The perverse incentives that underpin ad fraud

The spotlight is now squarely on fraudulent non-human Internet traffic, even though it’s a problem that has existed for years. That might be because many of the key players — middlemen, agencies and even publishers — have no real incentive to stop it.

Last week, the IAB issued a set of “best practices” for reducing traffic fraud risk, intended to help ad buyers, publishers and ad tech middlemen like networks and exchanges avoid non-human, or “bot,” traffic. The guidelines feature obvious tips, including, “as a premium publisher purchasing traffic, pay the higher price to buy quality.”

But many legitimate players in the online ad ecosystem have benefited to some extent from the presence of fraudulent traffic. More impressions equals more money, whether those impressions are being served to real people or not. Fake traffic might make for bad PR for the industry as a whole, but for publishers, agencies and ad companies, weeding out fake traffic would result in a dip in the volume of ad impressions they can serve, and most likely a dip in ad revenues and performance as a result.

“The lack of incentive is quite strong across the entire ecosystem. Buyers have privately said to me they know there’s a lot of fraud, but if they cut that traffic out, their campaign performance goes down,” John Battelle, Federated Media CEO and leader of the IAB’s “traffic of good intent” task force told Digiday.

“In between buyers and publishers, there’s an awful lot of incentive to do things that aren’t in the long term good for the industry,” Battelle added, stating that some ad exchanges take a hands-off approach when it comes to policing bots and other suspicious traffic.

In the fiercely competitive online publishing and ad tech markets, two metrics are of utmost importance: scale and revenue. Inconveniently, cracking down on fraudulent ad traffic would have a negative impact on both and introduce additional overhead to boot. That’s less than ideal for those companies looking to IPO or sell in the near future, or even those that have gone public and now have shareholders to answer to.

One former publishing executive recently spoke in detail to Digiday about how he intentionally purchased fraudulent traffic and sold it on to advertisers. He said the ad partners he’s worked with simply turned a blind eye to bad traffic because they too were making significant amounts of money from it. Ad tech companies pay lip-service to the problem in the press, for example, by sitting on IAB task forces, but, he said, they ultimately ignore suspicious traffic because they stand to benefit from it.

“We worked with a major supply-side platform partner that was just wink wink, nudge nudge about it,” he said. “They asked us to explain why almost all of our traffic came from one operating system and the majority had all the same user-agent string. There was nothing I could really say to answer that question. It was their way of letting us know that they understood what was going on.”

Publishers are often the ones responsible for introducing non-human traffic into the ad mix, yet they usually plead innocence, too. Many publishers pay third-party companies to drive traffic to their sites for bargain-basement prices but do little to vet the quality of that traffic. As long as it’s performing and their advertisers are happy, they have no incentive to think too hard about where those clicks might be coming from, or why they’re so cheap. Ignorance is bliss, it seems. And profitable.

“To publishers, buying traffic for pennies a click or less from a network sounds like a dream come true. Maybe they don’t ask too many questions because it’s performing for their business,” said John Murphy, the man charged with maintaining quality across OpenX’s ad exchange.

Others are less than convinced by publishers’ innocence. Publishers are smart enough to know when something is too good to be true, they say. “Calling bullshit. They know,” commented Yieldbot founder Jonathan Mendez.

The anonymous publishing exec held similar views: “Publishers know. They might say, ‘We had no idea’ and blame it on their traffic acquisition vendor, but that’s bullshit. If you’re buying visits for less than a penny, there’s no way you don’t understand what’s going on.”

It’s evident that companies all over the ecosystem have benefited and continue to benefit from fraudulent traffic. Like many issues in the online ad industry, fake traffic might be filed in the “plausibly deniable” category.