Paid Ad Fraud Averaged at 17% in Q2—Here’s Why Marketers Should Care

According to the latest report from fraud prevention/analytics firm Pixalate, global programmatic ad fraud clocked in at 17% in Q2 of this year. That means almost $2.00 out of every $10.00 spent on programmatic ads went to fraudulent engagement.

And, a more recent report from Juniper Research found that $84 billion will go to ad fraud this year - and it's expected to increase from here.

So, how does widespread ad fraud relate to us, an influencer marketing company? Let's take a step back and define what ad fraud truly is.

What is programmatic ad fraud?

Simply put, programmatic fraud means some bad actors use automated means (e.g., bots) to view and click on paid display ads.

It's similar to an influencer buying fake followers to game the influencer marketing industry. Why would anyone invest the time and money to build massive click farms to skew ad engagement?

Who benefits from ad fraud?

People perpetrate ad fraud because there’s something to gain from it. But who might be behind the scenes?

In one example, an unscrupulous ad network might generate millions of fake impressions for ads served by their network to charge advertisers more money (as ads are usually paid for in CPMs or cost per 1000 impressions).

Alternatively, a black-hat marketer might want to waste a competitor’s budget on PPC (pay-per-click) ads, such as those on LinkedIn or Instagram, so they build a bot farm to fake millions of clicks and drain an advertiser’s budget.

In another scenario, a ghost site may have fake ad inventory and want to generate fake traffic and ad engagement to make their site qualify for programmatic ad networks and gain revenue from ads placed on their site.

The common thread here is that someone is gaining something—while advertisers are losing millions of dollars by serving ads to fake audiences.

How Ad Fraud Impacts Advertising ROI

The scale of the problem is massive.

According to Statista, programmatic advertising was a $200 billion industry in 2022, which means that $34 billion was lost globally to fraudulent advertising engagement. That's a lot of wasted ad dollars.

Brands will spend millions of dollars buying display ads and lose millions of dollars to ad fraud. Brands invest money in paid advertising because of a simple return on investment (ROI) equation—it's very easy to draw a linear correlation between dollars in and dollars out.

However, that ROI equation typically does not factor in ad fraud, meaning the cost of those "dollars out" is generally higher than what the ROI equation would show.

The issue that advertisers face is that they're at the mercy of a platform that is three steps removed from where they purchase ads to accurately report on and prevent ad fraud, so there's no way to know for sure how prevalent ad fraud is in their campaigns, and no way for brands to control this.

How does this compare to influencer marketing?

Typically, influencer marketing is one slice of the marketing and advertising pie.

The difference between investing in influencer marketing and paid advertising is that with influencer marketing, fraud is much easier to detect and typically appears in the industry as fake followers.

Not only is it easier to detect—but follower fraud has declined since 2019. An IMH report found “the percentage of influencer accounts impacted by fraud had dropped to 50% by 2021. By 2022, there was a further drop in these rates, with an average of 36.68% of accounts impacted.”

To report on follower health, our Fohr platform displays Verified Reach, a badge on influencer profiles that lets brands know what percentage of their following is active and engaged.

At Fohr, for our influencer campaigns, we focus on numbers much harder to fake: reach, saves, clicks, and engagement like DMs and comment sentiment. Those are metrics you can’t fake.

Influencer follower and engagement fraud is easily detectable. At Fohr, we detect it by looking for anomalies in an influencer's follower growth and engagement rate and mark suspicious influencers as "suspicious."

The beauty of influencer marketing is that brands have much more visibility into how influencer fraud is detected and have much more control over who they choose to work with, rather than blindly trusting a system to put their ads in the right place and hoping the right audience sees them.

As a brand calculating your return on investment for paid ads, it's important to factor this fraud into your marketing budget and channel strategy.

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