What the Industry's New Plan to Fight Ad Fraud Gets Wrong -- and Right

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The Interactive Advertising Bureau's Tech Lab recently released a blueprint of sorts that, in theory, would prevent another Methbot from happening.

Methbot, of course, is the ad fraud attack from late last year that has been crowned by some as the biggest in history. (Others disagree.)

The IAB's effort, blandly dubbed "ads.txt," has been applauded by both publishers and ad tech vendors as a step in the right direction in the fight against ad fraud.

But that doesn't necessarily mean it will succeed.

In short, ads.txt prevents fraudsters from selling inventory that says it's from the New York Times but in reality comes from www.YouJustGotScammedSon.biz.

As it stands today, there is no such thing as an authorized reseller of ad inventory. Anyone reading this can buy and resell inventory, regardless of criminal background, geography or whatever, right now. No certification or training necessary. That sort of wild west atmosphere allows hackers hell-bent on selling phony impressions access to marketers with deep pockets.

And it's how Methbot allegedly bilked marketers of $3 million to $5 million a day.

Nobody really knows how much is lost to ad fraud each year, but many agree that the number is in the billions. Adloox, an audit verification company, claims $12.5 billion was siphoned from marketers in 2016. White Ops, meanwhile, has pegged the number at $7.2 billion, but said Wednesday that it will actually go down to $6.5 billion in 2017. (Adloox, meanwhile, says it will go up to $16.4 billion the same year).

Here's what the IAB Tech Lab hopes to achieve
The IAB's ads.txt attempts to block fraudsters by creating an index of authorized resellers and publishers. If Time Inc. wants to do business with a reseller like Undertone, for example, they can add each other to ads.txt. And thus, transparency manifests.

"It can function in a similar way like the little chips in your credit cards," said Peter Spande, chief revenue officer at Business Insider. "It's a secondary level of authentication for a buyer and a seller to create a digital handshake and say, 'Yes, this inventory is genuine.'"

Sounds fantastic. What's the beef?
Spande and others are excited about what ads.txt could achieve, but a lot hinges on whether or not it's widely adopted. Insufficient takeup has the very real potential of unraveling the entire effort.

Marc Grabowski, exec VP of global supply and business development at Criteo, said he believes publishers may flinch when it comes to using ads.txt because it might be too transparent. It could allow marketers enough insight to see what the publisher is selling his or her impressions for elsewhere, according to Grabowski.

As it stands today, publishers sell their inventory through a litany of different silos that include their own direct sales teams, demand-side platforms and sell-side platforms. Prices are not the same for each of these channels, but publishers want to fill 100% of their inventory at the highest prices... or at least make sure the market sees high prices.

But publishers often offer different ad rates in different channels. Adopting ads.txt would let marketers figure out what others are paying for the same inventory.

"It's a double-edged sword," Grabowski said. "It is a trade-off between sustaining a higher CPM rate versus fill."

Another issue is that protocols like ads.txt are often adopted by region, with the U.S. being the first. Marketers in Europe or elsewhere that buy ads from stateside publications -- luxury brands, automotive -- likely won't care if a publisher has ads.txt or not.

And that could stunt ads.txt's growth.

Still, it's early days for the IAB's ads.txt. The intiative is open for public comment right now, and some of these concerns could be addressed in its final release.

Like Spande, Grabowski feels ads.txt is good for the industry, but also has his concerns.

"There are so many publishers globally who have different business practices and we don't think there will be a single solution that all are going to fall in line with in a short term," Grabowski said. "Every publisher is going to try and get some level of an advantage on either CPM or fill rate."

"I don't know if this is going to be adopted uniformly right off the bat," he added. "Over time, potentially."

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