The CMO’s Guide to Ad Fraud

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By Sarah Griffis, Sr. Manager, Digital Marketing Services at Capgemini

What if you could increase the accuracy of your performance data, reduce wasted cost and reinvest the savings in brand-building initiatives? At a time when most CMOs are working with reduced ad budgets because of the pandemic and its economic fallout, this may seem like an impossible task.

For many of my clients, there has been no stone unturned or effort left unevaluated to make budgets work in the time of disruptions. Many have been forced to make hard decisions on what they can support, and tougher still, who they can support.

However, there is a chance that there is a missing piece that is yet to be evaluated – a lurking budget siphon that is negatively impacting revenue on your dime.

By now, we’re all painfully familiar with e-commerce fraud on our websites—spoofed orders, stolen credit card numbers and revenue lost. But ad hijacking, affiliate malware, spoofed visits and other forms of ad fraud cost brands, too, by wasting money and driving away customers.

Ad fraud is a vast, complex topic, but learning to identify and prevent it can pay off quickly by protecting your budget—and by protecting your brand from impersonators that can ruin your customer relationships. Here’s a practical guide to spot and stop this insidious kind of fraud, save money, increase engagement and use your budget to invest in what matters to your customers.

Is ad fraud a problem you need to worry about?

In a word, yes. One reason for concern is that ad fraud continues to get more sophisticated. For example, ad fraudsters have exploited Facebook user accounts and created botnets that impersonate smart TVs to generate fake impressions (a practice known as click fraud.)

The cost of ad fraud is growing fast, too. Juniper Research put the cost to advertisers at $19 billion in 2018 and projected that it would rise to $44 billion by 2022. What could ad fraud be costing your marketing department right now? It consumes about 15% of the average ad budget, according to many estimates, although that can vary. And this kind of fraud hurts companies of all sizes, from small businesses to Fortune 500 enterprises.

Despite all of this, few companies devote the same kind of resources to ferreting out ad fraud that they do to stopping e-commerce fraud. One reason for the lack of prevention is the belief among some marketers that ad fraud is part of the cost of doing business. The other reason is that most marketers don’t realize how much fraudulent ad activity happens online, how many types of ad fraud there are, and how this type of fraud can erode their budget and damage their customer relationships.

What forms does ad fraud take?

In this guide, we’ll look at five broad categories of ad-related fraud. Keep in mind that ad scams are always evolving, so this is a general overview.

Click fraud

Click fraud is the type of ad fraud most of us are already aware of. Whether the clicks are generated by bots or people working in click farms, the goal is to inflate the number of clicks on pay-per-click ads.

What’s the point of all those clicks? It can vary. Unscrupulous website owners use click fraud to boost the numbers of the ads they host, so they earn more PPC revenue from advertisers. Unscrupulous business owners target their competitors with click fraud to drain their ad budgets.

Click fraud can also skew ad content by making it look as if the ads are popular with their target audience when in reality it’s just bots doing the clicking. That false feedback can make it harder to create ads that resonate with customers.

According to University of Baltimore research, click fraud alone will cost marketers worldwide more than $23 billion in 2020. But it’s not the only type of fraud marketers face.

Ad traffic hijacking

Fraudsters can hijack your digital ads by posting copycat ads that display your URL but retarget your ad traffic. Hijacking can create serious problems for your customers and damage your brand.

For example, one common way to steal customer data is to hijack a brand’s ads, redirect traffic to a fake site that impersonates the brand, and then invite users to log in or make a purchase. The fake site then steals their login credentials or payment data—or both. When customers discover fraudulent purchases or identity theft, they may blame the brand for the bad experience and refuse to shop with them again.

For years, the brands most often targeted by hijacking and impersonation attacks have been large, well-known organizations. Now, though, researchers are seeing fraudsters hijack smaller brands that have loyal followings and, presumably, fewer security resources than enterprise brands.

Affiliate fraud

Marketers also need to watch for affiliate fraud. Affiliate fraud often starts with browser extensions or toolbars that claim to offer benefits but quietly stuff affiliate link cookies into the victims’ browsers. Then, when they make a purchase, the fraudsters collect their commission, even though they had nothing to do with the sale. In effect, the merchant ends up paying for sales they would have made anyway.

Like click fraud, affiliate fraud can skew a brand’s data on ad effectiveness, in this case by making it harder to identify and focus on the kinds of affiliates that refer to real customers.

Customer journey hijacking

Scammers can exploit browser extensions in other ways, too. For example, a malicious extension can inject malware that shows up when the user is browsing a merchant’s website. The fraudulent display will look like it’s part of the website, so shoppers will likely trust it. But the display may be there to showcase the competitor’s products instead and direct the shopper to another website or even deface the merchant’s site by displaying inappropriate content. This is not the best-in-class experience your company wants to deliver to your customers.

Review fraud

Although retailers can be tempted to post fraudulent reviews, faking reviews can damage a brand’s reputation. It can also result in costly fines. For example, in 2019, the U.S. Federal Trade Commission fined one third-party retailer on Amazon $12.8 million for posting fake reviews. So, while you’re protecting your brand from external fraud, be sure your review collection practices comply with current laws and best practices.

How can you find out if you have an ad fraud problem?

Ad fraud can be difficult to detect. In the case of customer journey hijacking, one of our clients actually captured screenshots of a malicious browser extension injecting malware onto their site to display competitor ads. Most of us aren’t able to capture real-time proof of a fraud attack, but there are things you can do to spot fraud in your ad program.

Monitor your analytics

Watch your site traffic data for abnormal spikes and try to find out what’s causing that unusual behavior. For example, big increases in traffic with a higher than normal bounce rate can indicate click fraud. To know for sure, you’ll have to manually vet that traffic.

Choose the right metrics

As you’re trying to make ROI decisions, you may want to avoid making choices based on things like clicks and impressions that can easily be faked or spoofed by bots. That’s especially true if you know that you have an ad fraud problem. Instead, you may want to set ROI targets for signups or direct conversions. Although they’re not bot-proof, these metrics can be more difficult to fake.

Check your affiliates

Manually vetting affiliates can help weed out fraud, too. Reaching out to your affiliate partners to see if they can provide hard data on their program can help you see which ones are offering real value. And if an affiliate is doing something that negatively impacts your customer journey, like serving up an overlay that displays competitors’ products or a price comparison tool on your site, you may want to remove them from your program.

Find an ad fraud prevention partner

Most organizations don’t yet have in-house teams to combat ad fraud the way they do for order fraud, but that may change as more brands realize how much damage ad fraud can do. If your company isn’t ready to build a team in-house, there’s a growing number of third-party services that combat ad fraud, customer experience hijacking and brand impersonation. Many will offer a free evaluation of your site and ads to look for potential problems.

Working with a partner to stop ad fraud can prevent ad budget waste and protect your customer’s relationships now. It can also relieve you of the need to keep up with the increasingly sophisticated methods ad fraudsters use to target brands.

Before you invest resources in ad fraud prevention, you may want to calculate how much ad fraud is costing you. Like detecting ad fraud, tallying up the cost isn’t easy, but you can get a rough idea by using A/B tests.

One of our partners’ clients did an A/B test with malware-blocking software to get rid of adware that was interrupting the user experience flow on their website. In sessions with the malware blocker in place, the retailer’s conversion rate was 5.8% higher and the per-session customer value 4.1% higher than control group sessions without extra protection. Sessions that were protected from malicious adware generated $3.3 million more in revenue than control group sessions. The data strongly suggests that removing fraudulent ad messaging improves customer experience and leads to more purchasing behavior.

Protect your budget and your customer relationships

This guide is just an introduction to the ways that ad fraud can happen, but it should give you the information you need to start protecting your brand, customer journey and budget. Now’s the time to start eliminating fraud from your ad programs and preventing new fraud from targeting your brand. Then you can devote more of your ad budget to winning customers, building strong relationships and earning more revenue.

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