Digital advertising is expected to grow by 17% and become a $50 billion dollar industry by the end of 2014. But, as billions of dollars continue to flow into the industry, an equally staggering statistic has emerged that has companies and advertisers seriously rethinking their online advertising budgets.
A report released by the Interactive Advertising Bureau states that 36% of all web traffic is fraudulent, and not actually viewed or clicked by a real person. Online “bots” are created to visit fake websites and click advertisements repeatedly, while advertisers pay for these views believing they are reaching a real audience. The industry is struggling to find an answer for the overwhelming amount of fake traffic, and it could cause a major change to the industry.
“When you bundle bots, clicks fraud, view-ability and the lack of transparency [in automated ad buying], the total digital-media value equation is being questioned and totally challenged,” said the chief executive of the Association of National Advertiser, Bob Liodice.
However, even with 1/3 of web traffic officially labelled as fake, marketing executives are calling digital advertising “too important” to stay away from. In fact, digital advertising is still expected to rise to more than 28% of total U.S. advertising expenditures across all platforms and mediums. Advertisers are now demanding concrete viewership statistics as well as full reimbursements for significant fraudulent viewers.
Two vital statistics in advertising are the “reach“, or the number of individuals exposed at least once to an ad, and the “frequency“, which is the number of times that a single person is exposed to an ad in a specific period of time. These statistics are the basis for all marketing and advertising strategies, and any strategic decisions over the effectiveness of that ad are calculated using these basic numbers. Because of the recent exposure of rampant fraudulent web traffic, many companies are finding themselves questioning their involvement with digital advertising.
How will the future of digital advertising be affected by these developments? Will fraudulent web traffic continue to increase, and ruin the credibility of digital advertising?
– Greg Rothman
IMC Hawks Blog 