One month ago, consumer products giant Procter & Gamble - one of the largest and most sophisticated advertisers in the world - launched a mini crisis in the online advertising space, when the company announced that it was scaling back its online advertising spend, stating that "digital ad spending was lower versus a high base period and due to current period choices to temporarily restrict spending in digital forums where our ads were not being placed according to our standards and specifications." The implications to this admission that online advertising was either being gamed by bots, or generally underperforming were significant, as it jeopardized the future revenue streams of two of the biggest companies in the world, Alphabet (aka Google) and Facebook, both almost entirely reliant on online advertising. How long before other anchor names decided to similarly cut back on their online ad spending?...MORE
So, one month later, in its first tacit admission that its ad network has few protections against "fake traffic" such as ever more sophisticated ad bots - and that P&G's criticism was spot on - the WSJ reports that Google will issue refunds to advertisers for ads bought through its platform that ran on sites with fake traffic "as the company develops a tool to give buyers more transparency about their purchases."
Hoping to avoid further spending cuts and outright contract losses - especially to arch rival Facebook, which has similarly admitted to having ad exposure problems on numerous occasions - in the past few weeks Google has informed hundreds of marketers and ad agency partners about the issue with invalid traffic, also known “ad fraud.” According to the WSJ, the ads were bought using the company’s DoubleClick Bid Manager.
While in the past advertisers have received small credits from Google when they detect discrepancies, in this case, for some buyers, the fraud was larger than usual. However, since Google’s "increased" refund still amounts to only a small fraction of the total ad spending served to invalid traffic, some advertisers remain unsatisfied: "Google has offered to repay its “platform fee,” which ad buyers said typically ranges from about 7% to 10% of the total ad buy."Typically, advertisers use DoubleClick Bid Manager to target audiences across vast numbers of websites in seconds by connecting to dozens of online ad exchanges, marketplaces that connect buyers and publishers through real-time auctions.The ad spending flows through to the exchanges. The problems arise when ads run on publisher sites with fraudulent traffic, such as those where clicks are generated by software programs known as “bots” instead of humans. This is an issue of growing to concern to marketers. It is difficult to recoup the money paid to those sites when the issue is discovered too late.
Google added the affected ad buyers in this instance were impacted by invalid traffic over the course of a few months this year, primarily in the second quarter. Part of that traffic affected video ads, which carry higher ad rates than typical display ads and are therefore an attractive target for fraudsters.Scott Spencer, director of product management for Google, acknowledged that refunds have been paid, but he declined to provide a dollar figure for the amount being returned. Some ad buyers said the refund amounts range from “less money than you would spend on a sandwich” to hundreds of thousands of dollars.“Today, we can’t disclose the information about third parties,” Mr. Spencer said. “So when we aren’t able to catch invalid traffic before it impacts our advertisers and we’re unable to refund their media spend, it hurts us, even if we’re not responsible.”
Of the billions of dollars flowing into online advertising each year, a percentage is inadvertently shown to sites with fake traffic, with fraudsters siphoning off advertisers’ money for themselves. And while the individual instances of ad fraud tend to be modest in amount, combined they add up quickly: some $6.5 billion in ad spending will be wasted this year to fraud, according to a report released in May by the Association of National Advertisers....
In late July we mentioned P&G in relation to another problem—"Banner blindness":
...No wonder Proctor & Gamble could cut their online ad budget by $100 million last quarter and see no drop-off in sales: the 40% of traffic that isn't bots is basically blind to the ads.
Shhhh, don't tell Facebook or the GOOG, they'd be crushed.