Is your advertising reaching the people you think it is?

Many websites are financed by advertising revenue, and many businesses invest significant sums of money in ads in the hopes of improving profitability. Any effort to mislead online advertising systems for monetary advantage therefore has a negative effect on both businesses and websites.

Online ads are heavily reliant on algorithmic exchanges to connect content with prospective clients. Ad fraud exploits these automated systems to impersonate actual users and profit from the broadcast of ads to non-existent clients. Bots are just one of a range of tactics used to deceive ad networks and advertisers into paying them.

As a result, marketers are stuck paying for ads that are shown to fake visitors. On the other hand, publishers will see an unusual rise in payments. Marketers will eventually begin to analyse the number of ads they think have been shown to invalid traffic (IVT). Rates of IVT will be detected by advertisement exchanges, and if they're unusually high, websites will be blocked from gaining access to the exchange.

In 2020, worldwide damage from ad fraud reached a whopping $35bn, according to Statista. Other approximations differ – Juniper/TrafficGuard estimates it to be $34bn, predicted to rise to $87bn in 2022. According to them, the majority of this will be lost in the Asia-Pacific area, where the present $19bn is expected to climb to $56bn.

Most businesses believe that ad fraud doesn’t affect them. However, it’s likely that it could be slowly and methodically gnawing away at your budget, whether you are a marketer managing online campaigns, a corporation, or a startup.

Let's outline the major types of ad fraud that businesses are prone to experience in online advertising.

Domain spoofing – counterfeiting an email domain or site name to deceive users.

Malicious bots – click ads and spam bots that imitate humans and execute malicious attacks.

Location fraud – faking location details to deceive ad vendors of the location of the user.

Ad stacking – overlapping several adverts simultaneously and requesting payment for fake impressions.

Pixel stuffing – stuffing a complete advert into the space meant for a single pixel while requesting the complete amount for it.

Cookie stuffing – placing several affiliate cookies on visitor’s browsers to earn a commission.

There are four principal ways in which fraud can wreck your organisation’s profits. Perhaps the single most significant effect is the fact that it wastes financial resources while providing no results. Several types of advertising fraud earn credit for totally unconnected website visits (ad stacking, pixel stuffing and cookie stuffing), make artificial impressions and clicks (location masking, click injection and so on), or dramatically inflate the cost of clicks or impressions on mediocre websites (domain spoofing).

Then there’s the valuable time spent chasing non-profitable leads. Sales staff must concentrate on prospective leads to generate revenue swiftly and reliably. Advertising fraud produces mostly completely fraudulent leads with no interest in the products at all. If undiscovered, the sales team could be wasting time on mediocre leads from fake sources. Additionally, all the fake leads would heavily scramble the data and cause confusion for marketing departments.

Being the victim of fraud can also have a negative impact on your company’s reputation. Prospective clients, business associates, and shareholders may shun a company as a result of reputational harm, which can have a major effect on its profitability. Being linked to an advertising injection scam may be damaging to a company's image over time. In addition to that, advertisements that run on websites that are inappropriate for the company can also harm the public reputation of the company.

Finally, consider the legal costs. Retrieving money from cyber criminals is an arduous task. After a thorough investigation, filing, a case against an individual or syndicate that has acted illegally will necessitate considerable (and frequently costly) legal assistance. Of course, the opposing party will do everything in their power to avoid judgment. Even if caught, sometimes they might be in a financially compromised position, making it impossible for the lost money to be reimbursed.

Just like ad fraud, ad verification features several clever ways of preventing and tracking down ad manipulation. Ad verification and ad fraud appear to be in a continuous race to compete on who can outmanoeuvre and outsmart the other. While the race continues, novel solutions are finding their way to the frontlines, and residential proxies are one of such.

As each residential proxy is created by a different device, a wide range of IPs and locations are available. Ad verification companies can rest easy if they use a large enough pool, as they will be able to avoid any possible IP blocks from fraudsters. Additionally, they may check ads from any geographic location if necessary.

Put simply, ad verification companies run batches of tests on websites that display advertisements. They use residential proxies to visit the website from many different locations to ensure that ads are not being displayed in unintended countries (or if fraudulent strategies are not being employed within a limited region). Companies also use data to analyse whether the display is according to campaign settings such as site context, viewability and ad placement.

In its essence, ad verification rests on the premise that fraudsters will continue to do their thing, regardless of how complex or unethical it may be. As long as it remains profitable, ad fraud is going to continue. Therefore, in order to stem the losses inflicted, they charge a significantly smaller amount to keep company funds and marketing efforts safe.

Ad fraud is going to continue rising, especially since more companies are undergoing digital transformations. With online’s increasing importance there will surely be a rise in those looking to illegally profit.

Therefore, ad verification companies, and, in turn, residential proxies, have become a vital part of the online marketing ecosystem. While we can’t expect ad fraud to suddenly collapse, we can expect that improvements in cyber-security technology will reduce the negative impact.

Andrius Palionis is VP of enterprise solutions at Oxylabs.io.