Google's been running a secret test to detect bogus ads — and its findings should make the industry nervous

The ad industry is trying to root out fraudulent digital ads.
Google has quietly been running tests with media companies such as CBS to gauge how bad the problem is.
Industry leaders are banking on a new technical solution, ads.txt, to tackle the issue.

The digital-advertising industry is looking to stamp out bogus ad inventory, like websites that claim to be premium brands but are actually sites the average person hardly ever visits.

Google, with help from some media giants, is taking the lead. The company is pushing an industry initiative called ads.txt that's aimed at wiping out fraud that's dubbed 'spoofing' by the industry. Spoofing encompasses the variety of ways ad buyers can be tricked into paying for space they're not getting. For example, spoofers can buy cheap ad space, from a low-quality site, on an exchange and then falsely list it as space on a premium site — like, say, CNN.com— at a higher price. The ad in question will never run on CNN.com, though.

It's all enabled by the prevalence of programmatic ads, which are placed by algorithms and purchased on exchanges, rather than through direct negotiation with a publisher.

Yet spoofing is even starting to affect publishers that don't even sell ads via programmatic channels. Several publishers say they've been hearing from ad buyers that their ads are for sale on various ad exchanges, even though these companies didn't work with any ad exchanges to sell advertising.

The Google tests

To get a sense of the scope of this problem, Google has been quietly conducting tests with a handful of major media properties, including NBCU, CBS, and The New York Times, people familiar with the matter told Business Insider.

During these tests, Google and the partners shut off all of their programmatic ad inventory for brief periods, say, 10 to 15 minutes, and then scour the ad exchanges to see what's listed. Google and its partners found thousands if not millions of video and display ad spots still available on multiple ad exchanges, despite no ads actually being for sale at that time, the people said, asking not to be identified because the results haven't been publicly released.

These include Google's own AdEx exchange, as well as AppNexus, Oath's BrightRoll, and PubMatic. Google also discovered fraudsters claiming to be able to sell YouTube ad inventory on various exchanges, one of the people said.

Google's not alone in these findings. An ad-tech executive from a different company went looking for some spoofed ads on exchanges and said they easily found thousands of such misrepresented ads for sale, and below are the results of another search by the Marketing Science Consulting Group, a company that specializes in researching ad fraud.

Business Insider reached out to all the exchanges mentioned and included their comments below, if they responded.

fake ad inventory_720

The ad exchanges responded to details of the results by pointing to their efforts to stamp out the kind of fraud Google found.

"We’re unaware of major publishers running such tests and finding problematic selling on our marketplace," a representative for AppNexus said. "We do work proactively to avoid this type of problem. We are strong proponents of ads.txt, which we view as reinforcement of our longstanding policies and practices. We’ve created strong domain detection technology."

"Oath has invested in proprietary technology on our buying platforms, including BrightRoll and ONE by AOL, that aims to enforce supply transparency and prevent domain spoofing across the majority of supply partners," said a representative for Oath, which is owned by Verizon. "In fact, our technology blocks hundreds of millions of spoofed bid requests on a daily basis. Combined with our longtime partnership with the IAB, industry-leading third-party fraud measurement across our platforms and human review safeguards, we're fully committed to a safe, transparent supply chain for our advertiser partners."

"At PubMatic we work directly with our publisher clients to help them manage their digital inventory, and, as such, we are not aware of the issues," said PubMatic's chief marketing officer Jeff Hirsch.

The fake-Rolex problem

Marketers are expected to shell out $83 billion on digital ads in the US in 2017, according to eMarketer. And the more that advertisers spend, the bigger the opportunity for fraudsters. By some estimates, sophisticated ad-fraud perpetrators could cost the ad business over $16 billion globally this year.

There are lots of ways that ad fraud can happen. Often hackers from outside the US sell ads on fake websites using computer programs called "bots" that can mimic human behavior — making it look as though real people are visiting websites or clicking on ads.

Then, there's spoofing, which has been around for years. Companies like ESPN have frequently encountered people claiming to have their right to sell their ads when they don't. But as more big marketers push for better transparency in their digital-ad buying, following a string of recent reports of ads ending up in dicey corners of the web, there's more awareness of how common spoofing is.

"There’s quite a bit of mislabeling of traffic," said Mike Baker, CEO of the ad-tech firm DataXu. "It's become somewhat pervasive over the last few years. It could account for 20 to 30% of the traffic on some secondary and tertiary [ad exchanges]."

Ads.txt solution

Google has also hosted CEOs of several top ad-buying tech companies — "demand-side platforms" that act as major buyers on ad exchanges — including MediaMath CEO Joe Zawadzki, DataXu's Baker, and Trade Desk CEO Jeff Green. The meetings were said to be constructive as the industry looks to embrace ads.txt as a solution.

Ads.txt was borne out of the Interactive Advertising Bureau's Tech Lab with support from the trade group TAG (Trustworthy Accountability Group). It's a technical solution designed to protect web publishers from any unauthorized companies selling their ads via programmatic ad exchanges.

Here's how it works. By inserting a text file on their sites, web publishers can make it clear who is allowed to sell their ad space and who isn't. Assuming enough publishers implement the ads.txt solution — and enough ad buyers make an effort to purchase ads only from authorized sellers — this could go a long way toward weeding out spoofing.

"There’s always been spoofing in the market, and with video it is [more prevalent]," said Alanna Gombert, managing director and general manager of the IAB Tech Lab. "Now there is more scrutiny in the market. It wasn’t top of mind before. Now, everyone understands it; it's mainstream. And fraudsters are looking for known names that are on 'white lists' for advertisers. So this has opened up a conversation where ad buyers are telling sellers, 'I'm seeing you here,' and they are digging down and saying 'Oh crap.'"

Brands get woke

A number of major developments have combined to dial up the scrutiny on the online-advertising business, causing marketers to scrutinize where their ads run to how they pay for them and who gets a piece of every dollar they spend on the web. First, about a year ago, the Associations on National advertisers released a damning report detailing a glaring lack of transparency in the ad-buying world.

Over the past six months, Facebook has revealed a string of measurement screw-ups, while Google has faced multiple advertisers pulling out of YouTube after ads were found alongside hate videos.

And since the start of this year, Procter and Gamble's chief brand officer, Marc Pritchard, has been on a crusade, delivering a series of speeches in which he clamored for the ad industry to demand more clarity from digital media and the need to clean up the "crappy media supply chain," as CNBC reported.

All of this has brought the issue of ad fraud to the forefront. "Brands are woke," joked one ad-tech executive. "There's suddenly a lot of attention on supply-chain hygiene," he said. And hopefully ads.txt is the soap.

Some see the initiative as part of a larger set of antifraud tactics. Others are more bullish. "This will wipe spoofing out," said Andrew Casale, CEO of the ad-tech firm Index Exchange.

Who's responsible?

When it comes to supply-chain hygiene, there's plenty of blame laid on the ad-tech companies — especially since so many programmatic exchanges have made big public pledges to keep out bad sellers. But as one ad-tech insider said, big media companies often don't even know who is and isn't allowed to sell their ads on the web.

'They should take responsibility," he said. For example, one publisher said it was working with just three exchanges, but they were really running ads on 17.

So it's up to media companies to make the most out of ads.txt.

"Initially, this is putting the first implementation requirements on publishers," said Art Muldoon, co-CEO of the programmatic ad buying firm Amnet. "It's a burden and an opportunity."

Media sellers "are being directly harmed," said Mike Zaneis, president and CEO for TAG, the Trustworthy Accountability Group, an organization that was put together to tackle the ad-fraud problem.

"When there is twice as much inventory being sold out there than actually exists, that leads to deals you never get, bad prices, and the watering down of your brand," Zaneis said. "That has a direct financial impact."

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