In one discussion group of highly experienced marketing folks I belong to, a couple of them shrugged the online fraud off as "the cost of doing business." On the TV side, there is grumbling by agencies that being outed for inefficient or ineffective ad buying is unfair.
In any other business, if someone said, "You know, you are getting screwed to the tune of $10 billion a year," there would be investigations, CFOs would scream bloody murder, and heads would roll. But not in the ad business. Which is really curious since everyone claims they are more interested in accountability now more than ever, and are doing everything from consolidation to automation to bring costs down. Yet there is no outrage.
While this is not exactly like the proverbial $500 toilet seat that contractors routinely charge the defense department for, there seems to be a similar Pentagon-like lethargy in the ad business, because getting to the root cause of the misspending may be too time-consuming, too hard -- or more probable, the clients don’t really care. But they should.
There was a much-discussed story in TheNew York Times last Sunday focusing on whether Big Data is really adding much to the economy. While at this point it is hard to point to how it is adding to the GDP, it is easy to see how it can be used to spot trends that can be used (or ignored) to improve the bottom line. I have another client whose Big Data can help retailers solve this problem: If a visitor to your site needs an incentive promotion to become a buyer, what is the right offer? 10% off? Free shipping? Two for one? You might know the right (and least costly) answer if you have seen the visitor before and have some idea of his/her past history. But what if you have NEVER see this browser before? You only have seconds to make a decision. What's it going to be?
In both cases of online fraud and inefficient TV ad spending, the companies are reviewing MASSIVE amounts of data to spot trends and make recommendations to prevent harm. While the processes unto themselves do not raise anyone's bottom line, the application of their solutions do.
Everyone who has a business that scales as big as the major ad agencies suffers from inefficiencies (and I suspect a little fraud here and there). But to write it off as "the cost of doing business" is irresponsible and ultimately unfair to their clients. Yet there is no outrage.
The problem is two-fold: 1) We don't have the time to properly oversee anything because we're too busy dealing with our time-saving devices; and, 2) Our vast array of communications tools and avenues have virtually shut down communication. Or, as my brother, Jeff, would say: We're consumed with prioritizing our schedules when we should be scheduling our priorities. I guess $10 Billion just isn't a priority these days.
Mike and Jeff - points and points to points added to George's points. You know that old saying. " If you are not part of the solution, you are part of the problem." ? Don't you wonder even a little bit where that $10 billion is ?
Whenever I see the phrase "upwards of" some amount of money, I automatically think that it's a whole lot less than that amount. If we're too smart to be fooled by "save up to 75%" on a sales flyer, then why should we fall for "upwards of $10 billion"? I suspect this inflated figure is simply a gross misinterpretation of this from Wikipedia: "With paid clicks costing as much as US $100 and an online advertising industry worth more than US $10 billion, [click fraud] is on the increase." The phrase "as much as" is misleading, too, but how can the whole industry account for $10 billion if the amount of fraud is ALSO $10 billion? It doesn't help the cause to play fast and loose with the numbers. After putting "online fraud" "advertising" into a Google search, the largest recent estimate I could find said "up to $400 million" in fraudulent clicks, substantially less than $10 billion but still mired in tricky wording. Another source pegged it at $6 million a month ($72 million), even less of a scandal, so maybe some tiny waste is possible ($72M/$10B is really small). Or, it might be a huge problem, but no outrage can truly arise until someone cites a reputable source, and not with some vague estimate that feeds a particular pro-TV bias.
The $10 billion number is a conservative estimate based on a few key data points:
• If you take ComScore's estimate of 36% to 50% of all web traffic as invalid, and go with the low end at 30%.
• Emarketer estimates put the display market for 2013 at over $15 billion, mobile at $4 billion, and video at $3 billion. Even leaving out the entire search market this puts $22 billion of spend at risk of fraud due to invalid activity.
• 30% x $22 billion = $6.6 billion wasted in the USA alone.
• Conservatively estimating that the entire rest of the world has invalid activity on web ads at 50% of the USA total brings another $3.4 billion, for $10 billion total.
• Please keep in mind that the issues we're discussing here are not limited to the USA by any means, if anything foreign markets may have less standardization and protection.
So we'd say that the $10 bn number is a solid, conservative estimate and we could put the number much higher if pressed.
@Douglas -- your comment proves mine. We're drowning in a sea of data that no one can possibly reconcile. Or, as ersatz plumber Curly Howard would say: "No wonder the water doesn't work, the pipes are clogged with wires!"
George made another good point about the seeming lack of interest in building an auditing procedure to capture data to help identify inefficiency and fraud that negatively impact brand spending. In the 90’s Michael Browner and Linda Thomas Brooks of General Motors used ABCI to identify click fraud. At that time the interactive auditing done by the Audit Bureau of Circulation was headed by Dick Bennett (He is now CEO of ImServices). He audited every campaign and generally found ranges of error from 10% to more than 30%.
GM wanted to be fair to the sellers as well as themselves which are why they audited things separately. Over the years ImServices has been retained by some of the major online sites to check their internal data before they sought MRC accreditation.
When I worked at JWT we took the concept of fiduciary responsibility. We did everything we could to save the clients’ money and only pay the media when the spots ran and print ads had appeared as ordered.
Here's one theory...online impressions have been thoroughly commoditized, and quality environments & "honest" publishers have not really been rewarded by advertisers, so there is constant downward pressure on CPMs. Yay!, right? In this environment though, the "good news" is whatever is lost in fraud is probably made up in "savings via efficiency". Bad news is, the whole environment is polluted.
Steve, there's no demand for auditing procedures because no one in the Rube Goldberg world of digital media wants to be held accountable for a process impossible to explain.