You Ask, I Answer: Ad Spend Lost to Fraud?

In this episode, Andrew asks, digital ad spend dwarfs PR spend globally. Yet how much of that digital ad spend is being lost to fraud, etc. There's a few different answers here. Um, but the answers are all directionally the same. A lot.

A lot of it. So first thing we have to figure out is what constitutes ad spend waste, right? What constitutes um ineffective use of digital ad spend. There are the obvious things like, oh, you showed a bunch of ads to people who are unqualified buyers, right? You your targeting was off, etc.

Um, and there was no reason to send uh you know people to an ad to that ad. Uh if you're selling you know left-handed smoke shifters and you've targeted an audience that's predominantly right-handed, you've kind of wasted your money. That's not fraud, but it is definitely not helpful, right? It's it's kind of useless. Uh in 2019, Augustine Fu, uh, who is a um a researcher who does a lot of stuff in the digital ad space, um, identified that about 70% of ad spend is fraudulent.

Um the specifics are uh fake uh users, bots, fake profiles, malware, uh injection of stuff, uh spoofing, ad stacking, uh tag manipulation, all sorts of stuff. Essentially, whatever uh malicious actors can do to get an ad to count as shown, which would then trigger the the spend, um, without ever actually delivering any performance. Uh he identifies an additional 10% of his outright blocked, which to me feels a little low. Um we know that about 30-ish percent of uh internet users have some form of ad blocker on. And so uh like I said, I feel that that number is a little on the low side.

But of course, if you if you go by that, then 70% of uh ads are uh fraudulent, 30% are blocked, then you have 0%. Which when you look at your ad performance, that's not entirely unreasonable. Right? Think about that. What percentage of ad spend results in a sale?

Not a lead, but uh a sale, and does it pay for itself? Um, this is a question that a lot of us have to tackle on a regular and frequent basis. I'm selling a Google Analytics course right now. Go to trustinsights.ai slash G A Google Analytics. Um I'm selling this course and I'm running ads.

I'm running Google Ads for it. And I'm spending about a hundred bucks a week on ads, and I'm running until essentially um I've gotten 30 days or the price of two courses, because the course sells for 497. So, given those two things, how many have I sold through ads so far? I've been running ads for about 25 days. Want to take a guess?

Uh huh. Zero. I've spent money. Uh my targeting's pretty good. I've loaded my personal mailing list into it, um, so it's not like it's being shown to just randos.

And I've got a decent daily ad spend. I've got a decent budget, but creative is okay. It's not great, it's not you know like mind-blowingly good creative. It's basically me talking about the course. No sales.

Right? Now, again, think about that, right? My mailing list about my course, with me as the ad creative, should sell at least one, right? When I look at sales from directly from the mailing list, not from ads being run, uh targeting the mailing list database, but directly from the mailing itself is sold about eleven thousand dollars worth of courses, right? So the list is right, the targeting is right, right?

The audience is right. If you've bought the course, thank you. The ads to that same audience run simultaneously with the email campaigns, no results. Um we do work with a bunch of clients where they are running a bunch of ads, and you know the conversion rate to a sale around one-ish percent in a lot of cases. So that raises the legitimate question.

Is in fact 100% of our ad budget being wasted? Right? It's certainly above 50%. Um that's a valid question. How much is being lost to fraud?

The one of the figures given is approximately 70%, which makes you wonder: is it really worth it? Right? Give some thought to this. Give some thought to this math. In what other industry would a 1% success rate be okay?

Right? If you are in Major League Baseball, is a 1% batting rate acceptable? No. You're gonna get kicked off the team. You don't even make the team.

You will not even make any major league team with a batting rate that low, right? 20% uh is what they're looking for, I think. Uh babe Ruth was like 33% lifetime. 1%? No.

Um think about medicine. Uh would think about surgery. Would you want to go to a physician, a surgeon whose survival rate was 1%? No. Right?

I mean, you're at that point, you're better off doing it yourself. Um if you are uh buying food and only 1% of the food you buy is not rotted, would you shop at that grocery store? No, definitely not. And yet in digital advertising, we think 1% is awesome. Like, yeah, I got a 1% response rate to that ad.

So put another way, you fail at 99% of your time. Right? So the question is, is it worth it? Think about how much money you spend on ads. What else could you use that money for that was still marketing?

That was still marketing, but might be a better use of that funding. Could you use influencers and brand building instead? Could you hire a public relations firm? Could you that we have if it's as long as it's a good one? Could you uh just go out and bribe people?

Like, hey, I'm gonna give you this $10 coupon to try our service, which is effectively what it is. Um, could you fly a plane, buy a plane, fly a plane, and then just airdrop leaflets all over a city. The question we have to ask ourselves is what is the biggest bang for our buck or the currency of your choice. Are you being as efficient as possible with your spend? Because as we head into even more uncertain economic conditions, because we don't know what's going to happen, being a little bit more parsimonious with our budgets, being a little more careful about what actually works.

So if you're seeing 1% success rates in a channel, and and you and the data's good, and then you see like 20% success rate in a different channel, it is foolhardy to keep shoveling money into the 1% channel. Instead, shovel into the 20% channel or whatever your highest converting channel is until you see diminishing returns. So that's how much is estimated because we don't know. Estimated being lost in digital ad fraud. A lot of money, a lot of it.

Do your homework, do your do the math about what's most effective for your business, and then double down on the things that are working. Really good question. If you like this video, go ahead and hit that subscribe button.