Are You Losing 21 Percent of Your Ad Budget to Fraud?

Mar 29, 2019
By: Marissa Camilli

As app developers and marketers, many of us have rather despondently grown to accept the problem of ad fraud as an occupational hazard. However, when you realize just how much fraud is costing your business, it’s not something you are going to want to ignore and brush under the carpet to deal with another day.

According to a report by the fraud protection company Pixalate, companies in the United States are losing upwards of 21 percent of the ad budgets to fraudulent activities. This means you are losing $2.10 for every ten dollars you spend. If you lost this amount of money through a hole in your pocket, it wouldn’t take too long before you changed your pants or, at the very least, sewed up your pocket.

Scale up the problem to match a marketing budget of tens or even hundreds-of-thousands of dollars per month and the size of the loses no longer looks like pocket change — and still, app developers turn a blind eye to the problem.

Note: It has been estimated that the average app developer can expect to pay in the region of $200,000 to propel their app into the top 25 of an app store. This does not reflect the cost of keeping the app in this prime position. If 21 percent of this cost is lost to fraud, you stand to lose $42,000 before you’ve even begun to see a return from your investment in time and money spent developing your app.

Tricky to Spot, Harder to Stop

The problem is, ad fraud is tricky to spot and as it is so damned persistent, even more difficult to stop. You plug a hole and another one appears often from a completely different source.

The very nature of how smartphone users discover apps makes the process of identifying ad fraud problematic. It is not unusual for an app to be downloaded, activated and then never used again. Understanding the difference between a curious consumer and someone gaming the system isn’t always so easy to spot.

Further Reading: We’ve talked about the various common types of fraudulent activities facing app developers and marketers on this blog before, including Automation Redirection, Ad Stacking, Click Stuffing, Click Injection, and Emulators and Bots. If these are not terms you are familiar with, I suggest you start researching them as soon as possible. You then need to start asking yourself some questions. Could ad fraud be responsible for your poorly performing campaigns? What could you do with the money if you weren’t essentially giving it away to fraudsters?

Fraud: A Global Problem

Ad fraud isn’t just a problem in mature markets like the US. App developers in emerging economies, like India, where ad fraud currently stands at 36 percent can be devastated by the problem. Can you image what wasting more than a third of your ad budget does to your bottom line and expectations of success?

In emerging economies, where revenue streams may be more difficult to generate from eCommerce or in-app purchases, the impact of ad-fraud on potential profits can be even more damaging than in more cash-rich societies. It’s important to remember, just because a geographic region has high smartphone penetration rates – it doesn’t mean the population has the income to spend beyond their monthly call/data plan.

While ad fraud is less of a problem in Europe (Italy – 6 percent, UK – 11 percent, Germany – 13 percent), similar markets (in terms of maturity) like Australia are struggling with a fraud rate of 28 percent.

Smartphone Fraud

As the most popular channel to access digital products and services around the world, it’s easy to see why fraudsters are so attracted to the smartphone environment. The fraud figures themselves speak volumes about rising dominance of the smartphone over other technologies.  

More than one-in-five (20.4 percent) in-app display ads delivered by smartphone resulted in fraudulent activity in the final quarter of 2018, compared to 19.3 percent of ads delivered via the web on desktop and just 9.1 percent via the web on a tablet.

Demonstrating the fact that fraudsters see the maximum opportunity in the most popular digital environments, fraud on Andriod devices currently stands at 26.2 percent compared to 15.9 percent on iOS devices. It isn’t that Android devices are more susceptible to fraud than other technologies — it’s just that as the most popular technology platform out there, fraudsters are more attracted to it. Fraudsters like app developers want to go where the people go and so, in many respects, Android devices are a victim of their own success.

Mitigating the Risk of Ad Fraud

There are steps app developers can take to mitigate their risk of ad fraud. Understanding where their ads appear is an obvious precaution. According to the Pixalate report, Social Networking apps on Andriod (not including “walled garden” environments like Facebook or Twitter) are particularly risky, as are entertainment and tool categories.

The report also cites display and video-type advertising as much more risky than text-based advertising.

Note: The report also throws up some curious ad fraud hotspots. For example, weather apps on iOS are particularly problematic.

The biggest problem many app developers will face, particularly when marketing their apps across multiple territories and networks, is the lack of visibility into where their ads appear and differentiating between genuine engagement and erroneous clicks and installs.

There is Another Way

If the thought of throwing away upwards of 21 percent of your marketing budget is a big concern (and it should be), there are alternative, safer ways to promote your apps.

Pre-loading apps to new devices via Digital Turbine’s networks of manufactures and mobile networks creates a much more secure environment where ad fraud is greatly reduced.

First of all, we work in a clean environment. Both Digital Turbine and our partners have strict testing and quality assurance parameters to ensure all pre-loaded apps are free of stealth technologies that might contribute to fraudulent activities. We believe that every app we deliver carries our reputation with it and that is something we won’t risk for the sake of hitting a short-term sales target. There would be absolutely no point in claiming that we can help developers avoid fraud if we were contributing to it further down the line.

Secondly, because our pre-loaded apps only go to new devices we are able to match International Mobile Equipment Identity (IMEI) codes (a unique ID given to all smartphones) against any activations. This means you only pay for legitimate engagements which we recognize.

Additionally, Digital Turbine’s SingleTap Installs allow brands to bypass the Google Play Store and promote their apps via trusted channels like email marketing, promotional pages or banners on their mobile website, or links on their verified social media channels. This creates a fraud free solution for advertisers looking to get their app directly on device without any changes in brand experience or additional steps which lead to user confusion and may persuade them to abandon the download.

Finally, as leading technologists in the smartphone arena, Digital Turbine has pioneered advanced algorithms which help us monitor and track performance, as well as highlighting any potential fraudulent activities. This means we can guarantee the validity of any activations via pre-loads.

Talk to an Expert Today About Reducing Fraud

Ad fraud is a growing problem and will continue to confuse app developers true understanding of their success. Unless app developers can get a grip on the problem, there is a real risk that projects will never be able to reach their true potential, damaging profits and hampering future developments. The time to act against fraud is now.

How much further could your marketing budget go by reducing the amount you paid out to fraudsters? To learn more about maximizing your app marketing budget speak to one of our pre-loaded app experts at Digital Turbine today.

Marissa Camilli
By Marissa Camilli
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