The Impact of Ad Fraud on Marketing KPIs

Authored by Himanshu Nagrecha, Vice President, India & South Asia, TrafficGuard

The widespread digitalization of business has led marketing budgets to shift towards online platforms. Marketers are using new-age marketing techniques and increasing their ad budgets in a bid to introduce and establish their brand digitally. According to a global report by Dentsu, the ad spend is projected to reach $727.9 billion in 2023.

However, as the digital world has opened several lucrative avenues for brands, ad fraud has emerged as a potential threat to the marketing budget as well as effectiveness, and the damage caused by it is astronomical. According to research by Statista, the cost of digital ad fraud is anticipated to reach $100 billion this year, while APAC is the most hit region.

Ad fraud is not only responsible for draining ad budgets and impacting ROI of the campaign but also tends to impact heavily on marketing KPIs. As advertisers rely on a large amount of data in order to measure campaign success, ad fraud clouds the ability of marketers to make appropriate data-driven decisions. In the digital era, it is obvious for marketers to rely on digital marketing strategies. And understanding the impact of ad fraud on the marketing KPIs is crucial in a bid to reduce the impact and optimise the campaigns.

Distorted CPC (cost per click) metric

Ad fraud has the tendency to cause distortions in the CPC metrics. Fraudulent tactics such as click bots artificially boost the clicks generated by the advertisements. This leads to an increased number of clicks for the advertisers, hence the increased CPC, and the number of genuine clicks is diluted by the fraudulent ones. Furthermore, the CPC fraud increases the artificial competition by increasing the cost of each click in the bidding. As a result, the cost per genuine click also experiences an increase, which results in wasted ad spend, low-quality traffic, and lower returns on investment (ROI).

Inflated CPI (cost per impression) metric

CPI is a crucial metric to monitor as it helps marketers find out the effectiveness of the ad campaign. However, ad fraud tends to artificially inflate the CPI metric and undermine the accuracy of audience targeting, which misleads the advertisers about the actual cost of the impressions. Some of the fraudulent activities used by the fraudsters to tweak the CPI metric are stacking and impression stuffing. This usually inflates the volume of the fake impressions, and the ad does not reach the real users. As a result, the advertisers end up paying for impressions that do not tend to provide any genuine results. This inflated CPI again leads to wasted ad spend and an inaccurate reflection of the campaign’s true performance.

Diluted CPM (cost per mille) metric

Ad fraud inflates CPM figures artificially, leading to inaccurate cost estimates. A significant number of phoney impressions that do not reach actual users are produced by fraudulent activities like impression fraud and impression laundering. Ad stacking, when many ads are piled on top of one another and the user only sees the top ad while all the advertisers in the stack get charged, is a type of cost per mille (CPM) fraud. Fraudulent activities redirect impressions to covert areas or subpar websites, obstructing the intended ads from being seen by actual users. Advertisers suffer a higher CPM since they must invest more to attain the required amount of exposure due to the decreased number of real impressions reaching the target audience. By reducing reach and increasing the cost to provide each impression, ad fraud reduces the effectiveness of campaigns.

All things considered

Whether a business has been working for decades or a day, finding the best way to connect with and engage the target audience is one of the most challenging aspects of it. No amount of flawless product development or world-class logistics can compensate for a failure to communicate the brand message to the appropriate audience at the appropriate time. In this sense, a company's products and services are used in digital marketing to promote its brand and themselves.

With today’s technological advancements, marketers have the ability to measure the impact of their campaigns. However, ad fraud tends to distort the actual performance by tweaking key metrics such as CPM, CPI, CPC, and more. It not only disrupts ad performance but also results in wasting the marketing budget of a company.

In a bid to negate these ad frauds, a more proactive and collaborative approach is the need of the hour. Thus, implementing robust ad fraud detection tools is no longer a luxury but a necessity. With fraudsters consistently looking for new ways to target companies, it is imperative for modern-day firms to partner the right solution providers that can offer innovative solutions based on cutting-edge technologies while strengthening the layer of security and visibility to efficiently negate the challenges posed by ad fraud.