Ad fraud is the online nexus which criminality in all its various forms increasingly revolves aroundChristmas is fast approaching, which also means that, for many companies, so is the end of Q4. It’s the big spending time of year, but it’s not just consumers recklessly throwing their money around—Q4 sees brands and companies go on a spending spree of their own, with budgets expended furiously to buy online advertising and capture the eyeballs of a market at its most receptive.
But it’s also increasingly the season of risk, with money meant to buy ads being siphoned off by some of the nastiest elements on the web. Companies risk being complicit in funding criminal networks and worse because of the pressure on marketing to blow its budget in Q4—and it’s a risk that most CFOs are not only unaware of, but may actually be responsible for.
It’s a curious fact of corporate life that the importance of a department is often viewed as being directly commensurate with the size of its budget—and that the best way to justify and protect this budget is by ensuring the department’s coffers are completely empty at the end of Q4. In fact, CFO-defined KPIs are often based on this assumption. However, while finance might end up with a new computer system it didn’t really need, or R&D might acquire an entire room’s worth of ping pong tables, marketing budget may well be risked on something that could have serious repercussions for the company’s business and brand: fraudulent advertising.
Budgets under attack
Ad fraud is the online nexus which criminality in all its various forms increasingly revolves around. While consumer credit card fraud still continues to command the headlines, the money it generates for the perpetrators is relatively small beer compared to what they can make from generating fraudulent ad clicks and diverting money that was intended to buy legitimate advertising into a black hole of fake sites, false impressions and fantasy traffic stats.
It’s the very complexity of the online publishing environment that has allowed bad actors to flourish, with brands and buyers unable to accurately track where their ads are being served and who’s actually seeing them. Much of the process has become automated via programmatic ad platforms—but that has done little to stop the fraudsters from effectively stealing marketing budgets and using them to fund and run illegal activities, from money laundering and drug trafficking to state-sponsored troll farms and terrorist cells.
Legitimizing advertising spend
The marketing industry has an ongoing issue with ad verification—establishing that the budgets it hands over to agencies and the programmatic intermediaries are being spent on legitimate advertising. Partly, this is due to the complexity problem and the fact that verification isn’t a core competency of marketing departments or their agencies. Yet there’s also a darker reason for this lack of insight. The entire online advertising ecosystem is designed in such a way that, even when clicks are fraudulent and traffic is fake, the various middlemen in the chain are still taking their cut and making money, and so don’t have a great incentive to do anything about it.
But often, it’s the marketers themselves who collude in this situation by failing to demand more transparency, simply because they need to spend their budgets and—particularly in Q4—they’re not overly fussy how it happens. This also puts their agencies in an impossible position, being told to buy advertising wherever they can, regardless of its legitimacy, or risk losing the account. For the fraudster, all their Christmases have literally come at once.
Risky Performance Indicators
This is a crazy and frankly untenable situation, but the blame for it can’t just be heaped at the feet of the CMO and the marketing department. Rather, it’s indicative of a problem with corporate culture itself, where KPIs defined by the CFO to measure performance distort what the department should be trying to achieve—effective, verifiable advertising—and instead actually push it towards risky activities.
The marketing department’s Q4 budget splurge is not only throwing good money after bad, but at its worst, could be funding activities that are utterly antithetical to the values of both the company and its customers. It’s damaging enough when a brand’s promotional message is served next to inappropriate content, but just imagine the stock market and reputational fall-out if it’s discovered that corporate money is responsible for bankrolling criminal and terrorist acts.
Where does this pressure to spend come from? Surely a department should be rewarded for using its budget wisely and effectively rather than being forced to blow it all at the end of Q4? Yet time and again, this is what happens when a CFO imposes purely financial metrics on a department. In the ‘old world’ of less than twenty years ago, this pressure to spend meant that marketing merely wasted money on buying display ads in physical media—now, as their potential audience has migrated online, they squander money in a much more dangerous space where the evidence of what’s been bought is far harder to verify, with only traffic reports and ad impressions to show for their outlay. Yet CFOs just see budget being spent and KPIs being met, and are happy.
But they shouldn’t be, because these figures potentially mask a huge and damaging risk for the company. While risk officers are integrated into companies’ legal, compliance, financial and security teams, marketing continues to be overlooked, even though this is where a major source of risk for companies now exists. And if that wasn’t bad enough, the financial KPIs that CFOs impose actually incentivize this risk.
Easing financial pressure
It is vital that brands recognize this new threat to their corporate reputation and business operations, and not just treat ad fraud as an internal problem for the marketing department to deal with. At the same time, CFOs need to take the pressure off teams to spend their budget come what may for fear of losing it, otherwise it won’t be long until the Q4 bonanza leaves a company exposed to accusations of funding crime by proxy.
