Bot-Driven Online Ad Fraud Losses Decline

For once, a bit of relatively good news in cybercrime: online ad fraud losses to corporate advertisers fell 10 percent this year even with an increase in digital ad spending.

That's the finding of a new study conducted by the Association of National Advertisers (ANA) and security firm White Ops, which tracked online ad traffic patterns of 49 ANA members, many of whom represent some of the nation's largest companies, as well as other digital ad activity from October 2016 through January 2017. ANA members who participated in the study include Coca Cola, Unilever, and Walmart, for example.

Online ad fraud losses for 2017 will drop to about $6.5 billion worldwide from $7.2 billion in lost revenue for corporate advertisers in 2016, the study found. Digital ad spending is forecast to increase by 10% this year, so the decline in fraud represents a positive trend in combating fraudulent bot activity, according to ANA and White Ops. ANA members overall will lose even less in revenue - some $3.3 billion worldwide, the study shows.

"This is the first year [of this study] that we have seen genuine decline" in losses to ad fraud, says Michael Tiffany, CEO of White Ops. "The cost of bot traffic that defeats detection has gone up; it used to be a fraction of a penny per visitor. Now the market price for a realistic-looking bot has risen to about a penny per visitor … It costs more to perpetuate [this crime]."

Bill Duggan, group enterprise vice president at ANA, says companies are getting savvier about online ad fraud. "Three years ago when we started this journey" to measure and prevent online ad fraud, he says, the problem was just a blip on ANA member radar screens. "Marketers are taking a bigger interest in fighting fraud" today, he says, and the data bears that out.

Criminals use bots against advertisers by giving the illusion of real ad views, and the botnet operators who run those phony website visitors make money via cash-out points.

Bots continue to look more and more like humans in order to evade detection as phony traffic. Some 75% of the fraud spotted in the study was the handiwork of a computer plus a human on the same endpoint. Meanwhile, mobile ad fraud represents a tiny portion of the fraud landscape, with under 2%, the report found.

Craig Spiezle, founder of the Online Trust Alliance, says programmatic advertising marketing may be efficient, but it comes with security and trust risks. "There's a difference between efficiency and effectiveness: yes, you sell ads quickly, and inventory is great, but effectiveness [is low] because you don't know if your ad is being viewed or seen," he says.

White Ops' Tiffany says some programmatic ad-buying operations are improving now, given the fraud problems. "Several programmatic platforms have gone above and beyond instituting new security controls to tackle the problem," he says.

The next big thing: counterfeit inventory, he says. "We are seeing an increasing amount of counterfeit inventory. That was the kind of attack that Methbot did," Tiffany says. "Not just fake visitors but entirely fake inventory that purports to be real ads running on real websites, but it exists in the ether."

Methbot was a massive online advertising fraud operation run by Russian cybercriminals that was stealing up to $5 million per day from big-name US advertisers by posing as some 6,000 major US media sites, including The Huffington Post, Fortune, ESPN, CBS Sports, and Fox News, and generating fake ad impressions. Discovered in late 2016, Methbot had been operating in plain sight for three years, using its own internal botnet infrastructure rather than than the traditional ad fraud model of infecting unsuspecting consumers to do the dirty work.

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