miércoles, 10 de febrero de 2016

miércoles, febrero 10, 2016

Regulators are failing to block fraudulent adverts

The usual suspects in banking would be thrilled to be treated as leniently as those in marketing
 
©Ingram Pinn
 
 
You might have thought that an industry in which a tenth of transactions are fraudulent, which leaks billions of dollars a year, and in which many turn a blind eye to criminality would be raided by the police.

So far, there is no sign of it. The online advertising industry stays out of jail, despite advertisers knowing they are being deceived, and publishers and exchanges admitting it. Maybe it is too much to expect Interpol to scramble at the news that multinationals such as Unilever and Walmart are suffering — they are not widows and orphans — but this lack of action is striking.
 
The usual suspects in the banking industry would be delighted to be regulated so leniently.
 
Instead, Barclays and Credit Suisse this week paid $154m to settle findings by the US Securities and Exchange Commission that they failed properly to police their “dark pool” equity trading platforms.
 
Their offence was breaking pledges to protect investors who wanted to trade privately with each other from high-frequency traders infiltrating the pools in search of information. Mary Jo White, SEC chair, pledged on Sunday “to continue to shed light on dark pools”.
 
No regulator is doing this for the murky depths of online advertising exchanges and networks, where fraud often lurks. The dark pool malpractices are misdemeanours by comparison. A high-frequency trader is a model citizen set against a fraudster in Ukraine who implants malware on thousands of computers to make them watch adverts.

The promise of online advertising was that it would be more accountable and precise than the world of print and broadcasting, in which nobody knew if the adverts were being seen at all.

The magazine reader might be studying a marketing message or turning the page; the television viewer might be watching a commercial or making a cup of tea.

Three things have spoiled this digital promise. The first is that the technology, which was supposed to make precise measurement possible, equally makes it possible to game the system.

Advertisers largely pay for the “impressions” that are made on a display advert, that is the number of browser screens on which it appears. This does not prove that a human is operating the computer.

In practice, the machine often does so itself, racking up page impressions that are being sold to advertisers. Malware robots — “bots” in advertising jargon — are estimated to sit on 10 per cent of home computers in the US, browsing away in the background while the owners do other things, or sleep.

Second, the world of programmatic advert buying and selling is highly automated and bafflingly complex, filled with layers of intermediaries doing slightly different things for commissions. An advertiser places adverts through an online network contracted by its media buying agency. The network may find inventory on which to place them on an exchange such as Google’s DoubleClick Ad Exchange, into which thousands of publishers plug.
 
That is the simple version. There are more obscure ways to do it, enabled by automation and the internet. The result is that no one knows everyone with whom they trade, or can be sure where ads end up being shown. This makes it easy for fraudsters to infiltrate and infect the advertising supply chain.

Third, companies are desperate. The economics of digital publishing are under severe strain, with publishers being paid small amounts for millions of page views. They need traffic and some are tempted into buying it from brokers that can mysteriously rustle it up. Such publishers look the other way rather than delving too deeply into where the traffic comes from.

Fraud is most prevalent where those in the marketing industry pay highly to advertise to particular demographics. Asians and Hispanics in the US, especially those likely to buy luxuries or take expensive holidays, are in high demand. Yet 96 per cent of 4m ad impressions supplied by one publisher were bots imitating the browsing patterns of young Asians, according to a study published last month.

The study by the US Association of National Advertisers and White Ops, a cyber security firm, predicts global fraud in 2016 of $7.2bn, or nearly 10 per cent of the $77bn likely to be spent on online display ads. This makes it about 170 times more common than credit and debit card fraud, which amounts to 0.06 per cent of payments.
 
The industry’s biggest advertisers, exchanges and media agencies are trying to clean up their market. They have formed a trade body to certify sources of traffic and expel fraudulent activity from the ecosystem. Meanwhile, Google has 1,000 employees working on ways to filter out “bad ads”.
 
The industry may anticipate being left alone by regulators to deal with its fraud problem, given that they have little incentive to rush to the aid of multinationals. I would not count on it, though. Big companies are not the only victims. Fraud also affects small businesses that use exchanges to place ads and lack the resources to protect themselves from criminality.

There is little evidence that governments grasp what is going on, let alone plan to tackle it. But even the doziest official wakes up eventually.

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