How scammers make money from click fraud

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We have already written more than once about how Internet fraudsters suck millions out of advertisers' budgets. They spoil metrics, ruin marketing strategies and put a stain on companies' reputations. And in fact, the term Internet fraud is divided into different areas, each of which requires certain skills and knowledge, has different goals and its own level of threat.

Today we will talk about what types of fraudsters there are in advertising and how they spend advertisers' budgets on generating fake bot traffic, views and leads.

Contents
1. Types of Internet Fraud in Digital Advertising
1.1. 1. "Black" marketing
1.2. 2. Competitors
1.3. 3. Fraudulent advertising networks
1.4. 4. Fraudsters not from gangs
1.5. 5. Organized groups of fraudsters
2. Who is involved in creating an advertising offer?
2.1. Advertiser
2.2. Agency
2.3. DSP platforms
2.4. Advertising exchange
2.5. SSP platforms
2.6. Publisher
3. About the standard cash flow in advertising
4. On the movement of funds in advertising with the participation of fraudsters
5. How advertisers can stop scammers

Types of Internet Fraud in Digital Advertising​

Here's who might be behind the click fraud:

• "black" SEO and affiliate marketing;
• competitors;
• fraudulent advertising networks and platforms;
• ordinary scammers who are not part of any gang;
• organized fraudulent groups.

They all have different experiences, abilities and technologies, and the damage they cause also varies.

1. "Black" marketing​

Unlike "white hat" marketers, "black hat" marketers rely on deep knowledge of SEO, affiliate marketing, and webmastering, which together allow them to skillfully manipulate advertising. Thanks to their well-established tactics, marketers expand the reach of ads they place on their (and other) platforms. For example, they can use bait headlines or ambiguous and shocking announcements about celebrities.

Black marketers can also use bots to click on competitors' ads in order to spend the budget and sabotage all the efforts of direct and targeting specialists. In addition, such marketers themselves are often publishers/webmasters of the sites where they place clients' ads. This means that they themselves can apply various fraudulent schemes to ads.

This type of attacker is believed to have expert skills in online advertising fraud methods. And given the fact that the payouts and rewards can be very attractive, their interest in this business is very high.

2. Competitors​

Some advertisers, when launching their campaigns, believe that competitors are just waiting to start clicking on their ads. And these fears, in fact, are not without reason. Competitors can really click on their rivals' ads in Yandex.Direct and Google Ads.

Yes, such unfair play will slowly spend the competitor's advertising budget, and the latter, without suspecting anything, will pay for all clicks that do not bring conversions. Also, their actions can negatively affect the assessment of the effectiveness of advertising and increase the cost of a click and achieving the goal.

Despite this, this threat is still not as dangerous as other types of fraud. And it is worth noting that large advertising platforms such as Yandex and Google have sufficient filters to block most of these clicks.

3. Fraudulent advertising networks​

Not all advertising platforms and networks operate fairly. Some knowingly commit or become participants in ad fraud when they act as middlemen between black marketers and ad exchanges. Others turn a blind eye to fraudulent cases that occur right under their noses, as long as they get their cut of any deal.

At first glance, many of these networks look quite convincing. Large brands and partner agencies can place ads through them and invest huge amounts of money in advertising campaigns.

4. Fraudsters are not from gangs​

Advertising fraud attracts those who are already engaged in some illegal activity on the Internet (for example, sending spam or phishing), because the digital advertising industry is a huge money and high reward. That is why such attackers, having the appropriate baggage of knowledge in various fraudulent techniques, boldly embark on this path.

And since virtually no advertisers sue the scammers they discover, they will continue to do what they do, earning them incredible amounts of money.

We have already written about those who successfully sued Internet scammers. Find out who managed to find the criminals and stop them.

5. Organized groups of fraudsters​

Such groups pose a serious threat to digital advertising in particular and the entire marketing industry in general. It is believed that the activities of these highly organized attackers can even cause economic instability.

When people hear the word hackers, they immediately imagine this picture: guys in hoods, sitting in a dark room in front of a computer. But in reality, groups of Internet scammers are entire organizations with their own hierarchy and structure.

These are the real criminals who create elaborate scams through which they generate automated and fake CPM, CPL and CPC advertising actions and earn millions of dollars.

The most notorious example of such a group is Operation Methbot, which stole around $36 million from advertisers. The scammers struck deals with ad networks to place ads, then used bot farms and rented servers to imitate the behavior of real users. These “users” then visited clone sites of well-known sites, such as the New York Times, where the ads were placed.

Who is involved in creating an advertising proposal?​

Before we delve into the intricacies of advertising media movement, let's first recall who is involved in the entire advertising chain.

Advertiser​

An advertiser purchases advertising space on webmaster/publisher websites and platforms to promote their own products or services.

Agency​

Marketing agencies can help advertisers create more engaging ads and better tailor campaigns to reach a wider audience.

DSP platforms​

DSP (Demand Side Platform) platforms are auction systems that offer advertisers, agencies, and marketers the opportunity to buy available space from various advertising exchanges. That is, they are inventory aggregators - they collect all available offers from exchanges in one place. This is believed to increase the effectiveness of advertising.

Advertising exchange​

Exchanges are marketplaces that allow publishers to sell their ad inventory and connect to relevant networks. These exchanges operate autonomously and facilitate the entire process of buying programmatic advertising.

SSP platforms​

SSP (Supply Side Platform) platforms allow publishers to sell their advertising inventory on various exchanges. With the help of such platforms, webmasters increase the reach of their inventory and can receive the most favorable offer from the advertiser, thereby increasing their income.

Publisher​

A publisher, or publisher, webmaster, is the owner of a website or application who owns the traffic and offers space for advertising on their resource. The greater the volume of traffic, the more expensive the placement will be.

On the standard cash flow in advertising​

Here's what the standard process for purchasing ad space looks like:

1. Companies hire agencies to help them find the most profitable advertising and investment options.
2. Agencies look for suitable ad exchanges, distributing their budget across several exchanges depending on the amount of inventory they can purchase and the cost of placement. Or advertisers skip the first step and do everything themselves.
3. Publishers offer available ad spaces through SSP platforms, which act as a seller. The advertiser also sees the main characteristics of the site and the placement, which affect the price and the auction process.

In this scenario, the money goes from the advertiser to the publisher. And the return on ad spend (ROAS) — from the user clicking on the ad to the purchase of a product/service or installation of an app, i.e. achieving the target conversion — goes from the publisher back to the advertiser.

On the movement of funds in advertising with the participation of fraudsters​

So, we have figured out the types of Internet fraudsters, who is involved in creating advertising offers, and the standard chain of movement of funds. Now let's look at the ways and means by which fraudsters redirect money from advertising budgets to their own pockets.

With so many players and the ability of fraudsters to create fraudulent sites and apps (which ultimately generate countless clicks and views), it’s no wonder that the entire digital advertising ecosystem is so vulnerable. Attackers can easily penetrate all corners of the advertising ecosystem, hide, and exploit its capabilities.

Fraudsters use various ad fraud technologies to generate fake impressions, clicks, and leads. Examples include bots, malware, and click farms.

When an online fraudster gets involved, the expected return on advertising spend does not occur. In fact, given the rise of automated buying and selling of space, the number of fraudulent clicks, impressions, and non-existent leads has only increased to shocking levels.

The advertiser has become the only participant in this entire chain that directly suffers from ad fraud, while all other parties benefit – regardless of whether they are fraudsters or not.

According to the study, only a quarter (26.25%) of the entire advertising budget can be spent by the advertiser on a real click/view, etc. In other words, only every fourth click will bring a real potential client to the site or application.

It is the advertisers who find themselves in the most disadvantageous position, since they pay for all invalid clicks. Instead of real users, the attackers generate fraudulent traffic. Although it is worth noting that the publisher may also suffer - in terms of reputation.

Moreover, since digital ad fraud does not affect the budgets of all other market participants, many of them simply do not take any active steps to combat such fraud. As a result, the financial losses are borne exclusively by advertisers.

This means that the only victim in the chain is the one most interested in eliminating the problem of ad fraud.

How Advertisers Can Stop Scammers​

Ad fraud is a huge and pervasive problem that has plagued the digital advertising industry. And advertisers bear the brunt of the financial losses. But that doesn’t mean they should stop running their ads. Instead, they need to find ways to prevent fraud to protect their campaigns and save money.

Each type of scammer we listed above has their own motivation for committing fraudulent actions with advertising, whether it is depleting the budget, cheating on affiliate programs or causing damage to direct competitors.

But ultimately, no matter who is committing fraud, the result is always the same: your ad campaigns are ruined, your budgets are depleted, your metrics are messed up, and your conversions are zero. That’s why advertisers need to stay ahead of the curve with ad fraud protection services.