Google To Refund "Fake Traffic" Advertising Revenue

One month ago, consumer products giant Procter & Gamble - one of the largest and most sophisticated advertisers in the world - launched a mini crisis in the online advertising space, when the company announced that it was scaling back its online advertising spend, stating that "digital ad spending was lower versus a high base period and due to current period choices to temporarily restrict spending in digital forums where our ads were not being placed according to our standards and specifications." The implications to this admission that online advertising was either being gamed by bots, or generally underperforming were significant, as it jeopardized the future revenue streams of two of the biggest companies in the world, Alphabet (aka Google) and Facebook, both almost entirely reliant on online advertising. How long before other anchor names decided to similarly cut back on their online ad spending?

So, one month later, in its first tacit admission that its ad network has few protections against "fake traffic" such as ever more sophisticated ad bots - and that P&G's criticism was spot on - the WSJ reports that Google will issue refunds to advertisers for ads bought through its platform that ran on sites with fake traffic "as the company develops a tool to give buyers more transparency about their purchases."

Hoping to avoid further spending cuts and outright contract losses - especially to arch rival Facebook, which has similarly admitted to having ad exposure problems on numerous occasions - in the past few weeks Google has informed hundreds of marketers and ad agency partners about the issue with invalid traffic, also known “ad fraud.” According to the WSJ, the ads were bought using the company’s DoubleClick Bid Manager.

Typically, advertisers use DoubleClick Bid Manager to target audiences across vast numbers of websites in seconds by connecting to dozens of online ad exchanges, marketplaces that connect buyers and publishers through real-time auctions.


The ad spending flows through to the exchanges. The problems arise when ads run on publisher sites with fraudulent traffic, such as those where clicks are generated by software programs known as “bots” instead of humans. This is an issue of growing to concern to marketers. It is difficult to recoup the money paid to those sites when the issue is discovered too late.

While in the past advertisers have received small credits from Google when they detect discrepancies, in this case, for some buyers, the fraud was larger than usual. However, since Google’s "increased" refund still amounts to only a small fraction of the total ad spending served to invalid traffic, some advertisers remain unsatisfied: "Google has offered to repay its “platform fee,” which ad buyers said typically ranges from about 7% to 10% of the total ad buy."

Scott Spencer, director of product management for Google, acknowledged that refunds have been paid, but he declined to provide a dollar figure for the amount being returned. Some ad buyers said the refund amounts range from “less money than you would spend on a sandwich” to hundreds of thousands of dollars.


“Today, we can’t disclose the information about third parties,” Mr. Spencer said. “So when we aren’t able to catch invalid traffic before it impacts our advertisers and we’re unable to refund their media spend, it hurts us, even if we’re not responsible.”

Google added the affected ad buyers in this instance were impacted by invalid traffic over the course of a few months this year, primarily in the second quarter. Part of that traffic affected video ads, which carry higher ad rates than typical display ads and are therefore an attractive target for fraudsters.

Of the billions of dollars flowing into online advertising each year, a percentage is inadvertently shown to sites with fake traffic, with fraudsters siphoning off advertisers’ money for themselves. And while the individual instances of ad fraud tend to be modest in amount, combined they add up quickly: some $6.5 billion in ad spending will be wasted this year to fraud, according to a report released in May by the Association of National Advertisers.

Unlike infamous clickfarms, typically found in some shady warehouse in India or Bangladesh, the methods used by fraudsters are highly sophisticated. Some infect unsuspecting consumers’ computers with malware to form a “botnet” that clicks on ads in the background.

And while ad fraud has long been a well-known, if unresolved, problem associated with online advertising, what makes Google's admission unique is that for years the company had claimed to have it largely under control.

The search giant has had teams dedicated to filtering out fraud before an advertiser makes a bid on an ad. Those teams can also prevent exchanges from being paid if an ad has already been bid on, but invalid traffic is quickly detected. The teams also work to discover historical instances of fraud, which is what happened in this particular case.

In other words, Google confirms that a substantial chunk of revenue that it, and others like it, pocketed over the years was never actually earned. It also may explain the recent shift in the mood of online advertisers, such as P&G, which failing to generate the desired IRR, decided to cut back on advertising altogether.

Needless to say, any blowback against online advertising which is rapidly eclipsing conventional advertising media such as print and TV, would have a staggering impact on the valuations and stock prices of some of the most valuable companies in the world, among which Google and Facebook to name a few. As such while Google's admission is commendable, the question is not just how endemic "ad fraud" has become but also how credible any new anti-bot initiatives could be. If, as Google admits, as much as 10% of recurring revenue is "fake", if only applies a generous forward multiple to this, the impact to shareholders would be dramatic. Of course, if the real "ad fraud" number is notably higher, then it could eventually lead to a crash among the ad-driven tech giant space, which as disclosed in the latest 13F reporting period, is where the bulk of the hedge fund money is invested. Which is also why preserving credibility is suddenly so critical to the like of Google, because if and when doubts emerge among investors about the company's otherwise opaque revenue practice, then what until recently has been Wall Street's darling sector will be abandoned in a hurry.

For more on this topic, please read: "It's the Biggest Scandal in Tech (and no one's talking about it)"


janus yogibear Fri, 08/25/2017 - 13:50 Permalink

the only reason this shit isn't prosecuted as fraud is because it's facebook and google: the sacred cows of deep-state tech-pets.  any advertiser -- be it a newspaper, magazine, radio station or TV -- that knowingly misrepresents their audience can be charged with fraud and sued by their advertisers.this looks like a case for AG Sessions.janus

In reply to by yogibear

Thought Processor JLee2027 Fri, 08/25/2017 - 13:11 Permalink

  Offshore internet click traffic farms have been around forever.  They can easily go thru U.S. IP addresses. As such the whole 'click' based industry is suspect and at worst, a complete sham. Most people who really understand net advertising know and accept this.  They will not however work to stem it as it would be like cutting one's own arm off. As one ad exec has stated:  'Don't fuck with the magic'

In reply to by JLee2027

JLee2027 Fri, 08/25/2017 - 13:02 Permalink

Ever seen how complex they make Ad Words, etc?  It's to hide that they don't really work as well as they want you to think.  That's my cynical opinion and I'm sticking to it.

pigpen Fri, 08/25/2017 - 13:15 Permalink

Biggest black swan in silly valley, digital advertising is highly fraudulent and ROI is awful.Destroy Google Facebook by using brave browser or ublock origin for all social apps. Run everything out of browser to block tracking and ads by default. Set it and forget it even YouTube.Be careful is measuring something as you aren't going to like intended results. Goobook have awful transparency and have had nobody greasing their homework.Cut of their oxygen and use brave browser for everything. There is no digital advertising business if I'm never ever served an ad and don't see one.Cheers,Pigpen 

Aubiekong Fri, 08/25/2017 - 13:17 Permalink

Not only are they ripping you and your business off but Google is doing its best to destroy everything good in the USA....  Never again will my business advertise on Google.  And as a consumer I will not click on or buy things from other business who do advertise on google...

hooligan2009 Fri, 08/25/2017 - 13:50 Permalink

advertizing is paying someone to beg on your blockers have been downloaded on hundreds of millions of devices (i use this one "cui bono" from defrauding advertizers?A. those begging on their behalf, namely GOOG, FB and AMZN.the advertizers have been defrauded by their many people have ever bought product sold by the largest advertizers of cars, razors, coke, any kind of soap or shampoo because of an ad on their phone or on websites (like ZH)?A. double O, triple O, fuck all, no-one.internet advertizing is about as effective as a condom with a hole in it - snapchat is not going to direct any teenager behavior with 20 second ads - BECAUSE ADS ARE ANNOYING AND IRRITATE USERS OF A fact, ads are the same kind of distraction as libtard demonRat socialists - they whine, nag and annoy but have nothing valuable to offer anyone.

FiatFapper Fri, 08/25/2017 - 13:34 Permalink

I am a wanker; in eager anticaption (cock in hand), I go to a porn site, click play and it redirects then reloads the page. This is javascript just doubling-down on the ad content on that page.I don't really give a shit, as I use uBlock, ghostery and have tweaked some settings in FireFox.

rejected Fri, 08/25/2017 - 13:41 Permalink

I never ever, on purpose,  click on an ad or any thing that even slightly resembles click bait.I have an external volume control for self starting videos. They put them at the bottom of the page now knowing it irritates you. Also,,, no matter how interesting a self starting video seems,,, I do not watch it. Too me, it's like those preacher apprentices you sometimes see on a corner yelling the gospel. Downright annoying and rude.

dark pools of soros Fri, 08/25/2017 - 13:43 Permalink

people use ad block and the websites compensate by using ad bots to generate would be clicks, etc

advertisers stop advertising and their sales dont change

websites have to go to subscription base to survive

assholes steal content from paid sites and give it away for free with malware infested sites and/or selling your data to robo spammers

a fucking shit show economy since the beginning of the world wide web

CRM114 Fri, 08/25/2017 - 13:52 Permalink

I would like advertisers of half-decent products to know I will not buy from anyone who uses a pop-up ad, and that I will also never buy from anyone who uses mail-in rebates. These are by far the worst two practices in marketing.I am not alone.

desertboy Fri, 08/25/2017 - 13:54 Permalink

Anyone who doesn't consider that this pay-per-click business is totally gamed, clearly hasn't lived in the countries where this software is actually developed.

Stan Smith Fri, 08/25/2017 - 14:13 Permalink

The whole "pay per click" thing is a scam to the Nth degree.    It's the modern day equivalent of those fucking mailer ads packs that seems to keep our postal service afloat.Wasnt it just a year or so ago that Facebook admitted their traffic levels were 30%+ off on the high side?   It's not a stretch to see Google doing the same thing.   In fact, my guess is it's assured. 

hooligan2009 Fri, 08/25/2017 - 15:09 Permalink

ad blockers need to be extended into blocking "sponsored content".when search terms are entered,even though the results of the search are prioritized to suit the political beliefs and preferred suppliers of the search engine (say google or yahoo or whoeever)before you get to your search results, you are fornt run by a page of "sponsored content" that you did not ask for and that you do not have any interest in - in other words, more begging, just as irritating, distracting and irrelevant as those tone deaf street trumpet players or those kids on plastic buckets on inner city intersections.

Handful of Dust Fri, 08/25/2017 - 15:11 Permalink

I have met a few new hires who work for google and they are seriously shit heads. They would likely be fired within a few weeks given their tempers and ability to curse about almost any subject. The old crew were much better balanced. The newbies are so brainwahsed by CNN and an entitlement attitude I wonder what will happen at google. One of these folks had been looking for a job for years here and in Asia and only google evidently would hire him.Crazy.Plus, Damores exposure of their illegal practices and the three women who just resigned and described the discrimination there only confirmed Damores article.It's an awsome company but if they change direction/policies too much, they lose their #1 ranking.

Full Court Lug… Fri, 08/25/2017 - 15:13 Permalink

*Build a multinational conglomerate that hoovers up user data and hands it to the CIA/NSA, censors protected political speech for wrongthink, and derives a huge chunk of its revenue from outright fraud**also the doodles are super gay*How's that "don't be evil" thing working out?

ReturnOfDaMac Fri, 08/25/2017 - 15:32 Permalink

Huh, ah, what?  You mean letting a third party charge you whatever they want, with no proof of delivery, no verifiable means of getting results, and leaving them an open checkbook is not a good business plan?  I exaggerate but what the hey, its FRIDAY!

truthalwayswinsout Fri, 08/25/2017 - 15:45 Permalink

There is a solution but Google would go out of business.Just place the ads and run them to a special purchase site with a percentage of the funds paid to google.If this were done, Google would disappear in a few weeks.They are a scam.