Marketers are facing an unfortunate reality in the billion-dollar online advertising industry — more than one-third of Web traffic is bogus.
According to estimates from the Interactive Advertising Bureau, about 36 percent of all Web traffic is fraudulent, the result of computers hijacked by viruses and forced to visit sites, writes Suzanne Vranica of the Wall Street Journal.
Since marketers usually charge by the click, whenever a website loads in response to a user clicking on an ad, “bot traffic” actually cheats advertisers – who often don’t care if users are real people.
Phony websites created to provide false traffic let fraudsters collect payments from advertisers, through third parties who aggregate online capacity across several sites. The identities of the tricksters are difficult to distinguish, and they can be from as far away as Eastern Europe.
Although widespread fraud isn’t deterring marketers from increasing online advertising budgets, they are becoming more aggressive on keeping track where that money goes, writes Vranica.
Digital advertising, including social media and mobile devices, will increase this year to nearly $50 billion in the U.S., a rise of 17 percent. That makes about 28 percent of all U.S. ad spending. Digital was only 16 percent five years ago.
A number of prominent advertisers, such as L’Oreal, General Motors and Verizon Communications, found fake traffic was affecting legitimate online ad purchases, and the trend could have an impact on the effectiveness of digital advertising overall, when compared with traditional media like television.
“When you bundle bots, clicks fraud, viewability and the lack of transparency [in automated ad buying], the total digital-media value equation is being questioned and totally challenged,” Association of National Advertisers chief executive Bob Liodice told the Journal.
Advertisers are starting to question the wisdom of increasing digital ad budgets, Liodice added.
Part of the problem with online ad fraud is that it is difficult to pin down. One company estimates the number of online advertising fraud in the U.S. can be as much as $6 billion.
But few marketers are saying they will cut budgets. Instead, they are aggressively monitoring network traffic and demanding refunds when discovering fraud. For example, Verizon and L’Oreal demanded free ad space in recent months because of ad spending inflated due to fraud.
Demanding make-good ads will increase pressure on ad exchanges and networks for proper placement of online ads. Several marketers begin taking note of which that have consistently illicit traffic, and when there are requests for free ads, they are to be placed on high-quality sites, ones with traditionally lower fraud rates.
Computer manufacturer Lenovo Group is also working with ad-technology outfits to develop tests to determine fraudulent traffic. “Ultimately, this is about waste reduction,” says director of global digital marketing Gary Milner.