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Navigating ad fraud and consumer privacy abuse in programmatic advertising

Jul 14, 2021 3:15:00 PM



Article written by Jalal Nasir, CEO of Pixalate, originally published in TechCrunch.

Programmatic advertising is a $200 billion global marketplace that is rapidly growing and far-reaching, with Connected TV (CTV) serving as its latest accelerant. Unfortunately, however, it’s also a business sector rife with fraud and consumer privacy abuse, particularly in emerging media forms like CTV and mobile.

Global losses to ad fraud exceeded $35 billion last year, a figure expected to rise to $50 billion by 2025, according to the World Federation of Advertisers. Per the WFA, ad fraud is “second only to the drugs trade as a source of income for organized crime,” but there is no one-size-fits-all ad fraud strategy.

To capitalize on the promise of video advertising in mobile and CTV, and measure ad efficacy with confidence, business leaders must ensure that they’re reaching customers — not bots — and achieving their business goals while remaining compliant with the latest regulations and laws.

There are a few key steps business leaders can take to guard their reputation and their ad spend:

  • Deploy sophisticated tools to reveal the types of ad fraud attacks to which your ad budgets are falling prey.
  • Analyze your budget with quality versus reach in mind — fraudsters continue to take advantage of advertisers’ historic obsession with reach.
  • Acknowledge that the “Age of Privacy” has arrived; business leaders must remain compliant and protect their brand image in the ad marketplace.

Know the different types of ad fraud in CTV and mobile in-app to better protect your ad spend

It’s important to consider the various ways your ad budgets can be squandered on invalid traffic. Although 78% of U.S. households are now reachable via programmatic CTV advertising, ad fraud rates remain high, at 24% in Q4 2020. Traditional ad fraud attacks, such as spoofing (i.e., pretending to be a different publisher) and fake sites or apps, are being supplanted by more advanced schemes, such as CTV device farms.

Knowing that ad fraud is eating away at your budget is the first step, but business leaders need to understand the different schemes so they can apply the right protection in the right moments.

Looking at reach through a quality lens

Historically, the standard way to measure advertising has been focused on reach. However, reach is now more of a vanity metric if uncoupled from traffic quality.

Striving for reach while ignoring quality creates a prime opportunity for ad fraud. Generating fake traffic to create the illusion of “reach” has become a staple in many ad fraud schemes, with some CTV schemes fabricating up to 650 million bid requests a day per day from bots, per The Drum.

High impression rates that fail to convert into actual sales and pricing anomalies (as compared to a peer group) are compelling harbingers of traffic quality issues.

Because the growing CTV ecosystem commands premium pricing, advertisers may be tempted to seek out deals. However, several leading streaming TV providers, such as XUMO and Philo, have warned advertisers about prices that seem too good to be true, noting that they may be signals of fraudulent activity. Work to identify where traffic is coming from and ask questions when the data looks suspicious.

The ad industry itself is also fighting back by giving tools to business owners meant to stymie ad fraud. There are several industry working groups and watchdog organizations — including the Media Rating Council, Interactive Advertising Bureau and Trustworthy Accountability Group — that accredit certain platforms and suppliers to combat ad fraud. These working groups and organizations also regularly release industry standards and programs designed to address fraudulent activity, such as the Ads.txt initiative meant to help advertisers know they are buying inventory via legitimate third parties. All business owners should utilize certified platforms — along with emerging programs and standards — to stay on top of the latest trends in ad fraud.

Business leaders need to prioritize brand safety and compliance

In addition to navigating the complex world of ad quality, brands must now consider whether the publishers they are working with are brand safe and compliant with the latest consumer privacy and compliance laws.

Pixalate’s May 2021 estimates show that 22% of Apple App Store apps and 9% of Google Play Store apps that serve programmatic advertisements don’t have a privacy policy. This is significant because there are already documented cases of consumer data being misused as part of ad fraud schemes. And 70% of Google Play Store apps have at least one of what Google calls “dangerous permissions,” an increase of 5% in 2020. Additionally, of apps that serve programmatic ads, 80% of Apple App Store apps and 66% of Google Play Store apps count children aged 12 and under as part of their audience, which brings COPPA compliance risks into the equation as well.

There are a couple of things at play when it comes to brand safety that business leaders and brands should be aware of. The most important is that what is deemed “safe” for a brand is solely based on that brand — there is no golden standard because each brand has a different vision, mission and goals. Brand safety is subjective. However, it’s essential for success.

Ad fraud, brand safety and data compliance continually evolve, and leaders must follow the numbers, stay educated on market changes, and invest in the right partnerships to ensure consumers, not bots, are engaging with the most impactful and effective content.

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The content of this blog, and the Publisher Trust Indexes (collectively, the “Indexes”), reflect Pixalate’s opinions with respect to factors that Pixalate believes may be useful to the digital media industry. The Indexes examine programmatic advertising activity on mobile apps and Connected TV (CTV) apps (collectively, the “apps”). As cited in the Indexes and referenced in the Indexes’ key findings reproduced herein, the ratings and rankings in the Indexes are based on a number of metrics (e.g., “Brand Safety”) and Pixalate’s opinions regarding the relative performance of each app publisher with respect to the metrics. The data is derived from buy-side, predominantly open auction, programmatic advertising transactions, as measured by Pixalate. The Indexes examine global advertising activity across North America, EMEA, APAC, and LATAM, respectively, as well as programmatic advertising activity within discrete app categories. Any insights shared are grounded in Pixalate’s proprietary technology and analytics, which Pixalate is continuously evaluating and updating. Any references to outside sources in the Indexes and herein should not be construed as endorsements. Pixalate’s opinions are just that, opinions, which means that they are neither facts nor guarantees; and neither this press release nor the Indexes are intended to impugn the standing or reputation of any person, entity or app.

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