Digital Ad Fraud: We Need an Intervention, Not a Committee

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'A camel is a horse designed by committee,' the saying goes.
'A camel is a horse designed by committee,' the saying goes. Credit: iStock
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"If you see a snake, just kill it -- don't appoint a committee on snakes." -- Ross Perot

The digital media marketplace is overrun with snakes ... and the Association of National Advertisers is proposing the formation of a committee to solve it.

Digital advertising's "chaotic supply chain problems" (the prevailing euphemism for fraud, malware, bots and ad-blockers) have reached epidemic levels. And while digital media spending is projected to surpass TV in 2017, the annual cost of fraud and waste grows even faster, totalling billions of dollars in the United States alone. A quick update on just several of the numbers:

  • The Interactive Advertising Bureau estimates ad fraud, maladvertising and ad blocking cost the U.S. marketing and media industries $5.8 billion in 2015.
  • Multiple studies have determined that at least 33% of all Web traffic is considered fake: viruses hijack computers and program them to visit other sites; marketers are tricked into paying for nonexistent traffic; devices are hijacked and ads are filled unseen in the background.
  • An estimated 70 million U.S. internet users, or 26% of the U.S. population, used an ad blocker in 2016, and that number is continuing to grow. The cost to advertisers will total more than $1 billion in 2016.
  • FraudLogix reported 50% of ad impressions served to Internet Explorer, and 20% of those served to Google's Chrome browsers were "nonhuman" traffic.
  • Based on a two-month test in late 2015, White Ops and the ANA, partners in the Bot Baseline report, estimate the advertising industry overall could lose approximately $7.2 billion globally to bots in 2016.
  • The World Federation of Advertisers estimates that within the next decade, fake internet traffic schemes will rank 2nd only to drug trafficking as organized crime's largest revenue source.

ANA CEO Bob Liodice described the industry as currently "unproductive, unsustainable and undesirable." He delivered this harsh, yet honest industry assessment, but then disconcertingly recommended forming a committee to solve it. The new "initiative" calls on CMOs to join in a unified leadership effort to transform the marketing industry. This "Masters Circle" will attempt to address industry challenges such as talent supply, privacy, ad fraud, ad blocking, viewability and transparency. Laudable goals, to be sure, but inadequate for the current crisis. Rome is in danger of burning to the ground. Decisive action, not committees are needed.

The first step towards a solution is acknowledging there's a problem.

Collective institutional memory might be instructive here. Forty years ago, FSI's (Free Standing Inserts) were a major element of nearly brand manager's tool kit.

  • In 1977, about 72 billion coupons were issued, with total coupon face values of about $14 billion. More than 5%, or about $720 million worth of coupons, were redeemed. But manufacturers and the U.S. Postal Inspection Service (USPIS) suspected at least 15% of the redemptions, or $108 million -- $430 million in 2016 dollars -- were fraudulent.
  • The USPIS and the industry went on the offensive. They issued a $.25 coupon in the Metro New York area, for Breen, an exciting new, albeit non-existent detergent product. The coupon generated a 2.5% redemption rate. As a result of the sting operation, 26 retailers were indicted.
  • Even more important for the long term health of the supply chain, manufacturers accepted the fact they needed to change their couponing practices to prevent fraud.

CMO's don't need a digital advertising committee. CMO's need a digital advertising intervention.

  • The brand building capability of most digital media platforms remains a highly debatable issue.
  • It's not an exaggeration to say we're enabling fraud levels in 2016 thirteen times greater than the unacceptable coupon fraud levels in 1977 ($430 million x 13 = $5.6 billion versus $5.8 billion).
  • We know the fraud and waste are occurring, and yet we continue to enable it with double-digit digital advertising spending increases nearly every year.
  • We're enablers for the reckless manner in which we keep spending, despite the fact most CMO's continue to struggle to attach any ROI to their digital advertising dollars.

The final step in the digital advertising recovery process may require quitting.

CMO's are reportedly now the most likely C-suite players to get fired when companies miss their growth targets. Yet they continue to approve digital media spending increases, while still struggling to attach any ROI to a major budget expense. Furthermore, the long-term, brand-building capacity of many platforms is unclear.

Don't hesitate to kill the snake, i.e. eliminate the ineffective and fraud-filled digital advertising spending, and take those dollars to the bottom line.