The Marketing Industry's $7.2-Billion Dollar Problem

The online marketing industry has a $7.2-billion problem that most advertisers are unaware of – but losing money to: bot fraud. 

Marketers worldwide lost an estimated $7.2 billion to “bot fraud” in 2019; a number that is expected to grow this year, the Association of National Advertisers (ANA) revealed. Bot fraud involves the use of algorithms known as “bots” to view ads, which inflates viewer counts and advertising rates.

Around 9% of the ad views at 49 large advertisers were found to be bots by the ANA, Marketing Week reported. That means 9% of the money those advertisers spent was wasted on bots.

The damage done to some advertisers is even greater; the ANA found that up to 37% of the hits at some websites were fraudulent. Frighteningly the problem is getting worse, the highest bot-fraud rates jumped from 22% in 2014 to 37% in 2015. 

How Bot Fraud Occurs

Bot fraud occurs because criminals have figured out how to build algorithms that mimic human behavior online. The website views the bot as a person and counts it as such. 

Fraudsters make money from this scam by selling fake traffic to publishers or selling ad space on sites that are mostly viewed by bots. Disturbingly many advertisers are paying for bot fraud and not realizing it. The ANA found that some large advertisers were losing up to $42 million a year in bot fraud.

The root of bot fraud is in the nature of the digital-advertising market. Most advertisers rely on middlemen that take a 20% to 50% commission each time they sell an ad. The middleman does not care if the numbers used to sell are good because he makes the same commission on real and fraudulent ads.

The more bot fraud, the more money the middlemen make, so they have absolutely no incentive to stop or even try to detect the scam. The fraud rate for sourced traffic purchased from third parties was three times higher than from direct ads, the ANA determined.  Cynics would make a very good case that the middlemen have a strong incentive to encourage “bot fraud,” or even engage in it.

New kinds of advertising are making bot fraud even easier than ever; the number of fraudulent views attracted by some video ads was 73% higher than average, an ANA study determined. This occurs because it is often impossible for advertisers to determine who is watching an online video. 

Why Bot Fraud Prevention is so hard

Bot fraud has become a huge problem because it is difficult to detect and harder to fight. Fraudsters are constantly upgrading their bots making them difficult to detect. To make matters worse, many traffic providers have little or no incentive to combat the practice.

That makes it almost impossible for smaller advertisers to effectively combat bot fraud. A study by the ANA; and the cybersecurity firm White Ops, revealed that the most effective means of combating bot fraud are costly ones; such as third-party monitoring, media-quality measurements, and constant updates of antifraud technology.

Many entrepreneurs cannot afford these measures, so they have no effective means of detecting bot fraud. These advertisers find themselves in a costly bind; they have to purchase costly digital advertising, yet they have no way of knowing how much of it is being seen by real human beings.

The problem is getting worse because the extent of bot fraud and the potential rewards for fraudsters are growing. Better technology makes it easier than ever to commit bot fraud, even as investment in digital advertising and the potential profit for fraudsters increases every day.

The Ultimate Solution for Bot Fraud

The best solution for bot fraud would be to eliminate the middlemen that encourage it. Elimination of middlemen is now possible – because there is a better way to connect advertisers and publishers.

Using blockchain; the technology that is the basis of cryptocurrencies such as Bitcoin, it is now possible to create seamless and secure that provide instant connectivity. Using a blockchain-based solution an advertiser can connect directly with a publisher and instantly verify numbers like clickrates.

A blockchain can be used to create a permanent, encrypted record of a transaction that is secure and transparent. Advanced blockchains such as Ethereum can even be used to create “smart contracts” that automatically pay in altcoins such as Ether when a transaction occurs. This means a publisher would only get paid by the advertiser when a view is verified.

The Next Generation of Digital Advertising is here

AdBank aims to get rid of middlemen and end the problem of bot fraud by building such a blockchain-based advertising solution. Its’ ultimate goal is to eliminate the middlemen that can take as much as 30% of a publisher’s ad revenue.

This goal will be achieved with a proprietary mixture of artificial intelligence (AI), cryptocurrency, and blockchain. Blockchain will increase privacy, transparency and security, the AI is supposed to detect bot fraud, while cryptocurrency will provide for instant low-fee payments.

The AdBank Network is designed to serve as new kind of advertising marketplace that will enable website publishers and bloggers to directly connect with advertisers. The lack of middlemen will discourage bot fraud by getting rid of the group that profits most from it.

How Cryptocurrency and Blockchain can fix Advertising

By utilizing cryptocurrencies, AdBank aims to help publishers all over the world get paid fast for their advertising. Advertisers will benefit from the service because they will pay lower fees and receive real-time verification of viewer counts.

Small businesses will benefit most from this system, because they will get the kind of fraud-detection and viewer-count verification now only available to large corporations. That will make it possible for even tiny companies and startups with limited budgets to advertise globally.

Investors will be able to participate in AdBank’s efforts via an initial cryptocurrency offering (ICO). The ICO will create a digital token that can be used to pay for advertising, and bought and sold as an investment. Those interested in AdBank or its ICO should checkout: adbank.network, and see the future of digital advertising in action.