If you’re a frequent visitor to SEJ, you probably know what click fraud is. In fact, you’re probably seeing adverts right now for various services claiming to stop it in its tracks. Now it’s time to look into the actual data of what click fraud really looks like. Let’s move past the marketing buzzwords & fearmongering, and see what the science says with the first-ever annual click fraud report backed by data science.
If you’re swept off your feet with work and don’t have time to read this right now, click here to download the full report to read later.
With the explosion of ecommerce due to COVID-19, click fraud also saw a significant rise in many sectors.
In PPC Protect’s first-ever annual report on the state of click fraud, we dive into first-hand data from our database of almost 1 billion ad clicks and 100 billion data-points to unveil the key takeaways every marketer like you should know about click fraud and your exposure to it.
With trend data from thousands of Google Ads, DV360, and SA360 accounts, this report takes a scientific & data driven look at the trends of click fraud we saw in 2020 across paid search, display, and video, and what the future looks like for 2021.
Through this first-hand data, we’ll be highlighting the most critical industry changes we’ve observed to help you better understand this challenging threat, and give you the tools to help combat it.
Key Click Fraud Findings
- 11% of search ad clicks are fraudulent or invalid.
- 36% of display ad clicks are fraudulent or invalid.
- 17% of CTV impressions are fraudulent or invalid.
- Only 13% of accounts monitored had little to no fraudulent or invalid activity.
In 2020, click fraud saw significant increases across all types of ad formats.
Display ads received the highest amount of click fraud, with 36% of all clicks being fraudulent. Primarily down to the incentive of revenue share from every click, many fraud rings, and criminal gangs spend a considerable amount of time defrauding advertisers with fake websites.
CTV (connected TV) ads had the second-highest level of fraud at 17% of all clicks. Similar to display ads, many fraud schemes (DrainerBot and Methbot) automatically watch YouTube and other CTV networks to defraud advertisers out of their ad spend. ICEBUCKET, for example, generated around 1.9 billion fraudulent ad requests per day across CTV networks at its peak in January 2020.
The lowest level of fraud was found on search ads with only 11% of all clicks being identified as fraudulent. With no monetary gain to be made from clicking other advertiser’s ads, these are the least profitable for fraud rings and gangs – but have huge value for unethical competitors.
This level of fraud in the industry affects almost every advertiser in some way. From our first-hand client data, 83% of advertisers experienced a significant level of fraud in their account over the past 12 months, while only 13% of advertisers experienced little to no fraudulent activity.
Losses to Click Fraud
Average yearly SMB losses due to click fraud: $14,900
Average digital agency losses due to click fraud: $207,000
Average SME+ losses due to click fraud: $705,000
Losses from click fraud can vary dramatically depending on a business’s exposure to online ads.
From our client data, we found that the average yearly loss for small and medium-sized businesses (defined as a business with less than 50 employees) during 2020 was $14,900.
The second biggest victims were digital agencies with losses at $207,000, over 10 times the amount of SMBs. It’s important to note that these losses represent the client spend the agency is losing to click fraud, and not the agency’s own ad spend.
The biggest victims of click fraud by far were SME+ businesses (defined as over $10 million/year turnover in our data) with average losses of $705,000, over 47 times the amount of SMBs. This is, however, to be expected as losses to fraud generally scale with increases in budgets.
SMBs lost on average $14,900 to click fraud activity in 2020
The Impact of COVID on Click Fraud
COVID-19 has impacted almost every business in some way this year, and click fraud has also seen a sharp rise in activity.
From our data, there are only two sectors that have seen declines in click fraud rates:
- Local trade business.
- The travel sector.
With countries imposing nationwide lockdowns and travel restrictions, many of these local services and travel businesses stopped running online ads altogether for several months during 2020.
While a few sectors have seen a decrease in click fraud rates, many others have seen huge increases.
The health and medical sector saw a 53% increase in click fraud compared to the same time frame in 2019. This is most likely down to the rise in businesses running campaigns for vitamins, face masks, antibody tests, and other COVID-related items.
With more ad exposure, the chances of experiencing click fraud increase significantly.
Click Fraud Rates By Industry
From our data, the education industry saw the highest rates of click fraud throughout 2020 with 31.14% of all clicks being fraudulent. With schools being closed and transitioning to home tutoring, the educational industry saw a sharp increase in ad spend, which also fueled the rise in fraudulent activity and payouts for the click-fraudsters, as well as increased activity from unethical competitors.
On the opposite scale, the travel industry saw the lowest level of click fraud. Most likely because many travel agencies and businesses stopped running ads when the pandemic first started.
Due to fewer ads running there is less competition in the ad auction, the amount spent per click lowers, and ultimately the click fraud rate then decreased below the industry average of 15.35%.
Other industries such as real estate, legal and financial also saw much higher than average fraud rates throughout 2020.
Local trades followed this trend, and despite the fraud rate decreasing in this industry compared to 2019 as a result of COVID-19, it still remains well above average.
Click Fraud by Country
Just like industries and sectors can have a big impact on the amount of fraud advertisers receive, so can geographic targeting.
From our data, many of the largest ad markets in 2020 have seen double-digit increases in their fraud rates. India and Australia take joint first place with an increase of 37% each, while Germany had the lowest increase at only 11% from 2019.
The Types of Click Fraud in 2020
There are many culprits behind the act of click fraud. Originally just competitors, many new faces have begun to appear over the years with three categories now being the most common, and unethical competitor activity dwindling fast.
Responsible for 38% of fraudulent activity are automated bots and bot fraud. With huge criminal gangs taking advantage of click fraud due to its low-risk nature, many have designed sophisticated bots to do their dirty work without them having to lift a finger. Not only does this allow them to scale their fraudulent activities, but it also allows them to do it on autopilot.
As the popularity of apps and mobile phones has grown over the last decade, so has the amount of in-app advertising and fraud. In 2020, apps were responsible for 19% of all fraudulent clicks as many publishers engaged in ad stacking, click injecting, and running background ads.
Just behind app fraud are competitors. Responsible now for just 17% of click fraud, down from over double that just a few years ago, they make up the lowest amount of fraudulent activity from the three main groups. Competitor fraud is usually more of an issue for smaller local businesses, with bot fraud the main culprit for larger businesses.
Interestingly, in our recent survey of 410 PPC marketers, over 50% of respondents thought competitor click fraud made up at least 45% of all fraudulent activity. That’s over two times the actual figure, indicating that many PPC advertisers wrongly think competitor activity is costing them significant sums of money, when in fact other sources are much more harmful.
2021 Ad Fraud Forecast
For most people, 2020 was a terrible year. But hopefully, the worst is now behind us.
With our sights set on the future, what does 2021 have in store for marketers?
Here are some of the key industry trends to look out for:
More Sophisticated Ad Fraud Networks
Like a game of cat and mouse, fraudsters show no signs of stopping their fraud rings. As law enforcement continually crackdown on these fraud rings, you can expect the level of sophistication to increase significantly.
Increased Ad Spend & Competition
For many countries, restrictions and lockdowns are still in place, which has caused plenty of advertisers to reduce ad spend. If you’ve seen a reduction in CPC’s and competition during 2020, then don’t expect it to last forever as economies begin to open up again.
Continued Growth of New Ad Platforms
Each year there are plenty of new ad platforms that are launched. Just as platforms like Snapchat Ads took the marketing industry by storm in recent years, in 2020 it was TikTok’s turn. With many new ad platforms come an increased risk of ad fraud and exploitation.
New Click Fraud Protection Platforms
We’d be pretty ignorant to think that we’re the only click fraud prevention platform on the market. Over the past few years, there have been several new platforms joining the fight against click fraud. We welcome anyone committed to preventing click fraud to the market with open arms, but nonetheless reserve significant concerns about the lack of transparency, accountability, and reliability of the click fraud & ad fraud prevention space in general.
We think the industry isn’t adapting fast enough and is too reliant on outdated technology and selling purely on fear-based marketing, rather than innovating and truly trying to prevent fraud.
Not only are these outdated protection methods not effective enough, but they’re also often providing wrong and – in some cases – downright harmful information to advertisers, which leads to significant damage to their PPC campaigns and conversion activity.
Furthermore, we feel the industry as a whole has one significant problem that it just isn’t addressing: false positives.
If you’re trusting someone to block click fraud for you, you need to know that the data they are reporting is accurate, and they’re not just inflating figures to grab a sale.
We’ve seen false-positive rates as high as 23% on some platforms, which is extremely damaging to both user trust and their campaigns.
To that end, we have taken the industry’s first steps to openly publish our false positive rate, which as of January 2021 sits at 0.14%. We encourage other fraud prevention vendors to join us in improving transparency around this.
Click Fraud to Increase By 13% in 2021, Driven by CTV Activity
Based on our analysis and projections, we predict that click fraud will increase by 16% overall in 2021 when compared to 2020, with the majority of this increase driven by CTV (connected TV) activity.
Current data shows 17% of all CTV impressions are fraudulent. With CTV ads exploding in popularity, we forecast this to become an even more lucrative channel for the criminal characters behind click fraud and predict an increase of 31% to an overall rate of 22% for all CTV activity.
In contrast to this, we predict that click fraud on search ads will fall slightly to just under 10% overall (vs 11% in 2020), and display activity will increase by 12% to around 40% of clicks being fraudulent.
Lastly, our forecasts show that competitor driven click fraud will decline sharply from 17% of all click fraud to 11%, a 35% decrease, driven by increased awareness among advertisers in combating the issue. Countering this, we predict that bot fraud will reach new heights at over 40% of all click fraud activity, and app fraud will continue to grow at an alarming rate.
As an industry, we’re still a long way from eradicating click fraud forever. But by educating advertisers on the threats and dangers they face, we can help significantly speed up its extinction.
How Can You Stop Click Fraud?
It’s simple, request a demo and free 14-day trial of PPC Protect here and get insights into just how much ad spend you’re losing to click fraud. We’ll show you the real data, without the marketing fluff.
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The Global PPC Click Fraud Report 2020-21
The opinions expressed in this article are the sponsor's own.