Report: The Costs of Click Fraud Are Rising

By / Jan 21, 2016 (iStock/Thinkstock)

According to a new report from the Association of National Advertisers, automated bot traffic remains a major problem for ad buyers, many of which are losing millions of dollars due to such traffic. The report offers suggestions on how to minimize the problem.

The dangers of click fraud have long been known to the advertising industry—who can forget this harrowing statistic?—but according to a new study, 2016 could create new problems for advertisers.

A study released this week by the Association of National Advertisers (ANA) and the advertising-fraud firm White Ops suggests that marketers could lose as much as $7.2 billion globally in 2016 without an increased focus on click security. Of the 49 advertisers that took part in the study, losses were, on average, $10 million each in 2015.

That level of automated traffic led to some tough words from ANA President and CEO Bob Liodice.

“The level of criminal, nonhuman traffic literally robbing marketers’ brand-building investments is a travesty,” Liodice said in a news release.

Among other highlights from the study:

Bot traffic isn’t going away. In 2015, advertisers had rates of automated traffic ranging between 3 to 37 percent of overall traffic, with sourced traffic—that is, traffic that is acquired through third-party sources—experiencing more than three times the bot traffic. On the whole, though, the overall level of bot traffic stayed nearly the same across the advertising industry, falling by only 0.2 percent.

Higher CPMs=higher fraud rates. The problem of automated traffic, as you might imagine, becomes more common as the ads become more valuable. The ANA/White Ops report found that advertising with a cost per mille (CPM) rate above $10 was far more likely to be targeted by automated traffic than those with a CPM rate below $10. The problem is exacerbated by particularly valuable advertising types such as video ads that have CPMs above $15. Such high-value video ads were 2.73 times more likely to attract automated traffic than less-expensive advertising.

When bots become a problem. The ANA/White Ops study found that bots, which are often hard to detect, were generally more of a problem for programmatic ads that tend to be automated across the web. Direct buys are typically less of a problem. Bots also tend to come about when an ad is failing to hit its target. “Bots that fill inventory for ad buys of specific demographics and locations exploit advertising orders for audiences which are typically in short supply,” the report states. “These bots make a greater profit at the expense of advertisers seeking more targeted audiences.”

What can be done? The study recommends taking a proactive approach to fighting click fraud throughout the process, including adding language that advertisers won’t be charged for fraudulent traffic, working with media partners focused on reducing fraud, creating and leveraging internal antifraud policies, focusing on open dialogue with ad vendors to ensure a focus on the issue, and mixing technology such as traffic monitoring with effective policy. The study said that advertisers that took these steps tended to face fewer issues with automated traffic.

“Although our study definitively demonstrates areas of improvement because parts of the industry have become laser-focused on continually tightening controls and adjusting transparency, we are still facing an uphill battle to achieve broad acceptance of the need for deeper focus on the fraud problem, and ultimately to reverse these financial trends,” White Ops CEO Michael Tiffany said in the news release.

Those interested in reading the study can download the full PDF report via the ANA website.

Ernie Smith

Ernie Smith is the social media journalist for Associations Now, a former newspaper guy, and a man who is dangerous when armed with a good pun. More »


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