Alleged $7.5B fraud in online advertising

https://moz.com/blog/online-advertising-fraud

by inthewoods • 11 years ago

167 83 11 years ago

moz.com

taberiand• 11 years ago

They should use that new "I am not a robot" captcha technique to automagically guess that the viewer is a human

codezero5• 11 years ago

They unfortunately have little incentive to do so, since they profit from fraudulent clicks.

dangrossman5• 11 years ago

The long-term incentives for ad companies like Google are aligned with the advertisers. They only profit from fraudulent clicks in the short term. Every fraudulent click they charge an advertiser for increases the likelihood that advertiser's campaign has a negative ROI and they stop advertising. The lost future revenue is a much larger number than the revenue from today's clicks.

dangrossman5• 11 years ago

Google's the most open about the click fraud problem. They'll show you all the fake clicks you received but aren't being charged for if you customize the columns of your AdWords reports to add these two:

http://i.imgur.com/sW1stNL.png

A lot of the traffic they charge for on the display/content network is still awfully iffy. I get spikes of traffic from blogspot blogs that didn't exist the day before all the time. They won't exist a week later. How likely is it that a new blog with a single uninteresting post suddenly has tons of traffic interested in clicking my ads? Not very.

Gustomaximus3• 11 years ago

The worse point for junk clicks is mobile display - particularly in app. Id never advise RON campaigns here without super tight monitoring. I've never been sure if it's more fraud or 'well placed ads'. I'm guessing the latter as kids apps seem to be the highest offender for mobile display.

@dangrossman I build white lists rather than a black lists for companies where I handle their marketing for display on mobile. Not sure if your offering something like this in Improvely but I imagine it would be of value to a bunch of clients. Advertising networks will hate you!

icelancer• 11 years ago

. I'm guessing the latter as kids apps seem to be the highest offender for mobile display.

My son clicks ads and whines about it nonstop when I let him play iPad in his games.

partiallypro2• 11 years ago

My concern isn't that Google is being "open" about click fraud on their network advertising, which I think they are. But what about the fraud on Google service sites themselves. It at that point is no longer in Google's self interest to be as strict in their "open" reporting; it's ~90% of their revenue.

So, it becomes an ROI game, which as long as ROI is strong they can keep their rates up while keeping their profits climbing. Then again, Google's top line has been shrinking recently, so it is possible they are doing something about it, and it is hurting them. That or it's the general shift in advertising to focus on mobile where it's much harder to get engagement.

PPC campaigns feel like a shell game to me often times. Agency switching among advertisers is staggeringly high as people hunt for higher ROI.

Gustomaximus3• 11 years ago

Old story. For non-brand advertising this is easily solved by down funnel tracking. Any marketer worth their salt tracks to the 'ultimate goal' and will avoid the shadier networks by looking at overall results. End of the day it comes down to a ROMI metric. It doesn't matter if 50% of the impressions are fake as long as the total investment pays off. For brand marketing I follow the networks that show DM performance as this shows some level of quality.

newman8r5• 11 years ago

The tricky part is what to do when it doesn't pay off.. This isn't and has never been my primary line of work - but I can't say that every campaign I ran was profitable, even though the ones that were extremely profitable did make up for those.

geon4• 11 years ago

It is not tricky. You just stop using that ad network.

Gustomaximus3• 11 years ago

There's a great quote form John Wannamaker: “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”

Marketing is a case of art meets science. You need to make sure the total spend is net positive. Also it sounds like you do this a bit on the side. I'd really recommend getting a professional to help if you have the scale or a scalable business. Treat it like an investment. If you can get $1.30 back for a $1 in, go nuts and grow. You'd be amazed how common I find businesses that treat marketing as a cost center, refusing to invest more even when it's proven there is a significant positive return on their spend.

CaveTech• 11 years ago

Isn't click fraud basically solved by the free market? I mean, as more and more bots create fake clicks and impressions, the value of the traffic itself is reduced. This will lower the CPC and CPM and you'll still be able to buy traffic at its free market value. If the traffic becomes worthless, no one will be willing to pay for it.

Advertising fraud is basically arbitrage. The fraudsters are inflating the numbers but someone is still willing to pay a specific value for the traffic they're receiving. If a specific market is more prone to fraud, its because the amount publishers are paying is below its actual value.

dangrossman5• 11 years ago

It's "solved" for advertisers who can measure ROI, at least short-term. It's unsolved when the success metric for the campaign is not easily measured, like brand awareness. It's also not solved for the publishers not engaging in arbitrage or fraud who earn less and less per impression. Let it play out unchecked and the bad actors will kill the market by driving all the legitimate suppliers out of business: if ad rates are driven so low that content sites can't pay their staff with the ad dollars, they'll either go out of business or exit the market (i.e. erect paywalls, return to direct ad sales instead of participating in exchanges, etc).

meritt• 11 years ago

brand awarenesss

Exactly. Brand-awareness media buys tend to rely on third-party web traffic "experts" like Alexa, comScore, Hitwise, Quantcast, etc. These tools are incredibly simplistic and count the majority of fraudulent traffic as legit. When a site ranks highly across these experts, it is then used to increase the CPM a brand-advertiser ends up paying.

greglindahl• 11 years ago

The solution is better analytics. Any market player who can tell the difference between real and fake clicks will be better off than anyone depending on the market to somehow magically save them from increasing fake clicks by decreasing CPC and CPM.

GCA10• 11 years ago

Yes. I've seen certain areas where CPMs are falling, falling, even as reported traffic is rising. Such sites do whatever it takes to boost traffic some more. They also tend to cycle through a lot of "chief revenue officers" every 18 months or so.

It's a nutty way to run a business, but in the short-term it can pay the bills for lots of folks.

papercruncher2• 11 years ago

I work for an AdTech company. One of our selling points is that we track much time users actively spent on our ads (= ad is in viewport + tab is active + user has moved the mouse or scrolled in the past 20 seconds). If we consistently see a source of traffic spending < 30 secs, then we manually start digging into the logs.

If you're a brand/marketer, I recommend two easy things to increase your ROI: (1) Make sure you are not being charged for GoogleBot traffic. Seriously, for frequently updating sites, self-advertising GoogleBot can account for up to 10% of all impressions. Ad Networks can easily filter that traffic out. (2) If you're paying per impression, work with partners that charge on viewable CPM.

nkozyra• 11 years ago

Are there seriously ad companies that aren't filtering out common bots by UA in 2015? That seems unlikely but would be very disturbing if true.

Second, I think simple tests like "time spent on ads" as a trigger is an extremely simplisitc, inefficient and likely inaccurate way of determining "potentially not human." The systems here are very complex, designed to mimic randomness within humanesque constraints.

papercruncher2• 11 years ago

Yes, sadly there are. It's not necessarily out of malice, a lot of folks just don't grasp how big spider traffic is. Even Google Analytics doesn't filter out crawlers by default, that setting is buried somewhere in the admin panel.

You're right, "time spent on ad unit" is simplistic but it's not inefficient. It shouldn't be the only thing in your arsenal but it's a good signal.

I reckon you are also overestimating the amount of sophistication that goes into these systems. The ones that are out for purchase in a black market become well-understood within a few weeks and are easy to fingerprint. Since the network is paying on net-30 days, there is some time to retroactively run some analysis and filter out provably non-human traffic.

curiously• 11 years ago

this is a huge market correction just waiting to happen. I'm glad, it should take these annoying banner ads out once and for all.

logicallee3• 11 years ago

If you see banner ads (without clicking) you have the same experience as everyone else who actually sees them.

Maybe the reason you notice them and they bother you, is because the amount of your attention that that experience has to take up has to be so great that your peers' attention is worth the payment even when that attention is divided by 10 (if we assume 90% click fraud.)

In other words, given no other change except eliminating payments to non-person audience members, you might find the Internet is suddenly filled with advertisement that violently takes only 1/10th as much of your attention as currently, since the money is being spent on you and your peers only; and not on you, your peers, and then botnets and other dilution.

Put yet another way: the leakier the transaction between you (real user) and advertiser, the worse the experience you have so as to make up for it.

Let's put some numbers on it!

Let's say everyone is happy to buy a banana online and the profit is 20 cents. Then if click fraud is 0% and the cost of an ad is 1 cent, a 7% click-through is fine: it costs 14 cents to get a customer, leaving 6 cents profit. Any more than 7% click-through is pure profit.

But raise the click fraud to 90% and suddenly 7% won't do it: the real ad cost is now 10 cents, and instead of 7% click through you now need 70% clickthrough.

So the ad will be much, much louder.

fineman• 11 years ago

So the ad will be much, much louder.

And you figure that'll make the ad-haters click it more?

Also, that 10cent ad is much more ripe for the picking than the 1cent one. All of a sudden you're attracting click-fraud attention from far more sophisticated attackers. And driving more "normal people" to ask a techie to hide these annoying dancing bananas (and all others ads at the same time.)

I don't really think you've thought this through to the endgame.

geon4• 11 years ago

You are assuming the advertiser is not measuring the perfomance in any way.

More likely, the ongoing fraud is driving the prices down. Once the fraud stops, cpc would go up.

logicallee3• 11 years ago

Just a stylistic note, I found the word alleged to be a bit overused in the first part. A source of a quote in the article is given as: an interview given by "Jack Marshall, an alleged reformed fake web traffic buyer". How about an interview by Jack Marshall, who says he is a reformed fake web traffic buyer...

sjscott803• 11 years ago

Hello! I'm the author. I just needed to use "alleged" a lot because I was citing second-hand -- though credible -- information and did not do any independent research. I could not verify anything myself, so I needed to make sure that the point was clear.

alttab• 11 years ago

This isn't news IMO.

davidbanham• 11 years ago

In my experience, buyers are usually not sophisticated enough to have this discussion. Often, syndicate salespeople don't understand the issue either. Nobody else in the value chain is incentivised to educate them about the issue, so it doesn't happen.

I founded, ran and sold a digital advertising company in the video space. We sold through various means including networks, direct sales and quasi-direct sales where we would engage a local syndicate to sell on our behalf. These were usually major digital publishers that used to be print publishers.

These people are moving a _lot_ of the volume in this industry. They're battling widespread redundancies and falling budgets. They are not attracting the cream of the crop and are in an unfamiliar industry (tech).

newman8r5• 11 years ago

I'm not even in the marketing business but I tend to have a lot of fun with the people calling up trying to sell adwords packages... I know I have won if in the end they say "ok, actually that's more of a question for the tech guys in the back room...." when I ask them incredibly basic questions about their methods.

Guess it's so easy to sell to clueless business owners that taking 10 minutes to learn about the crap they are peddling isn't even worth it.

ChuckMcM6• 11 years ago

This isn't being 'buried' it just isn't that interesting. All of the money the client gives to the agency gets spent, some goes to the agency, some goes to the networks, some goes to the content providers. That isn't news at all.

Fraud is rampant. Also not new, although it is also also pretty easy to spot and block.

Almost nobody pays per 'impression' because, well that went out of style about the same time Yahoo! banner ads did.

Eventually the advertisers are going to pay for performance, and to do that they are going to have to fix the way they do advertising so that their ad, leads to their landing page which identifies who delivered the ad. Then they are going to pay based on whether or not the person who landed on their page actually buys something (service, good, or subscription). No money, no ad payment.

Most companies other than Amazon really aren't set up for that, and Amazon won't do it yet because, as far as I can tell, they aren't being forced too.

Its a shame that "affiliate" ads like the ones they let bloggers use have 100X there ROI of "CPC" ads and yet they have convinced the bloggers they can pay then a nickel and they should be happy when Google gets $13 - $23 for the same result.

I started building this system out of disgust but never finished it. It isn't that technically difficult, but it does have a lot of moving parts, and it does require infrastructure on the advertisers web site which can create durable transaction records. Some day I think.

omarchowdhury• 11 years ago

Almost nobody pays for impressions? Do you know how much money is spent on display ads on a CPM basis? Billions.

BorisMelnik2• 11 years ago

is true, and not just display ads even a lot of facebook is still CPM/CPC

chuckcode• 11 years ago

Spent some time a few years back working in web analytics and my experience was similar to what ChuckMcM describes above - advertisers were relatively sophisticated in general and wanted to pay for performance rather than impression. There are certainly agencies/networks that will waste you're money in advertising if you're not paying attention in digital or traditional media but controlling fraud wasn't terribly difficult. Lots of advertisers would run their own beacons to check and make sure they were getting the audience they were sold. The thing that made them the most nervous was when they couldn't audit their campaigns and the person measuring the audience was the same one selling it.

x0x06• 11 years ago

It's not at all obvious that advertisers are going to pay for performance, where I assume you mean buy ads on a cpa basis.

There's risk, and someone will bear, and get paid to bear, that risk. If advertisers buy on a cpa basis, they pay more for the privilege.

And frankly (imo) that's all for small to medium advertisers anyway. Bigger advertisers buy 3 month ios and, if you don't perform, don't reup. My experience at a large DSP is this: no-one comes in as a big account; they're all grown. You get $50k for 3 months and told to demonstrate performance. If you do, your account managers call up and demand 3-5x the money. Wash rinse repeat. You do get $3-$5mm/year accounts, but they all started under $100k/3 months. And in any case, all DSPs / ad networks will be measured on a cpa basis. Don't perform, and next quarters ios don't materialize. They're just not sold cpa.

If you aren't aware, btw, there are huge fights about attribution - last view is ridiculous but what most people use, leading to all sorts of gaming behavior particularly in light of cookie churn.

ChuckMcM6• 11 years ago

I am aware of the fights, and cookie churn is a symptom of the a challenging and, to my way of thinking, a not very good way of identifying origination.

Lets say I'm content provider A, I get your ad and it has an encrypted URL that lands back on my site. When it lands on my site I can decrypt it and know who sent that click to me and note it. Then, on conversion, pay that person.

The challenge this system has is that it doesn't let you throw your ads into a distribution bucket and wait for them to land on some site that is buying some traffic from some traffic provider. You have to know the sites (and presumably their IP addresses) where it lands. I need a relationship between the site showing the ad, and me. Then I can be sure that anyone who clicks on that ad, and then buys something from me, I can credit the sale to that site.

What is useful (and to some extent different) about this scheme is that you can compute ad spend against revenue generated. There is no 'fraud' because you don't pay unless someone "converts" (the term for making transaction). What it does do however is cut off all the shady ad networks and packagers and skimlinkers and what not because they don't add value for a large brand like Macy's or Target or Amazon.

So a blog like TechCrunch with a relationship with Target can give target an exact number of how much business has arrived at Target because of their ad on Techcrunch stories. And Target can compute exactly how much revenue the clicks that landed there from TechCrunch generated. And from their existing understanding of life time value of a customer who has landed on their site and made a purchase, they can price the value of that advertisement fairly precisely. TechCrunch gets feedback on how much their ads are worth to Target and can choose to make every ad a target ad if they think it will maximize revenue, base on the performance not on the click through rate. Target could lie about conversions, but that would be self defeating in the long term (they want people to land on their site and want people to carry their advertising).

If we learned anything from the meteoric rise of Google as an advertising behemoth it is that people will pay for metrics and demonstrable results. If you can provide the best metrics and the best results, you win.

zaroth• 11 years ago

Its a shame that "affiliate" ads like the ones they let bloggers use have 100X their ROI...

Sounds like an incredible market opportunity.

What are the companies that are building ad marketplaces targeting high performing affiliate bloggers which demonstrate their value better to advertisers, and share a higher proportion of profit with the bloggers?

Are there fundamental issues trying to scale up a business like this? Not everyone can spin their own custom 'sponsership' packages like DaringFireball, but there is a lot of good blog content out there.

I remember seeing some bespoke ad networks in the designer space, can't think of their name off-hand. Had the feel of a high-end web ring, if that's not an oxymoron.

jalfresi• 11 years ago

http://decknetwork.net/

toddynho• 11 years ago

http://carbonads.net/

pstrateman• 11 years ago

Eventually the advertisers are going to pay for performance, and to do that they are going to have to fix the way they do advertising so that their ad, leads to their landing page which identifies who delivered the ad.

I've setup a system that tracked that.

The result was a 95% drop in payments for referrals.

Maarten88• 11 years ago

I heard of (large) brand advertisers where marketing managers bought fraudulent clicks on their own campaigns to "guarantee" success of these campaigns, for internal politics/career reasons. These advertisers probably like it the way it is, and keep their offline marketing colleagues in the dark.

jmngomes• 11 years ago

I founded a startup creating an innovative media for mobile that, while probably not "immune" to fraud, had very little space for, and provided accurate and real measurements on engagement and content exposure.

While trying to sell this, I heard multiple advertisers say that they only buy TV ads because it would look "weird" with their hierarchy if the company is not on prime time TV, despite knowing that TV ads are hardly profitable and nearly impossible to measure. The same thing goes for billboards on roads with heavy traffic in the capital.

JOnAgain• 11 years ago

The majority of mobile is still CPM. I dare say the vast majority. Source: I ran a mobile DSP until recently.

jackgavigan• 11 years ago

Eventually the advertisers are going to pay for performance, and to do that they are going to have to fix the way they do advertising so that their ad, leads to their landing page which identifies who delivered the ad. Then they are going to pay based on whether or not the person who landed on their page actually buys something (service, good, or subscription). No money, no ad payment.

This already happens. It's referred to as an "acquisition" and "cost-per-acquisition" (CPA) is a fairly standard term in the advertising industry these days.

However, it doesn't necessarily involve money (e.g. a car company might define an acquisition as someone signing up for a test drive).

jgalt212• 11 years ago

Eventually the advertisers are going to pay for performance,

That assumes that you can actually measure performance or attribution. This is far from a solved problem. As such many publishers are reluctant to sell on this basis.

Trivial rebuttal:

User clicks on ad, buys product. Who's to say that ad caused the sale? Maybe they've seen that particular ad or a variant on dozens of different publisher sites. Or even better, maybe the true product awareness was driven by an offline interaction (billboard or word of mouth).

In the general case, you simply cannot measure direct attribution or performance with any real sense of confidence.

newman8r5• 11 years ago

All I can say is, every now and then I used to request a few grand from a popular network that I won't name but you probably know which one it is... about click fraud, inconsistencies (which I was not making up at all). Every single time,. no questions asked, I was given the full amount requested...

Now I'm not saying that means anything... but it always felt a bit odd like... yes yes we know how bad it is, take your money and shut up and keep buying those ads

anti-shill• 11 years ago

this puppy is gonna come crashing down...just like real estate bubble a few years ago....what will be the effect? Less online content, I guess.

fapjacks• 11 years ago

That is the fear, certainly. But I don't think so. I am thinking that advertising will become more aligned with the content, and ad-publisher relationships will become more organic. Now, I'll also readily admit that I think cooperatives are the future of business, so I can see where people wouldn't agree with my crystal ball vision of the future of advertising.

throwaway3453• 11 years ago

This article is a mess. The author states, "An entire industry—billions of dollars and thousands of jobs—is at stake," then goes into a completely different rant, "why is nobody talking about this?"

Over half the images are incomprehensible or offer no insight.

https://upload.wikimedia.org/wikipedia/commons/c/cb/Clickpat...

Including an unintelligible graph without an explanation to why it's necessary is bizarre. Even more so writing headers like "Responses to the scandal" and dropping in a stock photo of a gavel. It's like a pull quote, but even lazier.

There is some value in this article,

Hoffman, the retired ad agency CEO who I quoted at the beginning, puts it better than I can:
http://adcontrarian.blogspot.co.il/2013/06/the-75-billion-ad...

Even the author suggests to read this one instead.

Vegemeister• 11 years ago

Good. Every dollar that buys an ad shown to a robot is not buying an ad shown to a human.

nfoz• 11 years ago

I am extremely against advertising, but even though this is money being spent towards something that offends and antagonizes me, I still think that fraud in the industry should be called out and fixed.

geon4• 11 years ago

In the mid 00's I was working for a cashback/incentive site. Basically we would give monetary incentive to members of our site to complete whatever each specific ad was measuring. It could be signing up for a newsletter, or registering an account at some site. Poker websites would pay well for new users.

The whole scheme was of dubious value for the advertisers, obviously. The ad networks were happy to have us, though.

zw123456• 11 years ago

I don't know anything about advertising but sometimes I watch TV late at night and I see ads for various local and national companies and I always wondered how they ever could verify that they actually are getting the air time during the time periods and channels that they are paying for, it seems like the type of thing that could easily be either intentionally or unintentionally messed up. It seems like it could be something that could be automated, a system that would listen and or watch all the channels and log the adds for the companies that subscribe to the service to insure that the broadcasters are giving the time they say they are. There is probably already something like that out there, does anyone know if there is such a thing?

bjterry• 11 years ago

This definitely exists under the name "media monitoring." For example http://www.mediamonitors.com/ but there are a bunch of different providers.

reilly3000• 11 years ago

Moz is not a disinterested party. They sell services to promote marketing that doesn't involve paid media.

I am in the paid media business, and I am not disinterested either as such. I feel strongly that advertising is the lesser of evils of the alternative is marketing messages buried deep in content and social spam.

sjscott803• 11 years ago

Hello, I'm the author of the Moz piece and just wanted to respond. (No, I do not work for them -- I'm just a contributor.)

1. They do not sell marketing services. They sell marketing software.

2. I pitched my article to them, and they were very skeptical about the topic at first. Obviously, the issue can come across as very conspiratorial and sensational. But once I showed them all of my credible sources and citations and explained everything in-depth, they decided to publish the piece.

3. Again, I cannot speak for Moz, but my sense is that they will publish anything that they perceive to be very helpful and interesting for their audience -- digital marketers. They more that they do so, the more that their brand will grow among their audience and the more that people will visit the website to read the good articles.

lessthunk• 11 years ago

The smarter players measure and target accordingly. The rise of RTB and 3rd party companies or your own JS solutions let you cherry pick what you want, or you simply bid much lower (if at all) on traffic you consider not valuable.

This is mostly a problem for unsophisticated players and exaggerated hype originating from players that support tracking view ability, etc.

mrweasel• 11 years ago

This is mostly a problem for unsophisticated players

Aren't most customers of online ads unsophisticated users? The solution could of cause be to let a professional online ad company run your buying, but then you still don't know what they're doing with your money.

I believe that most of the people are running their online ad buys as if they where bus stops ads. That might be wrong to, but that's where the business needs to start.

paulpauper• 11 years ago

I'm sure fraud & waste exists in all mediums of advertising

$7 billion over meany years, while it seems like a lot, is still just a small amount of the total advertising online market

The figure may still be exaggerated and more research is needed. It could include things that are mistankingly called 'fraud' but instead if a misunderstanding of terminology

In a free market, online advertising fraud would depress prices as advertisers pay less due to worse results. If advertisers were getting 100% human traffic, rates would go up, making the ads more expensive.

So in the long-run it balances out. But on an individual level it sucks getting scammed.

sjscott803• 11 years ago

Hello, everyone!

I'm the author -- and I'm completely amazed. Thanks to whoever submitted this, and thanks to all the upvoters! I'll be going through the comments and responding when necessary. Feel free to AMA!

Oh, there seem to be a lot of interesting stories here from people who worked for ad companies and related firms. Feel free to post your comments on the original Moz article -- I'm sure the community there would love to hear about it.

vannevar• 11 years ago

Has anyone ever attempted to correlate the claimed activity with actual human behavior? You'd essentially survey a sample of people's online habits, extrapolate to the larger population, and compare that with a similar sampling/extrapolation of reported clicks and impressions. My guess is that the fraud rate would actually be closer to 90%. But as others have pointed out, the market eventually catches up and discounts the watered-down traffic.

stickfigure• 11 years ago

Who is buying ten-cents-per-impression ads? $0.10 CPM sure, but $0.10 CPI?

Alleged $7.5B fraud in online advertising

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