Deterring Online Advertising Fraud

How does an advertiser ensure a successful online campaign with an unknown publisher? This paper suggests the advertiser delay payments till it satisfies itself of the results it seeks.

The web is full of small sites where one can advertise. Advertisers have a tough choice. Ignore them at your own peril. Embrace them at, well, your own peril as well!

This paper suggests a way out of this dilemma. Online partners are not paid until after their work is complete, and advertisers can extend this delay both to improve detection of improper partner practices and to punish partners who turn out to be rule-breakers.

The paper captures these relationships in a screening model with delayed payments and probabilistic delayed observation of agents’ types. It derives conditions in which an advertising principal can set its payment delay to deter rogue agents and to attract solely or primarily good-type agents. Through the savings from excluding rogue agents, the principal can increase its profits while offering increased payments to good-type agents.

The result: the paper estimates that a leading affiliate network could have invoked an optimal payment delay to eliminate 71% of fraud without decreasing profit.

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Posted on 04/21/2009 by


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