FTC Urged To Probe Online Ad Fraud

Democrats Mark Warner of Virginia and Chuck Schumer of New York plan to send a letter to the Federal Trade Commission on Monday asking the regulatory body to examine the persistent challenge of fraudulent ads in online advertising, according to The Wall Street Journal.

For the past several years, as the buying and selling of digital advertising has grown more automated, the industry has grappled with various forms of fraud. For example, scam artists have built networks of bogus websites, where they sell ads and use computer programs-- or “bots”-- to make it look as though these sites are regularly visited by humans.

In other cases, fraudsters have used software to hijack people’s computers and direct web traffic to suspect sites loaded with ads.

Mark Wanrer, Chuck Schumer

The senators, both members of the Senate Banking Committee, noted that the ad industry has undertaken various efforts to stamp out fraud but questioned whether self-regulation will go far enough. “It remains to be seen whether voluntary, market-based oversight is sufficient to protect consumers and advertisers from digital advertising fraud,” the letter said.

The FTC’s relevance in the matter isn’t immediately obvious, given that the agency is generally focused on protecting consumers. On its face, it would seem marketers (companies) are the big losers from ad fraud. A recent study by the Association of National Advertisers estimated that advertisers could waste $7 billion this year on ads no people will ever see.

But the two lawmakers argue in the letter that wasted ad spending will eventually result in consumers paying higher prices for goods and services.

Plus, the more fraud in the online ad business, the more chances that consumers will risk having their personal information stolen, the letter contends.

By creating fake traffic, bots artificially drive up the cost of advertising “in the same way human fraudsters can manipulate the price of a stock by creating artificial trading volume,” the senators wrote in the letter.

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