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’ve been the victim of click fraud, then you’ve probably been left feeling cheated and defrauded. With so much money being wasted, it’s normal for a business to try and recoup their losses, especially when they were lost under shady circumstances.
Maybe you’ve thought about taking legal action against ad networks or alleged fraudsters. But with so much click fraud going on around the world, should it be down to you to do something about it?
Over the years click fraud has consistently been on the rise and currently costs businesses billions of dollars every single year. This has left many companies asking what’s being done to stop it. Due to its fraudulent nature, many businesses ask: is click fraud illegal?
With click fraud showing no signs of decreasing, we ask if the law is doing enough to protect you and your ads. Here’s everything you need to know about the legality of click fraud and what the law is doing to protecting you.
When you think of click fraud, the thought of its legality often jumps to mind. Afterall, click fraud does have the word fraud in it, and most cases of fraud such as credit card fraud often come with jail time. If click fraud is just another type of fraud then surely you’d expect jail time as well?
Unfortunately, it’s not that easy.
As you probably may know, different countries carry different sentences for crimes which means some crimes can range from suspended sentences and fines all the way to jail time.
When it comes to click fraud, most suspects are not actually tried for click fraud but more specifically wire fraud. This type of fraud is defined as: financial fraud involving the use of telecommunications or information technology.
Currently, wire fraud carries a sentence up to a maximum of 20 years. Yet no click fraudster has experienced this kind of sentence yet. As of writing, there has only been one fraudster who has received jail time for his role in click fraud.
The malware kingpin Vladimir Tsastin, was arrested in Estonia after running a click fraud scheme for nearly 10 years. Using malware-infected computers, Tsastin used these PC’s to fraudulently click ads on which he would receive revenue. After posing as several publishing companies, the bots were then used to generate fake views which lead to advertisers thinking they were receiving genuine views.
In total it’s believed that Tsastin managed to make over $14 million dollars from the click fraud scheme with over 4 million people falling victim to his scam. After the FBI had collected enough evidence on his fraudulent scheme, he was arrested in Estonia before being extradited to stand trial in the US.
For his crimes, Tsastin received a 7 year prison sentence with possible additional jail time back in Estonia. In addition to this, he also had to forfeit $2.5 million dollars in illegal profits. Although the sentence might not seem like a long time, it’s still seen as a great success. Not only does it prove that law enforcement are actively tracking online fraudsters, but they are also having success when prosecuting them in court. Hopefully, in the future more cases will arise against suspected fraudsters.
Aside from the FBI investigating click fraudsters, there are also other ways in which law enforcement are protecting advertisers from click fraud.
In 2004, Michael Anthony Bradley created a piece of click fraud software that was capable of defrauding millions of dollars from networks such as Google. Bradley notified Google of his software straight away and was willing to work with them to close up some of the flaws.
Bradley was initially offered $500,000 for his software by some of the world’s top spammers and online fraudsters. Knowing he could get a good price for his software, he approached Google and offered to sell it to them for $100,000.
After initially meeting with engineers from Google and discussing the software, everything seemed to be going fine and was invited back at a future date. Upon returning to Google’s offices, Bradley was arrested by a secret service officer and was charged with trying to extort $100,000 from Google.
Although the charges were eventually dropped and Bradley was allowed to go free, this case shows that law enforcement and Google are actively pursuing fraudsters. They could have taken his money and had a look at his software, but then they would only be encouraging fraudulent activity. Albeit this case was a long time ago, Google today still actively battle on against the countless click fraudsters by introducing new technology to detect them.
When it comes to click fraud, lawsuits are often a lot more common than criminal trials. This is primarily down to a few reasons. The first reason is that it’s much easier for a business to sue someone else for financial loss instead of trying to get law enforcement involved. Most law enforcement only want to spend their time going after the big gang who cost several businesses millions of dollars a year. If you’re a business who’s receiving a small amount of click fraud, then the chances are they won’t be interested in your case.
The second reason is that most businesses are looking for financial compensation for their losses. Sending a click fraudster to jail might feel satisfying, but it doesn’t solve the issue of the getting the money back. However, if you happen to win a lawsuit against another company or fraudster, then they’ll be forced to pay you a certain amount. Although this might not cover 100% of your losses, it’s still much better than being completely out of pocket.
Over the years there have been several high case profiles of businesses suing ad networks and other companies over alleged click fraud. Either the business has sufficient evidence to prove another party was involved in click fraud, or they believe an ad network wasn’t doing enough to protect them from click fraud.
When an advertiser experiences click fraud on an ad network, their first instinct will be to contact the network. After all, they are the ones responsible for serving the ads and making sure advertisers get their clicks. However, sometimes advertisers can feel like networks aren’t doing enough to protect them from fraudulent activities and lawsuits can often arise.
One of the biggest lawsuits involving advertisers and networks is a case from 2006 which involved Googled and several advertisers. The lawsuit was originally filed by Lane’s Gifts and Collectibles on behalf of all Google advertisers who had used the service since 2002. Although the jury ruled in favor of Lane’s Gifts and Collectibles to the tune of $90 million, none of the companies actually received money. Instead, all the advertisers received reimbursements on their ads that had experienced click fraud.
Since the lawsuit, Google have invested more money in click fraud prevention and now allow advertisers to claim back fraudulent clicks from several years back. Although their click fraud prevention system is still not perfect, it’s a welcomed improvement.
Sometimes click fraud disputes often arise when an advertiser clicks on other advertisers ads. In a recent example, Wickfire an ad management company, sued the company TriMax Media for alleged click fraud after they lost a client to Wickfire. According to an article from Adage, TriMax began bidding on search terms associated with Wickfire clients and clicking on those ads in search results. These actions drove up the advertiser’s costs which alerted Wickfire to the click fraud taking place on their ads.
The jury eventually ruled in favor of Wickfire and ordered TriMax Media to pay $2.3 million in damages. Although it’s unclear how much Wickfire actually lost from the click fraud, at least they managed to recoup some of their losses.
When it comes to digital marketing and pay per click, it’s not uncommon for a business to pay an agency or external company to manage their ads. Sometimes clients can feel like they have been let down by the agency and have not got the best return from their investment. Although this can be down to a number of reasons, some clients accuse agencies of purposely deceiving them.
In a recent case, the global taxi firm Uber has sued their ad agency Fetch Media Ltd for alleged click fraud and deception. Uber claims that Fetch improperly billed Uber for fake online ads and downloads it had nothing to do with. Uber is looking for a reported $40 million in damages with the trial set to start very soon. If they do win the case, then this would be one of the largest rulings in click fraud history.
It might seem like ad networks are often the ones receiving lawsuits, but there have been cases of them suing alleged click fraudsters to compensate losses.
In 2005 Google won $75,000 in a click fraud case against former AdSense participants Auction Expert International. The lawsuit claimed that the company artificially and fraudulently generated clicks on their pay per click ads platform, costing advertisers lots of money.
Since Auction Expert International where AdSense partners at the time, every click they made on these ads generated them ad revenue. Google claimed that they hired several employees to click the ads and generated over $50,000 in ad revenue. In this case, Google managed to recover their losses and pass them back onto advertisers, which resulted in a significant victory for Google.
Suing ad networks and competitors for alleged click fraud can be a costly and time-consuming process. Not to mention there is no guarantee you will win the case or even get any money back.
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