How marketers can stay one step ahead of mobile ad fraudsters

Mention fraud, and what often comes to mind are hackers breaking into banks’ servers or identity theft syndicates stealing people’s mail for personal information. But a far quieter, less well-understood, yet equally damaging means of deception exists: mobile ad fraud.

Uber learned this the hard way in 2016, when the American tech giant brought a US$17 million lawsuit against mobile marketing agency Phunware for faking app installation data through “click flooding,” a process that makes it look as if more people are clicking through an ad than there actually are. It was a big headline story for the unfortunately common occurrence of mobile ad fraud.

Mobile ad fraud doesn’t target everyday consumers and users, though. Its main victims are advertisers and businesses that rely on advertising data to make strategic decisions about where and how to spend their money.

Peeling back the curtain on mobile ad fraud

In the first half of 2020, scammers caused an estimated US$1.6 billion in marketing budgets to go to waste by using fraudulent methods to fake data points.

Advertisers are paid according to how many clicks or new users they can generate for their clients, so mobile ad fraudsters focus on faking data in order to trick their clients into thinking their efforts are paying off.

“Every ‘click’ causes money to go to the advertising network, when in fact no activity or install has taken place,” says Beverly Chen, the Asia-Pacific (APAC) marketing director of marketing analytics and attribution platform AppsFlyer. “Fraud twists the data that businesses rely on to make decisions, resulting in a misinformed use of resources, ineffective spending, and financial losses.”

Beverly Chen, APAC marketing director at AppsFlyer. / Photo credit: AppsFlyer

What draws these fraudsters to mobile advertising is just how lucrative it is. Despite the headwinds of a global economy impacted by Covid-19, mobile advertising has continued to grow as businesses scramble to digitize, causing money to flood into the market. This has created an undeniable lure to scammers, especially those in the APAC region. AppsFlyer’s 2020 The State of Mobile Ad Fraud in APAC report found that in the region alone, as much as US$945 million could have potentially been lost to app installation fraud last year.

“Fraud is an ever-evolving hydra,” Chen says. “Cut off one avenue, and scammers will find other new methods of carrying out fraudulent activities.”

To stay one step ahead, Chen suggests that businesses take multi-layered approaches to address fraud schemes at every level – from installation to in-app activity – in order to ably respond to the growing dangers of mobile ad fraud.

“The techniques of these bad actors and fraudsters are ever-evolving and, at times, even as sophisticated as those of the brightest tech players out there,” she adds.

Businesses should also familiarize themselves with the methods that are commonly used by scammers. Chen explains that mobile ad scammers have various fraud techniques at their fingertips, such as install hijacking, software development kit hacking – a type of bot-based fraud that’s also known as “spoofing” – and mobile device farms, where fraudsters use real or simulated devices to repeatedly click on ads or install apps to create the illusion of high-volume interactions.

In recognition of the growing threat of mobile ad fraud, more software developers are integrating mobile measurement platforms into their development kits to monitor app data. It’s not a silver bullet, as fraudsters are able to find ways to circumvent detection, but it’s an important first step to fight the most common forms of mobile ad fraud.

There is one silver lining, however: Between 2019 and 2020, AppsFlyer found that the financial exposure to mobile ad fraud dropped by 30%. But as the market continues to grow, the potential for further losses remains high.

The lure of Southeast Asia for mobile ad fraudsters

Southeast Asia’s mobile-first populations are often touted as positive indicators of its potential for mobile app marketers, but these same factors also act as a major lure for bad actors. The region has one of the fastest-growing rates of mobile penetration in the world, which has not only driven up user acquisition volumes for businesses but also made Southeast Asia a huge target, observes Chen.

“The lack of education around mobile ad fraud means fewer resources dedicated to app development or fraud protection services, while marketers’ increasing demand for volume in digital campaigns also drives fraud rates up,” she says. Chen adds that the most common cause of mobile ad fraud in the region comes are bots, accounting for 77% of total cases, while device farms and click flooding follow with 16% and 5% respectively.

However, not all countries in the region experience the same rates of mobile ad fraud.

Data from AppsFlyer’s report shows that Singapore and Indonesia experienced high rates of bot-based mobile ad fraud in the first half of 2020, likely because of their populations’ strong reliance on mobile internet broadband and smartphones. Singapore registered the highest rate of bot ad fraud (77%) then, followed by Indonesia (74%) and Vietnam (63%).

Southeast Asia’s mobile-first populations are a lure for bad actors. / Photo credit: Robin Worrall via Unsplash

Since 2020, AppsFlyer has begun to see shifts in fraudsters’ behaviors, as once-trusted sources become more vulnerable and new fraud types emerge. For instance, Chen says, “in-app fraud is increasing substantially due to the lucrative cost per action (CPA) payouts on top of cost per install (CPI).”

That being said, app install fraud remains a persistent problem – especially in APAC, where it is at a higher rate compared to the global average. The risk is especially high for gaming apps, as well as those that enable in-app purchases, like finance- and travel-related ones. To make matters worse, 16% of these fraud cases cannot be stopped in real time.

Real-time change meets real-time protection

Scammers follow where the money leads and are used to quickly moving on to new fraud schemes to evade anti-fraud solutions. This constantly changing landscape can pose a real challenge for businesses and marketers to keep up with, especially if they lack the manpower or financial resources to do so.

Often, isolated one-off cases can’t even be identified as fraud because the data generated hasn’t achieved enough scale to be noticeable. This is what AppsFlyer calls “post-attribution fraud,” where cases of bad-actor activity are flagged only after the fact and therefore cannot be blocked in real time.

“More advanced fraud schemes sometimes cannot be identified until certain patterns emerge at scale and contradict standard post-install user behavior,” explains Chen.

AppsFlyer began detecting post-attribution fraud schemes back in 2019 and, in response, launched its Protect 360 solution in order to help businesses guard against the threat of mobile ad fraudsters.

The solution, Chen explains, follows a “layered approach” that touches every point in the user acquisition pipeline in order to identify any non-human patterns and potential fraudulent behavior.

Unlike other attribution partners that flag fraudulent behaviour based on old fraud frameworks, Chen says that Protect 360 adds in a layer of post-attribution fraud to detect new fraud schemes. That means real-time data is analyzed and compared against certain validation rules and parameters. To ensure that legitimate activity isn’t confused with fraudulent ones, these rules are flexible enough to cater to the specific needs of marketer campaigns.

Once the software has discovered the bad actors’ behavior, it also removes the malware from the customer journey and begins real-time blocking of similar activity in the future.

“AppsFlyer saw this gap in the market and is the first company to add in a layer of post-attribution fraud so that advertisers can more easily detect fraudulent activities that may have slipped through the cracks and gone undetected,” says Chen.

As mobile ad fraud becomes increasingly common in the region, fraudsters are beginning to change their strategies to skirt newer protections, making it vital for businesses to meet these challenges head-on. According to Google’s 2020 eConomy SEA report, customers’ personal use of digital platforms increased by an additional hour over lockdown. This environment poses plenty of danger for businesses, but it has also raised awareness of the dangers of fraud and the power of anti-fraud solutions.

Companies need to take a proactive stance to integrate anti-fraud solutions that are data-responsive and layered throughout their customer journeys in order to elude the threats posed to them and their bottom-lines.

“No matter the scale of the company, it is vital to know that fraud comes in waves and is always changing,” Chen notes.

AppsFlyer empowers marketers to grow their businesses and innovate through its suite of comprehensive measurement and analytics solutions. Built around privacy by design, the company’s customer-centric approach has helped over 12,000 brands and 6,000 technology partners make better business decisions every day.

Find out more about AppsFlyer by visiting its official website.

This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.