Unmasking the $84B Ad Fraud Crisis: Empowering Marketers as Ultimate Shot-Callers

Google faced criticism this summer in two separate Adalytics reports. One report claimed that the search giant violated its standards regarding video ad placements on third-party websites, while the other alleged violations of children's privacy on YouTube. Despite Google's denial of the charges, these reports brought attention to the issues that arise in an ad market heavily dominated by Google and Meta.

At Advertising Week New York, Video Advertising Bureau (VAB) CEO Sean Cunningham gave a presentation discussing the significant power shift that has occurred, with marketers losing control to these tech giants over the past decade. He also discussed potential steps the industry can take to regain that control.

“There is unanimous acknowledgment that this power shift has indeed occurred,” stated Cunningham. "Contrary to the trend of the past 80 years where advertisers held the highest authority in the marketing ecosystem... these two colossal media platforms now hold even greater control than the advertisers themselves."

Google and Meta have captured a staggering 81% of the additional worldwide ad expenditure between 2012 and 2022, establishing themselves as the dominant players in the digital media industry. This level of market dominance has given rise to a dual standard, as described by Cunningham, between walled gardens and multiscreen TV advertising.

Google and Meta's lack of transparency has resulted in a decline in ad standards. Google claims that ads can be as brief as two seconds, with or without audio, and without differentiating between premium and user-generated content. This lowering of standards has been embraced by advertisers who are under the constant pressure for cost-effective campaign extensions. Advertisers have been offered cost suppression and replacement of premium inventory through programmatic advertising. However, the executive disagrees with this approach, stating that marketers should receive better treatment.

A fraudulent landscape

The Adalytics reports have revealed a concerning increase in transparency gaps and declining ad quality. This has created a higher risk for compromised ad spend and potential damage to brands. For instance, the first report exposed that over a three-year span, 1,100 advertisers were unknowingly subjected to worthless impressions on unsafe websites. Furthermore, another report highlighted how YouTube served adult ads to children, resulting in Google and advertisers facing federal investigations, substantial fines, and the threat of compromised "poisoned" first-party data stores.

According to Cunningham, a significant number of advertisers expressed feelings of betrayal, deception, and being taken advantage of by Google and YouTube when the reports became public. However, the majority chose to remain anonymous. Cunningham highlighted the cautious approach taken by advertisers, sharing a comment from a senior buyer who stated that they wouldn't risk challenging these individuals due to the extensive involvement their clients have with them in various capacities. This situation is concerning and potentially hazardous.

"We find ourselves positioned between the dangers of meth, heroin, and cocaine within the advertising industry. It is disconcerting when individuals disregard the consequences and casually ask, 'Why should you be concerned?' This precarious environment warrants caution."

Sean Cunningham

CEO, Video Advertising Bureau

In this challenging environment, the digital supply chain has witnessed a rise in numerous participants who take a share of the profits. Unfortunately, only 51 cents out of every dollar goes to publishers, and there is an alarming 15% of expenditure that is unaccounted for. Shockingly, a staggering 22% of online ad spend is wasted, resulting in a colossal $84 billion lost to ad fraud worldwide this year. According to recent findings from Juniper Research, this figure is projected to surpass $170 billion within the next five years.

To put this enormous number into context, the $84 billion lost to ad fraud exceeds the amount spent globally on print and audio media, which amounts to $76 billion, as reported by VAB. The extent of digital ad fraud in North America is roughly equivalent to the combined annual revenue generated by the NFL, NBA, and NHL. Additionally, it is important to note that the $84 billion ad fraud figure falls within the range of global estimated spending on methamphetamine ($61 billion), heroin ($110 billion), and cocaine ($130 billion), as pointed out by Cunningham.

What marketers can do

Cunningham's portrayal of the digital advertising industry as having low transparency and low standards, along with high risk and fraud, is far from positive. However, he offered a solution for marketers to regain control and establish the same rules as the multiscreen TV industry.

Marketers should insist on complete transparency from all media partners regarding the entire lifecycle of video ad units in a campaign. This includes access to the calculations for video ad impressions, detailed information about specific ad placements, and disclosure of ad placement and inventory sources in audience metrics. Additionally, marketers should demand that all media partners involve an independent third party to ensure transparency, eliminating the practice of self-assessment.

Cunningham urged marketers to question why ad fraud is not the prominent topic of discussion in the advertising industry, whether it be at Advertising Week New York, the ANA Masters of Marketing Conference in Orlando next week, or CES in Las Vegas in January.

He expressed his belief that Google and YouTube possess high intelligence, but if they are responsible for damaging the ad market, it is because they have the capability to do so. Cunningham called for a level playing field where Google and YouTube adhere to the same rules as everyone else.