Digital Advertising Fraud: The Time of Reckoning is Now

Is fraud a problem in digital advertising? Yes.

Is it an issue of transparency and clarity in the advertising supply chain? Yes.

Is it a problem that is ‘material’ (significant against the overall volume of dollars spent)? Yes.

If all of this is true, the multi-billion dollar question is: Why don’t we hear more about civil and criminal prosecution? Why don’t we hear about people losing their jobs over fraud? Where is the demand for accountability when criminal activity is committed? Fraud is theft, and the scale of ad fraud is staggering. If CFO’s knew how big of a problem it was, CMO’s would be held to more rigorous processes when buying media.

Over the last few months, Kochava discovered and identified what we believe is the largest coordinated approach to commit mobile ad-fraud by commercial operators at scale. This is not the action of nefarious, un-identifiable ‘bad actors,’ as most would assume when you ask them about how fraud exists in our ecosystem. Rather, what we found is being committed by companies that are supposed to be operating as trustworthy organizations with apps that are promoted by Google as ‘must-have apps’. The tactics we discovered as a result of our technology and team are not new — we’ve been identifying and mitigating fraud for our customers for years with our industry-leading platform.

While protecting our customers, our team has also been dissecting the signals that are being sent by fraudulent publishers. These signals were intended to obscure the identities of the fraudulent supply sources and maintain anonymity, but we have uncovered ways to definitively identify them.

The Buzzfeed report is the result of some of those findings.

The reason for fraud? It’s not as simple as saying, “fraudsters commit fraud.” The reality is that incentives are misaligned, driving individuals and companies to be complicit for a variety of reasons. Fraudsters are leveraging the complexity and opacity of the supply chain, and the incentives are driving people to look the other way. While we believe that over the long term there are fixes with blockchain-based infrastructure like XCHNG, our discoveries to confirm the identities of even some of these fraudulent supply sources today can’t be ignored. I believe the chapter of complicity is coming to an end and we are entering a chapter of reckoning.

• Marketers who are incentivized by ‘conversions’ are unknowingly complicit in that they are paying for organic users, but are not quick to scrutinize fraud because the fraudulent conversions perform so well (because they are stolen organic users). I believe that CFOs will see the prevalence of litigation in the coming months and will demand transparency and verified attribution of publisher traffic moving forward.
• Ad networks, who are largely incentivized by ‘conversions’, aggressively buy traffic from publishers to fill their demand resulting in their complicity to the fraud problem. Ad networks and media aggregators will recognize the liability of their complicity and will change their approach to ensure appropriate, mobile-centric fraud screening and greater qualification of their sub-sources.
• Measurement technology providers that charge on a CPI basis (and no other signal outside of conversion) are incentivized to enable sniped conversions and are therefore complicit. The complicit measurement providers have the most to lose. It is the measurement provider’s responsibility to act as referee, and instead they (two providers in particular come to mind) have aligned their incentives toward CPI-driven fraud.

The tectonic shift from complicity to reckoning is showing in a few critical ways:

• Kochava has been hired by leading advertisers, outside of our typical measurement customers, to provide technology which provides technical evidence and serve as an expert witness in active fraud litigation. Kochava is consuming the raw data from other measurement tools to provide expert perspective on how fraud is being perpetrated against advertisers that have not previously been our customers. Let that sink in.
• Our discovery as reported by BuzzFeed is substantive — it references the behaviors of known companies, including NYSE-traded companies. I believe the financial consequences will be material and will set the tone for others to change behaviors accordingly.
• This discovery was made possible because of the premium technology built by and delivered by our team. Kochava is not conflicted by our billing model — our approach follows the data. Of note, it was Kochava that discovered this — not the various participants in the ecosystem who purport to have fraud solutions.
• Advertisers who have been defrauded, specifically those that use our competitors’ measurement products, likely have strong cases which could be argued legally. Follow the data, and you will see where fraud has been perpetrated. Media is one of the single largest line-items in a budget outside of payroll and infrastructure. Removing fraud results in material bottom line impacts to the budget of an advertiser.

We believe that 2019 will be the year of reckoning and we welcome the opportunity to serve companies that want to align with proper incentives which mitigate fraud.

If you have lost money to the schemes outlined in the BuzzFeed article, we would be happy to support you and protect you moving forward. Make the move; we have you covered.