Paid Ad Fraud Averaged at 17% in Q2—Here’s Why Marketers Should Care
According to the latest report from fraud prevention/analytics firm Pixalate, global programmatic ad fraud clocked in at 17% in Q2 of this year. That means almost $2.00 out of every $10.00 spent on programmatic ads went to fraudulent engagement.
So, how does widespread ad fraud relate to us, an influencer marketing company? Let's take a step back and define what ad fraud truly is.
What is programmatic ad fraud?
Simply put, programmatic fraud means some bad actors use automated means (e.g., bots) to view and click on paid display ads.
It's similar to an influencer buying fake followers to game the influencer marketing industry. Why would anyone invest the time and money to build massive click farms to skew ad engagement?
Who benefits from ad fraud?
People perpetrate ad fraud because there’s something to gain from it. But who might be behind the scenes?
In one example, an unscrupulous ad network might generate millions of fake impressions for ads served by their network to charge advertisers more money (as ads are usually paid for in CPMs or cost per 1000 impressions).
Alternatively, a black-hat marketer might want to waste a competitor’s budget on PPC (pay-per-click) ads, such as those on LinkedIn or Instagram, so they build a bot farm to fake millions of clicks and drain an advertiser’s budget.
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In another scenario, a ghost site may have fake ad inventory and want to generate fake traffic and ad engagement to make their site qualify for programmatic ad networks and gain revenue from ads placed on their site.
The common thread here is that someone is gaining something—while advertisers are losing millions of dollars by serving ads to fake audiences.
How Ad Fraud Impacts Advertising ROI
The scale of the problem is massive.
According to Statista, programmatic advertising was a $200 billion industry in 2022, which means that $34 billion was lost globally to fraudulent advertising engagement. That's a lot of wasted ad dollars.
Brands will spend millions of dollars buying display ads and lose millions of dollars to ad fraud. Brands invest money in paid advertising because of a simple return on investment (ROI) equation—it's very easy to draw a linear correlation between dollars in and dollars out.
However, that ROI equation typically does not factor in ad fraud, meaning the cost of those "dollars out" is generally higher than what the ROI equation would show...