“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Alex White, general manager of data and trading at DG Peer39.
Fraud has always been the online industry’s open secret.
There are varying estimates as to its total costs, with one recent estimate pegging the total loss from fraud at $400 million, while another put the losses at closer to $10 billion.
That’s a large variation that tells us two things: The experts are not as expert as they think, and someone is profiting handsomely at the industry’s inability to curb the practice.
Who?
The fraudsters themselves are, of course, the primary beneficiaries, but fraud touches everyone in the supply chain – publishers, vendors and advertisers – with different levels of benefit, harm and motivation for solving the issue. It raises questions about who wins, loses and should pay for the detection and eradication of the practice.
- The perpetrator: publishers (sometimes unwittingly, but not always)
- The victim: advertisers
- Innocent bystanders: the technology partners in between
The Victim
Let’s start by looking at who’s harmed the most. It’s easy to challenge the idea that publishers’ representatives – supply-side platforms and networks – are innocent bystanders, and ask why they don’t do a better job policing the inventory they sell. The networks and supply-side platforms are either not in a position to recognize fraudulent traffic, or are turning a blind eye to the fact that publishers lacking brand-name recognition suddenly have unexplained surges in traffic and revenue. There is no real motivation to solve this from their perspective.
Ad exchanges are a bit different. While the industry seems to put exchanges on trial under the premise that they should foot the bill for flooding the market with bad inventory, I’d argue that they shouldn’t be held responsible. It’s easy to blame exchanges when they control the majority of what enters the programmatic market, but they don’t benefit enough from fraud. Passing along dud inventory only makes it harder for exchanges to build positive reputations.
So while the market clamors for exchanges to clean up their acts – and they should have some ability to evaluate bot sites and bad actors – why should exchanges be held under tighter scrutiny when all they are doing is bringing the publishers’ inventory to market?
Advertisers are the party paying for fraud right now, but only because they allow it. Fraud-avoidance tools are widely available, but adoption is low. There is no shortage of options, but advertisers allow themselves to be victimized and point fingers at the problem. It’s as if they don’t realize they are in control of the process. Using the available tools, advertisers could avoid giving money to the bad players and watch as fraud eventually recedes. In the absence of bot inventory, everyone would see an uptick in performance.
Agencies also perpetuate the problem. They’re judged on performance, so as long as the campaign is under budget and appears to work, the clients are happy.
The Perpetrator
As for publishers, let’s split them into two groups: Those who know they are perpetrating fraud and those who don’t. The first group is the bad guys maliciously defrauding advertisers while the rest of the players can’t – or don’t – do much to stop it.
Then there are those who just don’t know how much fraud affects them. I have spoken to a few publishers who have tried to boost their traffic at some point. This is a standard business practice and there is nothing wrong with looking to grow a business. The problem is that publishers need to be careful about how they approach this tactic and with whom they work. A rise in page views may appear to be quality traffic, but it could come via illegitimate means, and the publisher may be left in the dark. At some point the publisher might realize what’s going on, leaving them to make a moral choice. There’s more money coming in from ad revenue, but it’s not the result of qualified human consumers.
I’d like to think that all publishers faced with this question would clean up their act right away. However, online advertising is still a numbers game – higher traffic means more money, no matter where it comes from. The fact of the matter is that a publisher, real or fake, is making the lion’s share of the revenue, and the advertiser is footing the bill.
The truth is that open marketplaces are full of garbage. If publishers can pass this to networks and still profit, they’ll do so. Advertisers must maintain a responsibility to decide what they’re going to buy, and doing so helps them avoid victimization.
Fraud often comes from advertisers and agencies trying to keep costs down, but doing so irresponsibly. Reducing overall cost by blending programmatic with premium is a general best practice, but there is a difference in the RTB impressions you can buy. Mixing Bloomberg inventory with 20-cent CPM for run-of-network inventory might bring cost down, but spending a little more for a 40-cent CPM and guaranteed clean environments will allow advertisers to save money while avoiding the problems.
Andrew Casale recently wrote that bid retraction could save advertisers the revenue lost to fraud, and though I don’t disagree and think the idea is interesting, this strategy requires buy-in from the advertiser. No one can defeat fraud if the finger is pointed elsewhere or the buck is passed.
While some parties may profit, everyone gets hurt to some extent.
Follow DG Peer39 (@SemanticizeMe) and AdExchanger (@adexchanger) on Twitter.
