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Oct 28, 2019 | 5 minute read

Preventing click fraud with blockchain

written by Meaton

No one operating in the ecommerce market is a stranger to the threat posed by online fraud. That said, fraud is not a monolith; there are countless strategies employed by fraudsters to strike at merchants’ vulnerabilities.

Synthetic fraud and clean fraud tactics employ stolen cardholder information to complete purchases. Account takeover attacks have the same goal, but target consumers’ account credentials instead of payment details. Click fraud, however, can prove to be a much more difficult threat source to identify.

What is click fraud?

Click fraud occurs when a third-party clicks an ad link, such as a banner ad, with no intention of making a purchase. You still end up paying for the traffic, but there’s no prospect of making a sale.

It may not seem like click fraud is a big deal at first, but it’s a massive, fast-growing problem. The practice is forecast to cost businesses nearly $23 billion in ad revenue this year alone. Advertisers lose roughly one-third of all digital ad spend to click fraud. Worst of all, the practice is growing at a rate of 50 percent every year.

Facebook recently took their first legal action against two app developers suspected of click fraud. According to a statement from the social media site, the developers created Android apps infected with malware. Infected devices were then used as part of a coordinated botnet to rack up passive clicks, faking authentic user clicks on the platform's ads. 

That’s one method, but fraudsters have a variety of tactics at their disposal to carry out attacks. For instance, they may engage in hit inflation, where users who click a seemingly legitimate link are redirected to an ad page for just a split second. And of course, there’s the basic click farm, where users are paid to sit at a device and simply click ad links over and over.

Click fraud may be hard to detect, but it’s far from hopeless. As fraudsters develop new strategies to carry out attacks, new technological responses are created. The blockchain, for instance, holds the potential to revolutionize how fraud sources are managed, including click fraud.

What is blockchain?

Blockchain is best-known as the technology that undergirds cryptocurrencies like Bitcoin. The concept has many applications beyond that, though; in fact, blockchain may prove to be our best hope in the fight against advertising abuse.

Blockchain technology is built on an open ledger model, and one of the greatest advantages of this is transparency. Because the transaction record is mutually accountable and reconcilable, there’s little risk of mistakes or abuse of the system. You can more easily identify traffic and what share of ad spend it represents. If, for example, a large share of traffic is coming from specific locations outside your targeted areas, that should raise red flags.

Blockchain technology could have multiple applications for digital advertising beyond fraud detection, too. Advanced, more precise tracking means blockchain ad buys also flatten the layers of intermediaries involved in the process. It cuts out the middlemen, allowing you to serve ads directly to your consumers.

With a blockchain model, you aren’t reliant on a large, centralized system to carry out this process. Blockchain is a distributed network of devices, so if one device—or even an entire portion of the ad buying network—goes down, processes can still go on with minimal disruption.

While it’s not in wide use, the results of test cases are promising. Back in 2018, for example, Toyota managed to significantly increase their campaign performance by employing a blockchain system to identify and blacklist bad actors.

Obstacles to Adoption

So, if blockchain’s such a promising venture for advertisers…why aren’t more hopping on board? As of last year, only 11 percent of advertisers had completed a blockchain-enabled ad buy. Forty-five percent of those surveyed said they had no plans to explore the idea in the foreseeable future.

There could be several factors at play here. Concerns about energy efficiency, for one, are the product of blockchain’s affiliation with massive cryptocurrency mining operations.

There are also critics who claim that blockchain is insufficient for the demands of the digital ad space. The same survey cited above shows that 55 percent of advertisers see blockchain as too slow to manage media transactions. That’s plausible, at least; given that a blockchain system is simply a network of computers, the consensus process may slow down as those devices age.

Although Toyota found success with the blockchain model, we’ll need more test cases to prove the concept…and no one really wants to be the “guinea pig” when there’s so much money involved. But, while we may still be several years from any widespread adoption, we have some strategies that can help mitigate the click fraud threat:

  • Learn the telltale signs of ad fraud, and what you can do to mitigate risk. Tactics like domain squatting, cookie stuffing, and IP spoofing are common threats facing advertisers.
  • Tracking a variety of detailed metrics will help better target your users. This will enable you to better identify fraud warning signs.
  • Target your ads effectively to ensure they appear only on quality, trustworthy sites. Lower-quality sites tend to attract more fraud.
  • Try to exclude certain locales within reason. For instance, you don’t need to advertise parkas in Miami with as much frequency as you might in, say, Montreal.
  • Given that social sites like Facebook, Twitter, and LinkedIn have abundant and in-depth user data, consider investing on these platforms more often.

It’s true that blockchain might represent the future of online ad buying. We’re far from widespread adoption, though. In the meantime, it’s important that you take steps to mitigate your risk and remain proactive. Otherwise, you’ll quickly see your ad budget swallowed up by fraudsters.