Global digital ad expenditure is predicted to hit $316 Billion in 2019. To put this into perspective, this is larger than the GDP of Malaysia and almost half that of the GDP of Saudi Arabia. In the United States alone, spending on online advertising has a hit a record-busting $88 billion, marking the first time digital overtook television for advertising spend.

When there is such a large market, the opportunity for bad actors to hijack budgets is inevitable. It is also proving extremely costly. A study by the business school at the University of Baltimore, and cybersecurity company, CHEQ, found that global loss to online ad fraud will cost marketers $23 billion in 2019. Left unchecked, the level of online ad fraud is expected to reach $26 billion by 2020, $29 billion by 2021 and $32 billion by 2022. The study revealed that up to 20% or 30% of all ads are most often only seen by bots. In the words of Keith Weed, former CMO of Unilever, which spends $9billion on advertising a year: “Bots don’t vote, buy products, drink beer or shave. We want to know that real people, not robots are enjoying our ads. Bots don’t eat a lot of Ben & Jerry’s.”

Sophisticated fraud hitting the US

The complexity of the ad ecosystem is making attacks on ad budgets harder to trace. Professor Cavazos at the University of Baltimore, who carried out the research on ad fraud with CHEQ, says: “Likelihood of fraud increases with the number of participants in a complex system, and few sectors attract as many players engaged in a complex transaction as online advertising. Even in a simplified narrative of the process of placing an online advert, we see at least 23 categories of different player in this transaction.”

Fraudsters are benefiting from the complex ecosystem to perpetrate ever-more sophisticated attacks. Some 77% of online ad fraud is classified in the industry’s own terminology as “sophisticated invalid traffic” (SIVT) according to CHEQ figures, based on 4.1 billion ad requests. This contrasts with the easier to detect “general invalid traffic” (GIVT).

This study revealed a rise in such sophisticated attacks which use a triple-lock of interwoven frauds – combining sophisticated domain-masking, invalid-referrals and viewability fraud – in a coordinated attempt to evade detection. Other prevalent techniques included domain spoofing, in which scammers create hidden Iframes on webpages to run ads that consumers never see, and various means used by scammers to manipulate and falsify location data.

CHEQ founder and CEO Guy Tytunovich says: “Spending on online advertising has overtaken traditional media like TV, radio, outdoor, and print. This makes it wishful thinking to believe that fraudsters will not continue to be creative and innovative in targeting online adverting dollars. Every day we are seeing growing sophistication and frequency of attacks against online ad campaigns. The problem is exacerbated by the number of participants in a complex system, and the unique circumstances allowing bad actors to thrive.”

The cybersecurity approach to ad fraud

With its background in cybersecurity, CHEQ has realized that it needs to be as sophisticated as the fraudsters when it comes to attacks. Like many Israeli founders, Tytunovich is a former Israeli military intelligence officer. Tytunovich graduated from Israel’s elite and clandestine 8200 unit. Using cybersecurity training for the first time in the world of advertising, CHEQ engineers built an engine which examines over 700 different user parameters in real-time, including Device/Browser/OS Fingerprinting and sophisticated honeypots (proprietary bot-traps). CHEQ developed AI to detect abnormal and fraudulent behavior, comparing millions of events in real time.

The use of AI also allows the CHEQ platform to constantly predict new fraud, while CHEQ is also using proprietary ‘mouse movement’ data to train its AI in millions of data points, to understand and distinguish between human interaction online compared to bots.

CHEQ CTO Asaf Botovsky adds: “It is important today to employ an ad-verification solution that performs deep analysis. It is important to probe vendors of services, asking questions such as: how many parameters do they have to uncover bots? Do they rely on simplistic fake IP lists? What techniques do they use to investigate the evolving threat? Do they merely report on fraud and can they block ad fraud in real-time?”

He adds that it is important to look out for anomalies in marketing campaigns. “For example, a programmatic buyer can monitor the amount of money spent on each site. If, for example, you suddenly find you are buying a very large number of impressions on a site, this suggests fake bot traffic. Be wary of small sites getting lots of impressions. Another flag to look for is if a small site is suddenly getting you lots of impressions in your campaign, or if a very niche site in a country is suddenly getting you lots of global impressions, which is highly suspect and points to location fraud.”

Future growth of fraud in the US

New opportunities for attacks continue undiminished as the advertising landscape diversifies across new channels and geographies.

The growth of Over the Top (OTT) advertising— delivery of film and TV content via the internet,
has grown to 2.7 billion in revenue and has seen 54% growth last year. The mobile app economy is equally expected to grow 136% by 2020 at a time when more than a quarter of mobile app installs worldwide are fraudulent. Developing countries’ internet growth is fast bringing new potential for bad actors. Africa alone moved from just 2.1% of the population in 2005 with internet connections to over 24% in 2018. US regulators and leaders are waking up to the problem. Mark Warner berated the “prevalence of digital advertising fraud, and in particular the inaction of major industry stakeholders in curbing these abuses.”

Clearly, the $23 billion ad fraud epidemic remains a hidden and little understood crime.

Redress in such complex markets is unlikely to be immediate. However, action is needed to ensure the economic impact is curbed in order to restore trust in the advertising ecosystem and secure future online prosperity.

To download CHEQ’s global ad fraud report see: Ad Fraud Cost