When George John, the CEO of adtech company Rocket Fuel, clicked on to the Financial Times website on the morning of May 26 this year he was “dumbstruck.”
“Mercedes online ads viewed by more fraudster robots than humans,” read the headline, which went on to allege that ads for the car brand were placed on to fraudulent websites by Rocket Fuel. The research, by Telemetry (interestingly, a firm that had expressed interest in working with Rocket Fuel but the latter company instead chose a competitor) found 57% of the ads placed were “viewed” by automated computer programs, rather than real people.
While there was no suggestion that Rocket Fuel, which acts as an intermediary between advertiser and publishers, had deliberately placed the ads in front of non-humans, the allegations had the potential to be extremely damaging and immediately set off the gossip fires within the adtech industry. Some sources Business Insider spoke to in researching this piece said Rocket Fuel was unfortunate to be caught out, and that many adtech companies are aware that many of the impressions they are brokering are suspicious, but sell them on anyway.
Rocket Fuel fired up the crisis communications engine and immediately put out a statement rubbishing the “sensational headlines on top of non-news,” saying only 6% of the served ads identified were questionable (which also doesn’t necessarily mean they were bots).
The story was just the start of a series of setbacks for a company that once had a market cap of more than $1 billion. (It's now about half that.) But amidst the drama, Rocket Fuel was quietly working on a new solution that it thinks will not only instill more trust in its own network, but help raise the bar for the entire online ecosystem. And the company plans to make it free for everyone to use. Even Telemetry.
Back in 2013, things were far rosier at Rocket Fuel.
The company marked what AdAge described as the most successful adtech IPO of 2013 last September, with stock shooting up from the initial offer price of $29 per share to $59.95 as trading opened. This was all the more remarkable considering the stocks of other adtech companies going public that year, like Tremor Video and YuMe, failed to rise above their initial offering price.
The company posted successive quarters of double digit revenue growth. But investors, clearly unnerved revenue wasn’t growing at the triple digit levels it had been reporting the previous year, voted with their feet and the stock price began to fall (which tends to happen after many startup IPOs).
Then, on Aug. 5, Rocket Fuel delivered more bad news for shareholders: the company was lowering its revenue forecast for the full-year. On a call with investors, Rocket Fuel mentioned the company had seen "increased advertiser and agency interest in the quality of ad space and audiences they buy with increased concerns around bot traffic and viewability." Rocket Fuel's share price dropped by around 30% the next day.
Over the course of the following weeks, several law firms sensed a money-making opportunity and began filing class action lawsuits against Rocket Fuel, alleging the company disseminated false and misleading statements to investors. Specifically: that a large portion of the ads brokered by Rocket Fuel were being viewed by bots, which could have put its operations and financial performance in jeopardy, and that the company knew earlier than August its financial performance would not meet expectations due to, among other things, concern over inventory quality. Those suits have yet to enter the courtroom. Rocket Fuel denies the allegations.
What ad fraud is
For the most part, the perpetrators of ad fraud tend to be criminal gangs, who take money out the advertising ecosystem. There are many different types of ad fraud and the criminals' methods are becoming more sophisticated all the time. Often, they infect unsuspecting consumers' computers with malware and join them together in a legion of "botnets", in which computers to click on thousands of ads without their owners' knowledge.
We asked Niall Hogan, UK managing director of media valuation platform Integral Ad Science, to explain the type of ad fraud that may have affected Rocket Fuel in the Mercedes-Benz case.
Typically, a user goes on the internet and downloads an app or a program like, ironically, a pop-up blocker. That infects their computer with malware and takes ownership of the browser. A bot command centre begins creating a cookie profile that's attractive to advertisers by clicking on premium sites like Apple, The Financial Times and car manufacturers' pages. The command centre also instructs the botnet to perform other activities like watching videos, clicking on ads and even purchasing items with credit cards.
This fake user is monetised by the criminals via a fake website — which is often well-designed. The command center gets the botnet to visit it often, and those visits trigger a bid for that site in an ad exchange. In that exchange, advertisers are using technology platforms known as DSPs (demand-side platforms) to spend their advertising budgets and decide which users to target with their advertising. The DSPs see what appears to be a desirable cookie profile for this apparently attractive audience, and they bid to serve ads to it. The ads are clicked on by the bots, and the command centre takes the fee.
"You get websites we've never heard of generating millions of impressions. Suddenly it's one of the top-performing sites in a network and advertisers even start optimising towards it because it's working so well (in terms of clicks) and start giving it more revenue.
"Advertising exchanges might not identify it straight away as there's thousands of websites entered in every day and they try to vet them the best they can (at the bid stage) but it's difficult until you see it up and running. And even premium sites get caught out (with botnet traffic)," Hogan says.
Other forms of ad fraud include: ad stacking, where multiple ads are placed on top of each other in a single placement but with only one in view; pixel stuffing, condensing an entire ad-supported site into a 1x1 pixel; and cookie cloning, where a genuine user's cookie profile is copied by fraudsters, meaning that user can never delete their opt-in advertising preferences.
Ad fraud detection service Forensiq put together this short video, visualizing what it looks like when malware known as advertising takes over a computer:
Why ad fraud is so prevalent
One of the main issues with combatting advertising fraud is that online advertising, in general, is extremely complex. While the introduction of automated ad buying — or programmatic advertising — makes the process more efficient for advertisers in terms of cutting out the time it takes to buy an online ad, a single bid for a display ad can pass through a multitude of companies before it reaches a consumer, as the below diagram from Luma Partners demonstrates:
With all the different companies, acronyms and terms to get your head around, you can see why marketers often take an arms-length approach to their programmatic media buying and instead entrust their agencies to buy quality impressions for them. So if online advertising is that confusing, imagine how difficult it is to track down nefarious bot networks deliberately designed to look like humans.
Comscore has predicted that up to 36% of the traffic online is fake. Programmatic is growing apace and is expected to reach $53 billion in spend globally by 2014, according to Magna Global. That means brands could be wasting billions of dollars on ads not actually seen by anyone. Currently, programmatic still only accounts for 2-3% of marketers' ad budgets. So right now it's not front-of-mind.
Rocket Fuel is not the only company that has made headlines by being affected by bots.
Last year, Adweek reported 30% of the traffic running through AOL's Adap.tv was bots. Earlier this month, AdExchanger reported that up to 40% of the impressions flowing through the AppNexus exchange are "impossible to verify." Adap.tv denied the allegation, while AppNexus' CEO Brain O'Kelley told AdExchanger his company was aware it had a problem and was working hard to solve it. Last week Kraft Foods said it rejects 75-85% of the impressions offered up by real-time marketplaces because they are "fraudulent, unsafe, unviewable or unknown."
Those are all huge percentages but James Collier, EMEA managing director of device recognition company AdTruth, thinks ad fraud hasn't moved higher up the agenda yet because "it's not tangible."
He adds: "These digital ad campaigns still do reach genuine people, people still buy things from sites. But what brands don't know is what the revenue would have been if there wasn't any fraudulent traffic.
"Ultimately companies will say we have had a look at it, take people out for a nice lunch, give them some free budget and it'll mitigate all this. They were put on the naughty step and it [bad press and negative perceptions of their companies] will probably go away.
"The problem is, brands are also complicit because they are seeking lower (advertising rates) and that requires an enormous amount of momentum and investment. It requires people to say if you reduce traffic you will see a direct impact on (ad rates)...and we will have to readjust how much brands are prepared to pay for a genuine impression. It's hard to predict a huge rush to do that."
Integral Ad Science's Hogan thinks another reason preventing more from being done to solve the ad fraud problem as this the issue is not high up enough on the agenda of the people who ultimately control marketing spend: the chief marketing officers
Hogan says: "People on the supplier side have been aware of the problem for longer but it's only recently that there have been the tools to identify the problem. The only way the issue will step change is when marketers become positively aware of the issue and then get down to the seller. I don't think we're there yet."
Introducing: Traffic Scanner, "the Google Analytics of ad fraud"
Rocket Fuel is this week launching what it thinks is a solution to the ad fraud awareness problem.
Dubbed the "Google Analytics of ad fraud", Traffic Scanner is a free tool open to advertisers, agencies, DSP providers, publishers and competitors to plug in their websites and advertising to get an idea of the quality of the impressions they are being served against. Users need to insert a Traffic Scanner pixel into their display campaign or website and the tool will start loading a daily report.
Rocket Fuel says Traffic Scanner uses the same detection and fraud blocking technologies that are built into its own platform, which have been informed by accredited ad detection partners such as Forensiq. Rocket Fuel refused to list detailed examples of the the type of fraud Traffic Scanner picks up, so as not to tip off fraudsters.
The tool only gives a percentage of "quality" versus "suspect" campaigns and doesn't give an idea as to where the questionable traffic is coming from, but Rocket Fuel hopes it will do enough for advertisers to start questioning their suppliers and potentially cut some fraud out of the ecosystem.
Traffic Scanner is modelled on the free tools Google offers up for the industry to use, such as Google Analytics. The idea is that the more you measure your advertising, search marketing or ad campaigns, the more you'll be keen to continue using Google's products.
John says the same applies to Traffic Scanner: "Traffic Scanner is mostly for our customers and we hope it helps them have confidence in what we are doing for them. We're also encouraging them to put in the rest of their ads (that aren't running through the Rocket Fuel network) and making it free to use.
"That option is there and even if the only purpose (of someone using Traffic Scanner) is to raise awareness, because people might try it and say 'do I really want to use this, or would I rather pay?' That's excellent too. The goal is not to get people only using this tool but to get people to understand more about their digital advertising, even if that delivers leads for Forensiq, Integral Ad Science, etc."
Rocket Fuel: the future
Aside from the launch of Traffic Scanner, Rocket Fuel has already undertaken other proactive measures to ensure to the quality of the audiences it offers advertisers: working with industry bodies including joining the Interactive Advertising Bureau's (IAB) traffic of good intent and anti-fraud working groups, speaking on the subject of ad fraud at conferences, partnering ad fraud detection services like Forensiq and blocking between 39-40% of the approximately 58 billion impressions it has access to on a daily basis . It's already paying off.
Rocket Fuel also boasts major recent client success stories from the likes of Denny's, Toshiba, Birds Eye, Buick and Lufthansa on its website. And Mercedes is still a client too.
John says last month 10 people from a major CPG took part in the company's customer immersion programme. "They told us their dream team of three (internet advertising) partners is Google, Facebook and Rocket Fuel," he says.
Rocket Fuel also recently commissioned a study from Forensiq, an accredited member of the IAB, to evaluate the quality of its impressions. The research found just 3.72% of Rocket Fuel's impressions were categorized as high risk - well below that industry average of 36% comScore had reported.
Andrew Goode, COO of content verification and ad fraud detection service Project Sunblock, told Business Insider: "Over the past quarter, we have consistently seen very little fraudulent activity on campaigns where Rocket Fuel is the supplier of inventory and it is our opinion that Rocket Fuel has been among the most proactive businesses in attempting to tackle this issue."
Financially, Rocket Fuel continues to be a success story. In the most recently reported period, the six months to 30 June 2014, revenue rose 80% year on year to $167 million. Profit was up from $49.7 million in the first six months of 2013 to $84.5 million in the same period this year.
The Financial Times report did not spook investors or clients, John says, adding that the bulk of investor concern about Rocket Fuel and ad fraud hasn't the prevalence of it on the network and the financial implications (as the suits suggest), but how much time and energy the company is investing in educating customers on the issue.
As John neatly summarises: "Ad fraud is a big phenomenon, but it does not have to be a big problem."
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