
Alleged $7.5B fraud in online advertising - inthewoods
https://moz.com/blog/online-advertising-fraud
======
ChuckMcM
This isn't being 'buried' it just isn't that interesting. All of the money the
client gives to the agency gets spent, some goes to the agency, some goes to
the networks, some goes to the content providers. That isn't news at all.

Fraud is rampant. Also not new, although it is also also pretty easy to spot
and block.

Almost nobody pays per 'impression' because, well that went out of style about
the same time Yahoo! banner ads did.

Eventually the advertisers are going to pay for performance, and to do that
they are going to have to fix the way they do advertising so that their ad,
leads to their landing page which identifies who delivered the ad. Then they
are going to pay based on whether or not the person who landed on their page
actually buys something (service, good, or subscription). No money, no ad
payment.

Most companies other than Amazon really aren't set up for that, and Amazon
won't do it yet because, as far as I can tell, they aren't being forced too.

Its a shame that "affiliate" ads like the ones they let bloggers use have 100X
there ROI of "CPC" ads and yet they have convinced the bloggers they can pay
then a nickel and they should be happy when Google gets $13 - $23 for the same
result.

I started building this system out of disgust but never finished it. It isn't
that technically difficult, but it does have a lot of moving parts, and it
does require infrastructure on the advertisers web site which can create
durable transaction records. Some day I think.

~~~
zaroth
> Its a shame that "affiliate" ads like the ones they let bloggers use have
> 100X their ROI...

Sounds like an incredible market opportunity.

What are the companies that are building ad marketplaces targeting high
performing affiliate bloggers which demonstrate their value better to
advertisers, and share a higher proportion of profit with the bloggers?

Are there fundamental issues trying to scale up a business like this? Not
everyone can spin their own custom 'sponsership' packages like DaringFireball,
but there is a lot of good blog content out there.

I remember seeing some bespoke ad networks in the designer space, can't think
of their name off-hand. Had the feel of a high-end web ring, if that's not an
oxymoron.

~~~
jalfresi
[http://decknetwork.net/](http://decknetwork.net/)

------
Gustomaximus
Old story. For non-brand advertising this is easily solved by down funnel
tracking. Any marketer worth their salt tracks to the 'ultimate goal' and will
avoid the shadier networks by looking at overall results. End of the day it
comes down to a ROMI metric. It doesn't matter if 50% of the impressions are
fake as long as the total investment pays off. For brand marketing I follow
the networks that show DM performance as this shows some level of quality.

~~~
newman8r
The tricky part is what to do when it doesn't pay off.. This isn't and has
never been my primary line of work - but I can't say that every campaign I ran
was profitable, even though the ones that were extremely profitable did make
up for those.

~~~
geon
It is not tricky. You just stop using that ad network.

~~~
newman8r
That's a solution to mitigate losses but it doesn't address the fact that
someone has lost money due to fraud - and I'm guessing it hurts small
businesses the most.

Strategy-wise the solution is simple, but digital marketing is intrinsically
flawed nowadays and it's one industry that could literally be turned upside
down at some point in the coming decades as the internet evolves. And I think
a lot of people wouldn't mind that - especially the people with the power to
bring the change (i.e. developers and proponents of open source solutions and
haters of crappy spam)

~~~
geon
> it doesn't address the fact that someone has lost money due to fraud

You would try it out with a few hundreds or possibly thousands first. If it
isn't showing any return at all, something is fishy. You wouldn't with a sum
that would hurt to lose.

Then nice thing about the web is that we can measure and analyze user
behavior.

~~~
newman8r
Of course. I'm not saying it isn't possible to have a profitable marketing
campaign despite fraudor limit your losses (just starts to cost more since
some industries are more impacted than others). I'm just pointing out that
it's inherently a fraudulent/sketchy industry and therefore very subject to
potential disruption.

------
CaveTech
Isn't click fraud basically solved by the free market? I mean, as more and
more bots create fake clicks and impressions, the value of the traffic itself
is reduced. This will lower the CPC and CPM and you'll still be able to buy
traffic at its free market value. If the traffic becomes worthless, no one
will be willing to pay for it.

Advertising fraud is basically arbitrage. The fraudsters are inflating the
numbers but someone is still willing to pay a specific value for the traffic
they're receiving. If a specific market is more prone to fraud, its because
the amount publishers are paying is below its actual value.

~~~
dangrossman
It's "solved" for advertisers who can measure ROI, at least short-term. It's
unsolved when the success metric for the campaign is not easily measured, like
brand awareness. It's also not solved for the publishers not engaging in
arbitrage or fraud who earn less and less per impression. Let it play out
unchecked and the bad actors will kill the market by driving all the
legitimate suppliers out of business: if ad rates are driven so low that
content sites can't pay their staff with the ad dollars, they'll either go out
of business or exit the market (i.e. erect paywalls, return to direct ad sales
instead of participating in exchanges, etc).

~~~
meritt
> brand awarenesss

Exactly. Brand-awareness media buys tend to rely on third-party web traffic
"experts" like Alexa, comScore, Hitwise, Quantcast, etc. These tools are
incredibly simplistic and count the majority of fraudulent traffic as legit.
When a site ranks highly across these experts, it is then used to increase the
CPM a brand-advertiser ends up paying.

------
dangrossman
Google's the most open about the click fraud problem. They'll show you all the
fake clicks you received but aren't being charged for if you customize the
columns of your AdWords reports to add these two:

[http://i.imgur.com/sW1stNL.png](http://i.imgur.com/sW1stNL.png)

A lot of the traffic they charge for on the display/content network is still
awfully iffy. I get spikes of traffic from blogspot blogs that didn't exist
the day before all the time. They won't exist a week later. How likely is it
that a new blog with a single uninteresting post suddenly has tons of traffic
interested in clicking my ads? Not very.

~~~
Gustomaximus
The worse point for junk clicks is mobile display - particularly in app. Id
never advise RON campaigns here without super tight monitoring. I've never
been sure if it's more fraud or 'well placed ads'. I'm guessing the latter as
kids apps seem to be the highest offender for mobile display.

@dangrossman I build white lists rather than a black lists for companies where
I handle their marketing for display on mobile. Not sure if your offering
something like this in Improvely but I imagine it would be of value to a bunch
of clients. Advertising networks will hate you!

~~~
icelancer
>. I'm guessing the latter as kids apps seem to be the highest offender for
mobile display.

My son clicks ads and whines about it nonstop when I let him play iPad in his
games.

------
papercruncher
I work for an AdTech company. One of our selling points is that we track much
time users actively spent on our ads (= ad is in viewport + tab is active +
user has moved the mouse or scrolled in the past 20 seconds). If we
consistently see a source of traffic spending < 30 secs, then we manually
start digging into the logs.

If you're a brand/marketer, I recommend two easy things to increase your ROI:
(1) Make sure you are not being charged for GoogleBot traffic. Seriously, for
frequently updating sites, self-advertising GoogleBot can account for up to
10% of all impressions. Ad Networks can easily filter that traffic out. (2) If
you're paying per impression, work with partners that charge on viewable CPM.

~~~
nkozyra
Are there seriously ad companies that aren't filtering out common bots by UA
in 2015? That seems unlikely but would be very disturbing if true.

Second, I think simple tests like "time spent on ads" as a trigger is an
extremely simplisitc, inefficient and likely inaccurate way of determining
"potentially not human." The systems here are very complex, designed to mimic
randomness within humanesque constraints.

~~~
papercruncher
Yes, sadly there are. It's not necessarily out of malice, a lot of folks just
don't grasp how big spider traffic is. Even Google Analytics doesn't filter
out crawlers by default, that setting is buried somewhere in the admin panel.

You're right, "time spent on ad unit" is simplistic but it's not inefficient.
It shouldn't be the only thing in your arsenal but it's a good _signal_.

I reckon you are also overestimating the amount of sophistication that goes
into these systems. The ones that are out for purchase in a black market
become well-understood within a few weeks and are easy to fingerprint. Since
the network is paying on net-30 days, there is some time to retroactively run
some analysis and filter out provably non-human traffic.

------
throwaway3453
This article is a mess. The author states, "An entire industry—billions of
dollars and thousands of jobs—is at stake," then goes into a completely
different rant, "why is nobody talking about this?"

Over half the images are incomprehensible or offer no insight.

>[https://upload.wikimedia.org/wikipedia/commons/c/cb/Clickpat...](https://upload.wikimedia.org/wikipedia/commons/c/cb/Clickpath_Analysis.png)

Including an unintelligible graph without an explanation to why it's necessary
is bizarre. Even more so writing headers like "Responses to the scandal" and
dropping in a stock photo of a gavel. It's like a pull quote, but even lazier.

There is some value in this article,

>Hoffman, the retired ad agency CEO who I quoted at the beginning, puts it
better than I can:

>[http://adcontrarian.blogspot.co.il/2013/06/the-75-billion-
ad...](http://adcontrarian.blogspot.co.il/2013/06/the-75-billion-ad-
swindle.html)

Even the author suggests to read this one instead.

------
newman8r
All I can say is, every now and then I used to request a few grand from a
popular network that I won't name but you probably know which one it is...
about click fraud, inconsistencies (which I was not making up at all). Every
single time,. no questions asked, I was given the full amount requested...

Now I'm not saying that means anything... but it always felt a bit odd like...
yes yes we know how bad it is, take your money and shut up and keep buying
those ads

------
vannevar
Has anyone ever attempted to correlate the claimed activity with actual human
behavior? You'd essentially survey a sample of people's online habits,
extrapolate to the larger population, and compare that with a similar
sampling/extrapolation of reported clicks and impressions. My guess is that
the fraud rate would actually be closer to 90%. But as others have pointed
out, the market eventually catches up and discounts the watered-down traffic.

------
sjscott80
Hello, everyone!

I'm the author -- and I'm completely amazed. Thanks to whoever submitted this,
and thanks to all the upvoters! I'll be going through the comments and
responding when necessary. Feel free to AMA!

Oh, there seem to be a lot of interesting stories here from people who worked
for ad companies and related firms. Feel free to post your comments on the
original Moz article -- I'm sure the community there would love to hear about
it.

------
lessthunk
The smarter players measure and target accordingly. The rise of RTB and 3rd
party companies or your own JS solutions let you cherry pick what you want, or
you simply bid much lower (if at all) on traffic you consider not valuable.

This is mostly a problem for unsophisticated players and exaggerated hype
originating from players that support tracking view ability, etc.

~~~
mrweasel
>This is mostly a problem for unsophisticated players

Aren't most customers of online ads unsophisticated users? The solution could
of cause be to let a professional online ad company run your buying, but then
you still don't know what they're doing with your money.

I believe that most of the people are running their online ad buys as if they
where bus stops ads. That might be wrong to, but that's where the business
needs to start.

------
logicallee
Just a stylistic note, I found the word _alleged_ to be a bit overused in the
first part. A source of a quote in the article is given as: _an interview
given by "Jack Marshall, an alleged reformed fake web traffic buyer"_. How
about an interview by Jack Marshall, who says he is a reformed fake web
traffic buyer...

~~~
sjscott80
Hello! I'm the author. I just needed to use "alleged" a lot because I was
citing second-hand -- though credible -- information and did not do any
independent research. I could not verify anything myself, so I needed to make
sure that the point was clear.

------
reilly3000
Moz is not a disinterested party. They sell services to promote marketing that
doesn't involve paid media.

I am in the paid media business, and I am not disinterested either as such. I
feel strongly that advertising is the lesser of evils of the alternative is
marketing messages buried deep in content and social spam.

~~~
sjscott80
Hello, I'm the author of the Moz piece and just wanted to respond. (No, I do
not work for them -- I'm just a contributor.)

1\. They do not sell marketing services. They sell marketing software.

2\. I pitched my article to them, and they were very skeptical about the topic
at first. Obviously, the issue can come across as very conspiratorial and
sensational. But once I showed them all of my credible sources and citations
and explained everything in-depth, they decided to publish the piece.

3\. Again, I cannot speak for Moz, but my sense is that they will publish
anything that they perceive to be very helpful and interesting for their
audience -- digital marketers. They more that they do so, the more that their
brand will grow among their audience and the more that people will visit the
website to read the good articles.

------
zw123456
I don't know anything about advertising but sometimes I watch TV late at night
and I see ads for various local and national companies and I always wondered
how they ever could verify that they actually are getting the air time during
the time periods and channels that they are paying for, it seems like the type
of thing that could easily be either intentionally or unintentionally messed
up. It seems like it could be something that could be automated, a system that
would listen and or watch all the channels and log the adds for the companies
that subscribe to the service to insure that the broadcasters are giving the
time they say they are. There is probably already something like that out
there, does anyone know if there is such a thing?

~~~
bjterry
This definitely exists under the name "media monitoring." For example
[http://www.mediamonitors.com/](http://www.mediamonitors.com/) but there are a
bunch of different providers.

------
davidbanham
In my experience, buyers are usually not sophisticated enough to have this
discussion. Often, syndicate salespeople don't understand the issue either.
Nobody else in the value chain is incentivised to educate them about the
issue, so it doesn't happen.

I founded, ran and sold a digital advertising company in the video space. We
sold through various means including networks, direct sales and quasi-direct
sales where we would engage a local syndicate to sell on our behalf. These
were usually major digital publishers that used to be print publishers.

These people are moving a _lot_ of the volume in this industry. They're
battling widespread redundancies and falling budgets. They are not attracting
the cream of the crop and are in an unfamiliar industry (tech).

~~~
newman8r
I'm not even in the marketing business but I tend to have a lot of fun with
the people calling up trying to sell adwords packages... I know I have won if
in the end they say "ok, actually that's more of a question for the tech guys
in the back room...." when I ask them incredibly basic questions about their
methods.

Guess it's so easy to sell to clueless business owners that taking 10 minutes
to learn about the crap they are peddling isn't even worth it.

------
paulpauper
I'm sure fraud & waste exists in all mediums of advertising

$7 billion over meany years, while it seems like a lot, is still just a small
amount of the total advertising online market

The figure may still be exaggerated and more research is needed. It could
include things that are mistankingly called 'fraud' but instead if a
misunderstanding of terminology

In a free market, online advertising fraud would depress prices as advertisers
pay less due to worse results. If advertisers were getting 100% human traffic,
rates would go up, making the ads more expensive.

So in the long-run it balances out. But on an individual level it sucks
getting scammed.

------
geon
In the mid 00's I was working for a cashback/incentive site. Basically we
would give monetary incentive to members of our site to complete whatever each
specific ad was measuring. It could be signing up for a newsletter, or
registering an account at some site. Poker websites would pay well for new
users.

The whole scheme was of dubious value for the advertisers, obviously. The ad
networks were happy to have us, though.

------
taberiand
They should use that new "I am not a robot" captcha technique to automagically
guess that the viewer is a human

~~~
codezero
They unfortunately have little incentive to do so, since they profit from
fraudulent clicks.

~~~
dangrossman
The long-term incentives for ad companies like Google are aligned with the
advertisers. They only profit from fraudulent clicks in the short term. Every
fraudulent click they charge an advertiser for increases the likelihood that
advertiser's campaign has a negative ROI and they stop advertising. The lost
future revenue is a much larger number than the revenue from today's clicks.

~~~
codezero
Since you built Improvely, I'm curious, what motivation is there for click
fraud? Who benefits from fraudulent clicks?

By that, I mean, who's paying for bots to generate this activity, and what do
they gain by it?

edited :)

~~~
dangrossman
The motivation is a monthly paycheck from an ad network without having to
build a real audience for your website. If you can generate fake views and
clicks at a lower cost than the network pays you, and convince the network the
bot-generated activity is genuine, you're printing money.

~~~
codezero
Edited, sorry for misnaming, and thanks for the insight.

Doesn't this model only work if you are driving traffic/clicks to _your_ site?
What is the benefit for bots that are hitting other people's sites?

~~~
dangrossman
> What is the benefit for bots that are hitting other people's sites?

That's the "convince the network the bot-generated activity is genuine" part.
A site where all the "people" clicking ads are never seen on other sites
stands out like a sore thumb. Having a bunch of background benign-looking
activity lets you hide other kinds of fraud, too:
[http://krebsonsecurity.com/2014/07/service-drains-
competitor...](http://krebsonsecurity.com/2014/07/service-drains-competitors-
online-ad-budget/)

~~~
codezero
Gotcha. Bummer.

------
stickfigure
Who is buying ten-cents-per-impression ads? $0.10 CPM sure, but $0.10 CPI?

------
alttab
This isn't news IMO.

------
anti-shill
this puppy is gonna come crashing down...just like real estate bubble a few
years ago....what will be the effect? Less online content, I guess.

~~~
fapjacks
That is the fear, certainly. But I don't think so. I am thinking that
advertising will become more aligned with the content, and ad-publisher
relationships will become more organic. Now, I'll also readily admit that I
think cooperatives are the future of business, so I can see where people
wouldn't agree with my crystal ball vision of the future of advertising.

------
curiously
this is a huge market correction just waiting to happen. I'm glad, it should
take these annoying banner ads out once and for all.

~~~
logicallee
If you see banner ads (without clicking) you have the same experience as
everyone else who actually sees them.

Maybe the reason you notice them and they bother you, is because the _amount_
of your attention that that experience has to take up has to be so great that
your peers' attention is worth the payment even when that attention is divided
by 10 (if we assume 90% click fraud.)

In other words, given no other change except eliminating payments to non-
person audience members, you might find the Internet is suddenly filled with
advertisement that violently takes only 1/10th as much of your attention as
currently, since the money is being spent on you and your peers only; and not
on you, your peers, and then botnets and other dilution.

Put yet another way: the leakier the transaction between you (real user) and
advertiser, the worse the experience you have so as to make up for it.

Let's put some numbers on it!

Let's say _everyone_ is happy to buy a banana online and the profit is 20
cents. Then if click fraud is 0% and the cost of an ad is 1 cent, a 7% click-
through is fine: it costs 14 cents to get a customer, leaving 6 cents profit.
Any more than 7% click-through is pure profit.

But raise the click fraud to 90% and suddenly 7% won't do it: the real ad cost
is now 10 cents, and instead of 7% click through you now need 70%
clickthrough.

So the ad will be much, much louder.

~~~
fineman
> So the ad will be much, much louder.

And you figure that'll make the ad-haters click it more?

Also, that 10cent ad is much more ripe for the picking than the 1cent one. All
of a sudden you're attracting click-fraud attention from far more
sophisticated attackers. And driving more "normal people" to ask a techie to
hide these annoying dancing bananas (and all others ads at the same time.)

I don't really think you've thought this through to the endgame.

~~~
logicallee
I don't know. Consider television advertisements. A 90% fraud rate (false,
fraudulent, invented impressions) versus a 0% fraud rate baked into impression
numbers reported to advertisers surely would affect how much sales movement
they have to show, doesn't it? I mean sure, as the other comment pointed out
cpc prices must in some sense rationally reflect the fraud amount.

But nobody is perfect, no market is perfectly rational and efficient, and at
the end of the day the quality of advertisement that next to no real person
sees must be different from one where every impression paid for gets seen by a
real person... (including you and me.)

It would be a strange world otherwise.

------
Vegemeister
Good. Every dollar that buys an ad shown to a robot is not buying an ad shown
to a human.

~~~
nfoz
I am extremely against advertising, but even though this is money being spent
towards something that offends and antagonizes me, I still think that fraud in
the industry should be called out and fixed.

