Can Cash Back For Advertising Fraud Make Brands Trust the Web Again?

This could be an interesting test of markets' ability to manage reputation. Digital ad fraud has spooked potential advertisers, and competitive media, mostly of the traditional sort, has piled on.

Digital ad proponents breezily claim that the market will 'price in' risk. But as the following article explains, those concerned about ethics, trust and such other hoary values may have doubts about the ability of purely monetary solutions to absolve the web's taint. JL

George Slefo reports in Advertising Age:

As long as the ability to provide a 100% fraud-free environment is out of reach, the market will price that risk in. Whether money-back guarantees spread may depend at least as much on that dynamic as their ability to defend digital media as a whole.
Lexus dealers were so unnerved by online ad fraud a couple years back that they began urging Monica Mellier, group media director at the agency Team One, to redirect their ad dollars from digital media to legacy platforms such as TV or outdoor signs.
"We had a lot of conversations about how we could prove to them that what we were buying was reaching real people," Ms. Mellier said. "They were definitely concerned because they never had to deal with bots in traditional mediums like TV or magazine. The idea that a nonhuman could be engaging and causing this damage was futuristic or sci-fi to them."
But in November 2014, her programmatic media buying vendor, DataXu, began promising refunds for fraudulent impressions when they totaled more than 3%. "They gave us back money," she said. More important, the vendor eased the Lexus dealers' fears.Last week, TubeMogul, which helps marketers place video ads programmatically, adopted a similar money-back guarantee, even when ad fraud is below 3%.
The moves come as ad sellers in other media have taken to using ad fraud as a cudgel against their online rivals. Last fall, the Outdoor Advertising Association of America ran a campaign during Advertising Week in Manhattan that used billboards and trucks with messages directly attacking ad fraud. The campaign led to a 6% sales boost for out-of-home ads, the OAAA said. And ad buyers can expect to hear TV executives talk up online ad fraud, whether onstage or sotto voce, during their upfront presentations this spring.
"This is an operational burden," said Keith Eadie, chief marketing officer at TubeMogul, of the guarantee. "But it is the right thing to do. We want to remove fraud as a concern for everyone who uses our platform."
Fraudsters scam marketers in a number of ways, but essentially charge for ad inventory that nobody sees and yet is engineered to seem to have good traffic. It's all but impossible to completely prevent fraud in real time because modern ad tech means transactions take place in milliseconds. So TubeMogul is working with White Ops to gauge ad fraud after the fact, while DataXu works with DoubleVerify.

TubeMogul's fraud rate is already low, Mr. Eadie said, with around 1% of the impressions it sells failing to reach an actual human consumer. But refunds can help suppress marketers' fears about ad fraud, he said.

They could also turn ad fraud into a net positive for those who offer them.
"It will be part of what differentiates us," Mr. Eadie said. "We have a lot of inbound interest globally from this initiative because ad fraud is such a hot topic. Removing ad fraud from the equation is part of our marketing."
Whether money-back guarantees spread may depend at least as much on that dynamic as their ability to defend digital media as a whole.
Still, some industry players doubt refunds will shift money one way or another.
"While fraud is an ongoing concern, we believe that at the end of the day the market is pricing all these concerns into the media cost," said Yael Avidan, VP-product at Adelphic, whose programmatic platform focuses on mobile devices. "As long as the ability to provide a 100% fraud-free environment is out of reach, the market will price that risk in."
Marketers have likewise calculated for a certain amount of unavoidable waste in other media, she suggested.
"Each channel carries its own challenges," Ms. Avidan added. "If out-of-home and TV were measured using online metrics, their viewability would have rendered them borderline fraudulent."
Michael Parmley, digital marketing manager at Hotels.com, said his company already bakes in the cost of ad fraud when advertising on certain digital platforms. But reclaiming the actual money wasted might be better.
"Looking at our approach in a programmatic space, we want to make sure we are properly validating impressions, the website and viewability rate," Mr. Parmley said. "But ad fraud is one of those pieces that is so tough to nail down."
In its first full year, DataXu CEO Mike Baker said his company's guarantee saved its clients $54 million and increased business for DataXu (even after deducting the refunds). Each month, nearly a dozen of DataXu's 700 or so clients receive checks, he said. "This is something we mention at every phase of a conversation with a new customer," Mr. Baker added.