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Ad fraud costing $22.4 billion globally says GroupM

Mike Cherico

Ad fraud is costing companies billions, but there are signs that the digital ad market is improving.

Media buyer, GroupM, released a report this month that puts the cost of ad fraud at $22.4 billion globally.

The report says a large level of fraud hurts companies as well as investors. The report explains that fraud typically accounts for 10% of ad sales spending with the U.S. accounting for $2.496 billion of that fraud while China seems to be the largest offender with a fraud market responsible for $18.75 billion in unethical ad sales.

“Not only is this a concern about wasting their shareholders’ money, but also about the moral and ethical issues of funding harmful and illegal practices such as digital piracy and crime syndicates," says the report.

Ad fraud is an intentional effort to deceive measurement companies in an effort to make invalid traffic or robotic traffic appear human Joe Barone, GroupM Managing partner, told Fox Business

"It is impressions that are masquerading intentionally as human behavior, he said. "Sometimes it is bot farms, sometimes it is all technology, sometimes it is cell farms with people clicking on it.”

But the Association of National Advertisers, or ANA, has seen improvement during the past two years. The ANA said there has been an 11% reduction in fraudulent ad buys between 2017 and 2019, according to the report released earlier this year.

"Economic losses due to bot fraud are expected to total $5.8 billion globally this year, but for the first time ever more fraud will be stopped in 2019 than will succeed, according to the fourth Bot Baseline report from White Ops and the ANA," says the ANA report which adds, "The monetary losses, while significant, are an improvement over the $6.5 billion reported in the previous study released in 2017."

Tamer Hassan, Co-founder cybersecurity company of White Ops, explains in the report which her company helped produce in conjunction with the ANA the turnaround in fraud, “We are coming off a year of unprecedented industry collaboration that has proved to be a powerful tool for tackling ad fraud at a global scale.”

Social media and YouTube continue to be a breeding ground for fraud with challenges faced by the media giants in battling fraud.

“Facebook and YouTube face the harshest outside criticism over their content policies, targeting strategies and inability to police their own platforms,” the report says. “Social platforms are at once the biggest risk environment and the least open to independent third-party measurement... If the seller of the medium is the same entity that measures and reports on the medium, it presents a real governance issue.”

In a blog post, Google says it has waged a comprehensive, global fight against invalid traffic through a combination of technology, policy, and operations teams to protect advertisers and publishers and increase transparency throughout the advertising industry.

"We are committed to helping to create a better digital advertising ecosystem — one that is more valuable, transparent, and trusted for everyone," Google's Per Bjorke, Product Manager for Ad Traffic Quality wrote int he post.

Barone explains too that most of this ad fraud takes place in China. About 80% of the 22.4 billion cited in GroupM's report can be accounted for in China, according to the report. The

“Ad fraud dollars are both consumed and spent mostly in China. A large percentage of the actual ad media is created and consumed in the country of China.

"It is an enormous emerging market place and in the very early days of the development verification technology," Barone said.

Some companies, like Uber, are fighting back against ad fraud. The popular ride-sharing company has recently sued five ad networks for the poor management of tens of millions of dollars lost on poor and fraudulent ad buys GroupM explains in the report. But other methods will likely have a more broad effect.

“The clear answer to the problem is honest, third party (Nielsen-type) auditing of both content and count of ads actually delivered, but the major internet players have always resisted that, despite saying that third-party monitoring [or] auditing could help solve most, if not all of these problems." Porter Bibb, a media analyst from Mediatech Capital, said.

Another tactic in restoring brand safety is by establishing a viewability standard that has been a successful tool in the fight against fraud increasing real views by 150%. GroupM describes viewability standards in their report as those quality impressions that are viewable, free of invalid traffic, in the required demographic and location and in a contextually safe and suitable environment.

Advertisers pay for consumers to view the entire page. So a company named RealVudeveloped technology that edistignguished an ad that was surfed into view and a page that was actually scrolled into view and an entire page that is seen, hence the term viewability standard, Barone said.

“The big difference is our clients were charged when ads were clicked on, and now viewability means the clients are only charged when the ads are actually viewed," Barone said.

GroupM also describes how legislation and regulation would help alleviate fraud and could give ad buyers more information as to where their dollars are being spent and how, according to the report.

Meanwhile, GroupM also encourages buying ads directly from the source.

“When trading media, we prefer to buy programmatic media directly from high-quality and trusted media owners, and to avoid non-transparent ad networks and ad exchanges,” the report states.

GroupM also encourages third-party verification from companies like DoubleVerify, which promises to enable an advertiser to appear in impactful content environments like news while avoiding headline-grabbing partisan op-ed pieces.

While Barone says that GroupM cannot put a dollar amount on the damage that can be done to a company's reputation when its ads get placed fraudulently next to questionable content, he does share that about the concerns and issues faced by such ad fraud.

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The report also warns why action to stem fraud is so urgent: The internet hosts some content that can be damaging to brands when their ads appear on sites they don't want

"We do have research that shows that consumers do not want their favorite brand supporting terrorism, or child endangerment or sexually suggestive or any of a wide range of issues," says Barone. "We know consumers are concerned about it and stock holders are concerned about it, and marketing companies are concerned about it.”

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