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I seems to me that - besides the specific fraud scheme in the article - there is something else to be worried about. From the article: >The revelation of this

by jaclaz 8y ago

I seems to me that - besides the specific fraud scheme in the article - there is something else to be worried about. From the article: >The revelation of this scheme shows just how deeply fraud is embedded in the digital advertising ecosystem, the vast sums being stolen from brands, and the overall failure of the industry to stop it. And, more relevant: >Pixalate’s latest analysis of in-app fraud found that 23% of all ad impressions in mobile apps are in some way fraudulent. Now, if the numbers are correct and 23% of ad impressions is fraudulent, it should mean that either: 1) the firms/brands/whatever that are paying for these ads cannot measure with a sufficient degree of accuracy the results of these ads 2) they perfectly know that more than 1/5 of their ads expense is having "null" results but overall they are ok to spend the 100% price for less than 80% "real" impressions If the first hypothesis is true there is some incompetence around, if the second, it's business as usual. I believe more likely the #2 to be true, and since the companies/brands/etc. insist on it, this 20-25% "surcharge" is a "standard" of sorts. So,hypothetically , if these frauds would be completely eradicated and the companies would continue to invest the same amount of money in ads, we are doomed to see 20-25% more ads than we do now.

idunno246 8y ago
It’s defintiely 2. But ads are priced on value to the advertiser. If someone reduced fraud to 0% they would just charge 20% more, and that money goes from fraudsters to advertisers, not more ads. This exists already, networks that filter out fraud better can charge higher rates.
JumpCrisscross 8y ago
> they perfectly know that more than 1/5 of their ads expense is having "null" results but overall they are ok to spend the 100% price for less than 80% "real" impressions Don't ad companies charge fees as a function of spend? The chumps in this chain are (a) shareholders and (b) the managers hiring the agencies. (Counterfactual: if this spend is that useless, it should be possible to start a competitor that focuses on high-ROI advertising.)
- ucaetano 8y ago
  > Counterfactual: if this spend is that useless, it should be possible to start a competitor that focuses on high-ROI advertising. Exactly! And that's where online ads, user tracking, online-to-offline came in. The whole reason why it gained so much traction in the past 20 years is that it began to offer better tracking and results than other forms of advertising. If Google (or Facebook, or anyone else) stands still and lets fraudsters abuse their ad networks, the return on their ads will drop, opening space for their competitors. So controlling ad-serving quality is a competitive advantage.
  - paulie_a 8y ago
    Then why are online ads today just as useless and dumb as they were 29 years ago?
    - ucaetano 8y ago
      Source? And the increased flow of ad money to online ads proves you wrong.
  - appleiigs 8y ago
    > If Google (or Facebook, or anyone else) stands still and lets fraudsters abuse their ad networks, the return on their ads will drop, opening space for their competitors. I wish corporations would be so forward looking, but they are mostly short-sighted, worrying about the next quarters results.
BonesJustice 8y ago
I think those buying advertising know that the ad networks' metrics are hopelessly broken, that fraud is rampant, and that their actual impressions are far less than reported. But the problem is pervasive and spans the entire ad industry, so what are they to do, other than throw in as much money as possible and hope for the best? I recently saw a comment (can't remember where) from someone involved in an advertising startup ostensibly focused on serving unintrusive ads with accurate reporting, and the response has been overwhelmingly positive: ad buyers expressed profound relief at seeing ad metrics that actually made sense. I don't think we can make too many assumptions about how spending would change if ad metrics were actually accurate, simply because the current metrics are so bad, and the impressions so fraudulent, that the current ad spending is largely uninformed. If the metrics were accurate, ad buyers might very well end up spending less while getting more for their money, because they can suddenly make informed decisions.
- chatmasta 8y ago
  Really the only people hurt are those buying, eg Google stock based on ad impression numbers. The advertisers have already priced the fraud into their bidding. Other than that, the only people who care about impression numbers are google investors. Even then, they’re probably more concerned with the aggregate ad spend, which is likely unrelated to the percentage of fraud since it’s more a result of marketing budget than anything else.
  - BonesJustice 8y ago
    It probably hurts publishers (the entities hosting the ads). If the expectation of fraud renders ad impressions less valuable, then the publishers get a slice of a smaller pie. That, or they cram even more ads onto their sites to compensate, and users throw up ad blockers or go elsewhere.
Retric 8y ago
"Impressions" is a rather meaningless metric. If A$ = B impressions = C clicks = D sales then the amount of fraud is irrelevant it's just a question of A$ = D sales from the advertisers perspective.
- sroussey 8y ago
  Depends. Are the ads direct or banding? Coke ads to have you buy offline for example, the sales are not so easily tracked.
  - Retric 8y ago
    Coke still "just" cares about sales, they simply can't directly measure it as well and thus use impressions as a proxy for sales. It’s clicks they don’t nessisarily care about.
- soared 8y ago
  Every single brand still cares about impressions at some level, even if everyone knows they're broken. C-level likes to see that spend was $100k, we had 12.5MM imps, and drove $600k in revenue.
Itaxpica 8y ago
While the specifics are new, the issue of churn and waste in advertising very much isn't. John Wanamaker famous quote, “Half the money I spend on advertising is wasted; the trouble is I don't know which half" is from the 1900s.
dangrossman 8y ago
Publishers already stuff as many ads in the space they have as viewers will tolerate, so it's unlikely that a reduction in fraud will result in consumers seeing more ads. If anything they'll see fewer ads, since the existing ad space will become more valuable. The fact that ad space is primarily sold in the form of real-time auctions, and advertisers can track end-to-end results online (e.g. "we generated $10 in new sales per 1000 impressions last month") ensures that the price goes down when there's more fraud and up when there's less. Undetected impression fraud leads to publishers earning less for their legitimate impressions, not advertisers paying a premium.
elorant 8y ago
It's a known fact that the digital advertising industry is rifled with lies and overpromised goals. Everyone knows it, or at least suspects it, but there doesn't seem to be a way out. One third of web traffic is fraudulent. Google tries to track it and remove it from the bottom line but what the rest of the industry does is uncertain. As for your conclusion you can see it another way. If fraud disappears perhaps ads efficiency rates would also drop. Because ad fraud isn't only about ads that never show to their indented audience. A lot of times is about fraudulent clicks. So while you think your ad had a 2% CTR in reality it could be half that. You can never know who actually clicks on your ads. What you can know and measure is the conversion, aka how many actually bought your product. But if your product isn't sold online, like say packaged consumer products which are sold in super markets and all you aim with advertising is brand awareness you can't even track that. So you're siphoning millions to a black hole and you just pray that your analytics data are correct. Chances are, they aren't but no one will bother telling you. So eventually you might start seeing less ads because companies will realize there's no reason to keep their budgets at current levels. And then there is the fact that there are a lot of actors involved in fraud, either directly or indirectly. Take video ads for example which have a higher CPM. It's in the platform's interest, aka the publisher, to produce as much views as possible to pocket the money. It's not like the fraud is performed from some shady character who lives in the underground. A lot of the times it's the networks themselves who will try to rob clients from their money. Bottom line, there are a lot of angles to this issue.
ChuckMcM 8y ago
#2 is true but not exactly for the reason you specify, basically every company I've ever dealt with has an advertising budget, they spend it and they monitor how much they spend and how sales change based on that (and ad types and ad channels etc). If you have ever seen an advertisement for a Data Scientist at an online retailer this is what they will do, day in and day out. As long as the revenue gain (and resulting margin) is more than the advertising spend, it is a winning strategy. Meanwhile, every ad network has a 'beta' value which is the ratio of ad spend to revenue increase, ad networks with a low beta either have more fraud or they are hitting the wrong demographic, either way dollars are shifted away from that network to one with a higher beta.
- Scoundreller 8y ago
  For the advertiser, yes. But for the legit publishers, they’re all getting 80% of what they should have been earning. That’s less legit content for consumers.
anonymous5133 8y ago
It just gets priced in. If the ads were 100% effective then the price per impression would be higher.
ThrustVectoring 8y ago
>So, hypothetically, if these frauds would be completely eradicated and the companies would continue to invest the same amount of money in ads, we are doomed to see 20-25% more ads than we do now. Nope. Advertisers would charge their clients 20-25% more to serve us ads. Digital ads are like real estate - every available piece gets rented out at some price, because otherwise it'll sit empty and make no money instead. The only question is what price is market-clearing: quantity of ads served is completely irrelevant.
philipodonnell 8y ago
2. seems likely. There are parallels in the real world. Put up a billboard and maybe 25% of the people seeing it will never need your service. Is that 25% wasted? Yes. But you just build that into the price. Its not quite the same as fraud, since offline you can always argue about brand-building even among non-customers, but the end result is the same, money spent on ads that won't result in spend.

by jaclaz 8y ago

idunno246 8y ago

It’s defintiely 2. But ads are priced on value to the advertiser. If someone reduced fraud to 0% they would just charge 20% more, and that money goes from fraudsters to advertisers, not more ads. This exists already, networks that filter out fraud better can charge higher rates.

JumpCrisscross 8y ago

> they perfectly know that more than 1/5 of their ads expense is having "null" results but overall they are ok to spend the 100% price for less than 80% "real" impressions Don't ad companies charge fees as a function of spend? The chumps in this chain are (a) shareholders and (b) the managers hiring the agencies. (Counterfactual: if this spend is that useless, it should be possible to start a competitor that focuses on high-ROI advertising.)

ucaetano 8y ago
> Counterfactual: if this spend is that useless, it should be possible to start a competitor that focuses on high-ROI advertising. Exactly! And that's where online ads, user tracking, online-to-offline came in. The whole reason why it gained so much traction in the past 20 years is that it began to offer better tracking and results than other forms of advertising. If Google (or Facebook, or anyone else) stands still and lets fraudsters abuse their ad networks, the return on their ads will drop, opening space for their competitors. So controlling ad-serving quality is a competitive advantage.
- paulie_a 8y ago
  Then why are online ads today just as useless and dumb as they were 29 years ago?
  - ucaetano 8y ago
    Source? And the increased flow of ad money to online ads proves you wrong.
- appleiigs 8y ago
  > If Google (or Facebook, or anyone else) stands still and lets fraudsters abuse their ad networks, the return on their ads will drop, opening space for their competitors. I wish corporations would be so forward looking, but they are mostly short-sighted, worrying about the next quarters results.

BonesJustice 8y ago

I think those buying advertising know that the ad networks' metrics are hopelessly broken, that fraud is rampant, and that their actual impressions are far less than reported. But the problem is pervasive and spans the entire ad industry, so what are they to do, other than throw in as much money as possible and hope for the best? I recently saw a comment (can't remember where) from someone involved in an advertising startup ostensibly focused on serving unintrusive ads with accurate reporting, and the response has been overwhelmingly positive: ad buyers expressed profound relief at seeing ad metrics that actually made sense. I don't think we can make too many assumptions about how spending would change if ad metrics were actually accurate, simply because the current metrics are so bad, and the impressions so fraudulent, that the current ad spending is largely uninformed. If the metrics were accurate, ad buyers might very well end up spending less while getting more for their money, because they can suddenly make informed decisions.

chatmasta 8y ago
Really the only people hurt are those buying, eg Google stock based on ad impression numbers. The advertisers have already priced the fraud into their bidding. Other than that, the only people who care about impression numbers are google investors. Even then, they’re probably more concerned with the aggregate ad spend, which is likely unrelated to the percentage of fraud since it’s more a result of marketing budget than anything else.
- BonesJustice 8y ago
  It probably hurts publishers (the entities hosting the ads). If the expectation of fraud renders ad impressions less valuable, then the publishers get a slice of a smaller pie. That, or they cram even more ads onto their sites to compensate, and users throw up ad blockers or go elsewhere.

Retric 8y ago

"Impressions" is a rather meaningless metric. If A$ = B impressions = C clicks = D sales then the amount of fraud is irrelevant it's just a question of A$ = D sales from the advertisers perspective.

sroussey 8y ago
Depends. Are the ads direct or banding? Coke ads to have you buy offline for example, the sales are not so easily tracked.
- Retric 8y ago
  Coke still "just" cares about sales, they simply can't directly measure it as well and thus use impressions as a proxy for sales. It’s clicks they don’t nessisarily care about.
soared 8y ago
Every single brand still cares about impressions at some level, even if everyone knows they're broken. C-level likes to see that spend was $100k, we had 12.5MM imps, and drove $600k in revenue.

Itaxpica 8y ago

While the specifics are new, the issue of churn and waste in advertising very much isn't. John Wanamaker famous quote, “Half the money I spend on advertising is wasted; the trouble is I don't know which half" is from the 1900s.

dangrossman 8y ago

Publishers already stuff as many ads in the space they have as viewers will tolerate, so it's unlikely that a reduction in fraud will result in consumers seeing more ads. If anything they'll see fewer ads, since the existing ad space will become more valuable. The fact that ad space is primarily sold in the form of real-time auctions, and advertisers can track end-to-end results online (e.g. "we generated $10 in new sales per 1000 impressions last month") ensures that the price goes down when there's more fraud and up when there's less. Undetected impression fraud leads to publishers earning less for their legitimate impressions, not advertisers paying a premium.

elorant 8y ago

It's a known fact that the digital advertising industry is rifled with lies and overpromised goals. Everyone knows it, or at least suspects it, but there doesn't seem to be a way out. One third of web traffic is fraudulent. Google tries to track it and remove it from the bottom line but what the rest of the industry does is uncertain. As for your conclusion you can see it another way. If fraud disappears perhaps ads efficiency rates would also drop. Because ad fraud isn't only about ads that never show to their indented audience. A lot of times is about fraudulent clicks. So while you think your ad had a 2% CTR in reality it could be half that. You can never know who actually clicks on your ads. What you can know and measure is the conversion, aka how many actually bought your product. But if your product isn't sold online, like say packaged consumer products which are sold in super markets and all you aim with advertising is brand awareness you can't even track that. So you're siphoning millions to a black hole and you just pray that your analytics data are correct. Chances are, they aren't but no one will bother telling you. So eventually you might start seeing less ads because companies will realize there's no reason to keep their budgets at current levels. And then there is the fact that there are a lot of actors involved in fraud, either directly or indirectly. Take video ads for example which have a higher CPM. It's in the platform's interest, aka the publisher, to produce as much views as possible to pocket the money. It's not like the fraud is performed from some shady character who lives in the underground. A lot of the times it's the networks themselves who will try to rob clients from their money. Bottom line, there are a lot of angles to this issue.

ChuckMcM 8y ago

#2 is true but not exactly for the reason you specify, basically every company I've ever dealt with has an advertising budget, they spend it and they monitor how much they spend and how sales change based on that (and ad types and ad channels etc). If you have ever seen an advertisement for a Data Scientist at an online retailer this is what they will do, day in and day out. As long as the revenue gain (and resulting margin) is more than the advertising spend, it is a winning strategy. Meanwhile, every ad network has a 'beta' value which is the ratio of ad spend to revenue increase, ad networks with a low beta either have more fraud or they are hitting the wrong demographic, either way dollars are shifted away from that network to one with a higher beta.

Scoundreller 8y ago
For the advertiser, yes. But for the legit publishers, they’re all getting 80% of what they should have been earning. That’s less legit content for consumers.

anonymous5133 8y ago

It just gets priced in. If the ads were 100% effective then the price per impression would be higher.

ThrustVectoring 8y ago

>So, hypothetically, if these frauds would be completely eradicated and the companies would continue to invest the same amount of money in ads, we are doomed to see 20-25% more ads than we do now. Nope. Advertisers would charge their clients 20-25% more to serve us ads. Digital ads are like real estate - every available piece gets rented out at some price, because otherwise it'll sit empty and make no money instead. The only question is what price is market-clearing: quantity of ads served is completely irrelevant.

philipodonnell 8y ago

2. seems likely. There are parallels in the real world. Put up a billboard and maybe 25% of the people seeing it will never need your service. Is that 25% wasted? Yes. But you just build that into the price. Its not quite the same as fraud, since offline you can always argue about brand-building even among non-customers, but the end result is the same, money spent on ads that won't result in spend.