John Wannamaker, a very successful nineteenth century department store mogul, famously once said that “I know I’m wasting half of my advertising budget, I just don’t know which half.” In his day, he didn’t have to contend with online advertising and click-fraud.
Take it with a grain of salt, but a trade group representing the nation’s biggest advertisers has found that bots are costing advertisers billions of dollars. According to Bill Cromwell at Media Life, the report…
offers an in-depth look at bots, software that imitates humans by going to web sites and clicking on ads and activating online videos, creating fraudulent traffic that advertisers end up paying for. The study predicts bot fraud will cost global advertisers $6.3 billion next year.
In mass media, advertising involves three parties. The advertiser wants to deliver a message. The publisher, such as a television station, magazine, or website, will display the ad in exchange for a payment. An advertising agent places an advertiser’s advertisement in a publisher’s publication. The first two parties are almost the same in the online world, but the role of advertising agent is often done by an advertising network. (Google owns the largest advertising network in the world.) Most commonly, advertisers pay for each click their ad receives. If memory serves, the higher the click-through rate the more money the publisher and advertising network receive from the advertiser. This is clicks generated by software, rather than human beings who will actually respond to an advertising message, is a problem.
Lastly, I say to take this with a grain of salt because advertisers are likely looking to drive the price of online ads down. Moreover, the organizational co-author of the report, White Ops, is a technology firm that sells bot-detection software. It absolutely makes sense that they would find that bots and click-fraud are a big problem for advertisers.