Ad fraud loss slides to $6.5 billion worldwide

Digital ad sales are up and vendors are clamping down on fraud schemes designed to siphon cash from the industry.
Written by Charlie Osborne, Contributing Writer

Digital advertising fraud remains a thorn in the side of advertisers worldwide, but in a surprising turn of good news, the industry's financial losses are taking a downward spiral.

According to White Ops and the Association of National Advertisers' (ANA) latest Bot Baseline report, in the US, advertising fraud will cost companies an estimated $6.5 billion globally this year, which is down 10 percent from approximately $7.2 billion in 2016.

Advertising fraud can take a number of forms: Malvertising, the submission of seemingly legitimate ads that lead to malicious links; click-fraud, the use of botnets to generate illegitimate "eyeballs" on adverts for payment, and retargeting fraud are only some of the methods employed to make money for criminals.

However, it appears that ad networks and companies at large are beginning to wrestle control over the spiralling problem.

The report used data and measurements from 49 ANA member companies between October 2016 and January 2017 and includes brand advertising but not search-based buys, pay-per-click buys, or paid social media campaigns.

According to White Ops, paid traffic acquisition -- a legitimate, common method to promote websites to larger audiences -- is at major risk for fraud. Bots are often used to provide this traffic in fraudulent campaigns, which gives attackers the opportunity to cash in while the botnet's slave PCs pretend to be legitimate viewers.

When successful, such as in the case of Methbot, fraudsters can walk away with millions of dollars per day siphoned from companies worldwide.

Bots, including websites specifically created for bot fraud called "cash-out" sites, are still an issue as they are becoming better at resembling human behavior and avoiding anti-fraud detection systems.

The implementation of mechanisms such as cursor movement, pausing, and other browser behavior have made detection more of a challenge, accounting for much of the fraud-based losses that advertisers face.

In addition, mobile fraud is on the up.

Mobile web videos are a "hotbed" of fraud, according to the report, but as few video ads are viewed or seamlessly integrated into mobile browsers, marketers receive little reward for promoting this kind of advertising above other types and so the rate is still minimal in comparison to desktop-based fraud schemes.

In the past, there were high levels of risk associated with programmatic advertising, the use of software to purchase ads, but the company says that today, programmatic advertising is "no better or worse" than traditional, direct, human-exchange advertising deals.

"Many programmatic platforms have been able to outperform direct buys thanks to the introduction of strong security measures that remove bad actors and discourage publishers from experimenting with risky traffic sources," WhiteOps says.

However, fraud levels do tend to jump at holiday periods, such as Black Friday and Cyber Monday.

With digital ad spending is expected to increase by 10 percent over this year, it is becoming more important than ever that both legitimate online services and advertising networks keep fraud under control through methods including blacklisting, active engagement and training, and the use of fraud detection solutions.

It is important to note that the companies included in the survey may not reflect the industry as a whole due to the implementation of strategies and tactics to fight fraud, however, they do highlight that it is possible to lessen financial losses caused by unscrupulous cyberattackers and fraudsters.

When analyzed, extrapolating the survey members as an industry standard puts ad fraud financial loss at only $3.3 billion worldwide.

The best fighters of ad fraud in the top 20 percent, when extrapolated, projected a loss of only $700 million to avertising fraudsters worldwide in 2017.

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