Want to Be a Hero to Your Company? ANA Report on Programmatic Ad Fraud and Digital Ad Waste Suggests How

Between sips of rose at the Cannes Lions Awards in France this week, the ANA revealed a blockbuster report that shames the programmatic advertising industry. It purports to show that of about $88 billion spent each year by advertisers to buy ads through the digital ecosystem, as much as 23% (about $20 billion) is simply lost or unaccounted for. This may be partly due to ads being placed on websites that exist purely to show ads—i.e., clickbait pages that rarely encounter human viewers, except by accident.

It seems that advertisers, who pay by the CPM (cost per thousand impressions) model, have been paying for more and more impressions while also demanding lower and lower costs. The markets have gladly met their demands. As Augustine Fou, a noted ad fraud researcher, noted on LinkedIn recently, while ad inventory on TV was limited, this is not the case on the internet, where someone can always create and sell inventory that nobody will ever see because the internet is infinitely scalable.  

Dr. Fou might also point out that simple math shows that there are far more clicks paid for on the internet every day than there are humans to do the clicking. In his consultancy, he spots patterns, such as huge surges of bots appearing at night and at the end of each month, when publishers get desperate to make their numbers.  

In other words, advertisers are wasting a lot of money to show ads to robots, not humans. Their marketing teams then glorify every impression to support their arguments that their campaigns are reaching more and more consumers when in reality, the ads are being seen by bots. Bots may click, but they never buy, unfortunately.

A tried and true method for ad fraud is to create simple web pages that do nothing but show ads and have gobbledygook content remixed from some other site (enough to fool the copyright detection software). This is easy money for the fraudsters, and one would have thought it would have been solved by now. But it has apparently not been.

What does that mean for your company? It might be tempting to throw up one's hands and say there is nothing to be done, as the criminals are likely residing in Romania and are always one step ahead of the anti-fraud guys. But what other business model would tolerate waste of this magnitude? If advertisers wish to show a profit, this would seem to be low-hanging fruit.

Let's not be sanguine about the challenge, however.

To get lost money back, advertisers must conduct audits that their agencies will likely resist and/or refuse to provide the log-level data needed to determine what has been purchased and at what cost. Audits are expensive and not always successful. Moreover, the advertiser may not have negotiated a media buying deal with sufficient rights and constraints on the buyer's conduct to provide a helpful contractual hook. 

Moreover, the marketing team is often reluctant to "rock the boat" by questioning the integrity of the agency with which they are working closely. (It is not unusual for such a relationship to last for years and involve a revolving door between the client and the relevant agency team.) Moreover, if marketers admit 23% of their online spend is wasted each year, what do you think will happen to next year's budget? Plus, who wants to sue or even threaten the partner agency responsible for the next major ad campaign?

The in-house legal team may not be informed about this problem or its significance. The ad tech system is complex and opaque, and many lawyers don't understand it well. As outside counsel, we can flag the potential issue, but the effort may be disregarded as a sales pitch for a service they don't believe they need. Did I mention that audits are expensive and often inconclusive?

We'll have to break out of this mentality and find a way around these perceived hurdles if things are to change. Some major advertisers are leading the way, but too few. A few brave souls within companies can become heroes by correcting the future course and even pursuing remedies for past wrongdoing. It will take courage, but the potential rewards are great.