Is There Fraud in the Online Advertising Industry?

by | Dec 21, 2014 | Marketing Essays | 0 comments

online advertising industry fraud

Bob Hoffman has called it “fraud” perpetrated by “criminals.”

The retired founder, chairman, and CEO of Hoffman/Lewis Advertising — who now writes the Ad Contrarian blog and speaks at advertising conferences — had been referring to ongoing revelations in the digital advertising industry that a lot, if not most, of online advertising is a waste of money.

In 2013:

This past year:

  • Ad Age editor-in-chief Rance Crain wrote that “marketers are in the most denial when they continue to invest a bigger and bigger percentage of their ad budgets in digital despite the overwhelming evidence that there is massive fraud in the digital marketplace”
  • Media Post reported on a Forensiq report that found that a single bot that has been maliciously downloaded onto one computer could cause 10 billion fraudulent ad impressions every single day
  • Advertisers may lose $6.3 billion to bots in 2015, according to a new study from the Association of National Advertisers (ANA) and online fraud detection firm White Ops
  • Most recently, Google said that 56% of impressions on its AdWords display network were not “viewable”

The Charges

Hoffman summarized his view of online advertising with this set of points:

The Defense

  • The Interactive Advertising Bureau (IAB) says in its State of Viewability Transaction 2015 report“It’s time to set the record straight about what is technically and commercially feasible, in order to get ourselves on an effective road to 100 percent viewability and greater accountability for digital media,” Randall Rothenberg, president and chief executive (CEO) of the IAB, said in a separate statement. “The MRC said it best – 100 percent is currently unreasonable. Why? Because, different ad units, browsers, ad placements, vendors, and measurement methodologies yield wildly different viewability numbers.”
  • Marketing Land’s Ginny Marvin writes that Google’s report that 56% of Display Network impressions are not “viewable” is not actually shocking: “So why would Google report that advertisers have been wasting millions on ads that are never seen? To promote viewable impressions as the new standard and its own viewability measurement and ad buying capabilities.”

My Verdict

Don’t pay per impression or click. As we enter 2015, I do not understand why any online advertiser would still accept pricing in terms of impressions or clicks. Numerous advertising networks are offering pricing in terms of “conversions” — whether it is an e-commerce store purchase, mobile-app download, or anything else. If I know that I am paying, say, $1.00 per app download, then that metric renders any (real or fake) impressions or clicks meaningless because the end cost takes all of the factors into account — and I can determine the ROI accordingly. Google, in one example, is also making this tracking easier by adding an “in-store visits” metric to AdWords.

“Impressions” that are not “viewable” have always existed. Imagine twenty years ago. A TV network may tell advertisers that a certain TV show has 10 million viewers and then price a thirty-second spot accordingly. However, there was no way to know exactly how many of those viewers actually saw the advertisement — remember when people would go to the bathroom during commercial breaks in the days when we could not skip ads on DVR devices? Audience and viewing metrics have always been estimations. Advertising has always been a little of a crap shoot. The best that advertisers could do was run a campaign and then look at the overall sales figures afterwards. (But, yes, it is an example of the post hoc fallacy.)

But always enforce the law. If advertising networks are intentionally generating fraudulent impressions and then selling them, it needs to be held accountable. If media buyers are intentionally buying space on networks that they know are generating fraudulent impressions (and then charging clients on a per-impression basis accordingly), the same thing is needed. I’m not a lawyer, but any violators should be pursued to the fullest extent of the law — or at least blacklisted in the industry. These practices make digital marketers look like charlatans.

Still, branding campaigns are the biggest victims. Yes, I encouraged people a few paragraphs above to purchase online advertising on a per-conversion basis. But the fact remains that advertising has traditionally been a top-of-the-funnel tactic. As Hoffman has written, “Why do you think a can of Coca-Cola is worth 50¢ more than a can of Safeway cola? It’s not because of the Coke ad you saw last night or last week. It’s the ones you’ve seen for your entire life.” But building brand awareness over years seems to be not possible in digital advertising because of the purported lack of real impressions and views. (And because the public Internet is only twenty years old.) Take a look at this ad I saw here in Tel Aviv recently. Every person who saw the billboard was a real, viewable impression:tel aviv advertisement

The reality seems to be: If you want to build brand awareness over the long term, use traditional advertising; if you want bottom-of-the-funnel conversions, use digital advertising. It’s probably best to use both, depending on the context.

So, is there fraud in the online-advertising industry? Almost certainly. But I have yet to see answers to these questions:

  • Who exactly is creating and using the bots that are generating fake impressions? I want proof and names. (I’m saying this in general — please do not make charges below that could be libelous or slanderous.)
  • Are media buyers using specific networks that they know to use bots, or do the buyers simply know in general that bots are a problem in the industry? That’s a difference in the level of culpability.
  • If your ad network does not offer cost-per-action (CPA) pricing (also called cost-per-conversion pricing) — why? Why are you forcing people to pay per impression or click when you know the ROI is likely terrible?
  • Are any corporations out there using online advertising — whether through ad networks, online video, or social media — to build big brand awareness? Or do you still prefer to use traditional advertising?
  • Click-fraud in PPC campaigns used to be an issue, but I have not heard anything about that in a while. Is this still a thing?

I invite your thoughts and comments below.

Image: Hass Associates

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