The Case for Internet Advertising as Fraud

  |  March 21, 2013   |  Comments

And how its participants are co-conspirators.

When evaluating the potential indictment of an individual or institution it is a prosecutor's responsibility to determine that the elements of the underlying charge are present in the evidence. In some cases the evidence is indirect or circumstantial, and eyewitness evidence can be fallible, subject to interpretation or context. The prosecutor's main burden is to assure that administration of justice is carried out, not to pile up guilty verdicts; it can be a lonely and difficult decision to seek an indictment and equally as lonely and difficult to decline to not prosecute a case. In no way is my intent in this article to disrespect the administration of justice. Rather I am fearful that the online advertising industry and those of us who participate in it may be perpetrators and/or victims of fraud.

In order to evaluate if in fact there is evidence to support a charge we must first determine what potential law has been or is being violated. I have chosen to use U.S. Federal law for the purpose of this evaluation since this publication is read by a national (international) audience. I determined that the most appropriate and likely statute for prosecuting the fraud would be the mail and wire fraud statutes. This area of U.S. jurisprudence has a rich history, some of which historically dealt with false advertising claims and schemes.

18 U.S.C. § 1343 provides:

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

There are three elements to mail and wire fraud:

  1. Intent
  2. A "scheme or artifice to defraud" or the obtaining of property by fraud
  3. A mail or wire communication

To be fraudulent, a misrepresentation must be material.

Mail fraud does not require that the mailing cross state lines; however, wire fraud does require that the wire communication cross state lines.

All elements must be present in the evidence to move forward with a charge, and the prosecutor must in good faith believe that these elements are present in the evidence beyond a reasonable doubt. I believe we can all stipulate to the fact that online advertising would meet the third and final element of the crime (a mail or wire communication). The second, or "scheme or artifice to defraud" element is the crux of the matter.

What evidence exists to suggest a fraud is being perpetrated in the online advertising industry and who are the victims of this scheme? Identifying the victims is a prerequisite that allows us to frame the scheme. My assertion is that there are likely hundreds of "corporate victims" (sounds ironic) in the advertising world; we usually refer to them as "brands." Brands purchase online advertising for a specific purpose such as promoting products for sale, creating awareness of their brands or products, or engendering loyalty to it. Online advertising and online display advertising specifically are promoted as a means to accomplish these goals. Any practitioner of advertising understands that it is difficult to determine if advertising actually accomplishes these goals as desired by a brand, as measuring advertising effectiveness is at best an imperfect science. But what is absolutely an incontrovertible and basic fact is that brands expect that the advertising they purchase is in fact being seen, or more precisely being given the opportunity to be seen by a human. (Please note that this article and argument is neither for nor against the viewable impression and the viewable impression standard.)

I believe evidence exists to suggest that elements of the online advertising industry profit by selling or making available for purchase advertising that is not to be viewed, or that the likelihood of it being viewed is so low that it is ongoing, and market for sale is fraudulent. I believe this scheme is carried out in various manners, some of which can be identified but slip below the radar of scrutiny for multiple reasons. The biggest reason these fraudulent schemes go unidentified is that the primary method of auditing advertising delivery is aggregate-level campaign reporting that is most often scrutinized for generic elements such as impression delivered (which is really just how many times a call was made to an ad server - assuming you are using an ad server) or for other elements that are also based on machine (ad server) to machine interaction (clicks, views, etc.). Little if any attention is paid to the properties where a brand's advertising is appearing, in particular if an aggregator is involved. As the volume of digital advertising continues to explode, the opportunity to defraud advertisers becomes easier and the ability to screen against it becomes harder.

I would argue that there are several types of fraud being perpetrated on brands in this vein. One example is the use of bots, "turks," etc. to generate impressions and views. A second class of fraud is the creation of advertising inventory embedded in pages that have dozens of advertising units and little to no content, advertising inventory embedded in sites that are merely collections of thumb nails, or pages that auto-refresh the ads after minimal view time. While I can merely speculate here, I believe there are some sites in existence that conduct these types of activities, but will refrain from noting any particular site by name as this is based on my own subjective opinions. That being said, I was surprised to see some prominent brands that have recently purchased advertising on these sites that I consider suspect, which include some substantial and very well-known companies.

Is the intent of these advertisers to defraud the brand from their money by promoting these placements? Is all this activity fraudulent or is this more a case of caveat emptor? How do such leading brands end up in this predicament? All good questions that deserve case-by-case scrutiny. You the reader are the jury today and must decide for yourself.

However, let me close with one argument that I believe to be self-evident; if those of us who make our legitimate livelihood in this industry do nothing or turn a blind eye to this activity, we are co-conspirators with the parties who craft these frauds.

Fraud image on home page via Shutterstock.

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Edward Montes

As CEO and co-founder of Digilant, Ed is responsible for planning and implementing the company's strategic direction, overseeing international operations, and delivering on the company's vision. In 2010, Ed was awarded LatinTRENDS Magazine's Latino Trendsetter Award in the technology category. In 2011, he was named one of Boston Business Journal's Top 40 under 40.

Prior to becoming the CEO at Digilant, Ed served as the Manager Director for Havas Digital, North America where he was recognized with the Media All Star award by MediaWeek in early 2009.

Ed has also worked for Yahoo! Inc. and was a prosecutor in the Middlesex District Attorney's office of Massachusetts. He is a graduate of Boston University School of Law and the University of Massachusetts, Amherst.

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