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Digital ad fraud: What’s a CMO to do?

February 15, 2017 | By Tim Bourgeois — Digital Media Auditor and Consultant @ChiefDigOfficer

A recent report from White Ops estimates that a Russian bot operation — dubbed Methbot because of references to ‘meth’ in its code — is netting up to $5 million per day for its owners in fraudulent online advertising. Considering that this is just one, albeit huge, operation, and that White Ops readily acknowledges that the operation could be netting far more dollars, it’s easy to work the math and arrive at the conclusion that online ad fraud is a multi-billion dollar global ad industry.

What’s more, this particular operation doesn’t have the telltale characteristics that digital veterans typically associate with ad fraud — low end properties tricking users into clicking but quickly leaving. Rather, it is characterized by “falsified websites designed to look like premium publisher inventory”. (Indeed, the report cites specific examples from The Economist, Fox, and International Business Times, among others.)

To add insult, this report comes on the heels of a tumultuous year for the digital ad business. In 2016, industry opinion-makers like the Wall Street Journal, AdAge, and the Association of National Advertisers (ANA) began to treat the subject of fraudulence seriously and with increasing frequency. Perhaps the most vicious commentary came from a guest post on CNBC, dubbed “The Subprime Advertising Crisis is Here,” likening it to cause of the 2008 Great Recession.

With digital marketing budgets continuing to expand quickly, and entire marketing operations becoming increase reliant on digital as their driver, CMOs and marketing leaders can’t afford to be unprepared when the subject of fraud comes up with their managers and peers.

Here’s what CMOs need to know:

  • Marketers Don’t Need to Fret The Hype (Yet). To be sure, ad fraud is a problem that needs to be successfully corralled in the coming years. But it’s not yet enough of an issue to slow down industry growth by much more than a couple of percentage points each year. On a relative basis, even using aggressive estimates, fraud chews up 15% of the market. This is not ideal, but not catastrophic, either. Digital works, warts and all, and it’s still the most accountable of the major media available.
  • Publishers Need to Do More Message & Damage Control. The impact of fraud on publishers is more acute, and the category would benefit from playing a more proactive role in defining the ad fraud discussion (which seems to have been hijacked by P&G’s Marc Pritchard) and aggressively employing new technologies to combat the issue (and publicizing those efforts). Though Google and Facebook control as much as 80% of the sector, they aren’t as dependent on digital advertising as their traditional publishing counterparts, so can’t be depended on to solve this problem in a timely manner.
  • Be Prepared to Explain What Fraud Is & How It Works. Conceptually, the mechanics behind digital ad fraud are fairly straightforward. According to Integral AdScience, illegal operators have “found ways to game the system and earn money by serving ads in ways that have no potential to be seen by a real person.” They do this by creating fake pages and generating fake clicks. Specifically, the tactics used by fraudsters are increasingly complex, and not easily understood by even experienced marketing technologists.
  • Steer The Conversation to ROI & Flexibility. The biggest strength of digital marketing since the early days is trackability, and this remains unchanged in the face of fraud. With enormous confidence, marketers are able to monitor ROI in near real-time and make strategy and budgets on-the-fly to take advantage of marketplace shifts. The combination of accountability plus flexibility allows brands more opportunities to manage to ROI.
  • Get Ahead of the Issue. For brands spending more than $10 million per year on digital advertising, installing a resource (internal or external) to monitor and combat fraud probably makes financial sense. As DCN has espoused (and partnered with comScore to research), smart digital media buying resulting careful placement in quality environments reduces the instance of fraud. The educate the executive team on marketing KPIs, including the impact of fraud, through monthly reports and performance review meetings. Lacking the surprise and shock factor, ad fraud issues can be more readily explained as a cost of doing business; knowing that it’s being proactively managed can minimize the sting.
  • Be Prepared To Move. No matter how strong the argument you make, or how vigilant the monitoring, executive leadership and boards may require a forensic assessment to measure the impact of fraud. Understandably, fraud can be a bitter pill to swallow. Whether you’re a marketer or publisher, you’ll want to be on top of this issue — with potential partners and solutions at the ready — so the issue isn’t hijacked by an aggressive CFO or board member.

Tim Bourgeois (@ChiefDigOfficer) is a partner at East Coast Catalyst, a Boston-based digital consulting company specializing in strategic roadmaps, digital marketing audits, and online marketing optimization programs.

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