Alleged $7.5B fraud in online advertising

There's risk, and someone will bear, and get paid to bear, that risk. If advertisers buy on a cpa basis, they pay more for the privilege.

And frankly (imo) that's all for small to medium advertisers anyway. Bigger advertisers buy 3 month ios and, if you don't perform, don't reup. My experience at a large DSP is this: no-one comes in as a big account; they're all grown. You get $50k for 3 months and told to demonstrate performance. If you do, your account managers call up and demand 3-5x the money. Wash rinse repeat. You do get $3-$5mm/year accounts, but they all started under $100k/3 months. And in any case, all DSPs / ad networks will be measured on a cpa basis. Don't perform, and next quarters ios don't materialize. They're just not sold cpa.

If you aren't aware, btw, there are huge fights about attribution - last view is ridiculous but what most people use, leading to all sorts of gaming behavior particularly in light of cookie churn.

Sounds like an incredible market opportunity.

What are the companies that are building ad marketplaces targeting high performing affiliate bloggers which demonstrate their value better to advertisers, and share a higher proportion of profit with the bloggers?

Are there fundamental issues trying to scale up a business like this? Not everyone can spin their own custom 'sponsership' packages like DaringFireball, but there is a lot of good blog content out there.

I remember seeing some bespoke ad networks in the designer space, can't think of their name off-hand. Had the feel of a high-end web ring, if that's not an oxymoron.

I've setup a system that tracked that.

The result was a 95% drop in payments for referrals.

This already happens. It's referred to as an "acquisition" and "cost-per-acquisition" (CPA) is a fairly standard term in the advertising industry these days.

However, it doesn't necessarily involve money (e.g. a car company might define an acquisition as someone signing up for a test drive).

That assumes that you can actually measure performance or attribution. This is far from a solved problem. As such many publishers are reluctant to sell on this basis.

Trivial rebuttal:

User clicks on ad, buys product. Who's to say that ad caused the sale? Maybe they've seen that particular ad or a variant on dozens of different publisher sites. Or even better, maybe the true product awareness was driven by an offline interaction (billboard or word of mouth).

In the general case, you simply cannot measure direct attribution or performance with any real sense of confidence.

It's a nutty way to run a business, but in the short-term it can pay the bills for lots of folks.

@dangrossman I build white lists rather than a black lists for companies where I handle their marketing for display on mobile. Not sure if your offering something like this in Improvely but I imagine it would be of value to a bunch of clients. Advertising networks will hate you!

So, it becomes an ROI game, which as long as ROI is strong they can keep their rates up while keeping their profits climbing. Then again, Google's top line has been shrinking recently, so it is possible they are doing something about it, and it is hurting them. That or it's the general shift in advertising to focus on mobile where it's much harder to get engagement.

PPC campaigns feel like a shell game to me often times. Agency switching among advertisers is staggeringly high as people hunt for higher ROI.

Second, I think simple tests like "time spent on ads" as a trigger is an extremely simplisitc, inefficient and likely inaccurate way of determining "potentially not human." The systems here are very complex, designed to mimic randomness within humanesque constraints.

Aren't most customers of online ads unsophisticated users? The solution could of cause be to let a professional online ad company run your buying, but then you still don't know what they're doing with your money.

I believe that most of the people are running their online ad buys as if they where bus stops ads. That might be wrong to, but that's where the business needs to start.

1. They do not sell marketing services. They sell marketing software.

2. I pitched my article to them, and they were very skeptical about the topic at first. Obviously, the issue can come across as very conspiratorial and sensational. But once I showed them all of my credible sources and citations and explained everything in-depth, they decided to publish the piece.

3. Again, I cannot speak for Moz, but my sense is that they will publish anything that they perceive to be very helpful and interesting for their audience -- digital marketers. They more that they do so, the more that their brand will grow among their audience and the more that people will visit the website to read the good articles.

Guess it's so easy to sell to clueless business owners that taking 10 minutes to learn about the crap they are peddling isn't even worth it.

Maybe the reason you notice them and they bother you, is because the amount of your attention that that experience has to take up has to be so great that your peers' attention is worth the payment even when that attention is divided by 10 (if we assume 90% click fraud.)

In other words, given no other change except eliminating payments to non-person audience members, you might find the Internet is suddenly filled with advertisement that violently takes only 1/10th as much of your attention as currently, since the money is being spent on you and your peers only; and not on you, your peers, and then botnets and other dilution.

Put yet another way: the leakier the transaction between you (real user) and advertiser, the worse the experience you have so as to make up for it.

Let's put some numbers on it!

Let's say everyone is happy to buy a banana online and the profit is 20 cents. Then if click fraud is 0% and the cost of an ad is 1 cent, a 7% click-through is fine: it costs 14 cents to get a customer, leaving 6 cents profit. Any more than 7% click-through is pure profit.

But raise the click fraud to 90% and suddenly 7% won't do it: the real ad cost is now 10 cents, and instead of 7% click through you now need 70% clickthrough.

So the ad will be much, much louder.