Ad fraud costs everyone money. For consumers, its higher prices at the cash register. For marketers, it’s lost sales. For companies, lower profits. And for shareholders, the dividend checks shink. And the problem is getting worse.

A new study from WhiteOps reveals that up to $3.5 billion could be lost to advertising fraud this quarter in the scramble to fulfill peak demand. The researchers examined the increase in ad spend and the simultaneous increase in malicious bots during the holiday season, identifying the impact of these losses during this short yet critical timeframe.

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Digital advertising spend is expected to grow to a record-breaking $83 billion by the end of this year. A significant amount of spend typically occurs during the holiday season — in fact, November and December of 2016 saw nearly 50 per cent more spend than the average of the other months.

At the same time, cybercriminals selling bot traffic are enjoying their own peak demand. As spending increases, more publishers turn to pay-per-click traffic to get more visitors to serve more ads, dramatically increasing the demand for bot traffic on demand. And traffic spoofing operations see their fill rates increase.

Last year, between October and January, a White Ops analysis found that ad fraud spiked to 13.5 per cent, more than double the prior quarter. The findings also indicated increases during key holiday periods, including Black Friday and Cyber Monday. With these two factors of growing digital ad spend and fraudulent bot rates converging, advertisers lost an estimated $3.1 billion during the 2016 holiday season.

“The holiday season is a critical period for advertisers, but it has the potential to be even bigger for cybercriminals,” said Michael Tiffany, president and co-founder, White Ops. “As ad fraud reaches its peak over the next few months, we are urging advertisers to remain vigilant. As an industry, we need to be aware and partner together to stop ad fraud this season and into 2018 — especially as malicious bots continue to become more sophisticated.”

White Ops predicts that ad fraud and spend will reach its peak again this holiday season, potentially causing as much as $3.5 billion in losses. If this is the case, cybercriminals will collect over 50 percent of their payout in Q4, considering the total ad fraud losses for 2017 are estimated to be $6.5 billion.

With this in mind, White Ops advises digital advertisers to take precautions that limit their exposure to non-human traffic during the holiday season and beyond. This can be achieved by demanding transparency from all vendors about traffic sources and for audience extension practices. Advertisers should also look skeptically at narrow targeting and ‘cheap reach’ and adopt an ad fraud prevention solution.

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