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Why Fraud Schemes Like PARETO and OctoBot Are 100% Preventable

It seems like every week or so a new fraud scheme is uncovered. Most recently, CTV has been the biggest target -- and it makes sense. As the cord-cutting trend continues to accelerate and ad dollars shift, the fraudsters are not far behind. 

There are a couple of important points, however, that are kept in the dark every time one of these schemes comes to light. 

First, at a very basic level, the advertising industry should not have to pay for fraud detection. Do you pay someone not to steal your credit card information every time you purchase something online?

Second, we have the technology to prevent ad fraud. And it’s actually the same technology that these e-commerce companies - including giants like Amazon - use to give you peace of mind every time you make a purchase. It’s called cryptography. 

Up until recently, the advertising industry hasn’t leveraged this powerful tool. Maybe because building tech that uses cryptography is hard, or maybe because some companies have built businesses on today’s opaque supply chain and are unenthusiastic about change.

Christiana Cacciapuoti, executive director, AdLedger

Guest blog author Christiana Cacciapuoti is the executive director of AdLedger. (Image credit: AdLedger)

In a valiant effort to deliver an alternative to the third party cookie, Google leveraged cryptography for its recent FLoC (federated learning of cohorts) proposal, but so far it’s gotten mixed reviews. The EU rejected the proposed solution from the digital giant due to valid concerns about the proposal giving Google an unfair advantage. Publishers have criticized FLoC as yet another attempt from Google to increase their hegemony over their ad stacks.

But in the process, cryptography was given another point of validation from the biggest advertising player in the world. The bottom line is that cryptography can address some of the biggest problems in advertising, like fraud and privacy. 

When it comes to fraud, cryptography can solve things like domain spoofing overnight, which was the method used in a recent CTV scheme that forged 650 million devices. It can also ensure that device labels are correct, which is something that we saw in the most recent PARETO and OctoBot schemes. The fraudsters disguised low tier mobile inventory as premium OTT spots.

By having publishers and advertisers simply sign ad requests with cryptographic signatures, it creates technical proof that someone or something is what they claim to be, eliminating domain and device spoofing. And this digital signature can be placed directly into OpenRTB messages, working within the existing programmatic ecosystem. 

This is already being done in-market by some of the biggest agencies and brands in the world. And now that the pesky fraud problem has been addressed, buyers are taking this cryptographic approach to address privacy concerns. 

The same way advertisers and publishers can place signatures in programmatic ad requests, they can also cryptographically seal data associated with campaigns. This ensures that only agreed-upon parties with the cryptographic key can access the data, guaranteeing future privacy compliance with GDPR and CCPA. 

We are also seeing digital signatures disintermediate industry middlemen, who have managed to siphon off half of all online ad spending

While FLoC might not be the savior the ad industry is looking for, it certainly opened everyone’s eyes to the potential of cryptography. It’s already working at scale within the current programmatic ecosystem, solving for fraud, privacy and transparency problems immediately. The next step is just empowering supply chain participants with the technology. The technology to stop fraud schemes like PARETO and OctoBot. The technology to ensure GDPR compliance. The technology to cut out middlemen. The technology to take us into the future of advertising. 

Christiana Cacciapuoti is the executive director of AdLedger, the consortium building open technical standards that use blockchain to increase the integrity of digital media. Since co-founding the non-profit in 2018, Christiana has grown the consortium to include more than 90 brands, agencies, and publishers including IPG Mediabrands, Meredith, Omnicom, Hearst Television, Publicis, and The Hershey Company.