Forget Trade Wars - It's Ad Fraud China Needs To Be Tackled On

It is not surprising to hear that the large digital advertising markets are where the biggest chunks of ad fraud occur, but be prepared to hear a startling statistic: China is home to more four-fifths of the world's internet ad fraud.

As ever with ad fraud, and particularly when you include a market the size of China, prepare for some more big figures from the researchers at GroupM.

The media agency estimates the global risk of ad fraud amounts to $22.4bn. Some $18.7bn of this originates from China, giving the market an 83% share. That means ad fraud outside of China is estimated to cost the industry around $3.7bn, or roughly less than 2% of ad spend. 

Given that the ad fraud rate in China is running at around 30%, and that it accounts for 83% of global ad fraud, it would be fair to say China is not the sole market hit by the epidemic in cyber criminals defrauding advertisers and app developers.

To be cautious, it is fair to say that one would usually expect a slight lift in ad-fraud rates in the biggest digital advertising markets. If you are seeking to skim off money fraudulently, it makes sense to follow where the ad dollars are going. That is why ad fraud rates in individual markets average out at around Germany's rate of 1.6% but then lift to 2.4% in the UK and 3.4% in the US.

While China accounts for 83% of ad fraud, the US is by far the next biggest originating market at 11%.

It's a comment I have often heard from within the industry that while the US is right in calling out markets like China for not doing enough on fraud, the country should take a closer look at its own market as well.

With China, however, there is a worrisome point to make. The great firewall of China meant that the market grew in isolation from the rest of the world and so it must be accepted that logically, these are Chinese bad actors working from within China.

Perhaps the biggest point is that there are only a handful of big internet companies involved in the digital advertising supply chain. In fact, GroupM goes as far as to say there are three companies involved in the vast majority of Chinese digital advertising, and so improvements to just three players could have a massive impact.

The media business' researchers also point out that brand safety education is a must in China, and ad-tech vendors have to mature at speed to improve ad-verification processes. 

It is all very polite stuff for a market that accounts for four in five of the ad dollars stolen from advertisers globally each year -- yet this reduces to a little under one in three ad dollars spend domestically.

Clearly there is massive fraud going on at a domestic and international level. Tales of click farms in China fraudulently downloading apps are probably not too wide of the mark.

If these companies were mentioning Tiananmen Square, they would be dealt with harshly. As it is, all they are doing is defrauding the global digital advertising industry of $18.7bn a year, and so appear to be acting with little fear of punishment.

If China wants to be truly open and trade with the West, this cannot be allowed to continue. 

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