Digital advertisers warned of dangers
Tech that promises to deliver online adverts also poses risk of fraud
Damien Venuto
New Zealand advertisers have lost millions of dollars to ads that have never been seen — at least not by human eyes — a marketing expert estimates.
Kris Hadley, founder of Kiwi media agency We Are Together, told the Weekend Herald ad fraud could be sapping the local market of $600,000 to $1.6 million a year spent by NZ companies on online advertising.
He bases this estimate on Integral Ad Science (IAS) monitoring, which keeps tabs on ad fraud.
As well, said Hadley, NZ companies could also face losses of up to $6.6m a year through inflated commissions to so-called tech experts. Hadley said those estimates were conservative.
Late last month, Fast Company published a report indicating that as much as US$50 billion ($74b) a year is lost globally to ad fraud.
The report, based on a new study by Tel Aviv-based cybersecurity firm Cheq, said as much as 20c of every dollar spent on digital advertising was stolen through fraud.
This fraud largely involves socalled programmatic ads, purchased through tech platforms designed to connect human eyeballs to advertising.
Hadley said New Zealand’s market for ads sold in this way was about $80m a year.
He said the biggest problem in the local market arose from “bad actors” who hid their activities and did not use tools such as IAS to ensure the quality of what they were selling on to local brands.
“There’s a lot to the digital ecosystem that can be opaque and you have a group of people who don’t know a lot about the industry and they really rely on their partners to guide them. And in any gap between knowledge and awareness, bad actors can take advantage.”
When digital advertising platforms first appeared, they came with the promise of connecting viewers and advertising. Advertisers would pay only for ads that were seen by their targeted customers.
Businesses across the world steadily shifted their ad spending to digital. In New Zealand, overall spending on digital advertising is expected to hit $1b when the Interactive Bureau of Advertising for New Zealand releases its figures for 2018.
The problem is that less scrupulous players quickly learnt how to take advantage of the system. This has manifested in two main ways: ad fraud and inflated commissions.
Ad fraud is largely international, with sophisticated criminals developing smart tools that mimic human traffic and siphon advertiser money to fake businesses around the world. This type of fraud has been so successful and low-risk that it is even attracting cybercriminals from other areas, such as the finance sector.
The other problem came in the shape of inflated commissions.
Having learnt how easy and cheap it was to place ads, some unscrupulous operators set themselves up as digital experts.
Rumours of markups as high as 300 per cent on ad placements did little to dissuade advertisers from pouring money into these ventures. The reason was that marketers who had long paid traditional media fees were still getting a good deal for the level of reach they were getting in digital.
Hadley said the worst operators were careful to hide how much money they were slicing off for their commissions. And while the industry had become much more transparent in recent years, there were still examples of opaque business models in the local market.
“There are definitely still firms in New Zealand working that way. The wastage is potentially massive. It’s a really scary space for people who just don’t know enough to ask really the right questions.”
John Baker, managing director at media agency Lassoo, said the type of ad fraud seen internationally simply was not so rampant here.
“There is certainly a risk of
overstating its impact.”
He said the biggest risk of ad fraud or inflated margins now came from the industry’s fringes and was most likely to affect smaller businesses.
But this was not limited to digital advertising, and Baker said malpractice like this had always happened on the media industry’s fringes.
The veteran media man said that over the years he had heard numerous inflated promises across every media channel, from industry types trumpeting the effectiveness of their medium.
Invariably, he said, this tended to affect smaller businesses, which relied on what they were told and didn’t always have recourse to expert, independent advice. He said you did not see this type of behaviour from the bigger media agencies or established vendors.
For the most part, he said, marketers were very informed, asking the right questions and understood how digital marketing worked.
Spark, for example, has been very reactive in its approach to digital advertising. When the marketing team identifies a problem, they pull ads until it is fixed — as seen when the telco recently pulled its ads from YouTube.
“We make decisions as to how and where Spark advertises to ensure that we’re turning up in the right way for our customers, and reflecting our values as a business,” Spark head of brand Sarah Williams told the Weekend Herald.
Gill Stewart, chief executive of New Zealand’s Interactive Advertising Industry, said the best way advertisers could ensure they were not being taken advantage of was by operating with a reputable partner with transparent buying and selling practices that let them see how media was being bought and sold.
Over the past two years the IAB NZ — with its international equivalents — has also attempted to address the issue of ad fraud.
Stewart pointed to initiatives such as ads.txt, which allows publishers to specify who is allowed to sell their advertising. “It gives buyers confidence they are buying a genuine ad impression on the target site,” said Stewart.
But even though this initiative is only two years old, fraudsters have already found a workaround. The Wall Street Journal reported this year that fraudsters had already tricked the system, diverting US$70mUS$80m in global advertising.
In any gap between knowledge and awareness, bad actors can take advantage. Kris Hadley