Hass & Associates Online Reviews: Fraud lurks in shadows of changing digital advertising landscape

The automation of the advertising industry was supposed to reduce waste. But in a quest for greater efficiency, marketers have exposed themselves to a new challenge: fraud.

The uncomfortable truth about the $120bn digital advertising market is that the fastest-growing and most innovative part of the sector – open exchanges – is increasingly being exploited by criminals.

With concern among its clients mounting, WPP, the world’s biggest ad agency, last month said it would stop buying ad slots through such exchanges. These technology platforms, operated by Google, Facebook, AOL and Yahoo, allow marketers to place ads on hundreds of thousands of sites across the internet. But in doing so they have left the industry vulnerable to fraudsters.

Many worry that if unchecked, fraud will undermine confidence in digital advertising. That could hinder the industry’s efforts to capture the $400bn that brands spend on traditional media advertising such as television and newspapers.

“Everyone who deals in internet advertising realises that there’s a huge opportunity that hasn’t unleashed itself,” says Cameron Hulett of Undertone, a company that helps brands advertise online.

“The more that marketers hear about [online fraud], the more it makes them think ‘let’s stick with TV advertising’,” he says.

The trouble is that hidden among the multitude of honest publishers plugged in to the exchanges are sites operated by rogues. The most sophisticated fraudsters operate networks of automated computer programmes – known as bots – which they direct to their websites to attract advertisers. The bots mimic cursor movements and mouse clicks, giving the impression that a person is visiting the sites.

As the Financial Times reported in May, part of a Mercedes-Benz online campaign was viewed more often by bots than by human beings. Other techniques used by fraudsters include inserting large numbers of invisible ad units into web pages, which rack up costs for advertisers but are never actually seen, and generating traffic through malware installed on hijacked computers.

Vivek Shah, chairman of the Interactive Advertising Bureau, warned this year that fraud had “reached crisis proportions”.

His fears are supported by findings from ComScore that more than a third of web traffic is originated by robots or other “non-human” activity. ComScore also found that the majority of ads appear in parts of a web page that cannot be seen by a consumer, rendering them useless.

For Group M, WPP’s media buying division, the solution is to avoid open exchanges entirely. The company, which spends about $10bn a year on digital advertising, instead plans to buy all its digital ad slots through direct deals with big publishers such as Facebook, Hulu and Fox.

“It’s extraordinarily important that our clients have complete trust in the ad inventory that they buy,” says Rob Norman, chief digital officer of GroupM. “Fraud is a binary issue where the only good number is zero.”

But GroupM’s rivals believe it is making a mistake.

Buying ad slots through exchanges accounted for just $12bn of the $516bn global ad market last year, according to eMarketer. But that spending is forecast to double in size over the next two years.

Brands such as American Express, Netflix and Procter & Gamble are increasingly spending through automated platforms.

Arun Kumar of Mediabrands Audience Platform, part of Interpublic Group, says that marketers are pouring money into advertising on the “long tail” of sites available through exchanges because doing so produces good results.

Abandoning exchanges would be like not surfing the internet just because it is possible to catch a virus, he says. “Exchanges are a bit like the wild west today, but they’re evolving.”

Indeed exchanges and other intermediaries are ramping up their investments in technology to detect nefarious activity, responding to brands’ growing concerns about fraud.

Google this year acquired Spider.io, a London-based start-up that has exposed scams such as the Chameleon botnet that defrauded advertisers of $6m a month.

AppNexus, one of the biggest platforms for online advertising, now employs 20 people “to seek and destroy bad actors”, says its chief executive Brian O’Kelley. “It’s a constant fight,” he adds.

Meanwhile, specialist online media verification companies such as DoubleVerify, White Ops, and Integral Ad Science are also developing new solutions to detect deception. But according to Telemetry, the company that exposed the bots that targeted Mercedes, fraudsters are developing new techniques at a much faster pace than the companies tackling them.

Fighting fraud requires more than just developing better detection systems, says Marco Bertozzi of VivaKi, the digital ad buying division of Publicis. A big problem, he says, is that the entire advertising industry is too fixated on chasing cheap slots, even if that means “fishing in a cesspool”. Advertisers need to start looking much more closely at the quality of what they are buying, he says.

For now though, money is continuing to pour through the exchanges, particularly into video ads. Video ads cost about ten times more than banner ads, which has made them a prime target for fraud. Last month, DoubleVerify uncovered a fraudulent scheme involving 500 sites and 1 per cent of all video ad impressions across the internet.

Keith Eadie of Tube Mogul, an online video buying platform, says the arms race against unscrupulous operators shows no sign of slowing. “It’s like viruses,” he says. “They become more sophisticated each day.”