Warner, Schumer call on FTC to protect consumers from digital ad fraud

Today, U.S. Sens. Mark R. Warner (D-VA) and Chuck Schumer (D-NY) called on federal authorities to address fraud in the digital advertising marketplace.

In a letter to Federal Trade Commission (FTC) Chairwoman Edith Ramirez, the Senators – both members of the Senate Banking Committee – pointed to studies that have found rampant fraud in the $60 billion digital ad market, with one pair of experts discoveringthat as much as 98 percent of all ad clicks on major advertising platforms such as Google, Yahoo, LinkedIn and Facebook in a seven-day period were executed not by human beings, but by computer-automated programs commonly referred to as “botnets” or “bots.”

“These programs allow hackers to seize control of multiple computers remotely, providing them access to personal information as well as the ability to remotely install malware to engage in advertising fraud, entirely unbeknownst to the computer’s true owner. The ad fraud market has scaled to such an extent that it has attracted participation by organized crime, with a recent report indicating that by 2025 ad fraud could represent the second largest revenue source for organized crime groups after drug trafficking,” noted the Senators. “Bots plague the digital advertising space by creating fake consumer traffic, artificially driving up the cost of advertising in the same way human fraudsters can manipulate the price of a stock by creating artificial trading volume.”

A study by White Ops and the Association of National Advertisers estimated that this market manipulation scheme will cost advertisers over $7.2 billion in the next year alone.

Wrote the Senators, “it remains to be seen whether voluntary, market-based oversight is sufficient to protect consumers and advertisers from digital advertising fraud. And in the interim, consumer confidence in digital advertising markets has eroded, as evidenced by user adoption of ad blocking tools. The cost of pervasive fraud in the digital advertising space will ultimately be paid by the American consumer in the form of higher prices for goods and services. Just as federal regulation has evolved to keep pace with the ever-growing sophistication of our financial markets, so must oversight of the digital advertising space.”