A Startling Anecdote About Online Ad Fraud From Uber

Tyler Durden's picture

One week ago we said that Category 1 storm clouds are gathering over what has traditionally been one of the most lucrative, and perhaps only profitable, sectors to come out of Silicon Valley in decades: online advertising. We directed readers' attention to the recent Global Retailing Conference organized by Goldman Sachs, in which Restoration Hardware's delightfully colorful CEO, Gary Friedman, divulged the following striking anecdote about the company's online marketing strategy, and the state of online ad spending in general. What Friedman revealed - in brief - was the following:

"we've found out that 98% of our business was coming from 22 words. So, wait, we're buying 3,200 words and 98% of the business is coming from 22 words. What are the 22 words? And they said, well, it's the word Restoration Hardware and the 21 ways to spell it wrong, okay?"

There was much more in the full transcript which lamented just how seemingly useless and overrated online advertising has become (or perhaps always had been), a lament shared previously by consumer products giant P&G which several months earlier became the first to fire a shot across the "adtech" bow when not long after it announced it was slashing its digital ad spending because it thought it was not getting the kind of return on investment it desired, it made a striking discovery: “We didn’t see a reduction in the growth rate.” CFO Jon Moeller said “What that tells me is that that spending that we cut was largely ineffective.” Previously, the P&G's CFO had said that “the reduction in marketing that occurred was almost all in the digital space. And what it reflected was a choice to cut spending from a digital standpoint where it was ineffective: where either we were serving bots as opposed to human beings, or where the placement of ads was not facilitating the equity of our brands."

Moeller also touched on the two most common complaints about digital advertising scams: 1) advertisers are paying for ads that are viewed and clicked on by bots, not humans; and 2) ads are placed by thousands of automated “ad exchanges” that are out of control of the advertiser on sites and pages that don’t match the advertiser’s products.

The problem, as we discussed last week, for providers of online advertising is that increasingly more are waking up to the pitfalls of "adtech": the false promises, the opacity of digital advertising, the intractability of the Internet, the clicks and views by bots on which advertisers are wasting their money, and the billions of dollars that get blown down the drain without results.  The larger issue is, of course, that retail spending has grown on average by a muted 2% per year in the US over the past five years, while over the same period, digital advertising has nearly doubled to $72.5 billion in 2016, which implies that even digital advertising – despite the lure of Facebook and the like – cannot induce consumers overall to spend more and increase the size of the overall pie for advertisers. It can only, at best, divide up the pie differently.

* * *

And while the Restoration Hardware anecdote may have been a Category 1 "ad tech" storm, on Monday a surprising development out of Uber pushed the maximum sustained windspeed for the online advertising industry to a solid Category 2.

What happened is that Uber, long accustomed to being sued itself, for once was the source of a lawsuit, taking advertising agency Fetch Media to court for click fraud and alleging that the firm improperly billed Uber for “fake” online ads and took credit for app downloads it had nothing to do with. Fetch, incidentally, is owned by the world’s fourth-largest advertising company, Japan’s Dentsu.

In the lawsuit filed on Monday in San Francisco, Uber said it discovered something was "amiss" when it canceled a campaign on Breitbart following the recent blowback against conservative media, where Fetch was placing Uber ads. After the company had asked Fetch not to post advertisements on Breitbart, it saw ads appearing there anyway. While Fetch allegedly pulled ads from all networks that had a relationship with Breitbart, the move had little effect on the number of people downloading the app, contrary to Fetch’s claims, the complaint said.

Uber traditionally had paid Fetch and other ad networks when a potential customer downloads its app after seeing an ad. Uber alleged that after further inspection, Fetch had a widespread practice of over-billing. Uber claims that Fetch had been attempting to claim credit for app downloads it didn’t generate.

Furthermore, Uber claims that after it suspended the ad campaign, it saw no material drop in total installations, as the decline in paid signups was offset byt a "nearly equal amount" by organic installations. To wit:

Just before Uber suspended the entire Fetch Campaign in March 2017, Fetch was spending millions of Uber's dollars per week on mobile inventory purportedly attributable to hundreds of thousands (even millions) of Uber App installs per week. Had the advertisements been legitimate, one would expect to see a substantial drop when mobile advertising was suspended. Instead, when Uber suspended the Fetch Campaign, there was no material drop in total installations. Rather, the number of installations supposedly attributable to mobile advertising (i.e., "paid signups") decreased significantly, while the number of organic installations rose by a nearly equal amount

 

 

This indicated that a significant percentage of the installations believed to be attributable to advertising were in fact stolen organic installations. In other words, these installations would have occurred regardless of advertising. Instead networks or publishers in the Fetch Campaign fraudulently reported the last click attribution to claim attribution credit and were paid for the installation.

The complaint then claims ad fraud was not isolated to one core vendor of ads to subcontractors, but that ad fraud was "perpetuated and even encouraged" between the ad agency and the networks and publishers:

Fetch’s own actions perpetuated, and even encouraged, fraud by the networks and publishers from whom it purchased mobile inventory.

 

When Fetch obtained makegoods on behalf of Uber, the credit would be in the form of additional mobile inventory with the same network or publisher. In other words, after a publisher was caught red-handed, for example click spamming, Fetch would reward the bad actor with additional volume and opportunities to report fake clicks.

 

Upon information and belief, Fetch also misused its position as a marketplace leader, and as Uber’s mobile media agency, to solicit improper “rebate” payments from networks and publishers in exchange for purchasing advertising inventories during the Fetch Campaign, and failed to pass such discounts back to Uber.

 

Fetch also failed to enforce Uber’s prohibition against rebrokering. “Rebrokering” is where networks or publishers take advertising offers and re-broker them to third parties to obtain a greater volume of clicks, and thus, hopefully, installations. Rebrokering is against the terms of the IOs approved by Uber for use in the Fetch Campaign and also leads to a loss of control by the mobile advertising agency over the quality of the advertising and the amount of fraud.

According to the lawsuit, from 2015 to early 2017, Uber paid more than $82.5 million for advertisements overseen by Fetch, and said it refused to pay more than $7 million that Fetch has said it owes.

Of course, should the court find that Uber's claim has merit, the implications for ad tech would be staggering: whereas last week's admission by Restoration Hardware suggests that online advertising is either being gamed by bots, or generally underperforming to the point where it is not worth the investment, the potential involvement of premeditated ad fraud among the key players in the industry - since Uber's ads were certainly not the only cockroach - would not only jeopardize the revenue streams of ad giants such as Facebook and Google, but could result in civil liabilities into the tens of billions in potential ad fraud.

As expected, Fetch pleaded innocent, per Bloomberg:

“We are shocked by Uber’s allegations which are unsubstantiated, completely without merit, and purposefully inflammatory so as to draw attention away from Uber’s unprofessional behavior and failure to pay suppliers,” Fetch Chief Executive Officer James Connelly said in a statement Tuesday. “We vigorously deny the allegations from Uber and will be responding robustly to ensure we set the record straight.”

Still, Fetch has acknowledged the challenge of online ad fraud publicly and said it was working with research firm Forensiq to “fight against mobile ad fraud.”

“One of the biggest challenges we face as digital marketers is to reduce mobile ad fraud,” Fetch’s Connelly said a year ago. The problem, of course, is when Fetch itself is the source of fraud.

Around the same time, Fetch’s global head of media, Steve Hobbs, told Adweek that a “significant amount” of downloads in Fetch’s system are flagged as suspicious. “Where there’s money, there is fraud,” he told the publication. “Being 100 percent on top of it is an impossibility, but we think with Forensiq’s help we can get it significantly lower.”

As part of the lawsuit, Uber plans to seek at least $40 million in damages according to Bloomberg. More notable is that Fetch’s publicly traded parent company, ad giant Dentsu which has a $12 billion market capitalization, is not named in the lawsuit, at least not yet. The question is if and when it emerges that such ad fraud as that claimed by Uber is endemic across all online ad network and perpetrated by virtually all ad giants, not only Dentsu but also Google and Facebook, what happens then to the biggest growth stories in the tech world once customer faith in the online ad model "deus ex machina" finally evaporates?

The full redacted Uber vs Fetch lawsuit is below

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White Devil's picture

Big fucken' deal.

seek's picture

There's a big overlap between online advertisers those contracted to spy on the people.

I'm pretty OK with anything that sabotages their business models.

RAT005's picture

I still don't understand how the buyers of online ads can think they work.  So imagine a bunch of over paid Uber execs trying to feel important.  They decide to spend $millions on online ads.  But do any of them ever click on an online ad?  I doubt, why would they think they are useful?

BarkingCat's picture

Aren't these Uber Executives Millennials or gen-Xers?

If they are they sure as hell would know  that online advertising does not work.

All they have to do is look at their own habits and the habits of their friends.

 

Stuck on Zero's picture

Just speaking for myself ... I don't believe that I have ever puchased anything due to an advertisement I've seen on the web. I usually go hunting for something and seek out websites with products and information. Most people I know have said the same thing. Likewise I never follow Google search featured sites ... they always lead to absolute garbage sites. Does that reflect anyone else's shopping habits?

techpriest's picture

I have bought... I think one item from a re-targeting ad. In that case, it was something I wanted to buy, and was saving cash for, and the ad prompted me to buy it sooner than otherwise.

Aside form that, I did human trial recruitment on Facebook once, and we were able to get people at a rate of $10/person. That comes out to 1 per 2,000 ads shown.

This article is also a screaming example of why you do analytics in-house. Don't trust an ad agency to tell you how effective their ads are.

Pairadimes's picture

The whole house of cards needs to come down, and take Google and Facebook with it. Couldn't happen soon enough.

Utopia Planitia's picture

Well, rite on theez heer ZH pages I dun seen an advert fer makin' at least $7,599 per month whilst settin' in mah mamma's underwears in her base-munt!  I done klicked the link an' wuz toad to sen' sum buckets o' cash to sum guy in his mamma's base-munt.  He dun haz the see-kret you needs tah get rich yerseff! Now I iz jus' waytin' fer dah monees to jes' roll in an' pile up in mah savinz jar! So that wuz wun reel guud advert!

quadraspleen's picture

I take it whoever fills these pages with shitty ads is taking note: if we ain’t already using AdBlock we will be soon

philipat's picture

The other large elephant in the room, which always gets conveniently ignored, is the widespread use of Ad blockers or, even worse for Goolag (Hence banned in Chrome) blockers such as Adnauseam which obfuscate the whole process by clicking on all the ads they block!

OverTheHedge's picture

I have been running adnausiam for about 10 days now, and I have already run up an advertising bill of over $1,000. Most of that is going to Tyler, probably, although I would expect as agencies and Google to be dipping their beaks as well.

If everyone starts to do the same,internet ads are rapidly going to be a thing of the past.  The numbers are quite impressive - my limited browsing gives approximately $3,000 per month. If every user on Zerohedge does the same, this is going to climb to big money very quickly. Alexa won't tell me how many unique visitors view Zerohedge unless I pay them money, but it has to be quite a few. I can't even find how many page views per article, which used to be shown before Tyler messed about with the formatting. If anyone has the numbers, I would be gratefully to see.

You can see why people set up bot-driven fake sites; good money to be made.

BabaLooey's picture

Working..............EARRRRRRRRRRRRRRRRRRNING....

SCAMMIN................to chillin

buzzsaw99's picture

i should sue state farm for wasting my money on fraudulent online advertising

NotBuyingIt's picture

But, but, but... they "love you a bushel and a peck!"

Fucking State Farm! They were involved in my gangstalking (at least my two agents were...). Fucking anal holes parked a State Farm van outside my house on my cul de sac just to "watch us" (and probably listen). What creepy fucking pricks! I got rid of them just as soon as I could. Went with another insurance agency and have had absolutely NO issues since.

I would NEVER EVER trust State Farm EVER again.

Buttertooth's picture

The only ads I see are for bullion dealers and lingerie.  My wife enjoys me buying neither.

philipat's picture

Wouldn't your wife's reaction depend on which of you you are buying the lingerie for?

buzzsaw99's picture

neither. you missed the joke.

any_mouse's picture

He would buy crotchless panties.

DontWorry's picture

Online advertising is a scam.  I can count the number on online ads I've ever clicked (on purpose) with one hand.  They all included big boobs.

Joyo Bliss's picture

2 hands for the big boobs

BarkingCat's picture

Same here although today is a bad example.

I actually did click on the one ad on a website and then bookmarked that website that it led me to.

However it's a very special case.

I was reading about barbecue and the ad was for a place that sells smoking wood chunks.

The article even mentioned the ad so I suspect there is no agency involved. Just some direct deal between a blog and a small business.

jmack's picture

most online ad's which i see is after i have purchased the product i wanted.  Nothing like seeing toshiba ad's for 6 months, after you purchase a toshiba laptop from a website.....  great algorithm there.   That is why i laugh at all the morons on ZH comments crying about algorithms. 

DontWorry's picture

Thats how you can tell that Al Gore invented the internet.  Its full of Al Goreithms.

 

FixItAgainTony's picture

up voted u 4 getting banned by the worst pun ever posted 2 ZH

any_mouse's picture

It isn't the quality or success of the HFT algorithms, it is the way they affect the markets.

Just as with ad algos. Do you want ads that are prescient about your purchases?

jmack's picture

  LOL, do you even know how HFT algorithms work?  from your post, you absolutely do not. Equally confusing is your reference to my post of the incompetence of ad algorithms, while implying they cpuld be prescient. extremely confusing.

techpriest's picture

I've looked under the hood at those - usually they use over-simplified algos: just show whatever you last looked at. This is running on the assumption that you didn't purchase the thing yet, which is often wrong.

It takes some actual research to make a prescient algo, and those are creepy when they work. For example, if a woman who normally buys scented products switches to unscented, she is likely pregnant.

gregga777's picture

What a surprise: one CONporation cheating another CONporation. What's that saying? There's no honor among thieves.

buzzsaw99's picture

i think it's funny how much money amazon wastes considering that everyone and their dog just goes straight to amazon.com and does a search there.

Jedclampetisdead's picture

Ah, so my job is to make sure everyone knowas jeff bezo owns amazon,  and lets turn this into a financial war against the traitorous globalists

buzzsaw99's picture

he loses money on every sale so i am doing my bit to bankrupt him by buying from them.

codecode's picture

In small, multiple shipments...

nati's picture

The role of Dentsu should not be understated: the company is regularly punished in Japan for a variety of fraudulent activities and is infamous for working its employees to death (known as karoshi in Japanese). Furthermore, like many Japanese multinationals, Dentsu sees no future in Japan, thus it is aggressively engaged in M&A to enter foreign markets and secure revenue streams from outside Japan. Fetch is just one example. The top-down nature of Japanese corporate culture means that Dentsu is very likely involved in the fraud perpetrated by Fetch. They need to be held accountable.

buzzsaw99's picture

here is a typical online shopping experience for me.  i am looking for xyz running shoes.  i go to academy and check size, color, price.  i go to amazon and zappos and do likewise.  those three are wasting their money on advertising.  maybe xyz running shoe corporation should run a youtube video to convince me to buy their shoes, but in my case the retailers have no reason whatsoever to pay google et al anything at all.  they would be better served cutting their running shoe price by ten cents.  i suspect that many others have very similar shopping habits.

GooseShtepping Moron's picture

Ad fraud is a shorter name for Crony Capitalist payola and Deep State racketeering.

What is do you think that paid for the internet? Who paid to criss-cross the globe with thousands of miles of fiber optic cable, to plant energy-sucking server banks in scenic desert locales, and to dot the virgin countryside with endless cell phone towers like so many termite mounds in the Serengeti, so that you, dear consumer, would never have to be without your Facebook? Who pays the exorbitant salaries of Silicon Valley CEOs? Who pays for these preposterous tech companies -- companies that make no product and waste everybody's time -- to have market caps measured in the hundreds of billions?

You do. It's baked into the price of every product you buy. They have socialized the cost of building the technopolistic panopticon they jail you in, even while they have you clamoring for more. It's called advertising.

Yes, it's a colossal waste of money, but only if you think their aim is actually to grow profitable companies. What they really want is to establish themselves in power, destroy all opposition, and channel the flows of money in their direction. Who needs profits when you can just suck the blood out of the peasants? There's plenty of peasants, after all.

Obviously this thinking will destroy economies and nations over the long run. The first companies that stand up to it will be the nationalist heroes in the age to come, but their path will be a difficult one.

newdoobie's picture

I think the desire to watch porn drove all those things

any_mouse's picture

Nope. Worse than most porn.

USA MIC.

ARPA, forerunner of DARPA, created ARPAnet to tie together universities and labs working on advanced war death technology.

ARPAnet grew to become the Internet and the World Wide Web (www.~).

Kidbuck's picture

Who paid for the internet? The same people who paid for the commercial success of VCRs, porn sites and their users.

pitz's picture

Ummm, transport is paid for by end-users.  And the Silicon Valley CEO types are largely compensated on money that's being lost by investors.  Some are just better positioned to get it than others.

Deep Snorkeler's picture

Without internet ads,

our American economy is a worthless shell.

Silicon Valley would collapse.

You don't want to bring all the

Tinkertoys down. Do you!?

Silence. Do the circle dance and pretend.

Smile.

hooligan2009's picture

on line advertizing costs companies tend of BILLIONS of dollars a year.

are shareholders happy that their dividends are being diverted to fraudulent advertizing and fat cat lunches, parties, hookers and blow?

course if the company doesn't pay dividends and runs at a loss, shareholders only have themselves to blame.

200 pe anyone for an online mail order catalog, or a cab company or a chat site or a search engine or an overpiced phone?

snowflakes get what sowflakes deserve.

Consuelo's picture

 

 

Footsteps...   I hear footsteps, Zuckerbot...

 

 

Anon2017's picture

Even when I don't use an ad blocker, I am not getting any more discount stockbroker ads or ads from anyone else  on this web site.  It looks like the online ad business is in for a lot of turmoil. 

pitz's picture

Does anyone have a good website with all of Google's servers and networks, identified by CIDR ranges, so I can finally block that trash at the source?

Users need to start giving companies that spam the proverbial death penalty as far as their networks are concerned.

 

Mineshaft Gap's picture

Good. Anything that weakens Silicon Valley's grip on us is to be celebrated.

DoctorFix's picture

Online advertising is much like newsprint of yore.  They don't really care if you succeed at what your trying to sell just so long as you keep the kitty full.

Nomad Trader's picture

I recently wrote a novel about trading. I advertised it here on ZH - negligable effect. I advertised it on Amazon - negligable effect. I advertised it on Facebook - they utterly ripped me off (according  to simple numerical and behavioural logic) and now I'll be pissed at them for the rest of my life. Now why would a company treat their customer so badly? Because either no one or almost no one in the company understands it themselves. The fraud is deep and very complicated and I honestly don't think they can stop it.

Old Poor Richard's picture

How do they know these sign-ups were hijacked, and not driven by advertising?  After I browse an item I'm thinking about buying, I'm absolutely inundated with ads for that item.  On ZH, on Breitbart, on Drudge, on HuffPo, on Salon.  Everywhere I go in the last few days I've been inundated with ads for filters and other DSLR accessories because of a visit to B&H photo and inundated with ads for car tires because of a visit to TireRack. 

If one of those ads triggers me and I click through and buy a camera accessory or order a set of tires, then the ad really triggered me, and so why shouldn't they be paid?  And if the ad never existed, I would have probably bought that lens filter anyway and I did in fact put tires on my car last Friday, "organically".  So I bought the tires anyway, "organically", but had I instead done that thing by clicking through an ad rather than on my own, then that "organic" purchase wouldn't have been "stolen" by the ad company, it was simply "snagged" by the ad company, an opportunity taken, nothing stolen.

King of Ruperts Land's picture

This was obvious years ago when I searched for a company and the paid placement would come first and the ordinary search result would come 4 results down. If I liked the company, I would save them the click money and click 4 likes down. If I didn't like the company I would click the "paid" link out of spite.

Why would a company pay Google for their own name. How stupid!