According to a recent report conducted by a cybersecurity company called Cheq, the advertiser will lose $23 billion globally to ad fraud in 2019. Cheq reports that global ad fraud will cost an unprecedented $23bn this year. They say that the value could reach up to $30bn including indirect economic and social costs. The report which is titled ‘The Economic Cost of Bad Actors on the Internet, Ad Fraud 2019” was recently released
The Cheq Report: The Economic Cost of Bad Actors on the Internet, Ad Fraud 2019
To come up with this report, the cybersecurity company used economic analyses, proprietary data and expert interviews. The resultant report reveals the extent of the damage caused to advertisers and consumers of ad fraud. It also investigates the root of the problem. According to economist Roberto Cavazo, a professor at the University of Baltimore who worked in conjunction with Cheq, the scale of fraud in online advertising is staggering.
Cheq reports that the total market expenditures on online digital ads in 2019 are expected to rise to $316bn. A value that’s greater than the entire GDP of Malaysia, this makes advertising very attractive to fraudsters. According to the World Federation of Advertisers, 30% of advertising is unseen by consumers. According to Anthony Hitchings, the Financial Times’ digital advertising operations director, the advertising industry continues to waste marketing budgets on what is essentially organized crime.
Cheq report predicts that the fraud is only going to get worse. They expect the direct cost to advertisers to hit $26bn in 2020, $29bn in 2021, and $32bn in 2022. According to their report, the burden lays on the shoulders of small firms who don’t have as much money as established brands to avoid ad fraud.
Why is the Advertising Industry Saturated with Fraud?
The reason why the advertising industry is so saturated with fraud is because of a lack of regulation. Another major is why is because of the complexity of the industry. For instance, if you compare financial services transactions with ad transactions, you will see a clear difference. In the US banks deal with five or six heavily regulated entities while in one ad transaction advertisers may deal with as many as 20 or more players. According to Cheq, report, these players’ interests are usually not aligned. Another clear difference is that some banks may have $1m credit card fraud requests to investigate per day. In advertising in fraud prevention solutions face 20,000 requests every second. This complexity issue leads to saturation in industry fraud