Once Ad Fraud Hits the Billions Does It Even Register?

It’s finally happened; Jay-Z is officially a billionaire. But his aren’t the only billions making news lately, as the ad industry reels from the massive amount of fraud still being perpetrated.

“A new report released Monday by cybersecurity company Cheq says advertisers will lose more than $23 billion globally to ad fraud in 2019,” writes George P. Slefo in AdAge. “Additionally, it says for every ad dollar spent, roughly 10 to 15 percent goes toward paying companies that protect marketers from getting bilked by bad actors.”

That $23 billion figure is massively higher than other industry estimates, like those from the Association of National Advertisers, which puts the potential hit for this year at $5.8 billion. 

Which figure is correct? Like always, look to the source. Cheq makes their money protecting people from fraud, while the ANA exists to support advertising. Both have dogs in the fight, if you will. Either way, it’s massive.

“The difference between those two numbers boils down to a convoluted digital advertising ecosystem with too many black boxes—brands, ad tech companies and other vendors do not openly share data—making it impossible for either White Ops and Cheq, for instance, to get a complete view of the entire ad ecosystem and see how much fraud is actually getting through,” Slefo writes. “This means that any report released by any company is only a best guess, not a definitive, accurate number.”

We’ve been talking about ad fraud for years, warning marketers they were getting mugged every time they purchased online ads. Instead of abating, ad fraud continued to rise, to around $7 billion in 2016. Fraud detection technology became the hot new thing, but the crooks always seem to be one – or several – steps ahead of the rest of us, and massive fraud sources like 2018’s Android app leak get little press.

Why hasn’t the industry demanded change? There’s a dirty little secret about complicity here that keeps a lot of this out of the press and under the radar, according to David Carroll, an associate profession of media design at the New School’s Parsons School of Design. He told Buzzfeed News’ Craig Silverman that the lack of public disclosure in intentional, “to stave off law enforcement and lawmakers.”

“The digital ad ecosystem has created a situation in which the interests of various companies in the supply chain are not aligned, says Roberto Cavazos, a University of Baltimore economics professor with a background on studying fraud from different business sectors,” Slefo writes.

“There is little regulation, connectedness or disincentive against fraud,” Cavazos, who led the study Cheq, says. Change “will require honest and robust methods to confront the realities and tackle this challenge.”

Confronting the realities seems to amount to resignedly assigning up to 15% of your digital ad budget to fraud prevention measures … which may or may not work. If this level of fraud was occurring in other industries (say, for example, billions of dollars were being lost to fraud in grocery stores) we’d have a national emergency on our hands.

Whether it’s $5 billion of $23 billion, the issue remains. Brands are bleeding budget dollars in online ads, and there is no viable end in sight in today’s climate. Meanwhile, I wonder how much fraud there is in print ads? Oh, right, none.