Methbot ‘king’ just got nabbed, and Adveritas wants a slice of that $100bn ad fraud market
Adveritas’ TrafficGuard platform is set to play a big part in the growing ad fraud prevention market, which is expected to reach $100bn by 2023.
Digital advertising is a huge industry, but how much of that is wasted due to fraud?
Latest estimates show digital ad fraud is costing advertisers and brands $44 billion currently, and is set to increase to $100 billion by 2023.
The problem itself has been around for more than a decade, but has proliferated significantly particularly in the last five or six years.
Fraudsters game the system by creating malicious ad selection algorithms that select fake web pages over legitimate websites, and charge advertisers a premium for the ‘service’.
The most well known algorithm ‘Methbot’ was first uncovered in 2016, where sophisticated bots were programmed to watch 300 million video ads per day on 6,000 spoofed websites made to look like premium publishers.
Since then, fraudsters have evolved and become even more brazen, with new malicious programs like ‘3ve’ surpassing the original Methbot.
Last month, a Russian national dubbed the “King of Fraud” was jailed for 10 years by a federal jury in New York for orchestrating a sophisticated ring that defrauded digital advertisers of US$7m.
Aleksandr Zhukov and his co-conspirators created hundreds of thousands of fake websites, including spoofed versions of New York Times and the New York Daily News.
He ran the ads on these fake websites which were never shown to human users, and raked in millions of dollars from scammed advertisers.
One Australian-based company that is set to play a major role in preventing future digital ad frauds is Adveritas (ASX:AV1).
“This is a massive issue globally,” Mathew Ratty, CEO of Advertias, told Stockhead.
“It’s taken a lot of resources just to take one person down – one person who made US$7m is nothing when compared to the $44b being lost globally.
“Now, more than ever advertisers need a proactive and transparent anti-fraud service like TrafficGuard which mitigates the impact of ad fraud.
“By having software like TrafficGuard in place, it will make the business of ad fraud infeasible for fraudsters. Our role is to ensure the fraudster does not get attributed and rewarded – simply put, you don’t rob a bank when there is no money in the vault.” he said.
Adveritas’ TrafficGuard is an ad fraud prevention software that targets invalid traffic before it reaches a client’s ad budget.
Using TrafficGuard, marketers, agencies and ad networks can both detect and prevent invalid traffic in real time in order to maximise the return on their advertising spend.
Stockhead also spoke directly with Adveritas’ COO Luke Taylor, who said these ad frauds are taking a heavy toll on companies’ advertising budget.
“These ad frauds are illegitimately generating a cost on the advertising budget without real engagement, by creating a fake audience,” Taylor told Stockhead.
He says that it’s extremely difficult to monitor where ads are being displayed, and advertisers are just trusting the network when placing their ads.
“When you place digital ads on a platform, it could be displayed on any kind of site globally and that happens in fractions of a second,” Taylor explained.
“So the ability to monitor and manage the validity of those placements is the problematic component of this, and advertisers are mostly just trusting into the network.”
Taylor explains there are hundreds of data points that TrafficGuard can analyse throughout each touchpoint of the ad journey, such as information about the user’s device or browser.
The platform then uses behavioural analytics to see when an impression gets served, clicked, or when users buy a product – in order to determine the validity of the ads.
“TrafficGuard takes those signals in real time, verifying the engagement based on their behaviour and device information, to determine whether they are real humans and not a bot,” he said.
“We’re unique in that we have a full funnel view across the entire ad journey, and we’re taking more of a cybersecurity approach to solving this problem.”
Catching these signals in real time means that TrafficGuard is able to identify invalid activity before there’s a cost to the advertiser.
Taylor acknowledged that like real viruses, the Methbot gets more sophisticated over time and ad prevention technologies will have to keep up with new ‘mutations’.
“The reason the recent arrest was such a big deal is because it’s the most sophisticated fraud scheme that’s been found today,” Taylor said.
“But the key word here is ‘found’, because the most sophisticated frauds are actually the ones they haven’t found yet.”
Taylor said the TrafficGuard technology is constantly being developed by his team to evolve along with the evolving malicious programs.
He also lamented the fact that the range of platforms on which these frauds could occur is getting wider, as it now includes mobiles, applications, and connected TVs.
“But TrafficGuard will work anywhere within the digital realm. It could also detect frauds in a diverse range of ad types from affiliate advertising to email marketing,” Taylor told Stockhead.
Taylor emphasised that the real cost of not engaging with an ad fraud prevention platform like TrafficGuard is the possibility of a significant loss in sales.
“Invalid traffic and fraud could cost advertisers somewhere between 20-25% of their ad budget, and to engage with us it only costs 2%.”
“But on a ROI level, the real lead-on value for advertisers is on the opportunity cost,” Taylor said.
“If they’re a business selling a $1,000 product, they only need a few more customers to engage on the ad to earn a massive ROI on the investment of that traffic, and that’s where the value of TrafficGuard lies.”
This article was developed in collaboration with Adveritas, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.