• by Tobi Elkin , Staff Writer @tobielkin, July 20, 2016

Shailin Dhar is on a crusade of sorts. He’s attempting to battle online ad fraud, one of the global advertising industry’s most pernicious problems.

Dhar, an independent consultant who works with publishers and other entities in the digital ad industry, knows a thing or two about fraud. Three years ago, he worked for a firm called Darcher Media that owned phony Web sites. His job was to inflate the number of visits to those sites in order to increase ad sales. In essence, Dhar was buying fake traffic.

Dhar knew the sites were generating non-human traffic and that advertisers weren’t clued in. He said that Darcher racked up millions of dollars selling ads that weren’t seen by humans. Dhar quit after failing to convince his employer to deploy a different business model. He was sued by Darcher for "stealing trade secrets" and settled in March 2015.

Disillusioned by his experience, Dhar told RTBlog that the reason he began to consult was to raise awareness of all the issues surrounding ad fraud and arbitrage: “It’s shocking that when you start talking to people, there’s very little awareness of what fraud is, and that executives are complicit in fraud. It’s hard for people to turn down easy money in the form of ad-serving fees from fraudulent impressions.”

To bring the problem into perspective, malware and bots, or non-human traffic, are gouging advertisers to the tune of an estimated $7.2 billion in 2016, according to a study released in January by the Association of National Advertisers in conjunction with White Ops. The Interactive Advertising Bureau’s report last December put that figure at $8.2 billion.

But those  numbers are bound to increase. Ad fraud doesn’t stand still.

In fact, Dhar maintained that bot creators are always generating new forms of fraud and there are increasingly more complex sources of traffic. Further, he said that while third-party fraud detection tools provided by the likes of Moat, Integral Ad Science, DoubleVerify and others aren’t useless, they’re not perfect. Fraud detection technology “should not be the only solution for fraud. There’s no perfect method for detection,” Dhar said.

He offered RTBlog an example of an agency using a major demand-side platform (DSP) for buying traffic on Netflix.com. The trouble is, there are no banner ads on the Netflix site. When Dhar brought the issue up to the DSP, its response was that this wasn’t identified or detected as fraud, so no refund was possible. “It’s a big problem if an advertiser winds up buying $1 million of fraudulent impressions,” he said. “I generally tell people that if they see a dollar amount estimate on how big fraud is, multiply it by four.”  

Dhar claims that the exchanges don’t really care about fraud. “Every company is making money from an impression, whether it’s a robot or a human. If you’re selling high volumes of impressions each day, you’re that doing that because it’s only a five- or 10-cent CPM. You have to make your money in the volume. Ad networks are paying ad-serving fees, and networks are trading on fraudulent impressions,” Dhar said. Exchanges are paying $50k in ad-serving fees per day. Every layer of the ecosystem is infected.

Further, Dhar maintained that account managers aren’t incentivized to get rid of fraud. If you have a client paying $50k a day in ad-serving fees, you work hard to make sure that clients are serving impressions.

So what’s the solution? Accountability on the buy side and the ad network side is needed. According to Dhar, oversight that clearly illustrates that an entity is a seller or a buyer -- vs. an ad network -- is a must. “Ad networks will go out of business, eventually. Right now, people still want to buy cheap space.”

Moreover, the programmatic food chain is “really infected” by  fraud, he said.

Last week, Sens. Mark Warner (D-Va.) and Chuck Schumer (D-NY) drafted a letter to the Federal Trade Commission, asking it to evaluate the negative economic impact of digital advertising fraud on consumers and advertisers.