Online Ad Fraud Costs Advertisers $5.8 Billion Annually (#GotBitcoin?)
Ad spending lost to schemes declined 11% since 2017, but fraud is shifting to platforms where it is more difficult to prevent. Online Ad Fraud Costs Advertisers $5.8 Billion Annually (#GotBitcoin?)
Online Ad Fraud Costs
Marketers are expected to waste $5.8 billion this year on buying online ads that will be viewed by bots instead of humans, a study published Wednesday found—an 11% decline from the amount the group estimated was lost to fraud in 2017.
But ad-fraud schemes on other platforms have quickly risen and been much more difficult to measure, according to the study, which was conducted by the Association of National Advertisers and fraud-detection company White Ops Inc.
For years, marketers, publishers and researchers have labored at the Sisyphean task of fighting the industry scourge of so-called bots, computer programs that mimic humans’ mouse movements and clicks to give the impression that a human is visiting a website.
Fraud-detection companies have created technology to detect and block bots, making ad-fraud schemes more costly. Ad fraud also has become more legally serious: The Justice Department charged eight people implicated in ad-fraud schemes last November.
“There is a point at which ad fraud becomes substantially less attractive,” said Michael Tiffany, co-founder and president of White Ops.
The greatest strides against ad fraud have been made in desktop display advertising, the study found. Such ads made up the majority of ad impressions observed in this year’s study, which tracked online ad buys by 50 brands from August through September.
The $5.8 billion that the ANA and White Ops expect to be wasted on ad fraud represents less than 2% of eMarketer’s predicted $333.25 billion in digital ad spending for 2019.
While the results are encouraging, the study was hardly representative of the broader digital ad industry. Its participants showed above-average use of fraud-prevention measures.
Of publisher domains considered in the study, 78% were covered by Ads.txt, an industry initiative that lets publishers display a simple text file on their sites listing every company authorized to sell their ads. Of advertisers buying ads in the study, 90% had verification measures in place to prevent their systems from purchasing fraudulent traffic. The report also excluded certain types of advertising, such as search and paid social-media campaigns.
“Continued measurement, continued vigilance is still a must because the forms of fraud are flowing into areas that are less measurable and more lucrative,” said Augustine Fou, an independent ad-fraud researcher who reviewed the report. “They’re accurately reporting on what they can see.”
Online Influencers Tell You What to Buy, Advertisers Wonder Who’s Listening
Billions are paid to social-media personalities to pitch products in an influencer economy riddled with deceit.
Ipsy, an online cosmetic brand, was a pioneer in paying social-media stars hefty fees to promote its eye shadow and lip gloss in Instagram posts and YouTube videos.
Now, the brand is leading the way again, this time by pulling back.
Companies will funnel billions of dollars this year to the online personalities, known as influencers, who pitch their products on social media. Yet with no way to measure sales or verify how many people even see the ads, the companies that paved the way for the influencer economy—mostly early adopters like Ipsy—are questioning if it’s worth it.
What began as friends and family sharing their favorite products has become a lucrative advertising industry of celebrity endorsers, influencers and meme creators. Such paid endorsements, known as sponsored content, are the online equivalent of a 30-second TV spot. Big-name stars can command $100,000 or more for a single YouTube video or Instagram photo.
ut a whiff of deceit now taints the influencer marketplace. Influencers have strained ties with advertisers by inflating the number of their followers, sometimes buying fake ones by the thousands. They also have damaged their credibility with real-life followers by promoting products they don’t use.
“All these paid posts make you question whether influencers are genuine or just doing it for the money,” said JaLynn Evans, a 19-year-old student at Virginia Commonwealth University.
The loss of trust undermines the power of influencers, according to Marcelo Camberos, Ipsy’s chief executive. “Have they peaked? I don’t know,” he said. These days, the firm is recruiting its own customers to post products—for free.
Accurately tracking the effectiveness of influencer advertising is difficult. By one measure, their influence is waning. Engagement rates, which measure the number of “likes” a post generates as a percent of a person’s followers, are down this year, compared with the same period last year, according to InfluencerDB, which makes tools to help brands manage influencer campaigns.
“Consumers can see if someone honestly cares about a product or whether they are just trying to push it,” said Anders Ankarlid, chief executive of online stationery retailer A Good Company. “The bubble is starting to burst.”
Advertisers can’t ignore social media. Instagram alone has more than 1 billion monthly users. Mediakix, an influencer marketing agency, estimates companies will spend between $4.1 billion and $8.2 billion globally in 2019 on influencers. That is up from $500 million in 2015, but still a fraction of the $624.2 billion companies will spend globally this year on advertising, according to an estimate by media buying agency Zenith.
Walmart Inc. this year began adding influencer posts to its website to promote products such as Sofia Jeans by Sofia Vergara and a home collection by blogger Liz Marie. Last year, Unilever PLC warned that fraud undercut the power of influencers. Yet in June, its investment arm agreed to buy a stake in a software company that helps brands oversee influencer campaigns.
Despite questions about declining influence, the money paid Influencers keeps climbing—roughly 50% a year since 2017, according to Mediakix, which helps match brands with influencers. Prices per Instagram post range from $200 for an influencer with as few as 10,000 followers to more than $500,000 for celebrities with millions of followers, according to Mediakix.
A lawsuit this month hinted at the sums paid the biggest celebrity influencers. The singer Ariana Grande sued Forever 21 Inc. for allegedly stealing her likeness after she rejected an endorsement deal with the clothing retailer.
Ms. Grande, who has 165 million Instagram followers, accused the company of hiring a look-alike model for its Instagram posts and website. The model wore a hairstyle and clothing similar to what the pop star wore in her “7 rings” music video, which has more than half a billion YouTube views.
“The market value for even a single Instagram post by Ms. Grande is well into the six figures,” said the lawsuit, which seeks at least $10 million in damages. Forever 21, in a statement, disputed the allegations.
Akash Mehta, an influencer with 293,000 Instagram followers, was recently offered five times his $2,000 asking price for a single post. He has been paid by such well-known brands as Volvic water and Swiss watchmaker Ulysse Nardin SA. The big offer, he said, “was a turning point for me. It made me realize that influencer marketing has gone wrong.”
Mr. Mehta said he accepted the payment, but he didn’t believe he could deliver five times the value of what he usually charges.
Some established brands also see trouble. Kellogg Co. , which paid the endurance athlete and Special K fan Sophie Radcliffe to post about her love of the cereal, said standing out from the crowd has gotten tough. “Consumers are wising up to how influencers work,” said Joseph Harper, Kellogg’s e-commerce marketing manager for Western Europe.
Sensing the shift, some companies are rethinking how they use influencers. Banana Republic, which has used such high-profile influencers as Olivia Palermo, a socialite with 6.2 million Instagram followers, is also tapping its own customers. The Gap Inc. -owned clothing chain has real-life shoppers pose in their favorite Banana Republic outfits on Instagram, in exchange for $150 gift cards.
Cassie Fisher, 21, was one recruit who said she had soured on influencers with no connection to the products they promote. What sets her apart from influencer phonies is that she was already buying most of her clothes at Banana Republic when the brand reached out to her, she said.
“My friends and I are sick of being sold things all the time,” said Ms. Fisher, a student at University of South Florida with 1,342 Instagram followers. “When you scroll through your Instagram feed, it’s one sponsored post after another.”
Mr. Mehta, the influencer, also worked as a digital media manager for Christian Dior SE and Estée Lauder Cos. overseeing their influencer-marketing programs. He said companies don’t always know what they are buying.
“When you pay for a billboard, you know roughly how many people will see it,” said Mr. Mehta, 25. “With Instagram you have no idea. Followers can be bought.”
A Good Company, the online retailer, worked with 4,000 influencers to promote its eco-friendly stationery and other office supplies. It paid them cash or gift cards for their social-media posts.
The company, which didn’t get its expected sales boost, sent an anonymous survey to their influencers, asking if they had ever paid for followers, likes or comments. Nearly two-thirds of respondents said yes, Mr. Ankarlid, the CEO, said.
HypeAuditor, an analytics firm, investigated 1.84 million Instagram accounts and found more than half used fraud to inflate the number of followers.
Some influencers had large numbers of followers who weren’t real people, meaning the accounts had been bought or were inactive, according to Anna Komok, HypeAuditor’s marketing manager. Clues include large numbers of followers outside the influencer’s home country.
The scams cost little. Enterprises known as click farms employ people to inflate online traffic. They sell 1,000 bogus YouTube followers for as little as $49. On Facebook, the same number of followers costs $34, and on Instagram they cost $16, according to Masarah Paquet-Clouston, a researcher at cybersecurity firm GoSecure, who collaborated with others to seek prices.
Facebook and Instagram, which is owned by Facebook Inc., have policies against such deceptions, a company spokesperson said. The company said Instagram has an initiative to remove phony likes, follows and comments from accounts that use third-party apps to boost popularity. YouTube also prohibits such deceptions.
Influencer deception will cost advertisers $1.3 billion this year, estimated Roberto Cavazos, a statistics professor at the University of Baltimore.
TV, radio, magazine and newspaper advertising are based on standardized, audited third-party measures, including those from Nielsen Holdings PLC.
Some influencers mislead followers by failing to disclose when they are paid to post about products or services, as stipulated by Federal Trade Commission guidelines.
Tom Le Bree said when he co-founded online retailer Beautonomy in 2018, “We thought influencers would be a silver bullet and bring all the traffic we needed.”
Beautonomy worked with influencers with about 100,000 followers on Instagram and other social media. The influencers created their own Beautonomy makeup palettes and promoted products in posts. Beautonomy, which is co-owned by beauty company Coty Inc., agreed to give the influencers a percentage of sales. But they didn’t generate enough sales to justify the program.
The company instead turned to buying ads on Facebook and elsewhere, Mr. LeBree said.
Advertising executive James Cole said he worked on dozens of social media campaigns with influencers without any measurable return. He quit trying.
Instead, Mr. Cole founded H Hub, which operates more like a traditional ad agency. It connects photographers, videographers and other content creators with brands, including Yelp Inc. Rather than paying influencers, brands acquire content from H Hub and post it themselves.
“When Instagram started, it was a place you looked at images posted by your friends or other people you trusted,” he said. “Brands ruined it by injecting their own messages. Consumers are wising up to the fact that just because an influencer posts about a product doesn’t mean they actually like it.”
Jewelry retailer Alexis Bittar has moved away from influencers. The company now prefers creating its own social media content. Recent posts include photos of the 1968 Alexis Bittar-branded Volkswagen bus the company shows off at such events as Art Basel in Miami and the Coachella music festival in California.
“We scaled back paying for posts,” said Matteo Del Vecchio, chief executive of Alexis Bittar’s parent company, Deconic, which is owned by Brooks Brothers. “It’s difficult to quantify how that translates into sales.”
Even with high-price offers, some influencers are having second thoughts.
Amber Atherton caught the attention of advertisers after she starred in the British reality TV show “Made in Chelsea.” Then she experienced the influencer’s dilemma. “Brands were offering to pay me $5,000 for a single post,” she said, “even though they weren’t relevant to my followers.” She turned down products she wouldn’t use, she said.
Ms. Atherton later founded Zyper, a software company that has helped Banana Republic and other companies find customers to enlist as influencers.
When Ipsy got its start in 2011, its strategy of using influencers instead of traditional advertising was unconventional. Founder Michelle Phan was also an influencer, giving makeup advice on YouTube. By 2017, she had 10 million followers. That year, she left Ipsy and stopped posting on YouTube.
“Who I was on camera and who I was in real life began to feel like strangers,” Ms. Phan said, in a YouTube video to explain her exit.
Even In Streaming TV, Advertisers Are Dealing With Fraud
Some marketers are pursuing more direct ad deals to better ensure their ads are seen by humans.
Advertisers are flocking to streaming TV, pursuing viewers who are spending more time watching programming on ad-supported services. But fraudsters seeking to steal some of those new ad dollars are moving in, too.
Fraud in internet-connected TV is surging, according to ad measurement and verification firm DoubleVerify Inc. The company said it detected 780 fake streaming-TV apps this year that it believes were set up by bad actors to lure spending by unsuspecting advertisers—just one of the scams in play.
A separate analysis by ad tech firm MadHive Inc. at the end of 2019 deemed 20% of connected-TV inventory to be suspicious or fraudulent.
Streaming-TV advertisers must be vigilant to ensure their ads appear in the right contexts and in front of actual viewers, said Heather Stewart, general director of global media and marketing services for General Motors Co. “We have to stay on our toes and think about what the next mousetrap is to make sure it doesn’t happen,” she said.
The stakes are getting higher as streaming TV becomes a more important advertising channel for marketers. Ad spending on internet-connected TV sets, where a vast majority of streaming TV happens, will reach almost $8 billion in the U.S. this year and is likely to total $15.6 billion in 2023, according to research firm eMarketer.
Some advertisers said they are already actively monitoring for fraud in streaming TV, and have sought to eradicate or mitigate such activity by focusing on fixes such as direct deals with platform and app owners. But as more advertisers move into the medium, so do the opportunities for bad actors.
Fraud in connected TV can occur in multiple ways.
In a practice known as device spoofing, for example, scammers can trick the systems that stitch ads into programming by sending ad requests from smartphones with metadata reconfigured to make them look like they are legitimate streaming TV devices.
DoubleVerify detects more than 500,000 devices masquerading as connected-TV devices every day, according to the firm’s chief executive, Mark Zagorski.
Scammers also create their own connected-TV apps, releasing them in TV app stores and receiving few downloads but luring ad money with simulated ad impressions. Another scheme involves creating “CTV farms” to fabricate traffic using bots instead of real humans.
It is harder to track and stop ad fraud in streaming TV than in other kinds of digital media because the ad technology infrastructure is still nascent and less transparent, ad executives said.
Fragmentation among devices, platforms and the number of ways advertisers can purchase ad space on streaming TV doesn’t help either.
The issue is compounded by connected-TV ad prices that are generally higher than other forms of video and digital media; the cost of a thousand ad impressions can be $20 to $40, if not higher, as marketers seek high-quality inventory next to movies and TV shows, according to ad executives.
“Fraudsters go where the money is,” said Nicolas Bidon, chief executive of WPP PLC-owned agency Xaxis.
“Emerging technologies often require new solutions, and CTV is no different,” he added.
Hershey Co. has been increasing its spending on ad-supported streaming platforms and services in the past year, particularly since the coronavirus pandemic drove more viewers into streaming.
But the maker of Hershey’s Kisses, Reese’s peanut butter cups and other snacks has also been actively monitoring its spending to ensure that its ads are seen in the right places and by actual people, said Charlie Chappell, head of media for Hershey.
“As we were getting into it, we knew fraud was gonna come,” Mr. Chappell said. “We’re working with partners on the publisher side and the tracking side to get ahead of it—because it should not be a surprise to anybody.”
Advertisers are also increasingly seeking to do direct deals with device owners and app publishers, including executing buys through private, invitation-only automated marketplaces, which can offer more control, security and visibility over where their ads run. Those options are preferred over conducting automated buys through open ad exchanges, where ad buyers said fraud can be more prevalent.
Dentsu Aegis Network does not use open exchanges to buy streaming-TV ad time for its marketer clients, said Brad Stockton, vice president of video innovation at the ad agency, part of Japan’s Dentsu Inc. He described open ad exchanges as a fraud-ridden environment, similar to the situation in mobile advertising during its infancy years ago.
“If you are running in an open exchange, you are putting [a percentage] of your money in the garbage can,” Mr. Stockton said.
New Ad Fraud Scheme Highlights A Growing Problem For Streaming TV
Oracle says it detected a continuing effort to lure ad dollars with simulated devices and apps.
Oracle Corp.’s data cloud and measurement business said it detected a new instance of fraud in streaming television that likely impacted millions of dollars in advertising spending, signaling a growing problem for advertisers as they move more dollars into the medium.
The operation, which Oracle Data Cloud has dubbed “StreamScam,” took advantage of flaws in streaming-TV ad-serving technology and the supply chain to fool marketers into paying for ads that were never actually seen by viewers on real devices and apps, the company said.
Based on an estimated average cost of $20 to deliver a thousand consumer impressions in connected TV viewing, the swindlers likely stole $14.5 million over the last four months, according to Derek Wise, chief product officer of Oracle Data Cloud.
The scam, which was first uncovered by Oracle over the summer before the fraudsters accelerated their operation in September by faking more devices and apps, is still ongoing, the company said.
Ad fraud is more commonly associated with web video and display advertising, but bad actors are following the money as marketers shift money into streaming TV.
Although still only a fraction of the $60-$70 billion spent on traditional TV in the U.S. every year, ad spending on internet-connected TV sets, where most of streaming TV happens, will reach almost $8 billion in the U.S. this year and likely total $15.6 billion in 2023, according to research firm eMarketer.
And the ad technology infrastructure underpinning streaming TV remains nascent compared with online and mobile advertising, giving swindlers an opening, Mr. Wise said. “This is escalating significantly,” he said.
With StreamScam, swindlers used a practice known as “spoofing” to trick advertisers into believing their ads were running on legitimate apps and devices, according to Oracle. They used thousands of servers to impersonate “server-side ad insertion” technology, which are systems that stitch ads directly into programming to prevent issues such as buffering during an ad break. These fake SSAI servers then sent falsified ad requests masquerading as legitimate IP addresses, devices and apps.
Oracle said it uncovered StreamScam after noticing irregularities in the measurement data such as ad requests coming from older Apple TV models running on new iOS software that they couldn’t support.
An analysis from Moat, a measurement and verification business within Oracle Data Cloud that says it tracks server-side ad insertion as well as ad impressions that actually play, confirmed the purchased impressions and programming never ran on real devices.
StreamScam involved 28.8 million fabricated household IP addresses, and spoofed about 3,600 apps and 3,400 internet-connected TV device models, according to Oracle.
Spoofing, the most common and troublesome version of fraud in streaming TV, requires the exploitation of not just flaws within the server-side ad technology but also a lack of visibility for advertisers buying inventory on open ad exchanges, said Tal Chalozin, chief technology officer of ad-tech firm Innovid Inc.
“That is the core part of all of this,” he said. “They take advantage of there being no direct connection between the merchant and the buyer by inserting themselves into the middle.”
Some advertisers have sought to do more direct deals with streaming-TV ad sellers, sometimes setting up private, invite-only automated marketplaces, in an effort to evade swindlers and secure more control over where their ads run.
But the industry will need to improve the technology tools, systems and measurement within streaming TV to more effectively combat ad fraud, Mr. Wise said.
Device makers, for example, can do a better job of disclosing what percentage of different models are being used by consumers currently, which would make it easier for measurement firms to detect anomalies, he said.
Some efforts already have been made to combat ad-fraud in streaming TV. Measurement and tech firms such as DoubleVerify Inc. and MadHive Inc. are developing brand-safety and fraud-management tools.
Earlier this week, the Interactive Advertising Bureau, an industry trade group, signaled plans to bring a set of standards to streaming TV called “ads.txt,” which enable publishers and distributors to declare who is authorized to sell their inventory.
Oracle’s Moat, which is used by advertisers as an independent third party to measure and track digital ads, also is pushing clients to make “valid traffic” a requirement before purchasing streaming-TV ads, much in the way they have learned to do in mobile advertising, Mr. Wise said.
“Connected TV looks a lot like digital five years ago,” Mr. Wise said. “Our past told us programmatic advertising without measurement was a bad idea; now we are talking about programmatic ads across connected TV without measurement. We need to learn from our mistakes a little bit quicker.”
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