Why Ad Fraud Is a Bigger Threat Than We Thought

Digital ad spending in the United States was expected to top $129 billion in 2019, accounting for 54.2% of total media ad spending. Given the increased popularity of online browsing and buying, it’s no surprise e-commerce retailers are increasingly turning to digital advertising over traditional print and television advertising.

Although merchants are finding digital ads more effective in reaching their target customers, the approach is not without risks. In fact, merchants worldwide lost an estimated $7 billion to ad fraud in 2016. But those aren’t the only costs. Ad fraud can also result in a poor-performing campaign, decreased conversions and low viewability scores.

But this doesn’t have to be the result of digital ads. Merchants who understand the effects of ad fraud on their business can take actionable steps to prevent it. Here’s how to get started.

What Is Ad Fraud?

Ad fraud is essentially invalid traffic to a website, whether intentionally or unintentionally. One of the most common forms of ad fraud is click fraud — when fraudsters, malware or hijacked devices send ads to invalid destinations, which means your target audience never sees your ad. Other common types of online ad fraud include impression, conversion and data fraud.

These fraud risks are on the rise, thanks to a corresponding increase in programmatic buying, a practice that lets merchants attract their audience’s attention in real time. Programmatic and video ads tend to carry the highest fraud risks for merchants — thanks to a lack of a human connection in the transaction and higher cost-per-thousand view rates, respectively.

And because ad fraud carries almost no risk for fraudsters but offers comparatively higher payout potential, it’s something merchants must be mindful about.

Why Ad Fraud Is a Problem

With an average ad spend per online user that’s 455% above the global average, North America is the largest digital advertiser in the world. But with robust spending comes an increased risk of fraud. TrafficGuard and Juniper Research estimate that in the next five years, advertisers will lose $100 million a day to ad fraud, up from $44 million in 2018. To make matters worse, the same study expects more than 20% of ad transactions will be derived from fraud by 2023. Advertisers of shopping apps were reportedly at an increased risk, losing $275 million to mobile app ad fraud in 2018.

Fraudulent app installs now make up 11.5% of all ad-driven installs, with bots producing 30% of these installs. Even worse, marketers had more than $800 million in mobile app fraud losses in 2018 — a 30% year-over-year increase.

While ad fraud is common, it’s also unusual in that organized crime has not yet become a major player. But experts warn that the emphasis is on “yet.” With so much potential profit to be made, they say it’s only a matter of time before organized crime rings jump in to get their share.

Part of the reason ad fraud is on the rise is, as with most types of fraud, it’s constantly evolving. Cybercriminals don’t simply give up when one attack method is blocked, and the industry starts cracking down. Instead, they look for new vulnerabilities and new approaches that will yield even better results and keep e-commerce merchants struggling to keep up.

Fraudsters are now hiding software deep within browser plugins that can launch click fraud attacks, inject scripts onto websites and more. And with users eager to download and install new plugins that make life easier, users may actually be installing malware that steals from them — and from you if the customer visits your website.

But the icing on the cake just may be that these threats are so subtle that customers and merchants don’t even realize that they’ve been compromised. And unsuspecting victims are perfect for spreading that infection across multiple sites and stores.

What Can E-Commerce Merchants Do?

Because it can be so hard to identify ad fraud, merchants might be concerned there’s nothing they can do to prevent the negative effects.

Some experts say that’s OK — that as long as fraud isn’t negatively affecting merchants’ conversion rates, it might be safe to leave well enough alone.

But merchants who want to tackle the issue head on can consider implementing these strategies.

Create Safe Content

It might sound too easy to work, but if you’re creating and publishing original content — not to mention building your own platform and having technical personnel on staff — you can increase the chances you’re reaching your target audience and making your campaigns less susceptible to fraudsters.

Monitor Website Traffic

Many e-commerce merchants don’t know a lot about their own website traffic, including where it’s coming from and what impact it’s making on their business. And that can be a critical mistake. To improve conversions and to protect your website against subtle attacks, make sure you have experienced personnel assigned to monitoring and analyzing website traffic.

Develop Relationships With the Right Partners

Publishers, agencies and other media owners have begun coming together to pool their knowledge and resources to fight ad fraud and filter out fake traffic. With the rise in fraud, it takes a diverse team — not just one or two companies on their own — to help secure digital ads.

You should also ensure your publisher uses domain or bot detection tools and ask how they’re reducing ad fraud. Don’t forget to ask for a list of tools they’re using to confirm ad viewability.

Knowing that you’re developing partnerships with like-minded agencies and companies can help you reduce your exposure while giving you access to a broad spectrum of industry expertise.

This is also a good approach when you’re looking for trusted partners to protect your business against card-not-present fraud, chargebacks and false declines. At ClearSale, we don’t think you have to accept fraud as just another cost of doing business. Our unique combination of advanced artificial intelligence and expert human analysis means you can confidently leave fraud protection to us while you put your focus back on growing your business. If you’re interested in learning more, just contact us. We’d be happy to help.

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