SunTrust On The $6 Billion Digital Advertising Fraud

SunTrust analyst Robert S. Peck provided highlights from a recent report from WhiteOps and the Association of National Advertisers which suggests significant fraud in digital advertising.

Approximately 25 percent of video ad impressions are from ‘Bots’ and advertisers stand to lose over $6 billion due to fraud in 2015.

Peck noted the following points:

1. "Advertisers will waste $6.3B in digital spend in 2015. The study found that Bots inflated publisher audiences by 5-50 percent and consumed 11/23 percent of the Display/Video ads shown. Projecting this onto 2015 expected digital ad spend of $48.3B ($40B display + $8.3B video) yields $6.3B in waste."

2. "Premium direct-buys ARE vulnerable. The study found that Bots consumed more than 10 percent of ad impressions even in premium direct campaigns on well-known publishers."

3. "Programmatic buys show higher prevalence of Bots. The study found that Bots consumed 17 percent of ad impressions placed programmatically with a range of 3 to 31 percent across participants."

4. "Sourced-traffic is the highest predictor of Bots. The study found that Bots represented 52 percent of traffic sourced from third-parties by publishers aiming to bolster audience measures."

5. "Bots garner higher share of retargeted ads. The study found Bots to be slightly more engaged than humans, building cookies-based credentials that are attractive to advertisers and garnering 19 percent of retargeted ads as a result. Bots were often included in segmented audiences sold by ad platforms."

Peck concluded that “Bots inflate audiences (ad supply overstated) and thus drive down the value of human ad impressions. This puts the good publishers (audience primarily humans) at a disadvantage relative to bad (audiences inflated by non-human traffic). With non-human impressions getting the same CPM as human, it creates a perverse incentive to grow traffic even via in-sourcing of Bot-laden traffic.”

The analyst note also stated that if the industry seeks to suppress Bot-traffic, it will provide a headwind for low-quality publishers and a tailwind for high-quality publishers as demand rises for human impressions.