The financial impact of ad fraud is expected to total $5.8 billion worldwide this year, invalidating 8% of display and 14% of video ad impressions, according to the Association of National Advertisers’ latest annual report.
And while the conventional wisdom is that those crimes are perpetrated by foreign entities, multiple sources told Adweek that law authorities are beginning to zero in on U.S. soil and that those perpetrators are aided by programmatic players eager to legitimize their role in the often murky world of ad tech.
While few people would speak on the record—due in part to the sensitive nature of ongoing legal cases and investigations—many in the industry indicated that the myth of the foreign bogeymen defrauding the U.S. ad industry of its hard-earned dollars could soon erode, as uncomfortable truths are aired in public.
The gateway Methbot report
Last year saw the culmination of a year-and-a-half project known as Project 3ve, with the Federal Bureau of Investigation’s Cyber Division helping to issue a series of indictments widely recognized as one of the industry’s most high-profile attempts to combat online ad fraud.
The Project 3ve indictments, unsealed last November, were the culmination of an investigation first spurred by claims made in a December 2016 report from bot detection company White Ops. The report alleged that in an operation known as Methbot, a Russia-based network of cybercriminals employed different techniques than the “normal means of ad fraud,” infecting users’ machines with malicious code to generate fake ad impressions to pull off the biggest ad fraud on record.
Methbot created hundreds of thousands of counterfeit IP addresses that were registered to legitimate internet service providers and then used to generate fake traffic. This would then make it difficult for the majority of the industry’s invalid traffic-spotters to detect and resulted in more than $3 million per day disappearing into the pockets of fraudsters, according to the report.
Growing sophistication among advertisers
Although the accuracy over the extent of the Methbot’s financial impact varies, some of the industry’s most high-powered marketers have since grown wary of simply accepting ad verification companies’ assertions.
For instance, in Methbot’s immediate aftermath, Marc Pritchard, chief brand officer at Procter & Gamble, publicly issued a resounding clean-up call during his 2017 IAB Leadership Summit address. He described the ad-tech sector as opaque at best and fraudulent at worst in a presentation where he told vendors to shape up or lose his business. Later that year, a high-profile legal dispute between Uber and Fetch helped keep the issue of ad fraud in the public eye.
Shailin Dhar, who works with several blue-chip advertisers as CEO and co-founder of fraud intelligence company Method Media Intelligence, said that his clients are increasingly starting to question the figures from their digital ad partners.
“Many of the brands that we work with have accepted the fact there’s a systematic problem in the supply chain in digital media,” he said. “One of the things they’re always interested in looking at is what waste they can cut out and what can they objectively prove is fraud.”
The 3ve takedown
Separately—and most crucially, quietly—in 2017, White Ops handed over details of its Methbot investigation to law enforcement authorities, including the Department of Justice and FBI, with the company also joining forces with Google to assist in a subsequent investigation.
The result was a 13-count indictment unsealed by the DoJ in November, which saw eight foreign nationals alleged to have committed offenses including wire fraud, computer intrusion, aggravated identity theft and money laundering.
Federal documents detailing the charges claim that the affair involved the creation of more than 5,000 fake domains and the leasing of more than 650,000 fake IP addresses to compromise more than 1.7 million computers in order to defraud advertisers.