Over the last year, I’ve written several posts ‘outing’ clearly fraudulent ads I’ve seen online. There was the “American Anti-Aging Association”, a fake trade association with a fake building and fake wrinkle cream ratings; the Yahoo Answers ‘results’ that were really just an ad; and the MarketWatch ‘article’ that was actually a press release for a ‘turn your cash into gold site.’

I thought of this point again when I saw an ad claiming you could lose 45 pounds in three weeks through a combination of the Acai diet (as seen on Oprah!) and a colon cleanse product. When I clicked through to the site, a lot of the elements of the site really disturbed me. For example, the author of the site said she was from “Daly City, CA”. Amazing she lives near me! When I used a remote proxy server to come back to the site, she was suddenly from Houston, TX.

And then there were the ‘before and after’ pictures that showed dramatic improvement, but omitted the heads of the before and after models (gee, I wonder why?)

And at the end there were comments from ‘users’ of the product who had to rave about how great it was. Funny thing was, there was no place on the site to actually submit comments!

Though all of this may sound funny to you and me, this site and sites like it apparently make millions of dollars a month from these ‘fake blog’ ads! And if you subscribe to the “Fixing Broken Windows” theory – that not addressing small infractions create an environment where larger crimes are more likely to occur – every fake blog that scams consumers out of $50 helps foster an environment where even bigger scams can flourish.

Of course, online scams aren’t new – we’ve all received emails from Nigerian 419 scammers, the ‘verify your account’ phishing requests, and the promises that “you are the 1,000,000th visitor to this site, you’ve won.” For every new scam that pops up, the FTC or the DOJ springs into action (well, spring probably implies a speed that doesn’t actually exist) and tries to fight the scammers. Witness the FTC fines against “free iPod” advertisers, or the “Consumer Alert” on the 419 scams.

But identifying fraudulent advertising has little value if you can’t actually prevent this advertising from occurring. In the case of the Nigerian 419 scams, the FTC is powerless to arrest Nigerian nationals. And even if they arrested some of the offenders, these criminals would soon be replaced by new scammers (and they are no longer limited only to Nigeria). Assuming the government can stop an entire type of fraud from occurring, a new fraud quickly takes it’s place.

The problem, as I see it, is three fold. First, to directly steal from Thomas Friedman, “the world is flat.” By that I mean that the barriers to entry to create fraudulent advertising online have lowered to the point that anyone can quickly build a large, highly profitable, and potentially fraudulent advertising campaign online. Consider access to the media just 20 years ago – unless you had hundreds of thousands of dollars and a lot of knowledge of print or TV advertising, it was impossible to get your message in front of a large audience. Moreover, the media outlets were relatively small in number (there are only so many TV stations and newspapers), so it was fairly easy to keep track of major ad spenders and punish false advertisers.

Today, you can start a campaign online “for as little as $5.” You can be virtually anonymous, you can live anywhere in the world, and you really don’t even need computer skills to set up a reasonable looking Web site. There are hundreds of thousands of places to advertise and an ad can reach tens of millions of people in a matter of hours. As the number of advertisers and advertising locations has exploded, it’s become virtually impossible for any governmental or trade organization to actually regulate online advertising. Shut down one bad actor and that actor can simply get a new credit card and a new Web site and be back in business by the end of the day.

Second, technology has made it easy to defraud people without guilt. One of Stanley Milgram’s great observations in his incredible book, Obedience to Authority, was that people were more likely to commit acts of violence against other people as the distance between the two people grew greater. It is much easier to kill someone by pressing a button on a ship 100 miles out at sea and having a missile destroy an anonymous building 15 minutes later, than it is to put a gun to someone’s head and pull the trigger. The same is true for advertising. The ‘snake oil’ salesmen who travelled from county fair to county fair selling fake elixirs had to look their victims in the eye. Online marketers never see the person who falls for their ploys – at worst, they may get a few angry emails, if they even have a contact us page to begin with.

Third, there are no standards by which online advertisers are judged to be legitimate or fraudulent. Take the fake blog I noted above – how would Advertising.com or Google truly determine whether that site was a real blog or a fictional one? Google has attempted to do this with policies like Quality Score, but in truth these policies can never pick up all scammers, and only serve to create a cat and mouse game where Google’s new anti-scam policies are quickly circumvented by clever scammers.

Whenever it is impossible to differentiate the good eggs from the bad eggs, the good eggs usually suffer. It’s impossible to apply an ‘innocent until proven guilty” standard in such a case, because it basically gives the scammers carte blanche to abuse the system. So the end result is blanket punishment of all actors, be they good or bad.

And this is the path that Google has taken with Quality Score, and that many publishers have taken with respect to affiliates – set universal rules designed to weed out the scammers but that as a consequence also prevent a lot of legitimate businesses from thriving. In other words, if we as advertisers don’t attack this problem ourselves, we will eventually leave others to handle it, and they might handle it in ways we don’t like.

My feeling is that the online advertising industry needs to start self-regulating itself, and fast. I wrote about this at the end of last year:

We members of the advertising industry need to consider what happens to self-regulated industries when they fail to effectively regulate themselves. Just ask the financial industry after Enron, or the meat packing industry after “The Jungle.” For that matter, ask the “free iPod” advertisers what happened to them (Google and Yahoo banned them).

For Internet advertising, there’s a fine line between deceptive advertising and ‘mere puffery.’ Though I believe most Americans have developed the ability to understand the difference between the two, the window of opportunity for the online advertising community to define and regulate this line is closely quickly. I’d much rather have our industry make this determination, that the FTC in Washington or the American Trial Lawyers Association.

Ultimately, I envision this as something analogous to the “Fly Clear” program being promoted by the TSA. The idea is that you can get fast-tracked through airport security if you undergo a background screening and agree to follow some rules. Imagine if such a program existed for online advertisers. Members could agree to be audited by a policing element within the advertising community, and anyone who violated the defined ethical rules of the group would be removed.

Publishers like Google and Yahoo would give group members “pre-approval” to run on their networks. For example, an affiliate could run on AdWords without fear of Quality Score punishment, provided it was in good standard with the self-regulation team. By contract, advertisers who were not members (or had been kicked out) would be subject to extra scrutiny by publishers, and likely face penalties or outright bans.

Though it sounds somewhat Draconian and bureaucratic, the alternatives aren’t pretty. As many advertisers have found out the hard way, once you are labelled a bad player, there’s often no recourse and your entire business can be shut down virtually overnight. I’d much prefer a rigid system that protects the good than the wild, wild West in which the online ad world currently resides.

Postscript: To see a great summary of some of the current online ad scams, check out this PowerPoint presentation by Jay Weintraub!

You Give Leads A Bad Name – Get more Information Technology

3 Comments

  1. Sagar November 27th, 2008

    I agree with your comments. As much as the online ad industry may balk at the notion of self-regulation, the alternatives are far worse. The question is whether there is truly a market incentive to eliminate these scam ads. Can one construct a convincing model which shows that the end of these kinds of ad scams would significantly lift clickthrus on the remaining legitimate ads? Without being able to tie this to a strong appeal to legit advertisers’ self-interest, I do not think it would take shape.

  2. David Rodnitzky December 1st, 2008

    Thanks for the comment Sagar. I’d answer it with two thoughts: first, I do think there is a strong self-interest in self-regulation, as I note in the post. It is definitely ‘theoretical only’ at this point, but hopefully advertisers can be persuaded to agree that self-regulation is in their best interest. Second, if a regulating arm could create a ‘stamp of legitimacy’ for approved advertisers, it would lead to many financial benefits for these advertisers. For example, publishers would be more likely to give preferential pricing to advertisers that they know are legit. Advertisers could put this seal of approval on their Web sites, which would increase consumer trust and therefore conversion rate. And advertisers would be less likely to be penalized by AdWords and other media outlets that use broad algorithms to determine legitimacy, thereby opening up profitable media channels currently not available.

  3. Anonymous December 20th, 2008

    Im sick of it.The ads all over the net.Its ruining the net.Making you download and play 50mb video ads.Without even asking.Wasting your download limit.The mindset of these scammer people is unbelievable.The company’s who’s ads are smashed into peoples faces interrupting there web surfing.Must suffer huge losses because the people now hate that company for annoying them.Not to mention the illegal ads.For outright scams.That appear on legitimate websites.Then people say that site is a scam.When its the advertising people who put the ad there.

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David Rodnitzky
David Rodnitzky is founder and CEO of 3Q Digital (formerly PPC Associates), a position he has held since the Company's inception in 2008. Prior to 3Q Digital, he held senior marketing roles at several Internet companies, including Rentals.com (2000-2001), FindLaw (2001-2004), Adteractive (2004-2006), and Mercantila (2007-2008). David currently serves on advisory boards for several companies, including Marin Software, MediaBoost, Mediacause, and a stealth travel start-up. David is a regular speaker at major digital marketing conferences and has contributed to numerous influential publications, including Venture Capital Journal, CNN Radio, Newsweek, Advertising Age, and NPR's Marketplace. David has a B.A. with honors from the University of Chicago and a J.D. with honors from the University of Iowa. In his spare time, David enjoys salmon fishing, hiking, spending time with his family, and watching the Iowa Hawkeyes, not necessarily in that order.