The Current Digital Advertising Fraud Landscape

March 2022

Telecoms & Connectivity

Scarlett Woodford

Principal Analyst

The Impact of COVID-19 on Merchants

Due to the COVID-19 pandemic, there has been a widespread acceleration of digitalisation across a number of different verticals. With government lockdowns in certain regions requiring the cessation of non-essential appointments, hospitality, personal care, retail and travel, enterprises and organisations have been forced to develop their digital presence at unprecedented rates. 

As part of this digital transformation, there has been an increase in the number of organisations adopting an omnichannel approach to customer services, marketing, and sales, aiming to reach customers on their preferred platforms. This has led to a shift towards conversational messaging. As a result, there are now an unprecedented number of brands and enterprises with an online presence. 

An Overcrowded Digital Advertising Space

This has led to an increasingly saturated advertising market, resulting in advertisements becoming more expensive, due to the increasing cost of hosting campaigns on advertiser networks. Importantly, this elevated expense does not necessarily translate into more efficient campaigns. With consumers bombarded with digital advertising campaigns on the majority of digital content sites, the probability of a consumer clicking on any given advertisement decreases due to the sheer number of competitor adverts.
 
Advertisers are now facing increased pressure to strengthen their online presence, whilst also having the awareness that online advertising involves costs and losses. Due to the prevalence of advertising fraud, advertisers must face the reality that as larger proportions of advertising budgets are allocated online, the amount lost to fraudulent online activity will also increase.

The Many Forms of Advertising Fraud

Ad fraud is a term used to describe any attempt to deceive digital advertisers or digital advertising networks for financial gain. Below, we provide an overview of the main forms of digital advertising fraud: 

• Malicious Bots: A broad category in which fraudsters can use bots to generate large quantities of fake clicks on an ad, or fake visits to a website. 
• Hidden Ads: Ads are placed in such a way that they are not visible to the consumer. This targets ad networks who pay based on impressions and views, rather than clicks. 
• Install Hijacking & Click Injection: This uses a compromised app that is already on a device to detect installs; generating a click before the new app is opened. 
• Click Flooding: Large quantities of clicks are generated with random device IDs; hoping that the legitimate user will install the application later. 
• Click Hijacking: This involves compromising a user’s computer, an ad publisher’s website, or a proxy server. 

• The value of digital advertising spend lost to fraud will reach $68 billion globally in 2022; rising from $59 billion in 2021.
• The top 5 countries most impacted by advertising fraud, which together account for 60% of global losses, include: the US, Japan, China, South Korea and the UK.
• Those advertising in the US will potentially suffer the most in financial loss due to fraudulent activity, with total losses in the US expected to surpass $23 billion in 2022.
• The most successful ad fraud detection tools will harness machine learning algorithms to compare advertising traffic with previously observed, verifiable baseline data.