When one thinks of organized criminal activity, it is often unsavory activities involving trafficking of some form, but fraudulent web traffic is rapidly growing as a high reward, low risk, low effort criminal pursuit. Last year, the World Federation of Advertisers (WFA) concluded that within a decade, online advertising fraud is likely to be the second most lucrative criminal activity, trailing only opiate and cocaine trafficking.
The WFA projected web advertising to be a half trillion-dollar industry in 2025 and then projected a 10 percent fraud rate, arriving at $50 billion as the economic impact of fraudulent activity. Ad fraud is not only parasitic theft, but a source of easy funds for organized crime, terrorist groups and hackers.
When Hewlett Packard Enterprises evaluated various forms of hacking across two dimensions (Payout Potential versus Effort and Risk), ad fraud was the clear winner across both dimensions, easily beating out extortion, credit card fraud, IP theft and other fraudulent activities. It is clear that increasing the difficulty in carrying out fraudulent activities and/or reducing the economic benefit of a fraudulent activity is imperative if we are to deter the bad actors.
As advertising has shifted to programmatic advertising and real-time bidding, the increase in volume of transactions made possible by these technologies inadvertently make it relatively easier to carry out fraudulent activities. The advertising industry needs to adopt a series of strategies which help combat fraud and ensure digital advertising is both legitimate and brand safe.
Not only does online advertising fraud represent a deadweight loss to advertisers, but it can result in brand harm when advertising is placed next to objectionable content or malvertising. In a recent study, nearly 70% of respondents said brand safety has become more important to their businesses. With programmatic marketing, advertisers are looking to ensure that ads will be displayed on brand safe networks, not “fake news” sites with fringe or hateful content.
“The challenge is to have transparency around who your partners are to make sure that they’re legitimate actors, to make sure your ads are on appropriate content,” said Michael Zaneis, CEO, Trustworthy Accountability Group (TAG). “Then make sure that real humans are seeing your ads and not nonhuman, fraudulent traffic.”
TAG provides an industry “white pages” for advertisers, helping authenticate over 200 advertising companies across 20 countries.
While TAG offers a whitelisting mechanism, another strategy for reducing advertising fraud is referencing IP address blacklists which block advertising revenue from being directed to criminals. TAG has also developed a fraudulent traffic list of 65 million IP addresses sourced from 12 to 15 major ad platforms each month. This blacklist allows the industry to collectively fight fraud through shared intelligence.
Fraud can be fought via data, heuristics and cooperative efforts. Whitelists verify legitimate members of the advertising ecosystem while blacklists flag known fraud sites. High quality data is the cornerstone for both digital targeting and fighting digital fraud.
“It was so easy to just turn on the nonhuman traffic and there was no accountability, and that’s no longer the case,” said Zaneis. “We have stopped the dumb criminals. Now we need to be able to stop the smart criminals.”
Unfortunately, ad fraud is becoming increasingly sophisticated via malvertising schemes (malware which hijacks a computer and generates nonhuman traffic), the purchasing of authenticated IP addresses tied to fraudulent infrastructure, the spoofing of common domains, and other nefarious practices. Unfortunately, mobile is increasingly subject to ad fraud as “legitimate” apps redirect users to fraudulent ads.
While vigilance has helped reduce the percentage of fraudulent activity versus total advertising spend, ad fraud is growing in overall dollars due to the rapid growth of digital advertising. Ad fraud will remain parasitic as long as it is lucrative, easy and low risk. Progress is being made against fraud through verification and information sharing, but the sheer growth rate of the medium continues to fuel criminal activity.