Companies Media & Marketing
Ad iconoclast: Four reasons why digital industry is rife with fraud
Sam Buckingham-Jones Media and marketing reporter
Apr 30, 2023 – 4.47pm
Bob Hoffman has made it his life’s mission to call out spin in the world of advertising and marketing.
The former US advertising agency executive is known as the ad contrarian, a moniker he assumed while railing against online tracking, Facebook, Elon Musk and, most recently, the $US68 billion ($101.6 billion) advertising fraud market believed to be directly funding global organised crime.
Mr Hoffman recently wrote AdScam, his sixth book and one that targets the entire online advertising sector for aiding this fraud.
Juniper Research, a UK-based data firm, estimates Australian businesses lost $US1.32 billion ($1.97 billion) in 2023 to fraud. In 2022, that figure was $US1.2 billion.
The vast bulk is stolen from programmatic – or digitally traded – advertising. Mr Hoffman, who was in Sydney in April with media consultancy Madclarity, says. “The Russian government hacked 250 US agencies in 2021, including the National Security Agency and the Homeland Security agency ... Do you think that if they can hack those places, they can’t hack the advertising industry’s programmatic defences? Come on,” he says.
“If you can steal billions of dollars, with probably a tiny chance of being caught, and no chance of consequences even if you are caught, why would you not?”
Ad fraud can involve creating websites that are made for advertising with stolen content or gibberish, or layer many digital ads on top of each other that aren’t actually visible – anything to trick digital exchanges into thinking an ad has been shown to a customer.
The major digital advertising exchanges sell access to audiences wherever they are, pitting a reader who would be expensive to reach on The New York Times site against the same person when they click on a cheaper website.
Madclarity partner Eric Faulkner points out Proctor & Gamble slashed online spend by $200 million in early 2018, eliminating 90 per cent of the online publishers it advertised on. Organic sales grew later that year.
“The farther down the long tail, you go to the smaller and smaller websites, the more likely you’re not buying a real website. And you’re not really buying a real audience,” Mr Hoffman says.
There are four reasons why ad fraud persists and why, in his words, there are “perverse incentives for marketers to use this stuff”.
“The more crap they buy, the lower their cost per 1000 [views] goes,” he says. “They’re buying all the stuff that’s almost free, it’s so cheap. They get the reports they show it to the boss, ‘Look how low my CPMs (costs per 1000s) are, see? I’m doing great’.”
The second reason is the money flowing into and out of the advertising technology sector. “I mean, no one wants to kill that golden goose,” he says.
Third, the biggest “ad-tech” players are some of the most powerful entities in the world – Google, Facebook and Amazon, for example. “Who wants to come up against them?” he says.
Finally, “everyone thinks it’s the other guy who’s getting screwed”.
“People say, ‘I know there’s fraud, but you know, we have fraud detection software’,” Mr Hoffman says. “Get the f--- out with your fraud detection software. It’s worthless bullshit.“
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