To settle in, let’s briefly wrap our heads around what various people mean when they talk about “supply chain problems” and “ad fraud.”
There are various misdeeds to consider. These may include, but are not limited, to:
What these have in common is that advertisers pay hard-earned money, from their shrinking margins, for advertising, and they may not receive what they negotiated for. The financial damage is considerable, but no one knows how much of it is illegal.
Legislation is two decades behind the internet. What’s the penalty for infecting millions of browsers with ad injection software? Until last month, zero, apparently. And don’t blame “digital.” Blame greed.
In November, the FBI arrested several cybercriminals for ad fraud. Finally, but it’s just a start.
For technology-derived theft alone, estimates of loss range from $6 billion to $15 billion per year in the U.S., and higher. (I saw $50 billion the other day). For perspective, $15 billion annually is roughly equivalent to 5,000 average bank robberies PER DAY. How do you think the FBI would respond if there were suddenly 5,000 bank robberies per day? Not well, we imagine.
Further, monies that evaporate into the supply chain could be as high as 20% of digital media spend, per Ad Fin, a company that analyzes server log data on behalf of advertisers.
This has gone on for decades, but mitigation has been absent. Apologists ruled, saying things like “It’s a rounding error,” “It’s priced into the rate,” “No, harm no foul,” “Advertisers will not pay us to fix it, so why should we?,” “There has always been waste.” My favorite: “Define transparency!!”
Ad fraud is the perfect crime! It relies on the idea that victims will be embarrassed or in denial, and middlemen will want to leave well enough alone. Advertisers say, “Give me proof!” — but creating evidence costs money. Catch-22. Advertisers are the only parties that can get the proof.
There are oblique angles of defense: For example, what if the ill-gotten $15 (or $50!) billion funded organized crime and terrorist groups? Worried?
How much certainty do you need to act? Certainly, the hubbub over placing ads on terrorist training videos (which paid terrorists less than the cost of an rpg round per year) sets the standard. Why ignore $15 billion that disappears into the criminal ecosystem? Why assume none of it funds terrorists?
How is it that advertisers settle, even as their precious earnings are diverted to thieves?
You’ve been robbed, OK? You should call the police.
Finally, something happened.
About four years ago, the Association of National Advertisers hired global bad-ass private investigators (K2) to track down the truth regarding at least some of the issues, mainly “non-transparent” business practices. The investigators did their work, and verified what whistle-blowers had been saying.
Three years on, something else happened. Some real law enforcement stepped up: the FBI. Cue sound of trumpets. You can read about one aspect of the investigation here.
Last quarter, in response, the ANA said: “ANA members are not obligated to cooperate with the FBI,” and “have the option to ‘do nothing.’”
Whaaaaat!? I’m sure the ANA legal team mandated that posture, so, no blame, but still, common sense might suggest a different response.
As a counterbalance, someone should make a statement like this: We encourage all advertisers and their agents to cooperate fully with, or even proactively support, the FBI investigation. If you don’t, the FBI won’t get enough evidence to convict anyone of anything, and nothing will change.
Advertisers, you finally got some help. The bad guys outspend and out-think the average bureaucracy. Sorry, but true.
What makes you think that public statements decrying lack of transparency will change their behavior? Who is on your side, really? Answer: the law. The sheriff’s in town, y’all. Consider yourselves fortunate.