Estimated reading time: 2 minutes, 22 seconds

Digital advertising is fraught with challenges, not the least of which is dealing with blatant fraud and addressing limitations associated with technology that generates viewing data.

Fraud, of course, is prevalent in any industry and can cause skepticism among customers. For new and quickly growing industries, nefarious activities often fuel debates over the types and extent of regulations and enforcement that should be enacted to ensure that customers remain confident that fraud is being kept at bay.

At the same time, the cost of fraud isn’t measured simply in dollars that end up in criminals’ pockets. Indeed, firms often allocate a portion of their operating expenses to prevent fraud by developing new technologies and having employees actively monitor day-to-day events.

Advertisers typically spend more than $17 billion a quarter to push out digital images. It’s hard to estimate what portion of that amount is captured by criminals, but one thing is clear: large and sophisticated scams in digital advertising are thriving.

Just recently, digital security firm White Ops reported that a massive Russia-based operation that uses bots to replicate human web clicks on bogus internet sites is stealing up to $5 million a day from U.S. advertisers. The scam involves using some 571,000 IP addresses and collecting fees for displaying more than 300 million phony video impressions a day. It reportedly involves technology that is designed to slip past fraud detection measures. In some instances, technology limitations rather than deliberate fraud have deceived advertisers with inaccurate viewing data.

Facebook, for example, made numerous announcements last year of either under reporting or over reporting viewing data. With those concerns in mind, Facebook in November rolled out its Metrics FYI blog to keep advertisers up to date on measurement errors that may be distorting viewing data.

With growing concerns over fraud and inaccurate data, it’s likely that new technologies and services will be created to thwart criminals and to verify data. TubeMogul, which provides a platform that allows its clients to plan, buy, measure, and optimize online video advertising, is one example. In discussing its second-quarter results, TubeMogul explained that in some instances, new client adoption had been delayed while the company migrates its technology for mobile devices from flash to HTML. The company maintains that more advertisers will embrace video advertising when technology advances make it easier to verify viewing data.

Industry cooperation on developing best practices may also prove beneficial, with the American Association of Advertising Agencies having recently created the Trustworthy Accountability Group that is certifying firms that fight fraud and are taking actions to promote transparency. Yet, in at least some instances, smarter mouse traps may result in smarter mice as scammers develop new technologies to thwart anti-fraud measures. The end result is that the battle to stop advertising fraud is likely to be an ongoing and long-term struggle for digital marketers.

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