A new study conducted by IAB and EY shows that fraudulent impressions, infringed content, and malvertising costs the U.S. digital marketing, advertising, and media industry $8.2 billion annually. While the study is US based, IAB Canada hopes this will motivate the Canadian marketplace to rally around smart solutions that will protect businesses and consumers. It is clear that the enormous costs quantified in this study can be mitigated through improved business processes and by addressing weaknesses in the digital advertising supply chain.
The report, “What Is An Untrustworthy Supply Chain Costing the Digital Advertising Industry?”, was conducted independently by EY and released this week by the IAB. Strategic advisory firm MediaLink collaborated with the IAB and EY to design the scope of this study.
According to the research, more than half the money wasted in the digital advertising ecosystem derives from “non-human traffic” – fake advertising impressions that are neither generated by real advertisers nor received by actual consumers. Eliminating these fraudulent impressions would save advertisers more than $4 billion annually
The study identified three primary supply chain costs. They are:
- Invalid Traffic – As described above, ad fraud accounts for the largest portion of costs, at a total of $4.6 billion. Seventy-two percent of the loss associated with the web’s fraudulent traffic happens on desktops and 28 percent on mobile.
- Infringed Content – At $2.4 billion, infringed content – stolen video programming, music, and other editorial content that is illegally distributed on the web – represents the most significant share of lost revenue opportunity costs. Two billion dollars of that total is based on an estimate of approximately 21 million U.S. consumers’ willingness to spend $8 per month on what is currently classified as infringed content. The additional $456 million represents the loss of potential advertising dollars. The findings show that unless the industry takes significant steps, there is a likelihood that the number of people consuming stolen content on digital platforms will increase.
- Malvertising-Related Activities – Combating malware-related activities, which can expose web users to unknown or potentially dangerous third parties, comes in at $1.1 billion, with $781 million of those losses being generated from ad blocking instigated due to security and malware concerns. Costs associated with investigating, remediating, and documenting direct incidents of malicious advertising total $204 million.
“To help the industry reclaim some of the $8.2 billion in costs, EY believes that improving some fundamental business practices is critical,” said Nick Terlizzi, Partner, Ernst & Young LLP and a member of its EY Media & Entertainment Advisory Services. “Some basics include knowing your supply chain partners and investigating new potential relationships using address information, tax IDs, and background checks.”
The report also features guidance in eliminating supply chain corruption in digital advertising, and encouraging industry-wide collaboration to build a trustworthy supply chain under the auspices of The Trustworthy Accountability Group (TAG) and other initiatives. TAG was established in 2015 to focus on securing the supply chain and to deliver billions of dollars in value to advertisers.
For more information on this study or TAG, please contact us at IAB Canada.