20% of Digital Ad Dollars Were Wasted in 2016

Of an estimated ad spend totaling $66 billion last year, some $12.5 billion (20%) was wasted as a result of fraud or invalid traffic. The total lost to fraud was larger than all the advertising revenue booked by 80 premium publishers, including the AP, NBC, NPR, PBS and many more represented on Digital Content Next rolls.

According to a study by m/SIX, a U.K. media agency, $27 billion was spent last year on programmatic advertising (ads sold through an automated process) and 29%, or $7.8 billion, was invalid and advertisers received no benefit from the ads. Another $4.65 billion was lost on fraudulent direct sales.

The m/SIX report warns:

If ad fraud continues to evolve at this rate, the money we stand to lose to ad fraud in 2017 could be as high as $16.4bn (This is as digital spend grows to hit $80bn, as forecast by eMarketer, and the programmatic/direct split shifts to a 50:50 balance).

The study reviewed 200 billion daily bid requests, 4 billion ad calls and 10 billion ad impressions per month over a 12-month period. In 50% of the sample, programmatic ad fraud was committed either by bots or hijacked devices and direct ad fraud was the result of a fraudulent traffic source from the supplier or a fake domain.

One of the agency’s recommendations to curb fraud involves major media players such as Google and Facebook:

Beyond the wider debate about whether [Google and Facebook] should allow compromising content to be published on their platforms in the first place, as a very minimum they ought to have proper measures in place to ensure that this type of content isn’t – and cannot be – ad-enabled. …

[T]he time has come for the Googles and Facebooks to stop marking their own homework, and allow specialist, third-party auditors inside their walled gardens – to verify the viewability, non-human traffic and brand safety scores they send back to clients. Only then will we truly break the back of the ad fraud problem.

Because so much web content that consumers rely on is ad-supported, advertisers who continue to lose money to fraud may choose to stop throwing good money after bad and cut back on their advertising spends. The result could be fewer ad-supported sites and less diversity of content.

More details and recommendations are available at The&Partnership website.