• by Karlene Lukovitz  @KLmarketdaily, November 27, 2023

The latest analysis of the effects of invalid traffic/IVT estimates that the problem will result in $72.37 billion in wasted ad spend in 2024 — up 33% from an estimated $54.63 billion wasted in 2022.

The report, from marketing efficiency platform Lunio, was based on an analysis of 2.6 billion paid ad clicks and 104 billion impressions from more than 60,000 ad accounts across Lunio’s clients — all resulting from paid media campaigns — conducted between May 2022 and May 2023.

The analysis found 8.5% of all paid traffic, and one in every 11.7 paid-traffic website visits, to be invalid.

In addition to wasted ad dollars, IVT causes brand marketers to waste time on spam leads that will never convert, and contributes to inaccurate budget allocations and revenue forecasts. Applying its wasted ad spend forecast for 2024 against an average return on ad spend across all industries of 2.87:1, per a study by Nielsen, Lunio estimates that total lost revenue opportunity for brands and advertisers could be as much as $204.83 billion in 2024.

IVT rates on Google channels, including Search/shopping, Pmax, Display and YouTube campaigns, averaged 5.5% in the analysis — much lower than the 17.5% average found for non-Google channels including Bing, Meta, LinkedIn, TikTok, X and Pinterest.

Applying the 5.5% rate across Google’s 2022 global ad revenue of $224.47 billion and projected 2024 ad revenue of $301.59 billion, Lunio estimates wasted ad spend at $12.35 billion in 2022 and projects it at $16.59 billion in 2024.

Applying the 17.5% rate across about $241.6 billion in non-Google ad revenue in 2022 ($230 billion for social media, $11.59 billion for Bing), an estimated $42.28 billion in ad spend was wasted in that year. In 2024, applying that IVT rate against an estimated $300 billion in global social media ad spend and $13 billion in Bing ad spend results in projected $54.78 billion in wasted ad spend.

Google/YouTube have come in for criticism for allegedly violating their own ad placement statements — and its Google Video Partners had the second-highest IVT rate among analyzed channels (chart below). Still, by and large, when it comes to IVT rates, Google-owned channels — particularly Google Search, which accounts for 58.1% of its ad revenue — benefit due to their catering to users with high intent who are actively searching for specific information, notes this report.  

Google also has strong built-in protections and policies addressing IVT, and its channels generally offer less complex ad formats that offer fewer opportunities for IVT-driving interactions with bots than interactive ads, the analysts point out.

Still, Google has so far been unable to reduce the problem to a negligible (under 1%) level.

Rather than avoiding or minimizing investment in non-Google channels, the report recommends a diversified marketing mix that includes both demand capture such as Google Search and demand generation such as social brand awareness campaigns—but with a strategic approach to mitigate wasted ad spend due to IVT.

The data were also segmented to analyze IVT by region, channel, industry and company size. (IVT rates are presented as percentages and represent the number of invalid clicks divided by the total number of clicks in the sample taken for each category.)

North America had by far the lowest IVT rate, at 7.5%, followed by EMEA (17.4%, including 18.8% in the U.K.) and LATAM (18.2%).  

Among the analyzed channels, LinkedIn had the highest IVT rate (24.6%). Against LinkedIn’s $5.8 billion 2024 ad revenue forecast, that would represent $1.43 billion in wasted spend.

The other top-five-highest rates were found in Google Video Partners (24.55%), X (23.6%), Meta (17.5%) and Pinterest (14%).

YouTube’s IVT rate was lowest (3.9%), followed by Google Search (4.7%), Pmax (6%) and Google Display (7.3%). Microsoft Bing (8.5%) and TikTok (9.2%) also had relatively low rates.

Looking at industries, insurance, retail, real estate, financial services and leisure/travel/tourism campaigns had the highest IVT rates, ranging from 21.6% to 13.4%, and construction, legal, consumer services, health care and manufacturing had the lowest rates, ranging from 1.5% to 5.1%. 

Larger businesses with 10,000+ employees experience significantly higher rates of invalid traffic than all other company sizes: 17.6% on average, versus 6.9% for those with 11 to 50 employees and 8.3% for those with one to 10 employees.

Big companies are more susceptible to the financial impact of invalid clicks and more likely to be affected by the downstream effects of invalid traffic such as skewed analysis and fake lead submissions, the analysts explain. In addition, they tend to allocate a significant proportion of their advertising budgets toward campaigns with broader targeting to prioritize reach and brand recall, which drives up their average rates of invalid traffic across both Google and non-Google channels.

On the other hand, small to mid-sized businesses tend to use more specific, localized targeting with lower potential for wide-scale invalid traffic. Narrower targeting helps keep advertising costs down, and this inadvertently reduces IVT exposure.

However, the data “clearly shows invalid traffic is a problem for all companies, regardless of size,” the report stresses. “For larger companies, the higher average rates of invalid traffic call for more stringent monitoring and prevention methods. On the other hand, smaller companies should not overlook the potential to significantly improve their performance marketing efficiency by blocking invalid traffic and protecting up to 10% of their budget. A small increase in spend efficiency can translate into a significant advantage when competing against other SMBs with limited advertising budgets.”