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Ad Fraud Creates Worry For Some, Opportunity For Others

Welcome to Your New Sales Pitch: 'We're Fraud Free'

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With its glaring fraud problem now exposed, the digital ad industry is scrambling, looking for solutions to show it's dealing with an issue that appears out of hand.

For some, that scrambling means pressure from clients and bosses who are demanding they bring the situation under control. For others, it means opportunity and in some cases a new lease on life.

Welcome to ad tech's hottest new sales pitch: "We're fraud-free!"

"It's obviously creating a big boom for us," said Joe Marchese, CEO of True[x], an ad-tech company which creates ads requiring human engagement to unlock content. Since True[x] ads are unattractive to fraudsters, the company is winning over new customers looking for fraud free environments, according to Mr. Marchese.

"What fraud is doing is making this category of engagement advertising, raising it up quite a bit and saying that this is our anti," he said. "This is a space where we know there are human beings."

True[x] has already booked twice as much revenue for the second quarter of 2014 than it did in the same quarter of 2013, largely due to new positioning. "Even pre everyone buzzing about fraud, we were doing the right thing," Mr. Marchese said. "It's almost unfortunate that it took a lot of nefarious actors in the industry for people to learn what the right format would be for them all along."

David Sendroff, founder and president of Forensiq, said his company has grown dramatically since pivoting from detecting affiliate fraud to detecting ad fraud in early 2013. "We've tripled our staff since we've pivoted," he said. "It's the right thing to do, but it's also the right thing to do from a business perspective."

And as more advertisers seek to tie ad performance with concrete sales results (instead of gameable metrics), companies enabling such attribution stand to gain as well. "When we bring it to their attention during the sales process, they say that's exactly what we need," said David Perez, CMO of attribution and measurement firm Convertro, of his company's fraud-busting offering.

Another bubble?
There may even be VC money available for fighting fraud startups, said Taylor Davidson, director of kbs+ Ventures. "The concern of many VCs about investing into companies focused on fighting ad fraud is whether it's a stand-alone business or a feature of the various companies incented to fight fraud," he said. "That said, there will be more funding into the space."

Integral Ad Science, which has a fraud detection product, is seeing a growing number of inbound leads, according to its CEO Scott Knoll. "As of late, we've certainly been getting a lot more calls and interest in our ability to detect fraud and prevent fraud," he said. "We've increased the scope of what we do with a lot of the advertisers. They're understanding now that they're wasting a lot of money."

Integral has added over a dozen people to its fraud detection team in the past year and doesn't plan to stop there. "We've definitely added to the team and we'll continue to add to the team," said Mr. Knoll. The company, he said, has been detecting fraud since 2011 and in market with a product since 2012. Burt interest picked up of late.

Mr. Knoll said Integral will be in the fraud fighting business for the long haul. "At some point it becomes more manageable, the amateurs are completely gone, and you still have people in lab coats trying to fight it, similar to the McAfees of this world who are continuing to fight that kind of fraud," he said. "There's no silver bullet. The problem is not going to be eliminated."

Of course, the whole situation might look a bit funny. The digital ad industry let the fraud problem grow, and now that it's blown up, there are companies booming as the cleanup effort gets underway. But Mr. Knoll said it would be a mistake to raise an eyebrow.

"Let's not lose sight of the big picture which is, right now there is an unacceptable amount of money that is intended to be used for marketing that is going to the bad guys," he said. "They are stealing and every dollar that can be kept out of their hands is good for the industry. If there are some companies that make some money keeping dollars out of the bad guys' hands then, you know what? So be it."

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