent to under one percent for desktop ads and from seven percent to nearly zero for mobile. Ad fraud detection and/or protection services are in high demand, providing
ad tech companies that specialize in this field revenue growth rates in high double-digit ranges. The investment is likely to pay off.
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