How Ad Fraud Impacts the Coronavirus Online Sales Boom

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@mashabeetrootMasha Beetroot

Mind-smeller.

While the current COVID-19 disease has affected several industries negatively – including the catering, tourism, and real estate sectors –, coronavirus had an unexpected impact on online sales.

As the employees of numerous organizations switched to home office work and schools have been closed in multiple countries while people in the most affected countries fear to go into public places, consumer shopping trends have switched from physical, in-person shopping to the online purchase of products.

Coronavirus Outbreak Results in an Online Sales Boom

According to Quantum Metric's study, the e-commerce activity of Brick and Mortar retailers have experienced an average weekly growth rate of 52% as well as an 8.8% increase in conversion rates in the US. Many compare this coronavirus-caused online sales spike to holiday shopping, which facilitates an average growth of 2-3% among businesses, compared to non-holiday periods.
In China, during the peak of the outbreak, the citizens of the Asian country have been reportedly ordering groceries online to secure their daily food supply. During the 10-day period to February 2, online sales of fresh food increased by 215% – nearly 15,000 tonnes – at the Chinese retail company JD.com.
As a direct result of the coronavirus outbreak, the online sales of disinfectant products have also seen a sharp increase. Between February 10 and 13, Dettol experienced a 643% YoY sales increase for the company's disinfectant products on the Chinese e-commerce store Suning.com.
The sharp coronavirus-related online sales growth has also impacted the global ad market.
On one side, the advertising production industry – where tight deadlines, seamless travel, and inflexible budgets are very common – is in chaos due to the travel restrictions, canceled events, and other safety measures imposed by governments. On the other hand, TV ad markets remain strong, with opportunities to grow in the near future as consumers stay home.
This signals a trend on the global ad market where budget from offline advertisements and events are being redistributed to online channels. Meanwhile, the edtech, online gaming, and movie streaming industries are on the rise. 
While Chinese e-learning leaders added $3.2 billion to their wealth, the online language learning application Duolingo saw a 100% increase of active users among Chinese citizens in February. In the same period, Netflix experienced a 28% increase in downloads in Asia while the net sales of Chinese mobile games surged by 32% in the first week of February compared to 2019 data.
Furthermore, the mobile app industry has also seen a growth of nearly 15% in organic application installations between mid-February and mid-March. The rise in installs was even higher for non-gaming apps, with communication, utilities, finance, health and fitness, as well as news applications experiencing an increase of 150%, 110%, 40%, 30%, and 30%, respectively.

Ad Fraud Is Growing With the Coronavirus Online Sales Boom

As a consequence of all the above-mentioned, fraud is on the rise. When online sales are booming, it's easier for fraud to "get lost" and for cybercriminals to gain increased profits with their fraudulent schemes.
Fraudsters are already taking advantage of the fear and panic caused by the coronavirus outbreak. According to the cybersecurity firm Norton's report, bad actors are exploiting the public fears with phishing attacks, malicious emails, and fraudulent ads that offer treatment or cure for COVID-19. Misinformation is also among the top dangers, while other groups of scammers are phoning people up to tell them they have been infected with the coronavirus.
And ad fraud – that has already presented a significant issue for the Southeast Asia region, representing 40% of the estimated ad fraud losses in APAC of the total of $650 million between November 2018 and April 2019 – will also rise with the coronavirus online sales boom.
Despite the COVID-19 outbreak, companies have increased their advertisement budgets with global ad spending rising by 7% from 2019 to 2020 to reach $691.7 billion. The growth is even higher for industries that are positively affected by the online sales boom, including the e-commerce and social media sectors where digital ad spend is expected to increase by 17.7% and 22.2%, respectively.
Source: E-marketer.com
The growth of ad spending, as well as the valuation of the global advertising market of $225 billion by 2020, provides a good chance for cybercriminals to steal a piece of the pie with ad fraud schemes. While the percentage of their profit margins did not change, increased online ad spending allows advertisement fraudsters to earn more revenue.
Furthermore, as a result of the lack of regulation as well as the complexity of the online advertising market, ad fraud will continue to dominate the market, with advertisers losing an expected revenue of $5.8 billion to $42 billion in 2019 alone.
Ad fraud activates at its full power without any limitations, even in sectors that are the top victims of the coronavirus outbreak (such as the travel and event industries) as cybercriminals are exploiting the current chaos to operate fraudulent schemes as part of a short-term strategy to gain profit.

Cut the Right Costs and Increase Ad Spend

Coronavirus has impacted some industries negatively but also resulted in a boom in online sales. Also, despite the current COVID-19 outbreak, the global ad spend is increasing in 2020. 
While industries – such as the travel, catering, and event sectors – are the sufferers of the COVID-19 outbreak, organizations in other markets should not be afraid to engage in marketing activities.
Furthermore, based on relevant research, companies that have cut their ad spending during a recession experienced double-figure losses in sales and income. 
With that said, instead of cutting company ad spend during the coronavirus outbreak, it makes more sense to cut the right costs and invest heavily in ads to be on the top when the crisis passes.
Successful companies have also found the strategy of shifting their funds into performance-based marketing channels like affiliate marketing beneficial as they helped them maximize ROAS, manage their costs, and capture lost in-store traffic.
Due to all this, ad fraud will continue to rise as cybercriminals are taking advantage of the current situation to get their share from the growing online market. And, as the shift of dollars into performance-based marketing channels makes sense for many companies, affiliate network fraud will also increase.
To protect your company against ad fraud in affiliate networks, I’ve listed two major issues you should be careful about as well as their respective solutions.
The first is cookie stuffing, which a common type of e-commerce fraud on CPA platforms. With this strategy, fraudulent affiliates access tracking cookies on as many computers as they can. "As a result, the CPA platform will then issue a commission to the malicious affiliate when a consumer makes a cookie-tracked purchase, damaging company revenue with an average overpayment of 30-40%" - says Sergey Belov, CEO of Adv.Cake agency, who developed a solution that offers protection against the mastication of tags to help companies save their budget for affiliate marketing.
The second affiliate ad fraud strategy is brand bidding, which concerns mostly popular brands (as they are directly sought after). Based on the fact that people often make mistakes when they search for domain names in search engines, fraudsters create domains that are very similar to the original brand’s – with the difference that they deliberately include typos or common spelling errors.
When the user makes a typo or a spelling mistake, he arrives at the wrong site, where he is redirected to the fraudulent affiliate’s website. As the fraudster’s site includes affiliate tags, he will receive a commission for each order customers place on his domain, despite the fact that his contribution to attracting this particular user remains very dubious.
Sergey Belov comments: "Sadly, we’ve discovered that, due to the COVID-19 outbreak, the number of fraudulent earnings for cybercriminals utilizing the brand bidding strategy has increased with the growing number of direct requests."
The good news is that it is possible to prevent the use of brand contextual advertising in the affiliate channel. For example, Sergey says it is possible to reduce companies' affiliate budget by an average of 20-30% as the direct result of efficient protection from the brand bidding strategy.

Digital and Affiliate Marketing: a Viable Solution for Businesses in Time of Crisis

Despite the negative impacts of the current coronavirus outbreak, the digital advertising market continues to boom.
And it makes sense. In times of recession, eliminating the right costs and increasing the ad spending of businesses can not only help them to survive a crisis, but it could also help enterprises in securing a larger market share as well as outperforming their competitors.
Furthermore, history has proven that investing more heavily into performance-based digital marketing channels like affiliate marketing can get better results for businesses in times of crisis. Therefore, enterprises are able to harness the benefits of these channels during the COVID-19 outbreak.
However, when businesses are utilizing performance-based marketing channels, they have to take the rising rate of ad fraud into account, which is the direct result of the coronavirus outbreak-caused online sales increase.
Therefore, while you are managing your affiliate marketing network, it’s crucial to screen it for common ad fraud techniques – such as cookie stuffing and brand bidding – and introduce measures to protect your organization’s advertising budget from cybercriminals.
(Image source: Source: https://www.adweek.com/programmatic/lower-ad-fraud-will-be-achieved-once-increased-incrementality-takes-place/)

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