How Bid Retractions Can Defeat Ad Fraud — If Buyers and Sellers Cooperate

by Andrew Casale (VP Strategy)

It probably isn’t immediately obvious to point to cocoa beans when we think about making the RTB environment more conducive to — and profitable for — brands and publishers alike.

But we probably should. In late May, French company Sucden bought 1,000 metric tons of cocoa on the futures exchange. The exchange that inspected the cocoa consignment noted that it came from a warehouse where some inventory suffered water damage. The exchange declared 100 tons of the purchase to be unfit for delivery, and offered to swap out the bags. Sucden rejected the exchange’s offer because it had no way of assuring the other 900 tons were fine. Sucden refused the consignment within 10 days of payment, which was acceptable by the exchange’s regulations.

Now, if a transaction like that works for cocoa, it should also be able to work with advertising, right?

Transactions on the futures exchange and an ad exchange resemble each other quite a bit. The difference is that in the digital ad market, the seller offers an impression, buyers place their bids and there’s no recourse afterward because “delivery” happens within a fraction of a second between the bid and the buy. If the buyer has reason to believe it bought a junk impression, the market treats it like it’s the buyer’s problem, with no recourse available. Right now, the way they sort it out is inefficient and wasteful because there is no process to flag fraudulent impressions, allowing bad actors to continue operating even if one buyer becomes wise to them.

 

Who’s To Blame For Fraud?

As has been discussed numerous times already, entities create bogus websites and generate bot traffic. Or ads are rendered on impressions where they’re never seen, and viewability can only truly be verified after an ad has been delivered. Fraudulent players continue making money until they’re caught, and there’s no way to call for a refund after they’re caught. By that time, it’s already too late; the impression has been bought and the damage done.

Some argue fraud is the sell side’s problem to solve. Others say the onus to curtail fraud falls on the buy side. In any event, no one has solved it perfectly and fraud detection has basically become a giant game of Whack-a-Mole that plays in favor of the bad actors. If they get caught by a majority of buyers, they still get to collect their “earnings” and simply open up under a new name the next day. When we see how other industries have the ability to cancel a transaction after the purchase, that mechanism looks enviable by comparison.

It might appear that if the digital ad industry had a means of canceling exchange transactions, the buy side would gain a strong upper hand. A publisher may wonder what’s to prevent buyers from canceling buys of legitimate ad inventory. But the ability to flag bad actors benefits both sides.

Pressing The Cancel Button

If buyers could cancel purchases of fraudulent inventory, it would make those bad actors more visible and leave more money in the hands of DSPs, thus creating more ad revenue for legitimate publishers. Also, the ability to pull a bid, if both buyer and seller agree, would allow publishers to offer make-goods within programmatic — something that is not feasible in today’s system. These will eventually be needed to preserve a positive relationship with advertisers in the developing age of programmatic guarantees. In advertising, where there are guarantees, there are inevitably make-goods.

If there were means to allow cancellation of a transaction, it would also be possible and advisable to discourage buyers from canceling buys without careful consideration. In turn, there would have to be limits or thresholds on how many cancellations they could make, or how much ad inventory they could reject. If the vast majority of buyers deemed a publisher’s inventory to be quality, the publisher should still be credited if the buyer seemingly arbitrarily decided to cancel. But, on the other hand, if the vast majority of buyers deemed a publisher’s inventory to be fraudulent, the buyers should be credited. This paradigm change would remove the comfort a fraudster has in the “revenue” they accumulate, as it could be taken away at any point after the fact.

If both the buy side and the sell side recognize fraud as a problem, and each points the finger at the other for allowing it to perpetuate, then both sides need to cooperate on a solution. Otherwise, the only winners in this scenario are the bad actors.

We can’t reach a point where a major brand gives the industry an ultimatum to fix a problem or it will pull its spending, as we’ve seen in the past with ad networks. If other industries can develop a respected system of canceling unacceptable transactions, the digital ad world can, too.

We just need to be proactive and collaborative in finding a solution to fraud — before the entire industry is put on notice.

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