EIGHT AD FRAUD PREDICTIONS NOBODY IN ADTECH WANTS TO MAKE — part 1
2015 was the first year when the advertising industry started to widely talk about ad fraud. It is also the first year when the advertising industry started to understand its own involvement in ad fraud, and saw that no longer it would be possible to pretend that itself was not the one who made the most money out of the rampant fraud in its systems. It does not come as a surprise that few are willing to openly discuss what 2016 may bring.
ON MAKING ACCURATE PREDICTIONS ABOUT FUTURE EVENTS
For those that know me, know that I have a history of calling out things in regards to ad fraud before others. Also you might know, that more often than not, my predictions turn out to be accurate. The reason is that I try to pick out the most obviously outstanding thing that is not being talked about but matters. Then usually it’s really not a prediction at all. It is simply pointing out what is already happening or is going to happen due to obvious causes and conditions.
From the 8 points that I make in this article, the first one is the one where I more or less know that things will happen in the way I “predict”. The next 6 points are natural evolutions on that basis. For the last prediction, the one about ad fraud going to grow, I provide background and reasoning to the extent that should be convincing for anyone. Actually, most of these things are already happening, it’s just that people who say things are affraid of saying these particular things.
As a further point of reference for my influence as a researcher and commentator of the programmatic industry (i.e. why should you give a for what I’m saying about ad fraud), check WFA’s Guide to Programmatic Media: What Every Advertiser Should Know About Media Markets — arguably the most influential paper written about the topic of programmatic media. I’ve also co-founded botlab.io, the first and still today only research foundation focused on ad fraud research.
EIGHT AD FRAUD PREDICTIONS ALMOST NOBODY IN ADVERTISING TECHNOLOGY WANTS TO HEAR
1 A credible overall baseline for ad fraud will be established, with accurate local data available for some markets
2 More evidence will emerge about involvement of leading advertising companies in ad fraud and their earnings related to it
3 Those advertising technology companies that are aiming for an IPO will have their SEC filings (related to ad fraud) heavily scrutinized
4The legitimacy of the claims and capabilities of anti ad fraud vendors will be put under thorough investigation
5 Misleading marketing tactics and empty promises of advertising technology companies in regards to ad fraud will be exposed
6 Ad fraud becomes better understood as a major threat to the society, forcing the advertising technology industry to take security seriously
7 Government regulators and law enforcement take more active role in fighting ad fraud, the biggest and fastest growing cybercrime
8 Total ad fraud revenue and damages will continue to grow in substantial measures
Below I will cover the first 4 points in some detail.
RESEARCHERS WILL ESTABLISH A CREDIBLE BASELINE FOR AD FRAUD GLOBALLY AND SOME MARKETS INDIVIDUALLY
We’ve now worked 6 months with multiple partners on establishing such a baseline. We don’t have any other interest than having as comprehensive of a view of the kinds of ad fraud, and the extent of the exposure to ad fraud, as it is possible at this point. Nobody is paying us or our research partners for this work. Nobody gets a first dib to it. Everybody will get unrestricted access to the findings without limitation.
Assuming that really is happening, let’s start with the question everyone wants to hear. What will we find out in terms of the actual rates of exposure to ad fraud?
- Sophisticated markets suffer from 20–40% ad fraud exposure
- Less sophisticated markets suffer from 40–60% ad fraud exposure
- The least sophisticated markets suffer upwards from 60%
Unlike certain recent studies suggest, investment is not safe with premium publishers, and in some cases even direct buys are “poisoned”.
With a baseline, and the accompanying classification of ad fraud activity, decision makers can for the first time effectively evaluate claims made by vendors regarding their ad fraud exposure and the measures that are being allegedly taken to counter fraud.
Having a credible view in to the extent of ad fraud exposure, and to the way it manifest in the eco-system in terms of transactions and money flow, opens up a couple of really important questions for credible answering:
- how much of the total digital spend is fraud?
- how much of digital growth is fraud?
- how much money in total are vendors pocketing from ad fraud?
At this time, it is not possible to ask these questions, because there is no credible evidence about the extent of the exposure across the industry. The claims that are taken with the greatest face value, are the ones that have lower estimates than any other research.
MORE EVIDENCE WILL EMERGE ABOUT THE INVOLVEMENT OF MAJOR ADVERTISING COMPANIES IN AD FRAUD AND THEIR EARNINGS RELATED TO IT
The earnings part is the key here. Right now we have a system where more there is ad fraud, the more a given ad network or advertising technology company makes money. This is more true with Google than any other company. Google’s involvement have now been evidenced by researchers to extend in to charging clients when they know the traffic event is caused by a bot.
Google has been charging marketers for advertisements it places on YouTube even when the video platform's fraud…www.ft.com
If 20% of Google’s inventory is bots, then 20% of its ad revenue is being created from criminal activity. Google is not alone in this, it just happens to be the biggest. Inflated market caps of adtech companies are discussed in more detail here:
Ad fraud is the biggest cybercrime, making a whopping $10 billion or more for cybercriminals this year, causing damages…medium.com
With Matomy we have an example of a company that has now lost 2/3 of its market cap due to its exposure to ad fraud being revealed. And it’s not alone having suffered this effect.
With the overall ad fraud exposure baseline, and better understanding of the various kinds of ad fraud, we will be able to accurately asses how exposed a major company to ad fraud may be. Because ad delivery companies are wired for delivering ads, it is very easy to covertly test their genuine capabilities.
The baseline for overall global exposure will be more relevant, the bigger the company is. With the baseline in place, the extent of the involvement of major companies in the problem will inevitably come out.
ADVERTISING TECHNOLOGY COMPANIES AIMING FOR AN IPO WILL HAVE THEIR SEC FILINGS HEAVILY SCRUTINIZED
A company’s exposure to ad fraud and its claimed capabilities to counter it, will take the center stage in any advertising technology IPO filing that comes in 2016. Matomy and Rocket Fuel will be key points of reference for understanding the risks in having a major advertising technology company file for an IPO at this point in time.
Britain's technology ambitions have suffered a blow as Matomy, the only member of the London Stock Exchange's two-year…www.telegraph.co.uk
It’s important to understand that because at this point in time nobody has a comprehensive and well documented understanding of ad fraud as a whole, it is unlikely that there is someone who is not exposed to it. This means that investors should evaluate advertising technology companies more carefully than before. Basically we know everyone is exposed, but nobody is sure to which extent, and who is more than the other. We also know that we’re getting closer to a far more transparent market place.
In terms of botlab.io, we will pay attention especially to those companies that make statements to the extent of “we’re taking care of ad fraud already”.
We will work togehter with a global network of researchers, journalists and decision makers to ensure that those companies get the attention their claims deserve. If there is indeed such a company that can “take care of ad fraud”, then everyone’s attention should be in that company.
No better way to move on to the next point, than this highlight with details on another advertising technology company battered by ad fraud exposure (becoming evident to investors).
THE LEGITIMACY OF CLAIMS AND CAPABILITIES OF ANTI AD FRAUD VENDORS WILL BE PUT UNDER INDEPEDENT INVESTIGATION
Based on the information I have, it seems fair to suspect that some of the alleged leaders in the anti ad fraud vendor space are little more than sales and marketing companies. They are not security companies they claim to be, and they do not have the resources and capabilities that are required from a company to offer the kinds of solution security companies offer.
As a testament for the disconnection between the claims a well recognized vendor is making, and its ability to make such claims, Pixelate made it to the 2015 FULL SPECTRUM CYBER DOUCHERY LIST. With a total of 5 entries, Pixelate tops this year’s list.
WELP, another year is almost gone and Krampus has been sharpening his bundle of switches to beat all the bad cyber…krypt3ia.wordpress.com
As a result of the mistakes that had been made by Pixalate in reporting Xindi the Botnet, the adtech industry now has the fury of some of the most influential security researchers.
No better place to end the first part of this article than with Xindi, perhaps the greatest ad fraud fail of 2015.
Start reading the part 2 here: