Ad fraud still rampant in Southeast Asia with potentially USD 260 million lost, report finds

Fintech and e-commerce platforms are affected the most by ad fraud.

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Ad fraud still rampant in Southeast Asia with potentially USD 260 million lost, report finds

A report by adtech firm  AppsFlyer found that the Southeast Asian region is especially vulnerable to ad fraud compared to the rest of Asia Pacific. Southeast Asia lost almost USD 260 million in the past six months to digital ad fraud, such as fake app installs or clicks initiated by bots, estimates AppsFlyer.

The firm said Southeast Asia still has “click farms,” or physical locations with racks full of devices on which scammers manually perform different actions like clicks, installs, and registrations, to skim off rewards. However, device farms are now seen as a less effective method because they’re drowned out by the number of real mobile devices. Fraudsters now resort to more sophisticated, automated tools.

Southeast Asia’s losses accounted for 40% of the total estimated ad fraud losses in APAC which totaled USD 650 million, according to AppsFlyer. India is the second biggest target for ad fraud in the region with estimated losses of USD 186 million.

AppsFlyer identified several reasons why Southeast Asia is particularly susceptible to ad fraud.

The region has a high mobile internet penetration rate and people spend 3.6 hours per day on average on their phones, which is higher than in China where individual usually spend 3 hours on their mobile devices. According to a We Are Social Report, in 2018, there were 391 million mobile internet users in Indonesia, Thailand, Malaysia, Singapore, Philippines, and Vietnam alone.

At the same time, an improvement in the quality of connectivity and the rise of electronic payment channels are also contributing factors that make Southeast Asia a profitable target, AppsFlyer says. The problem is compounded by the fact that Southeast Asia still has a bit of a talent shortage in app development, that fraud is already comparatively high in local marketing networks, and that now marketers are spending in increasing high volume on digital campaigns.

Fintech and e-commerce companies are most affected by ad fraud, AppsFlyer found. That’s not surprising, considering that these firms also tend to be the biggest with large marketing budgets to spend.

In this report, AppsFlyer analyzed activities from November 2018 to April 2019 by examining 2.5 billion installations consisting of 8,000 apps in the entertainment, finance, gaming, e-commerce, travel and utility segments.

AppsFlyer is a company that offers solutions to the problem it describes, which means it has an incentive to call the problem out and put numbers on it. However, it’s a well-known issue in the industry and most marketers admit that they expect to lose a significant amount to fraud.