How fraud is disrupting the ad industry

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For the past few years, the ad tech industry seemed brimming with optimism. With new devices and media abundantly available to marketers today, advertising seems perfectly poised to make a positive difference for brands. We've seen bright-eyed headlines highlighting the "year of mobile," "rise of programmatic," the "era of wearables," and so forth. So, how, amidst all the creative possibilities, has the issue of ad fraud spiraled out of control in the past year?

The research is damning. Some verification companies are reporting ominous statistics that half of web traffic isn't human, and consequently, brands are losing $6 billion every year to "fake" impressions.

How fraud is disrupting the ad industry

The numbers are certainly incredible. We've diagnosed the problem and, rightfully so, concerns have spread like the plague. Scammers have always existed in the ad space, but the sophistication of modern day fraudsters is starting to make the fraud tactics of yesteryear look like child's play. For this reason, all parties in ad tech -- both buyers and sellers -- are now scrambling for the solution.

When we magnify the problem, we have to take a closer look at several facets: how it seemed to proliferate so rapidly, why it has become ubiquitous in our industry, how numerous parties play roles that support fraud's existence, and finally, what can be done to eradicate the issue.

How fraud came to be

When we think of key performance indicators (KPIs) and success metrics, "clicks" still come to mind. Our metrics are still heavily performance-based, and advertisers still demand to see these numbers. These demands drive vendors to purchase cheap inventory, which may translate to more counted conversions, but little to no increase in sales, revenue, or ROI. And as more and more media are bought and sold in programmatic environments, the rate of ad fraud, as well as the sheer number of transactions occurring daily, is only going to increase due to a lack of human transparency. Open exchanges offer a cornfield of sorts for the fraud industry: The fake sites, or sites riddled with bots, are primed to inflate whatever KPI is needed to hit an advertiser's goal. And with their backs against the wall, buyers have had no choice but to shift budget to those "high performing" environments.

Ultimately, the buying and selling process within the industry has long supported the existence of ad fraud. Wherever media spending is significant, fraud has the potential (and demand) to grow. Only recently have fears reached critical mass due to technological advances on the programmatic front.