Private Exchanges Aren’t Immune To Ad Fraud

andrew-pancerData-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Andrew Pancer, chief operating officer at Dstillery.

I attended the AdExchanger Clean Ads conference in New York last month. Overall, the presentations were good, but I took some issue with certain points of view on the “dangers” of buying on open exchanges.

Some recommendations were made on stage encouraging marketers to stop blindly relying on open exchanges and instead establish direct-to-publisher relationships. It was also suggested that marketers should enable private exchanges as a means to guard against fraud.

While I agree that marketers need to be diligent about the inventory they buy and that direct publisher relationships are a good thing, I disagree with a few of the statements presented.

Private Exchanges Are Not The Solution To Combat Ad Fraud

Private exchanges help marketers to meet strategic objectives by efficiently working directly with specific publishers. They help publishers achieve higher inventory rates versus open exchanges or other remnant strategies. Private exchanges are not, however, a fraud-prevention solution.

All things considered, private exchanges typically have lower levels of fraud than open exchanges, but they are not immune from contagion. Integral Ad Science’s Q1 2015 Media Quality Report measures publisher fraud levels at 4% of traffic.


Source: Integral Ad Science Media Quality Report – Q1 2015

There are two main causes of private exchange fraud. The first is aggressive audience acquisition. Many large publishers promise audience levels that they can’t achieve organically, leading them to acquire traffic, much of which is non-human, driven by bots. The second cause is that botnets generate traffic on legitimate sites to make them look real and to throw fraud-detection services off of their scent.

The Inclusion Of Open Exchanges Enhances Audience Targeting

Open exchanges, while infected with a higher level of fraud – 16.5% per the same report – are an important component of the Internet ecosystem. They have an abundance of great inventory, ranging from name-brand publishers to obscure long-tail sites. Characterizing the open exchanges as havens for fraud is harmful to the good actors who rely on programmatic advertising to support and grow their businesses.

Further, participating in private exchanges to the exclusion of open exchanges will damage scale and performance of advertising campaigns. Marketers tend to focus on finding scarce events, such as a conversion. Open exchanges allow advertisers to reach large groups of more finely targeted audiences. When an addressable audience pool is materially restricted, the marketer will have a difficult time achieving its desired scale and performance.

The best way to navigate the use of open exchanges is to understand how your vendor partners combat fraud. If you use a demand-side platform (DSP), how do they eliminate fraud in all environments? How do they go beyond the basic blacklist? If you are a DSP, ask your exchange partners, both open and private, what they are doing to stop botnet traffic in all areas of their business. With the right strategy and focus, fraud on open exchange inventory can be minimized to the same levels as private exchanges or even buying directly from publishers.

The Clean Ads conference was focused on cleaning up the digital marketing ecosystem. As an industry we should strive to support and strengthen a healthy and scalable solution for our clients. Hiding behind private exchange walls is not the solution. Investing in fraud-detection/elimination technology and building a sophisticated alert system that works across open and private exchanges is. By doing so, we provide brand marketers a real solution to get their message in front of desired audiences at scale.

Follow Dstillery (@dstillery) and AdExchanger (@adexchanger) on Twitter.

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