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 Spurred by a warning in December by the Association of National
Advertisers (ANA) that businesses are losing $6.3 billion a year to
so-called "click fraud," these companies now stipulate in
advertising contracts that they will only pay for online ads when
given proof that humans clicked on them.
"We don't want to be paying for non-human traffic," said Mark Clowes,
global head of advertising at American International Group Inc, the
largest commercial insurer in the country.
In a typical click fraud scheme, a crook infects many computers with
malicious software, and directs the machines - called bots - to
visit a webpage, click on an ad or watch a video. The fake traffic
fools a marketer into thinking the site is popular, so it pays to
place ads and links on the site.
A study conducted by cybersecurity firm White Ops for the ANA found
that bots viewed almost one-fourth of online video ads and 11
percent of display ads. The study, published in December, involved
36 participants including AIG and MillerCoors.
While click fraud has been going on for years, the ANA report has
galvanized advertisers to fight back, ad executives said. What had
been a trickle of references in contracts is becoming a flood.
"We've written into all of our contracts that our clients insist on
at least 95 percent human traffic and anything less requires a make
good or credit," said Barry Lowenthal, president of The Media
Kitchen, an ad buying agency whose clients include Victoria's Secret
Pink.
"By the end of 2015 we expect that every major agency and every
major advertiser will include these kinds of clauses in their terms
and conditions."
WEB PUBLISHERS AT RISK
U.S. digital advertising revenue is expected to reach $59 billion
this year, according to eMarketer.
Online ads are sold through a complex, opaque system that can
involve many parties including advertising agencies, website
publishers and automated ad exchanges - the middlemen who aggregate
and resell ad space across many websites.
Website publishers often pay third parties to direct visitors to
their sites, a practice known as "source traffic." According to the
57-page ANA study, about half of all click fraud came from
publishers paying for third-party traffic providers. (http://bit.ly/1Gj8wfI)
As advertisers crack down on click fraud, website publishers could
suffer in the short term, said ANA Executive Vice President Bill
Duggan.
Smaller publishers, in particular, would likely find it difficult to
quickly respond to pressure from advertisers to eliminate bots. On
average it costs up to 3 percent of a digital campaign to sweep the
traffic.
An industry attorney said some publishers are not happy with the new
contracts, which shift fraud costs to them from advertisers.
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"You cannot inject a new risk module without having somebody
squirm," said Joseph Rosenbaum, a partner at Reed Smith LLP. "Nobody
likes to have additional liability."
Scott Cunningham, senior vice president at the Interactive
Advertising Bureau, which represents some 600 website publishers,
disagreed. He said the responsibility falls "squarely" on
publishers.
"Your inventory is competing with criminal inventory. You absolutely
have every obligation," Cunningham said.
Representatives for major website publishers Google Inc, Facebook
Inc, Microsoft Corp <MSFT.O>, Yahoo Inc and AOL Inc said they have
been aggressively working to combat click fraud for several years.
AOL and Facebook said the new advertising contracts had not hurt
revenue. Microsoft, Yahoo and Google declined to comment.
FIGHTING FRAUD
Firms that audit traffic include White Ops, DoubleVerify, Integral
Ad Science and Moat Inc.
OpenX, an advertising exchange that uses algorithms to buy and sell
ads, said it took a 15 percent hit to revenue growth in 2013 after
investing heavily to clean up its traffic. Growth was back on track
by 2014 and OpenX spends more than $1 million each year to ensure
traffic quality, it said.
Concerns about click fraud have prompted some advertisers and
website publishers to form an alliance in December.
"This is the No. 1 industry priority right now," said Mike Zaneis,
interim head of the alliance, known as the Trustworthy
Accountability Group. Board members include executives from Facebook,
McDonald's Corp, Procter & Gamble Co, Publicis Groupe SA and WPP
Plc.
"It's gaining momentum," Zaneis said.
(Editing by Peter Henderson and Tiffany Wu)
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