Worldwide, the programmatic advertising market size is forecast to grow by $433.7 billion, accelerating at a compound annual growth rate of 32.23% between 2023 and 2027. However, as the advertisers’ spending increases, so too does money lost to programmatic ad fraud. Already thought to be costing advertisers around $50 billion annually, programmatic ad fraud is one of the most important challenges facing the digital marketing industry. But what, exactly is programmatic fraud, and how can the industry best combat it?
What is programmatic ad fraud?
Broadly speaking, programmatic ad fraud refers to the practice of fraudulently manipulating online advertising campaigns, typically through automated software, to generate revenue. These are criminal schemes that exploit vulnerabilities in programmatic advertising processes and technology (i.e., the systems used to enable the automated buying and selling of online advertising space for personalised advertising ad scale.)
The three most significant types of programmatic ad fraud are:
- Ad impression fraud: This involves generating fake ad views or impressions. Fraudsters use automated bots or compromised devices to repeatedly load ads without any real human audience, artificially inflating impression counts.
- Click fraud: In this type of fraud, clicks on digital ads are artificially generated, often using bots or click farms. This creates the illusion of high engagement, but no genuine interest or potential for sales exists.
- Ad injection and domain spoofing: Fraudsters inject ads into websites without the publisher’s permission or create fake websites that mimic legitimate ones. Advertisers pay for space on what they believe are reputable sites, but their ads are displayed on unauthorised or low-quality sites, or not shown at all.
How does ad fraud affect programmatic advertising?
It is thought that programmatic ad campaigns have as much as 40-50% fraud rates. In worst cases, therefore, ad fraud in programmatic is costing advertisers as much as half of their campaign budgets. In addition to financial losses, ad fraud can negatively affect brands in several other ways. These include:
- Brand damage: When ads appear on low-quality or inappropriate sites due to ad fraud, it can harm the brand’s reputation, as consumers may associate the brand with these negative contexts.
- Poor campaign performance: Ad fraud skews analytics and data, leading to misleading campaign performance metrics. This results in ineffective marketing strategies, as decisions are based on inaccurate data.
- Reduced customer trust: Consumers may lose trust in a brand if they perceive its ads as pervasive or intrusive, especially if those ads are the result of fraud and appear in unsuitable online environments.
- Decreased campaign ROI: The return on investment (ROI) for advertising campaigns diminishes significantly due to fraudulent activities, as a portion of the ad spend is diverted to non-genuine interactions.
How to stop programmatic ad fraud
There are a broad range of tools on the market to help advertisers stop programmatic ad fraud. These include ad verification tools, bot detection solutions, ad fraud detection tools, and “know your traffic” solutions. However, many of these tools can only be applied once a campaign is in effect. Given the rapid growth in programmatic ad fraud, advertisers need an approach that protects their as spend from the outset.
It is in this regard thar telco-verified IDs are showing much promise. Telco-verified IDs combine first-party data from publishers and brands with telco network intelligence to create rich customer profiles and activate them in programmatic advertising campaigns. There are two types of ID. The first is a publisher ID that represents visitors to a publisher’s site. Telcos verify that these IDs correspond to a known subscriber, in effect providing assurance that the user is a real human being rather than a bot.
The second ID is a transaction ID, these are also linked to real humans via telco customer intelligence. The transaction ID enables programmatic campaigns to be activated while providing advertisers the peace of mind that the audiences they are engaging are attributable. In addition to guarding against bots, this approach also ensure that the advertisements are being seen by the right audiences, helping improve ROI and ensure brand safety.
With telco-verified IDs, advertisers can mitigate programmatic ad fraud with intelligence that is 100% verified at source. This is a major new tool in the battle against ad fraud, one that will protect budgets while increasing the accuracy of programmatic campaigns.
