A recent report released by the World Federation of Advertisers (WFA) highlighted the increasing global epidemic arising in advertising that could impact a plaintiff firm’s marketing strategy—due to ad fraud, a huge number of online ads never reach actual humans. The WFA estimates that by 2025, ad fraud will result in losses to companies aggregating over $50 billion annually, which could easily rise to $150 billion if nothing is done to protect consumers against the fraud. Further, the WFA predicts that fake internet traffic schemes will end up being the second-largest organized crime enterprise behind the drug trade.
The WFA defines ad fraud as “an activity where impressions, clicks, actions or data events are falsely reported to criminally earn revenue, or for other purposes of deception or malice.” Some examples of online ad fraud include, but are not limited to, defective ads that do not load properly, “bots” that mimic human activity by searching and clicking and “pixel stuffing” which cram advertisements into a small one-by- one pixel. All of these methods still count as impressions that are reported to companies as advertisements, even though the human eye will see none of them. While researchers know that this type of fraud has a substantial impact, the exact impact is unknown because many consumers are unaware of the extent to which they are exposed to ad fraud. In the annual report by the Association of National Advertisers (ANA), it was reported that approximately $7.2 billion (5% of total ad spending) was lost in 2016 due to ad fraud. The WFA contends the number is much higher.
It is worthy to note that cyber criminals are not the only ones who wish to keep this impact of ad fraud in the dark. Even publishers, ad agencies and ad networks have reason to keep this quiet as “nobody wants to take the fall and say they were the ones who hired the bad apple,” says Jeremy Goldman, a Los Angeles-based partner at Frankfurt Kurnit Klein & Selz, who specializes in digital media law.
So how does a law firm combat ad fraud? The report by the WFA suggests several actions that advertisers can take “including setting new standards, making contractual changes, demanding increased transparency and putting in place internal resources dedicated to countering ad fraud.”
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