Should The US Government Intervene To Solve Digital’s Fraud Problem?

jayfriedmannewData-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 Jay Friedman, chief operating officer at Goodway Group.

Fraud costs marketers $7.2 billion annually, according to the ANA.

Ask buyers who’s at fault and they’ll say they’re not sure, but they know it’s not them.

Ask demand-side platform (DSP) vendors and they’ll tell you it’s a supply-side platform (SSP) problem. Ask SSP vendors and they’ll tell you they do what they can, but buyers should use fraud-monitoring services to protect themselves more thoroughly. That’s sort of like saying, “Come shop in my store, but bring a weapon because I can’t guarantee your safety.”

This is counter to the culture in the United States, so a reasonable question to ask is: Should the US government do something to curb digital media fraud?

Absolutely

Jewelers who advertise Rolex watches with “genuine Rolex” signs at their stores may sell so many Rolexes that it’s hard to keep track of exactly who they’re buying from at wholesale. Random vendors may pop up and sell their Rolexes for much cheaper than other regular vendors without leaving any contact info.

Some watches from these vendors look “good enough,” so they are allowed in for sale. Other watches are scrutinized and found to be as genuine as it gets, even though they’re stolen (but the jewelers don’t know that).

Both instances – buying stolen merchandise and buying fakes but selling them as authentic – break the law. The government has legislated against this to protect consumers.

Digital ad fraud isn’t much different. If an SSP doesn’t look carefully at the publishers it signs up and fraud occurs, it is responsible for facilitating fraud and stealing marketers’ money.

Maybe?

It becomes murkier when we try to define fraud, though. The Rolex example is easy. The government can take the watch to Rolex SA in Switzerland, which can provide a concrete determination on whether the merchandise in question is real.

Ad fraud happens and then the ad is gone. It leaves a lot of traces, evidence and information, but the ad-of-the-moment disappears. Even if we catch one live, is it fraud? It may be displayed on a site created to enable fraud, but we’re humans, legitimately viewing the ad.

There are dozens of “if it walks like a duck and quacks like a duck” signals for digital ad fraud, but that’s not the kind of definition that flies in court. 

No Way

First, we’d need to define ad fraud. Scratch that: First, the government would need to define ad fraud. This would require calling vast numbers of experts, and it would become politicized. We, the experts in the industry, can’t even all agree on the full definition of ad fraud. Good luck if the government gets involved and a judge has to interpret it.

Second, consider the disparity between investing in the stock market vs. a startup business and how that relates to digital media. The US Securities and Exchange Commission (SEC) highly regulates our stock markets and trading. If someone breaks the law, there are consequences. The unintended consequence to this high degree of regulation is that the SEC specifically does not look after many other forms of investment. Investing in a startup requires a lot of legal work for both parties that isn’t required for stock market investors.

So, will any new digital ad format need to be written into law? What if marketers were to disproportionately funnel money into display and banner ads instead of video because display is regulated and unchanging, whereas certain kinds of video, such as connected TV or programmatically traded linear TV, are not?

Finally, have Sarbanes-Oxley and Dodd-Frank really helped more than hurt? There are experts who fall on both sides. Regardless, we must remember that complying with legislation has its own costs that are ultimately passed on to the buyer.

So What?

Just because I’ve supplied more quantitative reasons not to legislate against ad fraud doesn’t mean the qualitative argument is won. If ad fraud levels don’t improve, we may be forced into this whether we like it or not.

Here are some certainties, though, that can lessen our need to legislate:

SSPs must be more careful and thoughtful about their inventory.

DSPs must thoroughly vet the SSPs they sign up, as opposed to signing up more just to achieve scale.

Finally, buyers must take their own responsibility seriously by working with fraud monitoring vendors to apply IP and site blacklists, determine SSP validity and take an active role in avoiding all fraud possible.

I believe we can cut 50% of the fraud from our ecosystem with 5% more effort on all of our parts. That’d be a heck of a start.

Follow Jay Friedman (@jaymfriedman) and AdExchanger (@adexchanger) on Twitter.

 

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