The 5 Types of Ad Fraud and Why They Should Matter to You

As the fraud lexicon keeps on getting more complex every day, we decided to go back to the basics in this article and define the different types of ad fraud (not to be confused with ad fraud techniques!). By giving a couple of examples of the technical mechanisms at work to make fraud possible, we hope to bring some more awareness to the threats and consequences.

Click fraud

Happens with pay-per-click advertising and may involve either humans (e.g. click farm) a computer program (e.g. malware) or an automated script (e.g. malicious bot traffic) pretending to be a genuine user and clicking on ad banners with no legitimate interest in the product being advertised. Illegitimate clicks not only inflate the cost-per-click artificially, they also generate fake traffic, resulting in an illegitimate increase of publisher’s or affiliate’s revenues. A sophisticated example of click fraud is click flooding: this is when a fraudulent source of traffic sends fake clicks to boost volumes in order to hide fraudulent conversions, maintain a lower CR, and go unnoticed. 

Impression fraud

Happens in cost-per-million advertising, also known as display fraud, also often found in video ads, is when an ad is not viewable (offer not rendered) to the human eye or simply played without a human audience, but impressions are still counted and subsequently charged fraudulently to the advertiser. The most well-known fraudulent methods for impression fraud are pixel stuffing and ad stacking.

Install fraud

Is when a fraudulent traffic source generates fake app installations and takes credit for them, hence collecting a commission for an invalid app download. This type of fraud could originate through the use of illegal malware installed in a device designed to automatically download applications or the fake attribution of the install using the methods of click injection, SDK spoofing, or clickjacking.

Lead fraud

Happens in cost-per-lead advertising, is when lead providers use fraudulent methods for lead generation with their own financial benefit in mind. Through either the purchase of illegal contact information lists from third-party vendors or the use of crawler bots that scrape the internet for consumer information specially-designed bots automatically fill out lead generation forms (like signups) with stolen or fraudulent consumer information. Alternatively, it could also be a case of misrepresentation of an offer, where a genuine user is misled to signup for a service or product they are not interested in. For more insight, check confessions from a Lead-Gen Specialist.

Within the context of lead fraud, for instance, fraudsters often use VPN proxy traffic to generate false leads from targeted Tier 1 targets (this is also known as "geo mismatch").

Subscription fraud

In the digital advertisement context, subscription fraud involves illegally subscribing a mobile end user to digital offers like apps or services without their authorization. This type of fraud happens typically in the telecom or mobile content industry and one of the mechanisms used could be MSISDN injection. MSISDN uses sophisticated pieces of automated software that emulate the journey of the user under certain conditions. Another mechanism used for this type of fraud is infected apps with root access and permissions to read and delete SMSs, which can subscribe mobile users without their knowledge or consent, leaving no trace.

One thing is certain, regardless of the type of ad fraud, all its forms convey serious negative impacts in terms of online advertisement budget misallocation, inaccurate user acquisition and lifetime value (LTV) analytics, carrying higher chargeback threats, as well as potential brand reputation damage. 

Peter Drucker is known to have said: 'what gets measured gets managed'. To learn more about how ad fraud affects your online advertisement campaigns and ad budget, feel free to reach out to us any time.