How to Identify, Report and Manage Ad Fraud (and Why It's Important)Ad fraud costs online retailers billions of dollars globally each year. Here's how to protect yourself and your company from losing out to the bots.

There's bought traffic, meaning your standard pay-per-click advertising. There's also bot traffic — that's ad fraud.

Combatting ad fraud, when it comes to e-commerce, is of the utmost importance. Why is that? The total loss of $7.2 billion globally is estimated at a cool $44 billion for 2022, according toqubole.com. Yeah, you read that right — I said$44 billion.

So what exactly is ad fraud? It can also be called invalid traffic, or IVT for short. It is the practice of misrepresenting (fraudulently, of course) everything ranging from online ad impressions, to traffic to clicks to conversions and data in order to generate revenue.

In the wake of this ongoing pandemic, even though a lot of brick-and-mortar operations are now back up and running, e-commerce continues to be the go-to storefront for several online retail businesses. We like to say that your online store is your flagship store. And at times throughout the pandemic, it's possible that it may have been your only store. The fact that your online store carries so much more weight when it comes to serving your customers means that combatting ad fraud becomes even more vital.

Related:The Growing Risks of Digital Advertising, and How Brands are Fighting Back

To that end, here is how you can protect yourself — and your business — from ad fraud's treacheries:

How to identify ad fraud

Let's get started. First, it's important that you know how to identify ad fraud to begin with. There are a total of five main forms when it comes to ad fraud. I'll get into each of them below.

1. Human trafficis the most typical when it comes to ad fraud. But human traffic is also the hardest to ward off and track, unfortunately. In this particular case, the traffic is essentially coming from humans. It's coming from click farms, specifically, and the impressions that it generates are fake.
2. Bot trafficis sometimes referred to as non-human traffic. It is characterized by faux impressions made by bots on ads. In most instances, bot traffic tends to be easier to detect and ward off than some of the other types of ad fraud.
3. Domain spoofingis another type of ad fraud. It happens when those who commit fraud come across as premium publishers who are in the ad-purchasing process.
4. Cookie stuffingoccurs when a fraudster of a third party puts cookies — covertly, of course — onto a user's browser.
5. Ad injectionis when the bad actors insert ads in the website without the publisher's awareness. This occurs most often with malicious adware apps and plug-ins.

Related:How AI Is Addressing the Fraud in Advertising: Here's What You Need to Know

How to report ad fraud

When it comes to reporting ad fraud, first you want to investigate user interaction. When it comes to click spamming and click injections — as opposed to other types of ad fraud — the publisher and advertisers might have difficulty finding the source of the attack.

Investigating user interaction at each and every point up until app installation is a fantastic way to detect and prevent further instances of ad fraud. A good rule regarding it is to have users get in touch with you directly and report their experience installing and using the app or website.

How to manage ad fraud

To prevent ad fraud from taking place on your e-commerce site, there are four specific ways, which we'll outline below.

• Employ an ads.txt file.This kind of file is a digital agreement that authorizes legitimate publishers and advertisers. When you are making an ads purchase, an ads.txt file provides a confirmation of a network license that is approved so that you can place the ads. This kind of file also does something similar for publishers in that it confirms the domain ownership.
• Collaborate only with verified vendors.Professional anti-ad fraud experts take a measure of traffic quality in addition to the total ad metrics. They identify invalid traffic and attempts from bad actors to skew your ad data. A vendor who is verified will also take a look at everything from your sources of website traffic and user engagement and each interaction on your e-commerce website.
• Use a bot management system.A large incoming amount of bot traffic that is programmed on your website is a sign. If it isn't prevented, it can lead to a financial loss. Choosing a management system for bots solves for this problem. It does this by filtering out bot behaviors, in addition to traffic from bots. Content delivery networks are also a solution for dealing with a deluge of programmed bot traffic.
• Keep a close eye on third party scripts. An ad's efficacy depends on its reach. To that end, advertisers and publishers employ scripts of third parties. These include plugins and extensions, for example, to their advantage in order to secure a bigger audience. This works for both ads and publishers, but still carries a risk that makes it not worth it. This is especially true in the case of third-party scripts that aren't verified. So, you want to monitor all of these third-party scripts that you put on your business's website or that you allow to have access to your private information that may be senstive.

Related:How Ad Fraud Ruins the Internet

Now that you have the information on what ad fraud is and how to deal with it, you'll be well on your way to identifying it, reporting it and managing it.

While ad fraud will not magically disappear (and we certainly wish it would), acknowledging that it is a problem and developing a set of best practices to deal with it may lessen the financial impact of fraud on your own business.