By: Shailin Dhar — The Dhar Method (www.dharmethod.com)

The business of ad-tech is different from any other because of the commodity it involves; especially now with programmatic becoming the major factor in digital ad-buys.

Automated advertising invites, as well as eliminates, a multitude of problems and as a result the industry has been on fire discussing and arguing what needs to be done and how to prevent the one of the biggest problems of all, ad fraud.

Here are the type of headlines we see all too frequently:

“$11 B of fraud plagues advertiser budgets in 2014–40% of digital ad budgets spent on non-human traffic”

“Publishers lose $15 B in potential revenue to fraudulent players.”

We all need to take a deep, deep, deep breath…hold it…and now exhale.

STOP trying to think of the problems and solutions that are affecting us as black and white scenarios. Let’s think critically and do like we teach kids to do: Think Outside Of The Box.

My favorite quote of all time about this industry is this: “Here’s the thing — online ad impressions are more like snowflakes than stocks: no two are exactly alike, and they melt.” — George John (Former CEO of RocketFuel)1

I believe this is the most insightful single sentence about digital advertising ( and programmatic in particular) to date. It not only acknowledges the concept of a disappearing commodity but embraces it. This is where my main concern with how programmatic media is approached by thoughtful business minds. Most approaches and philosophies refuse to incorporate the basic premise that the “good” or “commodity” of digital ad space is finite in nature. The actual life-span is sometimes a fraction of a second.

The other basic business philosophy that has resulted is the concept of infinite growth. Unrealistic business goals that are agnostic of how the digital publisher business really operates have created a need for what is often called “audience acquisition”, “buying traffic” and “audience extension”. Expecting a digital publisher to have 30%, 20%, or even 10% revenue growth Year over Year is not entirely feasible. Note I indicate revenue growth, not audience growth (or other growth metrics such as time spent, engagement, etc.)

The need for high growth rates for content websites led to a need for traffic providers to exist in the market. These providers generally sell PPC/CPC traffic to websites to help increase the number of “visitors” to a site. Buyers of the traffic are able to specify geo (generally country but can even get as granular as metropolitan area), browser, OS, and even device they want the traffic to come from. These traffic providers have been around as long as scaled ad supported websites; since the late 1990's.

In an all too typical model, a CRO sets financial goals, which are passed down to the Head of Operations, who passes it down to their ad operations team. One person on the ad-ops team tells their manager that they can double their audience this year for a mere $1000/month. Now the pats on the backs start going around and nobody is truly concerned with where the traffic came from. And NOBODY is going to go give back all the additional ad revenue once they find out that the traffic they bought might not be the cleanest.

Unsurprisingly, when a provider is charging $0.01-$0.05 per new user to the site, a lot of the PPC/CPC traffic is not real humans. In the beginning, these bots or “fake users” were very basic in their behavior and operation. As the detection of bots and process of verifying a real user has become more and more complex, so has the behavior of the bots. And why wouldn’t they get more advanced? They have every financial incentive to do so.

A lot of the rhetoric to describe bot traffic and the perpetrators of non-human traffic portrays them as malicious, “cyber criminals”, hackers, or bad actors.

I personally know several of these people, and many are upstanding citizens, great family men, loving mothers, and educated professionals. No one of them feels responsible individually for a headline like: “IAB estimates $8.2 Billion of ad-fraud to affect advertising industry in 2015.”

Also, they know that any financial harm is being borne by big corporations like GM, Walmart, Rolex, Toyota, or Coca-Cola that “can probably afford it.”

This leads into another one of my favorite quotes: “No snowflake in an avalanche ever feels responsible.” This certainly can apply to society at large, but it fits well into this commentary since we’re already talking about “snowflakes”. Each person involved in the bot traffic space does not feel, nor necessarily bear the full responsibility for the problems this causes.

To really understand the core of the problem, take a look at the financial incentives; profit margins of 100%+ are the norm. A reasonable operator can spend $1 to return $3. Few businesses see numbers like that. At what point would someone give up potential pay-offs like that to make sure they do not compromise what is seen as a moral gray area? I call it a gray area since there is nothing (currently) illegal about what is being done. The laws behind what defines a “user” have not been clearly written yet, nor do the majority of insertion orders explicitly prohibit purchased bot traffic.

So how should we all combat ad-fraud right now? There are many bot-detection companies that scan a publisher’s traffic and provide data on what is human, and what is not. These companies are run by brilliant tech minds and diligent engineers. Ultimately however, these are for-profit businesses. They have a financial incentive in the existence of fraudulent traffic. Morally, the company should be ecstatic if all the bot activity disappeared. But if the percentage of bot traffic on the Internet drops to < 1%, how many people will continue shelling out $15,000 per month to ensure not buying bad ad-space?

My prediction is: Very few.

Similarly, anti-virus software continues to flourish because viruses continue to exist.

To conclude, we ALL must start approaching these problems with a different mindset. We cannot fight technology with technology exclusively. People armed with both technology and knowledge will prevail.

A true, comprehensive understanding of how the economy of the internet is set up will allow us to analyze and then eliminate the problems of fraud that plague the digital advertising ecosystem.

Knowledge is power. Let’s all be powerful together.

Reach out for more information at: info@dharmethod.com

References:

1 — http://venturebeat.com/2010/02/23/you-cant-manage-online-ad-inventory-like-a-stock-market/ (February 23, 2010)