Curbing Digital Advertising’s Big Payments Fraud Problem

The complexity of online and mobile advertising — and the vast sums of money involved — make those areas extremely attractive for criminals. In a new PYMNTS interview, Yinglian Xie, CEO and co-founder of DataVisor, gives a tour of the landscape and details how to stop such fraudsters before they get too far.

Successful criminals, including those who ply their trade via digital and mobile channels, have certain advantages: flexible morality, of course, is one; another is determination. As well, successful criminals know that their targets are often complex systems — and complex systems offer many opportunities for financial fraud and massive theft.

Welcome to the world of advertising fraud. As PYMNTS research has documented, advertisers will lose a projected $5.8 billion to $42 billion to fraudsters this year alone. Stopping such fraud — which involves faking traffic to steal advertising money — served as the foundation for a recent PYMNTS discussion between Karen Webster and Xie, of DataVisor, a company that provides artificial intelligence-backed protections in the global digital economy.

Essential Problem

The problem, Xie told Webster, stems from the inherent nature of online advertising for retailers and service providers. The race to acquire customers, gain clicks and encourage conversions leads to a robust money flow related to online and mobile advertising. Costs per click, impressions or mobile app installations can range widely, Xie said, from less than a dollar up to a few hundred dollars per user in some instances.

“Attackers will try to leverage this opportunity to fake traffic or fake action,” she said. That means setting up fake companies or fake identities to direct those flows of clicks, impressions or app installations to a fraudulent operation. That, in turn, directs the money meant to go toward valid online or mobile advertising into criminals’ bank accounts — leading not only to theft of funds but also fake traffic and confusion when it comes to legitimate businesses getting a sense of how well their advertising is working. “It’s highly lucrative,” Xie said.

Indeed, the global digital ad market is expected to be valued at $225 billion by 2020, presenting an irresistible target for criminals. Ad fraud’s prevalence is primarily due to two factors: the lack of regulation and the sheer complexity and volume of online advertising. Both of these issues make it easy for fraudsters to execute and conceal their acts. Banks may process $1 million worth of credit card fraud requests in a day, but ad fraud detectors can face up to 20,000 requests every second.

Delayed Response

One would think the importance and costs of all those clicks, impressions and app installations would mean advertisers are keeping a close eye on where the money is going. After all, fraudsters might steal that money, but they don’t tend to convert — and that gap between the money and the conversion rate would undoubtedly be apparent to advertisers, one would guess. That’s true, but also simplistic, at least as Xie told it during the PYMNTS discussion. The complexities of online and mobile advertising can work to the advantage of criminals.

“It takes some amount of time to understand the quality of a channel,” Xie said, referring to advertiser efforts to monitor their returns on investment, to check how many conversions they get for every buck spent and to analyze consumer engagement with particular marketing messages. “By that time, the crime is taking place.”

Not only that, but online and mobile advertising involves a variety of players — publishers, advertisers, content syndicators — which also increases the complexity and the potential advantages for criminals.

Current anti-fraud methods might be well-suited to detect bots in online and mobile advertising, but in Xie’s telling, artificial intelligence (AI) to pinpoint and prevent advertising fraud is perhaps the best tool to combat such thefts. “You can help all providers and services to really tell the quality of that traffic early on,” she said. “And then you can help them make informed decisions.”

Another advantage criminals have is the relative lack of cooperation among industry participants when it comes to fighting back against this type of fraud. In a way, that problem reflects the fragmented nature of the industry. Even so, Xie said, better cooperation could help prevent more of the particular type of fraud. After all, she told Webster, the fraudsters are constantly changing their tactics, and that means the industry as a whole needs to keep up with those changes to defend against them. “You have to be able to detect new, evolving patterns of attack early on,” she said.

Payments and financial fraud take many forms, and criminals will keep changing and growing. That means advertisers — and anyone involved in digital and online marketing — must find ways to keep up.