Issues in Advertising Fraud: What is Fraud?
Over the last 10 years one of the main topics I have covered is advertising fraud. Over and over again fraud keeps on popping up in the industry both from small players to major players. It seems that no matter how much the industry matures, how much technology is created; fraud is a significant issue that siphons both money and confidence away from the industry. I’ve written about banner farms, click-fraud, lead-faking, IP spoofing… you name it. My friend Ben Edelman, famed attorney and Harvard researcher has made it his life to cover issues in interactive advertising and has exposed complex schemes that boggle the mind. Advertising fraud seems to be everywhere in all forms and needs to be exposed, talked about and changed. However, as much as there are obvious kinds of fraud, there are sometimes more nefarious methods of fraud that are not always classified by fraud but still affect the industry significantly and need to be talked about.
Someone recently made the ridiculous argument to me that the word fraud was used too often. Their argument was that certain types of fraud were more “mistakes” of misclassification. They argued that in the performance marketing world, creating leads from non-approved sources wasn’t generally fraud, but more of a quality-control issue. If an advertiser was looking for quality leads, and had specified that “incentivization” of those leads (such as providing money, point or a prize) was not allowed, that if this request wasn’t followed, there wasn’t fraud per-se. I disagreed, and continue to disagree completely with this and believe the entire thought process that goes behind it to be flawed completely. One could claim that this belief was limited to just that person, or a few people – but I’ve found that many people in our industry unfortunately believe this and it’s hard to change their opinion.
Let’s make this very clear: It is my belief that an advertiser who pays for advertising, whether its branded CPM, or performance based CPA or CPL, is completely entitled to get exactly what they pay for in entirety. Any argument that one is allowed to provide an advertiser a service other than what they specifically paid for and agreed on is fundamentally flawed. I’ve unfortunately heard the argument many, many times from people within the industry, especially on the performance advertising side: “If the advertiser doesn’t complain, what harm is it? They are getting results and we are producing results.” I believe those that argue that don’t actually believe this, but instead provide this as an excuse to themselves or their employees that there is something legit about what is going on.
According to Wikipedia, “fraud is an intentional deception made for personal gain.” In interactive advertising, I believe that this definition is extremely important and should be taken seriously in how the industry deals with fraud. While there will be honest mistakes where clear directions and restrictions are not always communicated by advertisers, as we mature as an industry this is less and less likely. Most of the “mistakes” that occur in the industry are fictitious in my opinion, but instead purposeful fraud by some party. We do have to be careful however who to blame: a specific network or company may not be the culprit but instead may just have a horrible quality and compliance team. In this case still, we need to somehow hold accountable those companies that seem to have problems over and over again and blame it on third parties – are they actually that incompetent, or are they purposely ignoring obvious sides of fraud and deception in order to benefit financially? How many companies have we heard about over and over again that continue to pass the buck and blame someone else for their issues? At what point do they leave the realm of ignorance and become an accomplice?
I’m not an attorney, but know that many enforcement agencies have made this same argument that ignorance and proper defense when there is overwhelming evidence that fraud is occurring. Similarly, claiming that something is really a “quality issue” over and over again seems to be nothing more than an excuse for companies that purposely ignore or are complicit in fraud. “Quality Issues” or fraud should be an extremely infrequent issue for any advertising company – and any company that encounters those issues more than a few times should invest heavily into a compliance and quality control team and be extremely proactive with fraud prevention.
It’s the season for conferences. Right now there is LeadsCon, then Affiliate Summit East, and not soon after, Adtech NYC. As we get together to meet about how to do business, let’s also sit down and talk about how to protect our businesses. I do believe more and more companies take this seriously – my friend and industry veteran Daniel Dye from GetAds and Scott Rewick run a group on Facebook that talks about these issues, plus which companies don’t pay, and it’s been highly successful in creating these discussions. These honest discussions about the industry often are considered highly inflammatory and confrontational, but in the long run they will help improve relations and more important make us all more money.
I found this program for one of the first affiliate summits, when Missy Ward and Shawn Collins were still writing for me in AdBumB (Oh, how they have grown all up!). First of all, I was amazed how many people I am still friends with that were speakers. Secondly, noticed that one of the main topics was from Jason Wolfe, the founder of DirectTrack regarding affiliate fraud. I wonder how much of the same issues persist?
Question to my readers: As an industry, what else can we do to prevent fraud? Where are you seeing fraud? Thoughts?
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11 Responses to “Issues in Advertising Fraud: What is Fraud?”
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(C) 2010 Pace Lattin. It is the policy of this blogger to not edit or remove any content and comments, unless it is specifically attacking a protected group or irrelevant to the conversation, such as a spam. These are the OPINIONS of the respective writers, posters, commentators. All DCMA Notices shoudl be sent to pace@pacelattin.com
Same issues exist today, plus a bunch of new ones…. The real issue is everyone is gaming the system. Advertisers often by not paying out what they had promised, or blending in "bad" ads, networks by slicing off traffic and misdirecting ads, publishers by loading ads or forcing redirects etc… even the viewers by using ad blockers to not load and thus not pay for the sites they visit…. the whole system has been and is a house of fraud. built of fake reports, and bad practices by everyone involved…. trust me I have tried to do it the right way as a publisher and as a network only to find that I was getting cheated by everyone if I did not spend 3/4 of my day checking up on them.
Until the industry has a clear cut way to track ad impressions, clicks and traffic we will always have fraud (by whatever name you call it).
Advertisers not paying for what they receive — or even discounting the final invoice due to scrubbed leads — is not fraud. It’s possibly bad business ethics (if they are abusing the bad-leads excuse or over-scrubbing), but it’s not misrepresentation in order to trick the other party.
This is fraud and it’s coming from ALL of the networks, no matter how big (yes, including yours Pace): Publishers joining affiliate programs in order to purchase their own offers using bad credit cards (and sending the products to the credit card holder’s address)….all in order to rack up commissions. Generally, they wait until the end of the month because contracts force advertisers to tally up within 7 days from the end of the period (not always enough time to see fraud).
The tactics are getting more and more sophisticated every day. We’ve seen so much of it, I could write a book about it!
But the networks don’t want to BAN those publishers because they’re the only ones driving so much traffic. Something wrong with this picture???
Yes there’s click fraud, advertisers not getting what they paid for and all, but what about "messaging" fraud to spike click rates?
Telling a user they can get a $10,000 Obama scholarship when there isn’t an Obama scholarship is fraud to the end user. Which is what our advertising industry should be about, making money while helping customers get what they want in a legitamate way.
Sure there’s Pell grants, & financial aid, but there is no such thing as an "Obama scholarship". Company’s who toe the line in regards to their messaging are also commitment fraud to the end user market.
If we as an industry don’t police ourselves by not doing business with companies who commit fraud, the government will step in.
That is why the 3rd party tracking/serving business exist. Double click, Mediamind. Although they are the tool to terminate the fraud, but they can spot it. So the advertiser can out smart whoever is fraud.
Hi all,
i believe pace rases an important issue here. i agree with most of what he says, and at the very least, we do need to account this issue and discuss it as openly as possible, to constantly thrive for a defenition of this sensetive issue.
on that note- pace, can you link to the facebook group of disscussion (or even start a new one) so as many people could join?
best regards,
Sapir
also, about your question, i believe the only real issue here is how proactive are the advertisers, not the publishers.
as much as i wouldn’t want to expense the publishers/affiliates from responsibility about the lead "quality", i do believe that some advertisers (if not many) enjoy the "comfort" of accepting this fraud traffic as long as it doesn’t "stain" their reputation- after all, when working on CPA (so it’s commonly believed), the level of detachment between end user and product is very high.
i do believe that when you allow yourself to take some fraud, or any, eventually you will recieve the "back-fire" at full force, as this false feeling of comfort is missleading.
when you deal with a product that is promoted through CPA models, given that your last concern is brand awareness, you are still dealing with another end of the process which is commonly neglected- the end users/customers. right- it’s very comfortable when you are scoring hundreds and thousands of new users every day, and some mihgt say it’s living proof of the "quality" of the traffic, but i dare say that if you look deeply in to the end users, and start respecting them and your product, you might find that this "comfortable" fraud traffic that create tons of conversions, is not worth the "magic" of it, given that you do want to plan a long term startegy on any market.
i suggest that we start taking more responsibility as advertisers, starting from self mangement of product criteria (more straight forward, honest, user valued products), and ensisting on lead quality and traffic quality, even on the expense of some decrease in income. as naaiv it may sound, i believe a short term decrease can allow a long term prosperity.
best regards,
Sapir Diamant
1 word – DoubleVerify
The only bulletproof model I know of is Pay Per Call. We can identify, track & block paid-to-read, (or in this case, call), rings, URL triggers, pharming, TDoS attacks & most of the other methods slammers, scammers and network-jammers use to game the system. The easiest e-scam of all is click fraud. Take a look at this article:
“Click Fraud – The Dark Side of Advertising” –
http://www.businessweek.com/magazine/content/06_40/b4003001.htm
Google, Yahoo’s etc. claim that they contain phony click to 15% is dreamsville – try about 30%. Here’s an overview of the benefits of the PPCall model: http://www.callbuyers.com
Earl Brown
Every single comment is smart, accurate and one dimmension of fraud. As with all examples of fraud on and offline, whereever there is easy money flow without 100% transparency of activity from the source to te destination you will find fraud. Fraud is like a cockroach, it hides in the dark and people often live with it not knowing the where and when. We just went through the largest financial fraud of our history on wallstreet, several years ago it was enron and many others. Doctors commit insurance fraud, insurance companies defraud insurers as a policy, congress defrauds taxpayers daily, taxpayers defraud goverment yearly. I can go on and on across every sector.
The only way u minimize fraud is through tranparency and slowing the flow of money without accountability. The affiliate industry is built on weekly payments and 7 day end of month recons… Please give me a break. Stop this and you will stop the first 50% of it. Add clear transparency on where and what is run by publishers and you will kill the next 25%. last, put all advertising media payments in a escrow style lockbox where all disputes can be arbitraded with 30 days through honest disclosure of facts and terms and you will kill another 15% of it. The last 10% can’t be stopped, the crooks are internal or too smart, give up on it.
Sure I know why none of these actions will be done, our industry isn’t willing to play this way for a lot of good valid reasons. So we will continue to rely on limited technology and relationships to minimize it… And the fraud goes on and on and on…
You tell the publishers that you dupe out at 25%, only to NOT disclose that you are going to contact the very dupes that you are rejecting for ‘dupe’ reasons ~ while never paying for the data that you are contacting and generating revenue from. I call it fraud.