Magazine article CRM Magazine

Fraud Hits Digital Advertising Hard: Invalid Traffic, Content Sharing, and Malware Cost the Digital Ad Industry $8.2 Billion per Year

Magazine article CRM Magazine

Fraud Hits Digital Advertising Hard: Invalid Traffic, Content Sharing, and Malware Cost the Digital Ad Industry $8.2 Billion per Year

Article excerpt

Poorly designed business processes and repair flaws cost the U.S. digital marketing, advertising, and media industry $8.2 billion annually, according to a study by the Interactive Advertising Bureau (IAB) and Ernst & Young. To recover these costs, companies must focus on invalid traffic, infringed content, and malware in the digital advertising supply chain.

Sherrill Mane, senior vice president of research and analytics and measurement at IAB, was floored not just by the cost estimates of what the entire ecosystem is losing in opportunities but also by "the porous nature of the supply chain."

"Until we realize this porous nature and how these things can happen, we're going to have a bigger struggle fighting fraud," she warned.

Of the three problem areas identified by the study, invalid traffic that affects search, audio, video, social, mobile, and Web applications costs the industry the most, at $4.6 billion--56 percent of the total. Invalid traffic causes systems to generate ad-related actions for reasons other than delivering the right ad to the right user at the right time. Examples of invalid traffic sources include hijacked devices that are modified to make HTML or ad requests without the user's control; adware traffic where HTML or ad requests are made independently of the user's requests; and browser pre-rendering, where a device makes HTML or ad requests in advance of the user's navigation to the requested content.

Infringed content--stolen video, music, and text content that is illegally distributed on the Web--costs the industry $2.4 billion. Of that, $2 billion can be attributed to consumers' spending an average of $8 per month to access what is currently considered infringed content, and $456 million constitutes the advertising revenue that is lost. Examples of infringed content distribution include unauthorized hosting sites that enable users to upload and stream videos, peer-to-peer communities that allow users to browse files on Web sites that link to other connected computers or servers, and unofficial storefront communities where users can purchase and download content from the site's own servers. …

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