Fraud in the area of Internet advertising 1

Fraud in the area of Internet advertising

October 8, 2019 | Media
Dobromir Ciaś on the problem of the online advertising market

The size of the Internet advertising market will reach USD 316 billion (i.e. EUR 280 billion) in 2019. This is more than China’s budget for armaments and the military, and it is approximately three times the annual budget of the Republic of Poland. The European Internet advertising market according to the IAB has a value of about EUR 55 billion (2018) and in Poland, it amounts to PLN 4.6 billion (2018). It is a market with an annual growth of several percents: according to forecasts, in 2019 the value of this market in Poland will grow to as much as PLN 5.6 billion, and Internet advertising gradually gains an advantage in the proportion of total advertising expenditure, including all other media.

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Due to its size, the online advertising market is a tasty treat for dishonest players. According to Jupiter Research, the value of misappropriated money in the global online market in 2018 amounted to 42 billion dollars. This represents 13% of Internet advertising expenditure. The same company estimates that the percentage of embezzled expenditure increases year on year by as much as 21% (2019 vs. 2018). The World Federation of Advertisers estimates that the value of money misappropriated for advertising will reach $50 billion by 2020.
Advertising fraud is one of the largest black markets globally and, due to its financial scale, it only gives way to the drug market and the human trafficking market. The online advertising fraud market is more than 10 times greater in financial terms than the estimated turnover resulting from the illegal trade in and smuggling of small arms.

The genesis of fraud in the advertising market is certainly influenced by the long-established balance of power between commercial players and the huge disproportion between the supply and demand for advertising space, which is becoming more and more stratified over time. Let’s take a look at a few facts:

  • The Internet advertising market has been growing every year in double digits, for several years (from 2015 to 2018 – 21% every year). Of course, the fast-growing online advertising market is generating a growing demand for advertising space.
  • On a global scale, the growth of Internet users is at a low level, expressed in single percentages, and in Poland, it practically does not change.
  • Existing advertising spaces of publishers are increasingly sold in the programming system, i.e. the previous, dominant model of direct sales is being replaced. In practice, for publishers, this means the possibility of more certain advertising space (because specialised platforms provide the purchase stream), but at the same time, their margin must be lowered due to the emergence of intermediary entities. Programming platforms take from a few to several percent of the transaction value from both sides (buyer, publisher).
  • The use of ad-blocking plugins is growing year-on-year. In Poland, as many as 46% of advertisements are blocked by AdBlock plug-ins. This is an increase of 8% compared to the previous year.

What does that mean? Even if we consider the annual increase in online advertising rates (depending on who estimates the increase between 4-8% for display advertising and 6-10% for video advertising), such a huge increase in interest in online advertising expressed in double-digit sales dynamics cannot be covered by the supply of advertising space. There are too many factors, which for the publishers themselves limit the possibility of keeping up with the demand – unchanging population, AdBlock mechanisms, weakening of the margin on programmatic mechanisms. Although the available advertising space (the so-called ad inventory) is increased by the yield management, i.e. optimized management of space display in the growing programming model, even taking the above into account, it should be stated that money on the advertising market is growing faster than consumers who would be able to watch these advertisements.

The gap between supply and demand is growing faster, especially in the case of modern and more multimedia forms of advertising – video and rich media. Market conditions are also subject to strong competitive pressure: the margin of media houses has melted over the last few years and the main selection criterion is the price. At the same time, the prestige and willingness to cooperate with publishers depend – as it has always been the case in the media – on their ratings. The longer the reach and the bigger the audience, the better the publisher can count on the market reception.

In the face of these trends, dishonest players in the media market want to adopt growing advertising budgets, but without having a real place (ad inventory) to implement them, they must themselves generate an excuse for the flow of money. There are situations in which campaigns are implemented in which the recipients are not living buyers but robots. “Printing the audience” means printing money, or rather the possibility of collecting it from the market willing to invest. Due to the fact that the market is growing faster in time than ad inventory, the percentage of frauds is growing year by year – hence the global and Polish estimates showing double-digit increases of frauds in advertising year by year. Before our eyes, a financial bubble is growing and one of the biggest financial embezzlements of the 21st century is emerging. Bots and artificial audiences are growing rapidly over time, which is indicated by the numbers coming from the social networking market: Facebook in the first quarter of 2019 removed 2.2 billion false accounts worldwide and this is nearly 2x more than in the previous quarter. It should be noted that Facebook officially reports that it currently has 2.41 billion active users per month and 1.59 billion every day.

What are the frauds in online advertising?

The mechanics of advertisement emission on the Internet is currently very complex. A single entry to every user’s website is nowadays associated with a complex process, in which numerous entities in a fraction of a second agree on the valuation of every advertising space. As a result of automated interaction between different players, the advertising ecosystem assesses whether and for whom (what kind of advertisement) the user’s entry to the website can be valuable and then, by means of real-time auctioning, the price of the advertisement is set. In such a complex, relatively opaque system it is not easy to find the moment of abuse and clearly identify the entity responsible for the abuse. What are abuse and fraud?

The most common and, at the same time, the simplest abuse is false impressions or false recreates of advertising. Research and audits carried out on advertisers’ campaigns show that at this stage there is a typical adulteration between 30 and 50% of traffic. Effects of this type are achieved mainly by the presence of bot’s impersonating living users, but other tricks are also used such as building invisible advertising page views for actual users or redirecting traffic from illegal sources; dishonest players are also able to earn money by overstating the reported effectiveness of the campaign by generating false clicks – in this case, there is also the use of robots or malicious software, which creates the so-called attribution fraud. Advanced robots that not only pretend to be living customers but also fill out forms with stolen or false personal data are becoming more and more popular. This is the case when an advertiser rewards an advertising network for obtaining so-called leads. If the criterion for settlement is shopping, we will find many examples of fake purchase engagement. It manifests itself in the fact that orders are generated which are never received, and in the case of such goods as software, bots farms massively order applications only in order to return them after a fixed period of time.

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Collision with the problem

Currently, more than 50% of Internet traffic is generated by bots and not by live users, which obviously translates into financial losses for individual “players”. The bitter effects of the audits hurt mainly advertisers and caused strong reactions. One of the entities initiating the discourse on fraud in advertising is Procter&Gamble. As early as 2017, P&G reduced its online advertising budget by $140 million due to the controversy over the quality of online advertising, and in 2019. Marc Pritchard, CEO of P&G, called on the industry to unite and act to create a new media supply chain based on quality and transparency: “Most companies are on track to provide a basic level of transparency by measuring visibility, third-party verification, transparent agency agreements, fraud prevention. Media providers who improve quality, ensure brand security and control their content will be preferred suppliers to P&G. ”. Until the case is resolved, P&G again reduced its digital advertising spending by $200 million in 2019, shifting this budget to other media. Unilever spoke for P&G, announcing a tightening of rigour in the verification of media entities with which it cooperates. Unilever Marketing Director Keith Weed said: “We want to know that the recipients of our ads are real people, not robots – bots don’t eat too many Ben & Jerry’s. We want to know that our ads are targeted at real people, not robots. We will defend good actors in the media market while reducing the role of bad ones. Unilever’s online ad delivery suppliers will need to be accredited with “strict verification criteria”.

Paweł Patkowski, Brand and Marketing Communication Director at Orange Polska, comments: “When running advertising campaigns, we want them to reach a precisely defined number of people. It is worth remembering, however, that it is not only the reach that counts but above all the quality of contact with our advertisement and the engagement of the recipient. Together with our business partners, we want to have full control over the quality and effectiveness of advertising. We do not want to pay for bots.

Advertising frauds not only cause losses for advertisers. They cause deep losses in the whole ecosystem, to which publishers and other entities participating in the media market belong in particular. Advertising frauds plunge publishers, depreciate their rates and are not only theft of money, but also a form of unfair competition. “We publish content for readers, not for bots. We do the same with the ads we broadcast to users, not to Internet programs. It’s time to change the rules of the market and start taking care of the quality of what we sell. – says Jerzy Wójcik, publisher of “Gazeta Wyborcza” during the June conference (IAB) Interact.

Marcin Perzyna, a producer and media expert, believes that “an artificially generated turnover movement will be difficult to combat because bad money always displaces good money. As an industry, we must jointly create regulations that will put the current situation in order”.

The only way we can fight the disease is together.

“Disease condition” – this is how you can define the situation of Internet advertising in the world and more and more entities are aware of the fact that you have to fight together to heal the situation. Individual entities – regardless of whether they belong to advertisers, publishers or media houses – are not able to control the situation 100% on their own. Neither can any of the parties be blamed for the current state of affairs.

In 2018 alone, Google, the provider of the largest advertising ecosystem, removed 2.3 billion non regulatory ads and more than one million accounts of rogue advertisers with its own filters. That’s 6 million ads removed per day! Globally, 734,000 rogue publishers have been removed from the ad network and ads have been removed from nearly 1.5 million apps. Due to the speed of developing fraudulent technologies, in 2018 Google introduced almost three times more anti-fraud classifiers in 2018 than the number of classifiers introduced in 2017. In 2019, Facebook for the first time in history filed a lawsuit against the creators of applications that, when installed on users’ smartphones, generated false clicks on ads published on the website. The functioning of both programs exposed both advertisers and Facebook, which returned lost money to their partners.

Olga Sztuba, a spokesman for Google Poland PR, says: “It is no secret that advertising fraud is a common problem in the advertising industry (…) For Google, it is crucial to cooperate with independent and specialized authorities, advertisers, research institutions, law enforcement agencies and other players in order to identify and eliminate potential threats. The market needs independent and specialised players to be able to concentrate together with Google in the fight against fraud.

Fraud on the advertising market and misinformation are two sides of the same coin.

In recent years, the phenomenon of electronic disinformation in the media, commerce and advertising has grown to dangerous proportions due to hate speech, trolling and the use of automated systems (bots), which were used both for political purposes (by some parties and politicians) and economic purposes (fraud in advertising and marketing campaigns). The tools and techniques used to spread disinformation on the Internet, developed by states that are hostile to democracy, are spreading wherever media professionals do not react and allow this phenomenon to spread. This has dramatic consequences mainly for the public sphere but also causes measurable financial losses on the Internet advertising market.

At the same time, since late 2018, we have witnessed the first coordinated police actions that identify globally active organised crime groups involved in millions of dollars of scams through false clicks and similar algorithms (digital ad fraud). Specialised criminal groups such as “3ve”, developed by the FBI and Google in November 2018, are active in the online advertising market. As the first clues of investigations indicate, disinformation and “digital ad fraud” are the systems of connected vessels. False web traffic drives online advertising expenditure, exposing advertisers to unjustified costs while spreading fabricated information and artificially ‘overclocking’ internet traffic.

Activities ensuring Internet traffics against disinformation is an element of solutions postulated by NATO since the summit in Warsaw in 2016, they are the subject of works of the European Parliament and the code of practice against disinformation adopted by the European Commission. A number of democratic countries, from the USA, Germany and Australia, are already taking coordinated action to protect information sovereignty in its broadest sense. The initiative to establish standards to safeguard information sovereignty must come out and must also be safeguarded by the main independent media market players.

In Poland, the SAR Marketing Communication Association, which signed the “Code of Conduct against Disinformation and Fake News on the Internet” (https://ec.europa.eu/digital-single-market/en/news/roadmaps-implement-code-practice-disinformation), is the initiator of the action, the aim of which is to interest and include as many advertising market participants as possible in the work on the implementation of standards of transparency and quality of Internet traffic. Currently, SAR is implementing the “Round Table” project, devoted to counteracting disinformation on the Internet, its consequences for network users, consumers and advertisers. Still in 2019, the first such a broad initiative of dialogue against fraud and disinformation is to be launched, which has been joined by many entities from publishers, media houses, advertisers, think-tanks and NGOs. In order to act effectively, it is necessary to make appropriate use of anti-fraud tools and technologies. “With broad cooperation of partners, we will be able to monitor the quality of online communication. Anti-Bots and Trolls Shield tools will be helpful in this process,” says Paweł Tyszkiewicz, managing director of the SAR Marketing Communication Association. Anti-Bots and Trolls Shield (ABT Shield) is a Polish technology that has gained recognition of Google itself and is currently co-financed by Google, as well as admitted to the global advertising system of the international giant. The technology is also used in NASK’s security systems and cooperates with other important malware detection tools. However, the tools alone are not enough, and new legislation and adaptation of the industry code is also needed. The Association of SAR Advertisers is implementing the plan:

  • signing of the declaration to fight against disinformation and fraud in advertising of a wide range of media market participants (the so-called “Warsaw Declaration”), which will be submitted at the level of European administration;
  • establishing a “code of practice”, i.e. a code of conduct which as a bottom-up law will be a set of rules that will be respected by media market participants and will determine the way of proceeding in case of detecting disinformation or advertising fads.

Firstly, awareness and secondly, cooperation

Since there are so many types of advertising scams, it is difficult to detect them. Sophisticated Invalid Traffic (SIVT), an abnormal movement, requires constantly updated advanced analytics and significant human intervention in order to detect unprecedented tactics of money fraud or the spreading of false content. The fight against bots, trolls and misinformation requires constant funding and, it must be clearly stated, is costly. We must remember the enormous inequality of power in terms of available budget and current expenditure – part of the money embezzled, which, as shown above, is not in millions but in billions of dollars, has certainly been devoted to the development of techniques of theft, manipulation and disinformation. However, it is worth realizing that the fight against these phenomena and mechanisms means, on the one hand, opposing mass-theft – one of the greatest economic scams of the 21st century – and, on the other hand, fighting for “purity of information”, which translates into the state of human minds, the condition of entire societies and the development (or protection) of a fair democracy. Isn’t it worth investing in it?

The strength of anti-fraud service providers, which fortunately are increasing and are trying to keep up with “bad things”, is that they can be useful to players on both sides of the online advertising ecosystem – both on the demand side (DSP – advertisers) and the supply side (SSP – publishers). Their activities are used to detect and block unfair activity during broadly understood media buying for advertising purposes. The key, however, is not only the technology but the cooperation of many entities and their unification in order to act in a common cause. The fight against advertising fraud and disinformation (also social) are two elements of modern cyber warfare, which has an impact on business, the public sphere and ordinary citizens. Our digital era, apart from a number of blessings, also carries enormous risks in this area, which we must oppose together. First, however, we must be aware of these threats in general. The next step is organised and effective cooperation.

About the author:

Dobromir Ciaś – founder of Edge NPD, a Polish technological company implementing, among others, a project to combat disinformation on the Internet (ABTShield). The seller of the New Europe 100 title awarded by the Financial Times, Google, Respublica and Visegrad Fund for the biggest innovators in Central and Eastern Europe, the winner of the Most Creative in Business Award. He has also been awarded several times by organisations connected with market research (PTBRIO, ESOMAR) and Sir Martin Sorell (WPP) for analysing the crisis in PL in 2008-2010. Prior to joining the Edge, NPD held managerial positions in MillwardBrown, SMG/KRC (currently Kantar group, WPP). He participated in over 1,400 research projects. He is the author of several publications on market analysis, analytical and research methods.