It’s tough to tell if digital marketing fraud is in fact on the rise…or if startup tech companies are simply becoming more aware of it.
For years, it seemed as though it was enough for companies in every industry to transition their advertising budgets away from traditional marketing practices to methods more conducive to the digital realm. Paying for online ads, SEO content, and click engagement seemed sufficient for businesses to leap into the digital marketing space. As many tech startups are now finding out, this didn’t end up being the case.
In the last ten years, tech startups, in particular, have discovered that the money they’ve been paying to digital marketing agencies was returning in the form of farmed-out clicks and engagements by bots, not actual revenue from real people discovering their product or service. It took years for many of these businesses to realize they were throwing money away.
Large numbers of clicks don’t necessarily mean that human beings are clicking on ads. They certainly don’t equate to additional revenue.
You might think that only smaller startups have been falling into this trap, but in the last few years, there have been several high-level lawsuits and scandals involving fraud and racketeering. From eBay to Uber, tech giants are also realizing how much money they’ve been throwing away on fraudulent marketing and scams.
Fraudulent Marketing in the Tech Sector
A Harvard Business Review study discovered as early as 2013 that there were no significant changes in eBay’s sales after discontinuing ads in specific regions of the country. This landmark study suggested that the millions of dollars the second-hand sales company was spending on advertisements weren’t increasing their bottom line in any quantifiable way.
Even if online ads led to a significantly larger number of visitors to a website, the cost of those ads dwarfed the amount of money made through them. The real-world dollar value of digital marketing practices was easily obfuscated by the impressive amount of clicks on advertisements and the number of SEO page engagements. This is a fairly common story.
More recently, Uber filed a lawsuit against their digital marketing firm Fetch in 2017, claiming that the London unit of Japan’s marketing giant Dentsu Inc. — one of the top ten marketing firms in the world — was guilty of using fraudulent ads and fabricated click generation. The $40 million lawsuit alleged that Fetch was improperly billing Uber for fraudulent ads. The Uber suit was later added to a San Francisco lawsuit against Phunware, whom Uber alleged wire fraud, racketeering, common law fraud, and transporting fraudulently obtained funds across state lines. Uber ended up winning the case and $17 million for spoiled evidence.
Another high-level digital marketing fraud case involves Airbnb. According to CEO Brian Chesky, “90 percent of our traffic was direct or unpaid” on a recent quarterly earnings call. The home-share tech company chose to cut $800 million in online ad expenditures last year and alluded to a permanent shift to brand advertising in 2021.
As is so often the case, what happens at the macro level is also taking place with smaller businesses. Tech startups tend to be laser-focused on product and service development and therefore easy targets for slick-talking marketers boasting over impressive numbers. Thankfully, more and more startups are beginning to ask these marketers to demonstrate quantifiable sales conversions in dollars as well as clicks and engagements.
How Do They Do It?
Beyond accepting — and, in some cases, employing — bots as legitimate clicks, programmed marketing media has created the illusion that the scale of ad impressions, low cost per thousand (CPM) prices only possible from fake traffic, and fraudulent performance engagement of marketing content results in business revenue and growth.
Nowadays, tech startups have discovered that large-scale digital marketing doesn’t lead to tangible results. What matters is that real human eyes are seeing the ads, clicking on them, and becoming a user of the product.
With the COVID-19 pandemic adding economic pressure, businesses of all kinds are retooling their advertising and marketing tactics. More and more startup teams are demanding to see tangible results and refusing to be bamboozled by numbers that don’t drive sales.
Look for Digital Marketing That Offers Real Results
Tech startups that have been burned by digital marketing agencies often make the mistake of throwing out the baby with the bathwater. The best response is not to abandon digital marketing altogether but rather to spend time on the front end sussing out reputable agencies that can provide solid references and case study success stories.
Tech companies both large and small have become understandably skeptical of digital marketing tactics that include paying for fabricated clicks and the presentation of flattering “vanity numbers” that don’t represent revenue increases. Companies will need to bring a higher level of discernment to how they spend their advertising budgets. The best bet is to hire a digital marketing agency that provides quantifiable proof of revenue streams, not just empty click performance and the digital reach of ads that real live human beings either don’t pay attention to or click through very often.
Digital marketers typically know what they are doing. Integrity is paramount to money well spent on ads and the development of highly-trafficked website content that’s been optimized for search engines. As tech startups become more aware of the difference between clicks and the bottom line, honest and trustworthy marketers will edge out those that participate in fraud. Some of the largest and most powerful tech companies in the world will forgo digital marketing in favor of creating their ads and avoiding outsourced digital ads altogether. Smaller tech startups can learn from the costly mistakes and responses of Big Tech.