Commerce

Report: Enterprises lose millions of dollars to ad fraud each year


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Ad fraud, or click fraud, is a widely acknowledged bot challenge for marketers that costs businesses a significant chunk of their revenue each year. New research from Netacea revealed that 73% of enterprises lose 4% of their online revenue to ad fraud.

However, bots don’t stop there. Marketers have identified that the impact of bots on their analytics is equally costly to that of ad fraud. In fact, it’s higher, with 68% of enterprises stating they lose 4.07% of their online revenue as a direct result of skewed marketing analytics.

While the margin is small, it all adds up. For the larger businesses with an annual turnover of over $7 billion (or 25% of respondents), 4.07% equates to $284,900,000, vs. 4% at $280,000,000.

Netacea found that 68% of businesses say that they have suffered a financial impact due to bots. This is fairly consistent across all organizations but travel and eCommerce firms had it slightly worse. Almost no businesses say that they don’t know the impact of bots on their business, and just under a third say they have seen no effect. This is a very similar result to ad fraud. Both ad fraud and skewed analytics are having a noticeable impact on around two-thirds of businesses.

Above: Netacea asked: Which of the following statements best applies to your company?

Image Credit: Netacea

The challenge for enterprises is that this is an unseen and often unquantifiable cost. The report aims to help marketing and security teams understand the threat of skewed analytics and how it can be mitigated.

Businesses waste a great deal of money serving customers who do not exist. Each bot that arrives at a site may not be much of a problem — assuming, of course, it is prevented from disrupting the site or buying up goods for resale. But the sheer number of bots means that there is a considerable cost in serving them. Even if a business prevents every attempt at fraud, whether it’s account takeovers or checking stolen card details, there is a cost in serving bots.

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This cost goes beyond the infrastructure necessary to serve bots. If bots and real customers look the same, what does that mean for making decisions based on what customers are doing on a site?

Marketers make decisions based on data, but if the data is inherently flawed, can marketers make good decisions? If marketing teams base their strategies on flawed data, can they have any chance of success?

The report finds that marketing teams are often the first to recognize that a business has a bot problem, even before company security teams, because they have visibility of traffic to the site and mobile app. Unfortunately, security teams and marketing teams, with their very different functions, are rarely in close contact. The ongoing threat of bots will require security teams and marketing teams to work together: the marketing team may uncover the problem, but the responsibility for fixing it lies with the security team — and the security teams’ budget.

To understand this problem better, Netacea asked businesses based in the U.S. and U.K., across the ecommerce, telecommunications, entertainment (including online gaming and streaming), travel, and financial services markets to consider the effect of bots on their analytics. Netacea wanted to understand not only the impact of bots on a business’ bottom line, but how it compares to ad fraud, a more deliberate attack that enjoys a higher profile. It conducted this survey in collaboration with independent B2B research specialist Coleman Parkes. 440 businesses were surveyed, with turnovers ranging from $350 million to more than $7 billion.

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Read the full report by Netacea.

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