What Is Ad Fraud In Digital Marketing?
If you run online ads then you should have an extensive understanding of Ad Fraud. If not, you’ve got to read on.
If you own a business and have a website, then the chances are you’ve used (or thought about using) paid advertising. Whether it was paying to display your banner on another website or diving into the world of pay per click advertising, online advertising is becoming increasingly popular.
So popular in fact, that online advertising is now the go to place when it comes to advertising. On average, for every $1 a business spends on online advertising, they make $2 back in revenue.
This might be good news for advertising networks and publishers, but unfortunately, it’s not all plain sailing for advertisers and businesses. When an industry grows at an exceptional rate, it can also attract people with malicious intentions.
Millions of businesses around the world spend billions of dollars a year on online advertising. But what happens to their budgets and sales when fraudsters start to take over?
Since the dawn of online paid search, there has always been ad fraud, but it’s only recently that the amount of fraud has dramatically increased. In fact, businesses lost $16.4 billion to ad fraud in the year 2017 alone. This incredibly high figure is only expected to increase over the years as the levels of ad fraud increase.
So how exactly does ad fraud affect businesses, and who’s behind all of it?
We’re taking a look at the people responsible for this fraudulent activity and the direct effect it has on businesses. But before we start, let’s take a look at what ad fraud involves.
Ad fraud comes in various shapes and sizes and can differ depending on the type of advertising model used. Although ad fraud is mainly seen in pay per click models, it is possible to experience it in others such as cost per mile models.
Ad fraud is when a user with no intention of ever buying a product or service clicks an ad which causes a website financial loss. This might differ slightly in other models such as cost per mile (CPM) where the advertiser is charged per 1,000 views and not per click. Ad fraud, in this case, would be someone constantly refreshing the page in order to drive up the number of impressions. The advertiser will still get charged for the views, although the user had zero intention of ever visiting or buying anything from the website.
A few hundreds of page refreshes might not sound like a big deal, but when it is done on a much larger scale, it can quickly become a big problem for advertisers.
In pay per click advertising, ad fraud is often referred to as click fraud. Unlike the CPM model, advertisers are charged every time a user clicks on one of their ads. This charge can vary from a few cents all the way up to tens of dollars. Compared to other types of ad fraud, this is definitely the most common and most expensive.
This is primarily due to the fact that most of the ads are displayed on search engines such as Google and Bing, which makes them very easy to find. Another reason why this kind of ad fraud is so popular is there are plenty of incentives for people to do it. Not only does it cause financial loss for the advertiser, but it can also help improve exposure of other competitors ads.
Want to learn out more about click fraud? Be sure to read our comprehensive guide on What Is Click Fraud?
Now you know what ad fraud is and the various different types of it, how does all of this affect businesses who use online advertising day to day?
The first major impact that ad fraud has on a business is that it skews their advertising data. Every business that runs a pay per click or banner campaign will continually track the results to make sure it’s profitable. If a pay per click ad is getting lots of clicks and conversions, then it makes sense to keep that advert running. However, when an ad starts to get a lot of clicks but no conversions, then an advertiser might decide to stop it.
The only problem is, what if the increase in clicks were coming from fraudsters who wanted to destroy your PPC campaign?
This influx of click fraud can often skew your data making you think you’re getting a lot more traffic and therefore sales. Unfortunately, that’s not always the case, you might be getting more clicks and traffic, but you’ll soon realise that your conversion rate has dropped significantly. This skewing of data can make it hard for advertisers to assess which adverts are worth keeping and which are worth stopping.
Not only does this mean marketing departments have to spend more time trying to make sense of the data, but it could also lead to many bad marketing decisions.
The second and most obvious effect ad fraud has on businesses is that it increases their average conversion cost. If a business has to spend on average $5 to acquire a sale and they make $30 per sale, then they would be looking at around $25 profit.
However, when you throw ad fraud into the mix, this average cost of conversion can often skyrocket. The $5 you used to pay could easily increase to $10 or $20. It could even grow to the point where it isn’t profitable to run the advert anymore. This might cause you to cancel that particular PPC ad which then means you’ll lose traffic and sales.
As you can see, ad fraud might not sound like a huge threat, but the knock on effects it can have are vicious. The financial loss can be so extreme that some businesses might be forced to stop running PPC ads altogether. This could be a big deal if a website receives most of their traffic from paid search. Without traffic, how is a business meant to survive?
This leads us onto another problem with ad fraud; its effect on a company’s growth. Like we mentioned earlier, ad fraud can completely destroy a business’s advertising campaign. It can damage it so much in fact, that a business is sometimes better off stopping their online campaigns altogether.
Not only does this harm a business’s growth, but it can often be the end for some businesses. If the ad fraud becomes so severe then a business will be forced to use other kinds of advertising. Depending on the industry and niche they are in this can be just as expensive if not more than paid advertising.
If a business was running a PPC campaign and appearing first for the keyword “plumbers london” then the chances are they were getting lots of clicks. However, if the ad fraud forced them to stop their PPC campaign then suddenly they won’t be receiving any traffic. In order to get back to the level of traffic they had before they would have to invest lots into SEO marketing. Even after all that investment in SEO there would still be no guarantee that they would reach the number 1 spot.
As you can see, ad fraud can have devastating effects on businesses no matter how large they are. A business might be able to survive a few fraudulent clicks, but a full on attack can easily cost a business thousands.
In order to protect yourself from falling victim to ad fraud, you need to make sure your adverts are protected.
To protect your online ads you can follow our step by step click fraud detection guide, or you can automate the entire process with our PPC Protect software.
To find out how PPC Protect can protect your ads and save you money, click below to read more and try our free 30-day trial.