Why ad fraud is a mess in China

Ad fraud is an issue in every country, though it is especially rampant in China.

Digital spend in China is predicted by eMarketer to grow from $40.4 billion in 2016 to $83.6 billion in 2020. But the growth may be limited by ad fraud. According to ad firm AdMaster’s stats from more than 500 Chinese advertisers, on average around 28 percent of a digital campaign’s traffic was not seen by a human being during the first half of 2016, and the number of fraudulent traffic could go up to 95 percent for some campaigns.

“There’s no single country immune to ad fraud, but unfortunately it’s a bigger problem in China,” said Ronen Mense, vp of Asia for mobile analytics company AppsFlyer.

Ad fraud can take various forms, from impressions and clicks generated by bots, to fake websites stuffed with the highest-priced keywords to attract search ads. But the most severe ad fraud practice in China occurs when ads are placed around inappropriate content like pornography and violence. Publishers and ad networks — big or small — typically use this trick when they cannot reach certain key performance indicators, according to Marin Zhang, CEO for ad verification service Adbug. Foreign ad verification companies can hardly identify “unsafe content” because some issues like food safety and anti-Japanese sentiment are specific to China, he said.

While Zhang found that many display ads’ viewability is less than 5 percent, most advertisers in China are still using ad tracking instead of working with third-party companies to evaluate each click or impression, because everyone wants to make the numbers look good on the paper.

“Ad tracking is a weak technology in detecting fraud. But brands and agencies feel scared to work with ad-verification services,” said Zhang. “The question is: Do you want to report back to the headquarters with strong KPIs even though they are fake, or verified ones showing that all of your historical campaigns are shit?”

Mense echoed the same sentiment, adding that while there’s a mature ad validation system in the U.S., publishers and advertisers in China like striking direct deals without having any validation services involved. And many ad-tracking tools are data-management platforms as well, meaning that they can manipulate campaign metrics.

When it comes to mobile specifically, there are more than 200 app stores in China while there are just two major app stores — Google and Apple — in the States. “The Chinese mobile market is much more fragmented,” he said. “Those app stores can easily fake installs.”

But there’s optimism. Zhang believes that 2017 will the biggest year for brand safety and viewability in China. Mobile Marketing Association China set up a brand safety and viewability standard group last week, hoping to come up with industry standards and solutions to ad fraud. The initial 20 members include executives from Tencent, Procter & Gamble, and Zhang.

“In China, there are different parties at agencies internally competing for ad budgets. Some hate us, while some like us,” he said. “The global push for transparency influences the Chinese market. It’s a hard process for us to do business, but we are at a starting point.”