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Ad fraud: What it is and how to prevent it

Imagine hosting a big party to impress your friends. But uninvited guests arrive, eating and drinking what was meant for your guests. They waste resources and can ruin the fun for everyone else. This scenario mirrors the major issue ad fraud plays in digital marketing — it increases your budget and spoils your efforts to reach and engage your intended audience.

Ad fraud: What it is and how to prevent it

Table of Contents

Table of Contents

What is ad fraud?

Ad fraud definition

Ad fraud, also known as advertising fraud or digital ad fraud, is the manipulation of online ads to drain funds from marketers without providing real engagement or value.

In the context of our party analogy, ad fraud drains resources (ad budgets) while spoiling the fun (proper delivery).

According to Oberlo, a dropshipping app, the digital advertising market is projected to hit $734.6 billion in 2025. This number accounts for 70.8% of the overall ad spend worldwide. With so much money involved, it makes sense that fraudsters would want a piece of the pie.

Cybercriminals are often to blame. However, big companies trying to outdo their rivals unfairly may also engage in ad fraud. No matter who’s behind it, the outcome is always the same — money wasted on ads that don’t reach the right people.

How does advertising fraud work?

Bad actors often use bots to carry out advertising scams, mainly via click fraud. Bots mimic real users by clicking on online ads, watching videos, or opening apps. These bots, spread across various devices in a botnet, use different IP addresses to appear more legitimate.

Scammers also employ fake sites to simulate clicks and fraudulent traffic, tricking advertisers and networks into paying for nonexistent engagement. Essentially, ad fraud is like paying for a billboard on a busy street only to find it hidden in an alley — you pay for visibility that doesn’t exist.

Why does ad fraud occur?

Scam advertisements occur because bad actors exploit weaknesses in digital ads, primarily driven by their desire for financial gain. However, other reasons ad fraud occurs include:

  • Lack of clarity in the processes. Digital advertising involves many moving parts and layers of technology. This complexity creates a “fog” around the process, making it hard to spot fraud. This confusion lets malicious actors sneak in and manipulate ads without getting caught.
  • Pressure to achieve impressive stats. The success of ad campaigns relies on metrics like clicks and views. Wanting impressive stats can unintentionally push advertisers to cheat the system, as scammers take advantage of the demand for high numbers.
  • Bots and automation. Automated advertising processes have opened the door for bots and computer programs. These bots act like people, clicking on ads, visiting sites, or watching video ads to fake engagement and boost metrics.
  • Weak regulation. There are gaps in how regulation for digital advertising is enforced in different places. This can give fraudsters the confidence to run fraudulent ads that produce invalid traffic. The low risk and high reward is appealing.

Who are ad fraud’s most common victims?

Ad fraud mainly affects advertisers and ad networks. Juniper Research estimates that by the end of 2024, ad fraud could cost advertisers nearly $100 billion.

While many marketers and businesses using digital ads are susceptible to online advertising fraud, specific industries are more vulnerable to wasted time and unnecessary losses. These include the financial services, law, and retail/e-commerce sectors.

Still, scammers can exploit any expensive or competitive keyword.

The main types of ad fraud

Cybercriminals employ various methods to carry out ad fraud. Here are some of the most common ad fraud techniques and online advertising fraud types:

  1. Click fraud. Fraudsters often use bots to click on pay-per-click (PPC) ads with no intention of making a purchase. The most common type of click fraud comes from click farms. Instead of bots, click farms use actual people to click on ads and buttons, generating fake traffic and engagement. As a result, advertisers pay for these fake clicks, believing they’re reaching potential customers.
  2. Click hijacking. A more intricate type of fraud, click hijacking happens when someone redirects a click from one ad, essentially “stealing” that click and potential customer. The fraudster needs to have some level of access to the user’s computer, the ad publisher’s website, or a proxy server for this type of fraud to work.
  3. Click injection. Slightly similar in concept to click hijacking, click injection is a sophisticated form of mobile ad fraud where fraudsters insert fake clicks on ads in mobile apps. Their goal? To skew click-through rates, pump up the metrics, and illegitimately profit from advertisers.
  4. Domain spoofing. Domain spoofing happens when a fraudster disguises their counterfeit site as a legitimate and often popular website. They cleverly trick advertisers into spending money on ad space that isn’t worth much.
  5. Cookie stuffing. Cookies track how people interact with your ads, showing if they’re working or what interests users have. But there’s a catch — scammers can exploit cookie stuffing. They may insert unrelated cookies into users’ browsers to manipulate payment and credit for ads. They might also use bots to inflate ad impressions, driving up costs and profiting illegitimately.
  6. Pixel stuffing. Scammers use pixel stuffing to hide ads in tiny, often 1 x 1 pixel spaces, making them invisible to you but still counted as seen. This practice inflates ad views with unseen ads, misleading advertisers about the exposure their ads receive.
  7. Ad stacking. This type of ad fraud involves stacking multiple ads on top of each other in a single ad space, where only the top ad is visible to site visitors. While impressions are counted for all ads, only the top one is seen, leading to advertisers paying for views that never happen.
  8. Geo masking. Geo or location masking, also known as location fraud, tricks advertisers by making it seem like online traffic comes from high-value locations. Scammers manipulate location data so less desirable traffic seems as if it’s coming from desired regions. This leads to ads failing to reach their target audience.
  9. SDK spoofing. SDK spoofing tricks advertisers into paying for app installs that didn’t happen. It uses bots to imitate real user actions or compromise network security to fake in-app activities, falsely inflating download and usage numbers.

How do you detect fraudulent ads?

Recognizing signs of ad fraud can help you detect scam activities before they deplete your entire ad budget. Here are some of the most common signs to aid in ad fraud detection:

  • Unusual traffic patterns. Sudden spikes or drops in traffic, particularly from regions not targeted by your campaigns, known bot networks, or suspicious sources, often signal fake activity. It’s a clear red flag when the numbers don’t add up.
  • Abnormal click rates. Click-through rates significantly higher or lower than industry standards can signal fake clicks. Watch for repeated clicks coming from the same IP addresses or unusually low engagement from what should be high-quality traffic sources. Trust your instincts — if a click-through rate seems too good to be true, it probably is.
  • Mismatched conversion rates. A large gap between clicks and actual conversions is a telltale sign of fraud. Genuine interest typically leads to some level of engagement beyond a mere click.
  • High bounce rates. A high bounce rate suggests site visitors aren’t finding what they expected. This could be due to misleading ads or non-human traffic, neither of which benefits your campaign.
  • Rapid budget depletions. Watching your ad budget disappear faster than expected without clear results is a warning sign.

How to prevent ad fraud

While there’s no one-size-fits-all solution to ad fraud, adopting a proactive approach can significantly shield your advertising campaigns. The key lies in organizations being vigilant and aiming to spot ad fraud early. Some of the most powerful strategies to outsmart fraudsters include:

  • Monitor click data and set up custom alerts. It’s essential to understand what “normal” traffic looks like. Monitor click data and set up alerts based on sessions, page views, and other metrics.
  • Use ads.txt files. Use this type of file to list authorized ad networks and exchanges and sell-side platforms (SSPs) to resell your ad content. Make sure your partners have valid sellers.json files. These help advertisers confirm the origin of ad space and impressions they purchase.
  • Set up allowlists and blocklists. Allowlists specify approved sites for ad placements, ensuring ads appear only on trusted platforms. Blocklists prevent ads from displaying on fraudulent or inappropriate sites.
  • Double-check third-party plug-ins. It’s crucial to trust the developer when using third-party CMS plug-ins, extensions, or scripts for advertising and analytics. Devices from untrusted developers may serve as avenues for ad fraud. Before integrating a plug-in or other device, thoroughly inspect its code to ensure it performs what it intended.
  • Be precise when targeting your audience. Knowing what audience you’re targeting can speed up the detection of abnormal activity. For instance, focusing solely on customers in Spain can help to identify scammers more easily when trying to target a different geographic location.
  • Try ad fraud or bot detection tools. Consider investing in software built to spot and stop ad fraud and bot traffic. These tools use smart machine learning algorithms to sift through big data and spot fraudulent patterns.