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Is Programmatic A Recipe For Fraud? 12/09/2016

PubMatic president Kirk McDonald gave MediaPost’s RTBlog a rosy prediction of the future of programmatic advertising, saying, in part: “Brand marketers will follow in the
footsteps of Disney, Procter & Gamble, etc., by building internal programmatic buying competencies and pulling programmatic spending in-house.”

Brands populate the membership of the
Association of National Advertisers, which has warned them and anyone else who would listen that the online ad business is rife with fraud, wasting billions — an estimated $7 billion, at least, this
year — on online ads that people do not see.

The problem seems to be getting worse each year, as the ANA said that a 2015 study found between 3% to 37% of their ad impressions were created by
bots, up from a 2014 study where the bot traffic ranged from 2% to 22%.

A White Ops Inc./ANA study showed that display and video ads bought using automated systems had a significantly higher
level of fraud compared to ads that were purchased via human sales forces. Video ads, one of the fast-growing parts of the online ad business, performed far worse than display ads bought

“Theoretically, we [marketers] should be pulling back from the digital supply chain because of all the issues such as fraud, the lack of transparency,
ad-blocking and viewability,” Bob Liodice, chief executive of ANA, told the Wall Street Journal earlier this year.

Nobody denies the cost efficiencies earned by programmatic,
but surely brands are getting a little tired of the accompanying fraud and waste. Even Facebook and Google, which gobble up the majority of digital ad dollars (64%, according to Pivotal Research
analyst Brian Wieser — last year Google did $30 billion, Facebook $8 billion and they are doing even better this year) are not immune from fraud. Google has its share of ad fraud problems, and Facebook has admitted to a few “mistakes” such as how it counts video views.

And all of this before we even get to the ad-blocker

I suppose you could make the case that there is a concomitant amount of “fraud” in other major media, such as when a TV ad is served into a room where the audience has left or
muted the sound, or is counted in C3 or C7 but is subject to ad-skipping.

Interestingly, almost every study shows that the more humans are involved in the buying process, the less fraud.

While Kirk McDonald has a vested interest in a bright future for programmatic (and it’s hard to believe that as an industry we will ever go back to more labor-intensive ways of buying and selling
ads), one can’t help think that sooner or later, brands themselves will say enough is enough, and enforce whatever threats are implied behind their “demands” for greater accountability.

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