Online advertising and digital marketing, vector illustration eps10.
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The advertising industry’s rapid shift to digital formats is providing a boon to fraudsters, who will cost brands $7.2bn this year, up from $6.3bn in 2015, according to new research.

Marketers are losing money to fraudulent viewing by “bots”, or automated computer programs, that mimic human behaviour. Advertisers pay for those views even though they are not seen by the real people campaigns are intended to reach.

The study by the US’s Association of National Advertisers, whose members collectively spend more than $250bn a year on marketing, and White Ops, an online ad fraud investigator, attributed the rise in projected losses to an expected 15 per cent rise in digital ad spending this year.

The findings “underscore the need for the entire marketing ecosystem to manage their media investments with far greater discipline and control against a backdrop of increasingly sophisticated fraudsters,” said Bob Liodice, ANA president.

Fraud is just one of the concerns dogging the advertising industry, along with adblocking, transparency in media buying and viewability, or whether ads can actually be seen by website visitors.

“When you look at the entire technology equation, you have a number of things going on that can be paralysing to a marketer,” Mr Liodice said. “Who do we trust?” Globally, marketers are set to spend nearly $200bn on digital campaigns in 2016, accounting for almost a third of total ad spending, according to the consultancy eMarketer.

Brands have been racing to follow their customers from print, television and radio on to websites and social media platforms, but the booming digital advertising marketplace is proving difficult for many to navigate and vulnerable to exploitation from hackers and even organised crime.

Using malicious software, fraudsters take control of computers and sell bot-generated traffic to online publishers, who charge brands to display ads to their visitors — human or computer. In other cases, digital ads are placed on websites that are viewed almost entirely by bots rather than real people.

In 2014, an online campaign for Mercedes-Benz was viewed more often by bots than humans, according to an investigation by Telemetry, a UK company that specialises in ad fraud detection.

The ANA/White Ops survey involved 49 advertisers, including McDonald’s, AB InBev and Unilever, and tracked nearly 10bn advertising impressions over two months.

Rates of bot viewing ranged from 3 to 37 per cent, compared with 2 to 22 per cent last year. The overall and average rates of online ads being viewed by bots were “basically unchanged” from a year ago, the report concluded, with about one in 10 display ads being viewed by bots and about a quarter of online video ad views similarly fraudulent.

Of 28 publishers that participated in last year’s survey and returned this year, only nine reported a decrease in bot rates.

“While there is recognition that this exists in the marketplace, I do not believe that the industry has rallied hard enough or aggressively enough to solve this,” Mr Liodice said.

Higher priced advertising units, such as videos and ads that target specific demographics, are more vulnerable to bots than the average online ad, the study found, because they “provide a stronger economic incentive for botnet operators to commit fraud”.

For example, video ads that cost more than $15 to reach a thousand viewers had a 173 per cent higher rate of bot views than cheaper ads.

“Programmatic buying — placing ads on websites via digital marketplaces known as ad exchanges — was also found to be more vulnerable to bot fraud than buying ad space directly from online publishers.”

Programmatic display ads were viewed by 14 per cent more bots than the study’s average and programmatically bought video spots had 73 per cent more bot views.

shannon.bond@ft.com
@shannonpareil
@FTMedia

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