Programmatic Lunch

Ad Fraud Costing the Industry $8.2bn a Year, Says IAB

Tim Maytom

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The combined cost of ad fraud, ad blocking, pirated content and malvertising is costing the US marketing industry $8.2bn (£5.5bn) a year, according to a new study by the Interactive Advertising Bureau, the first to explore the impact of such problems.

The new study estimates that over half this money is lost due to 'non-human traffic' – fake advertising impressions generated by bots that lead to advertisers paying out for messaging that never actually reaches real consumers.

The study, carried out by Ernst & Young and MediaLink for the IAB, found that $4.4bn is lost to this kind of ad fraud, with another $169m spent trying to combat click fraud, bot farms and similar fraudulent tools.

Meanwhile, 'infringed content', which includes stolen editorial content, video and music piracy, takes another $2.4bn away from the marketing and media industry. While how much of this content would be paid for if not pirated is difficult to estimate, the IAB suggests that advertising around legitimate content would generate another $456m, while the content itself would earn publishers around $2bn.

Around $33m is spent each year combating pirated content, while a further $48m is lost by subscribers to online streaming services like Hulu, Netflix and HBO Go sharing their passwords with non-subscribers.

Finally, around $1.1bn is lost to malvertising, which includes deceptive downloads and hijacked links, and can lead to computers being infected with a variety of malicious software, viruses and spyware, and even lead to further ad fraud as infected machines are used as bots.

That figure also includes $781m lost when consumers adopt ad-blocking software, which the IAB groups with malvertising because it is often instigated due to security and malware concerns. Lost revenue from blacklisting due to malvertising costs around $57m, while the industry fight back against these issues adds another $17m to the total.

Altogether, the incurred costs of advertising fraud makes up 59 per cent of the cost, or $4.8bn, while lost revenue opportunities drain the remaining 41 per cent, or $3.4bn, from the coffers.

"No other report in the market today captures the full range and scope of the illicit activities identified and quantified in this study," said Sherrill Mane, senior vice president of research, analytics and measurement at the IAB. "Its findings should mobilise the entire ecosystem to rally around collective solutions that will protect businesses and consumers."

"Fraud is a big business, not a cottage industry, so we applaud the IAB for their unwavering support and dedication to surfacing these dynamic issues to all constituencies within the advertising community," said Wenda Harris Millard, president and COO of Medialink. "We must remain wholly focused on bringing this conversation to the forefront and developing systematic ways of eradicating this activity, enabling both publishers and marketers alike to thrive in this new age."