About 1/3 of digital ad spend is lost to fraud. With US digital ad spend at over 72 Billion in 2016, that's a hefty sum. Marketers spend stunning sums of money on advertising that no one ever sees. Fraud is diabolically difficult to detect, and even harder to understand.
We're taking an ongoing look at this many faceted problem, with explanations that you don't need to be a hacker to comprehend.
Ad fraud usually elicits thoughts of click farms and fiendish hackers perpetrating crimes from sites based in Romania, China or Russia. But it's not only sophisticated Russian botnets that are using fraud to their benefit. Increasingly, unscrupulous companies are using ad fraud methods to steal business and crush competitors.
Today we look at a court case brought by Wickfire, a digital marketing company, against a competitor called TriMax Media. This case is an interesting example of the many forms ad fraud can take, and the numerous ways it can be used for illicit gain.
Wickfire sued TriMax, and the jury found in its favor, rewarding Wickfire $2.3 million in compensatory damages. Both companies manage online advertising for clients, specifically the ads that appear when consumers use a search engine (ie Google, Bing, Yahoo) to find products or services.
PAY PER CLICK
This kind of advertising, a type of paid search marketing, is based on clicks. The objective for the marketer, or their agency, is to have their business show up at or near the top of the search results. The marketer pays each time someone clicks on their ad. This is known as PPC, or Pay Per Click.
Marketers choose Key Words that are the likely terms people will use to search for the marketer's product. They set a price for the maximum amount they will pay for each click on their ad, and they set a budget for how much overall they will spend in a time period. If the business is Plumbing, there will be many companies that choose "plumbing" as a Key Word, so companies willing to pay more will have their ad appear higher on the results page.
While the basics are simple, there are many ways to fine tune the process to get the best results. That's where marketing agencies like Wickfire and TriMax come in. They manage the PPC campaigns for their clients.
This includes using the best keywords, writing compelling ad copy, creating effective landing pages, and other services and strategies to maximize ROI. Converting the paid clicks into sales is, afterall, the end goal. Paying for lots of clicks that don't result in sales - Not Good.
CLICK CLICK CLICK CLICK
After TriMax lost a client to Wickfire, TriMax set out to damage Wickfire using a very simple plan. They searched for online ads that Wickfire was managing for clients. Then they clicked and clicked and clicked. Wickfire's clients paid for everyone of those clicks, none of which converted into a sale.
Wickfire gets paid commissions for ads that result in sales, and that wasn't happening. But even worse was the damage to their reputation. Clients were complaining and leaving. They were getting lots of clicks, and spending big money, but no sales. They blamed Wickfire.
TriMax went even further to make it look like Wickfire was damaging its clients. In another kind of online advertising, marketers pay to have their ads show up on a variety of different websites. Online marketers set terms and conditions about what key words can be used and where the ads can appear. To use a simple example, a marketer may stipulate that their ads should never be placed on a website that exploits women, or has racist content.
TriMax created false accounts in the names of Wickfire people. Then they placed ads that violated the terms and conditions the Wickfire clients had set. The ads were also in violatation of laws that govern online advertising standards. To all appearances, it was Wickfire that engaged in the illegal and illicit actions, and the repercussions were wide spread.
The actions of TriMax were ad fraud in its simplest form. Even so, when the case went before a jury, the attorney said her greatest challenge was explaining the whole process to jurors. Ad fraud is, as we said, hard to detect and harder to understand.