Is Much of Online Advertising Traffic Data Fraudulent?

Consumers are migrating online to do their information gathering, their price comparisons and to make their purchase decisions.

Corporations and the brands they support are desperate to try to figure out how to harness the power of that trend. Millions is being invested in research, statistical analyses and algorithm development to reduce uncertainty and increase the success rate of the ad-to-purchase decision chain.

A significant problem, however, is that the system by which such measurements are calculated can be gamed. And the evidence is increasing that much of the reported click-through data may be fraudulent. From trafficking in false Twitter followers which, the New York Times, reports is becoming a multi-billion dollar business to massive networks of computers controlled by malware, criminals and the merely unscrupulous or desperate are creating false impressions that may be diverting scarce corporate resources to unproductive or patently wasteful outcomes.

Advertisers claim to be aware of the problems, but as with many other aspects of cybercrime, are playing catch-up. The fraudulent activity is harmful in the short term, but the broader implications may be more worrisome. If internet advertising is deemed inefficient or ineffective, investment and innovation will suffer until it can be proven that the challenges have been corrected. No one organization 'owns' the problem so its solution is far from certain. In the interim, unfortunately, all online advertising are suspect. JL

Business Insider reports via The Bureau:

A huge portion of the web advertising eco-system is based on fraud, according to Spider.io, a company that analyzes web traffic.
The company tells AdExchanger that it has detected a massive botnet — a network of computers controlled by malware — that drives bogus traffic and clicks to a group of about 202 web sites:
Spider.io has observed 120,000 host machines on what it has dubbed the "Chameleon" botnet. It says these machines are driving traffic to a cluster of at least 202 websites, resulting in a minimum of 9 billion monthly ad impressions served.
This traffic often appears human, suggesting a high level of sophistication. Chameleon machines click on ads at a rate consistent with the general population – about 0.02% – and they even generate rollovers on 11% of impressions.
Spider.io estimates that the botnet is defrauding advertisers — who end up paying for clicks that don't really exist — of about $6 million a month.
Among the advertisers Spider.io alleges are paying for botnet clicks are American Express, AT&T, BMW, Chase, Citi, Dodge, Ford, LivingSocial, Mars, McDonald’s, Nationwide, Petco, Sprint, according to Spider.io's analysis.
The company has dubbed the botnet "Chameleon," and claims that "it is the first botnet found to be impacting display advertisers at scale."
Spider.io's claim comes at a time when the online ad industry is grappling with a wider problem, online ad fraud coming from web publishers who seem to be generating huge audiences for low-quality content that few people have heard of.
Adweek named six "suspect" publishers recently, who it says have massive traffic from no-name media brands:
Increasingly, digital agencies and buy-side technology firms are seeing massive traffic and audience spikes from groups of Web publishers few people have ever heard of. These sites—billed as legitimate media properties—are built to look authentic on the surface, with generic, nonalarm-sounding content. But after digging deeper, it becomes evident that very little of these sites' audiences are real people. Yet big name advertisers are spending millions trying to reach engaged users on these properties.
Two of those publishers, Precision Media and Alphabird, deny wrongdoing. Precision Media owns Toothbrushing.net, BabyPowder.net and Babylearningtoy.com. Roberto Abajam, an account manager at Precision, told Adweek that:
Precision had stopped buying traffic for these sites around January. "We're retooling," he said. "There is absolutely nothing nefarious here. There are no bots."
Alphabird owns Foreversport.com and Sportsnewsstories.com. Justin Manes, the COO, told Adweek:
"We buy lots of traffic all over the Web, and we run a heavy ad load because you have to pay for it. ... We buy 100,000 visits for some sites, and these sites obviously need content. We've got to recoup the cost. I don’t believe people are adversely affected by the number of ads."
But he admitted to Adweek that some of his traffic may be tainted. Alphabird is being "robbed" by bogus traffic, he says:
"We've spent a lot of time trying to keep out the bad actors," said Manes. "We’re trying actively to solve the problem. We’re not saying these sites are popular. We’re buying traffic and we’re being duped. We’re being robbed."
Will Luttrell, Co-founder and CTO at Integral Ad Science, a company that measures the integrity of online advertising, says he's seen campaigns that are 80 percent fraudulent because the buyer thinks they are performing well:
We've actually seen leading household brand campaigns that are 80% fraudulent. That number probably began lower, with a media buy across several channels and perhaps a 10% fraud rate on a $10 million budget. If the marketers saw that one channel in particular was receiving a lot of clicks or last-touch credit, they may have opted to double down on that channel. And if it continued to work just as well after they doubled down, they may have doubled down again and again, until their entire $10 million budget is going toward a channel that is 80% fraud.
Change appears to be on the horizon, however. A few "demand-side platforms" (ad buying companies, basically), told AdExchanger that they had begun to scrub their networks of questionable publishers.