Ad Fraud Will Cost $7.2 Billion in 2016, ANA Says, Up Nearly $1 Billion

Study Recommends Better Understanding of Programmatic Supply Chain

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Talk to any marketer about the state of digital advertising and they'll enthusiastically share their thoughts on how far the industry has come, and how it can deliver better quality ads to consumers and generate more revenue for those involved when it's paired with cutting-edge ad technologies.

After all, domestic digital advertising revenue surged 19% to $27.5 billion during the first six months of 2015, a landmark high for the industry, according to the Interactive Advertising Bureau.

But whenever ad fraud is brought up those same marketers will usually shrug their shoulders and say something about how ad fraud is just part of the game.

So it might not surprise anyone that $7.2 billion is expected to be lost globally as a result of nonhuman traffic in 2016, and that the problem is just as pervasive as it was last year.

That's according to the Association of National Advertisers, which partnered with digital security company WhiteOps to conduct a study regarding the state of ad fraud. The ANA and WhiteOps previously estimated 2015 would see $6.3 billion wasted on ad fraud.

Fraudulent impression levels have "remained unchanged" when compared to last year, the new study said.

So who is getting hit and how hard?

Automated software programs known as bots, the primary vehicle for ad fraud, infected a range of advertisers, which reported that bots represented 3% to 37% of the impressions for their ads. That's up from last year, where bot percentages ranged from 2% to 22%, the study said.

Media sites that garner higher ad rates struggled more with bot traffic, unsurprisingly, as fraudsters tried to intercept ad buys that were worth more money.

Display media with at least a $10 cost per thousand impressions, or CPM, had 39% more bots than media with lower ad prices, according to the study. The upper end of video, where CPMs are generally higher, had 173% more bots than those with lower-CPM video media, the study said.

Programmatic ad buys displayed higher levels of fraud than digital advertising as a whole. Programmatic display ads had 14% more bots than the study's overall average, and programmatic video saw 73% more bots.

Campaigns targeting certain demographics, or retargeting potential customers, also frequently engendered bots. For example, programmatic buys with Hispanic targeting were nearly twice as likely to encounter bot traffic than non-Hispanic targeted media, the study said.

"The level of criminal, non-human traffic literally robbing marketers' brand-building investments is a travesty," Bob Liodice, ANA president and CEO, said in a statement. "The staggering financial losses and the lack of real, tangible progress at mitigating fraud highlights the importance of the industry's Trustworthy Accountability Group in fighting this war. It also underscores the need for the entire marketing ecosystem to manage their media investments with far greater discipline and control against a backdrop of increasingly sophisticated fraudsters."

To better combat ad fraud, the study's authors recommended a better understanding of the programmatic supply chain. Language on non-human traffic should be included in terms and conditions when making ad buys, they added, suggesting that buyers should consider writing into insertion orders that they will not pay for fraudulent impressions.

Other recommendations included registering with TAG, the marketing industry's Trustworthy Accountability Group, to become identified as a trusted business partner.

Data was collected from nearly 10 billion online advertising impressions across 1,300 campaigns over 61 days, from Aug. 1 through Sept. 30, 2015. About 49% of ANA member companies participated in the study.

The financial impact averaged about $10 million per participant, the study said.

"In problems of security and fraud, the 'attacker's advantage' of only needing to find one weakness in a defense is well understood," White Ops CEO Michael Tiffany said in a statement. "The study highlights the challenges faced by the advertising ecosystem as defenders, and the many techniques that a sophisticated, persistent adversary can exploit within the online advertising industry."

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