By Rob Norman

Preamble: Following publication of the article below I was asked to highlight that bots are able to download and activate apps. This causes loss to the advertiser and a false gain to to the publisher. I was also asked to point out that bots can cause traffic to be re-directed from legitimate sites causing a theoretical loss to the publisher. Finally I was asked to highlight (as we have on many occasions) that fraud is a criminal issue and viewability a commercial one. Thanks for those contributions.

No one disputes that digital ad fraud exists. The ecosystem is under constant and evolving threat from non-human traffic in the form of bots. Nor does anyone dispute the existence of non-viewable advertising impressions. Many ads appear in areas of sites that cannot be seen — in part or whole — by their intended viewer. The Association of National Advertisers has determined that this an issue of extreme importance to their members.

Forrester, in a report published on March 30th 2017, defines the issue in aggregate as IVI (Invalid Impressions) and places a ‘nominal dollar wastage’ (NDW) figure in 2016 of $7.4 billion. This relates ‘only’ to desktop and lap top internet usage and only to the USA. This number has caused considerable alarm for advertisers and we believed it necessary to provide some validation particular for those advertisers that invest in tools to protect themselves and especially for those that do not.

The key word in the descriptor is ‘nominal.’ ‘Nominal’ refers to the aggregated value of all IVI, assuming that those impressions were paid for by advertisers at the same market average price that was paid for valid impressions.

In their report, Forrester recognized that ‘real economic wastage’ (REW) – the actual money – may be less than the ‘NDW’.

To add some context we have attempted to triangulate this data with other sources. $7.4 billion compares to $39 billion of US desktop and laptop ad expenditure that the IAB and PWC reported for 2015 (the most recent full year report). It can be inferred from the same PWC data that search constitutes 50% of that $39 billion. The Forrester report does not address search.

If we add the $7.4 billion (NDW) to the $20 billion non-search PWC figure we get to a total of $27.4 billion. We accept that we are adding a 2016 estimate to a 2015 actual. Expressed as a percentage this suggests that 27% of the traffic is invalid – this is different from the Forrester estimate.

Equally hard and more important to reconcile, and Forrester did not attempt, is the relationship between NDW and REW. REW is the number that really counts.

1.      Advertisers that pay for outcomes and engagement that can only be excecuted by a human suffer zero loss from either fraud or viewability -bots may be able to click but they can’t engage or buy – those that pay for clicks may suffer loss.

2.      Advertisers that deploy tools that allow them to pay only on a human viewability standard of their choice suffer zero economic loss – there is no premium incurred for paying for something when the alternative is paying for nothing. It should be noted that viewability is by far the biggest component of IVI and the easiest to detect.

3.      Advertisers that deploy fraud detection software and who don’t pay for non-human traffic suffer losses only to the extent that fraud detection is imperfect, but constantly improving. It’s worth noting that the MethBot incident identified by White Ops as a ‘$3m to $5m’ per day fraud was re-evaluated by the Trustworthy Accountability Group at $250,000 to $500,000 per day.

4.      Publishers that serve non-viewable ads or, serve ads to bots, suffer zero loss as they did not create an opportunity to see; nor did a bot deprive them of a human visitor.

Let’s add another layer of context. Forrester estimates IVI for mobile advertising at 1%. When the PWC/IAB 2016 report card is in, it’s likely that the total market value will be close to $70 billion. Half the total will be mobile and half of the total will be search. If all advertisers protect themselves, it is highly likely that the REW will be well below 2% for ALL digital advertising giving a total real cost to advertisers of around $1 billion. It may even be much less. Whatever the actual number is, it’s nowhere near $7 billion and that alters the narrative.

$1 billion is a lot of money so there’s no room for complacency in respect of real economic wastage, but there is room for context. Recently the market in digital advertising inventory has been described in the most unflattering terms. Vigilance must continue but it’s time to move the focus of the debate away from nominal economic value and to the important issues of inventory quality, user attention, effectiveness, and the creation of business value. It’s just as important to ensure that all protection tools are activated and that similar vigilance is conducted outside the US where viewability measurement may be less widely deployed and counter fraud measures less effective.

@robnorman #agencyvoices

This article was published by Advertising Age on April 12 2017http://bit.ly/2nFcGks