How much fraud is too much?

Seems like an odd question. It feels like the answer should be that any fraud is too much, right?

When it comes to programmatic display advertising, I’ve seen estimates that peg fraudulent clicks somewhere between 17% to 40%. If that’s the true, should you invest in this channel, or are you destined to be taken advantage of?

There are (at least) two ways to think about this:
1. The Moral Stance – Fraud is wrong and it’s risky. If it’s that prevalent, it’s best to just stay away from it.
2. The Pragmatic Stance – Fraud is the cost of doing business in the channel and as long as I can build it into our purchasing/pricing strategy, it’s fine.

The value of the moral stance is compelling and clear on it’s face. The pragmatic stance is a little more nuanced.

There are two problems with this approach.

First, it assumes you have a baseline understanding of the fraud levels you’re experiencing. Yes, the average may be between 17% and 40%. But, if others are better at playing cat and mouse with fraudsters, your rate may be considerably higher than average. And, either way, it’s now created a permanent need for you to vigilantly police the channel…

Second, it assumes you have an effective way to measure value. What’s your mechanism for assigning value to the display channel? Is it based on clicks? Are you using “view through” attribution (which itself is often just a lot of hand-waving and assumptions)? Unless you have a rigorous and grounded methodology in place, you may be giving too much credit to display.

It’s more common to be budget constrained, not opportunity constrained. There are a lot of other ways you can spend marketing money. So, unless you’re out of ideas, why spend your budget here?

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