UP541 Addicted To Fake Fan Numbers: When Sport Met The Dead Internet

Digital advertising has a dirty secret: most of what you're paying for never reaches a human being. Dr. Augustine Fou is a world leading expert in digital ad fraud and has spent 20 years watching the internet fill up with bots, fake impressions, and dodgy metrics; and the advertisers funding it often know, but keep spending anyway. The incentives are too comfortable to disturb.

Sound familiar? Sport has built valuation models, rights deals, and global expansion strategies on fan numbers that deserve the same scrutiny. This conversation is about the mechanics of self-deception, and why the moment of reckoning may finally be arriving.

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Transcript

Richard Gillis, Unofficial Partner 0:00

Are we addicted to to the massive numbers

Dr Augustine Fou 0:01

Yep. So that's been the kind of bill of goods that we've been sold for the last 15 years. It doesn't mean that it's actually gonna drive real sales for advertisers. Some of these advertisers are finally waking up to the fact that the super large numbers don't mean anything if the vast majority of them are basically bots that are following your account bot views on your YouTube, right? It's not actual engagement. It's not real people to begin with. So none of that's gonna actually translate into real business outcomes.

Speaker 2 0:28

Hello, Richard Gillis here. Welcome to Unofficial Partner. Today we've got Dr. Augustine Fu, one of my favorite guests, been on twice over the last few years. He is a absolute expert in the subject of digital ad fraud. The advertising industry's dirty little secret. Most of what you are paying for never reaches a human being. Fu has spent 30 years watching the internet fill up with bots, fake impressions and fraudulent metrics. And the advertisers funding it often know, but keep spending anyway, the incentives are too comfortable to disturb. If this sounds familiar, we're. The same is happening in sport. We built valuation models, rights deals, and global expansion strategies on fan numbers that deserve the same scrutiny. This conversation is about the mechanics of self-deception and why the moment of reckoning may finally be arriving.

Richard Gillis, Unofficial Partner 1:24

Listen, thank you very much for coming back on. It's been too long. The episode that we did, we've done a couple of things in the past and I'll point people towards those, and they have always been really well received. The numbers on'em are really high because. I always say that your work it does my head in a bit. let, let's talk about you.'cause I, I want to just sort of set you up with, the people that haven't heard previous recordings with you, what's the work that you do? give us a sort of taste

Dr Augustine Fou 1:50

sure. These days I'm doing ad fraud research, so in digital marketing, obviously we run billions and billions of ads online. The problem is some of those ads are actually not seen by humans. They're being displayed to bots or software programs, a lot of times the big advertisers are chasing these vanity metrics. Like, oh, we bought 10 billion impressions and we got 10 million clicks. And all of these vanity metrics are what we call quantity metrics. that doesn't necessarily translate into sales. So my job is to help them identify which ads are being shown to bots, uh, where they, where the ads go, like which sites and which apps are responsible for that kind of fraud so that they can actually, uh, put those in a block list and not waste any more of their ad budgets on that. these days I'm an ad fraud researcher and I have my own platform called FU Analytics, which is in a way similar to Google Analytics, but Google Analytics is used for websites. FU analytics is used to measure the ad impressions as well as websites bot detection is actually built in. So it becomes an analytics tool for marketers to use and also their agencies. basically monitor more closely their digital campaigns and make sure they're not wasting a whole bunch of money on fake visitors, fake views, fake likes, and those kind of things.

Richard Gillis, Unofficial Partner 3:13

Can you give us a sense of the scale of what you are seeing, the scale of the bots, the, you know, we'll get to the, the term dead internet in a minute, I'm sure, but just give us a sense of the scale of it.

Dr Augustine Fou 3:24

The scale is enormous and it's almost to a point where it's hard to believe how large it is. But let me use an analogy that maybe folks have heard of or understand, you've heard of these, uh, DOS or distributed denial of service attacks where giant botnets simply overwhelm a site with so much traffic that the site fails. And these include even the largest of sites, right? Whether it's Twitter or LinkedIn or any large sites, they can send so much traffic, uh, that they can take them down. So it's that same kind of traffic that is now used to generate ad impressions. For example, if you have a whole bunch of these fake sites, there's no humans that visit them at all. So they have to go out and buy 100% of their traffic. And essentially, you can think of that as just renting time on these giant botnets because you can basically tell them, uh, these botnets or whoever's managing these, we need 10 million page views. In fact, 10 billion page views on our sites or sites, they'll just send that traffic and then when the page loads, the ads load. the scale of the problem is truly enormous, but it's actually been very significantly under reported the fraud verification tech companies, that exist to try to detect that fraud is basically missing most of the fraud. basically it's marked as valid. When it's actually invalid.

Richard Gillis, Unofficial Partner 4:56

And why is that? Why is that happening? Is that a technical thing or is there, it feels like there's an incentive for everyone to have a big number.

Dr Augustine Fou 5:04

that's a perfect segue. Yeah, the, the incentive actually is kind of counterintuitive because for the past 10 years, a lot of the biggest advertisers and the biggest agencies love buying a lot of digital ads because it makes'em look innovative, right? That's literally for the last 10, 10 years. So if there's a lot of fraud. They could detect it. Then there's not a lot of inventory to buy because you realize that's all bot generated ad impressions, not humans visiting websites. there was an incentive. buy the services of these legacy verification companies, because both of them, there's two large public ones have published press releases that said fraud or IVT. Invalid traffic has been 1% for the last 10 years. So very conveniently, the agencies loved buying their reports because it said, oh, hey look, these guys said fraud is 1%, so there's nothing wrong with what we're buying. enabled them to continue to buy super large quantities. For the last 10 years. the problem is that's actually not all the fraud there is. Right? I like to say that the 1% that they detect is basically all that they can detect, not all the fraud. There is, and there's a technical reason for some of that as well. bots have gotten more advanced over the years, so it's actually harder to catch, but there's actually an even simpler explanation. It's called verification stripping. Both of these companies also have published about that they know that's happening. What that means is the bots are actually blocking their detection tags so that they cannot mark the bots. As IVT or invalid traffic. So the problem with these platforms is that they report no data as no fraud. And that's actually wrong, right? If they have no data, they shouldn't say that it's no fraud, because it could actually be a bot that just blocked their detection tag, so they couldn't collect any data on the bot. I think, uh, that's a critical. Kind of nuance that a lot more advertisers should ask them about, right? If they're paying these companies, these legacy verification companies for detecting fraud, and they're only catching 1% of it, that's not a very good use of money, So the, the big advertisers should ask them harder questions like, how, what? Percentage of the impressions that you actually measure, or could you actually measure with a JavaScript tag there's a whole bunch, like a large percentage that's not measured, you need to disclose that as not measurable instead of not fraud.

Richard Gillis, Unofficial Partner 7:40

Right.

Dr Augustine Fou 7:40

So that's been a major, major issue and that's why fraud and IVT, invalid traffic and bot traffic have all been severely under-reported. And that's why a lot of advertisers don't realize how big of a problem this is.

Richard Gillis, Unofficial Partner 7:54

See, when I first. Heard of this or when I, when you sort of think about it, you think, okay, you've got that chain of, you've got the client, the advertiser, the big brand, whatever they are, whether they're a car company or an airline or whatever it is at the top end. well, take me through the chain to

Dr Augustine Fou 8:12

Yeah.

Richard Gillis, Unofficial Partner 8:13

me as a punter who, who is in the middle between me and the airline.

Dr Augustine Fou 8:19

So the advertiser, right? Whether it's the airline, the automotive company, or whatever, the larger those advertisers, the more likely they would've used the media agency to buy their digital media for

Richard Gillis, Unofficial Partner 8:31

Yeah.

Dr Augustine Fou 8:32

And this goes all the way back to TV advertising,

Richard Gillis, Unofficial Partner 8:34

Yeah.

Dr Augustine Fou 8:35

would go to a big agency, a media buying company. And say, oh, you know, get us a really good deal on TV ads. And so the media agency would do that. in digital ads a lot of that negotiating power is no longer necessary because every single ad impression is auctioned off. So in programmatic media, buy in theory, every single ad impression is bid at the market clearing price. Bid and won at the market clearing price. So it really makes the agency's collective negotiating power completely irrelevant and digital. However, old habits die hard, so the big advertisers ask their agency to. Go buy me as many impressions as possible for as cheap a price as possible, right? They think they're getting a good deal by getting a very large quantity at a very low price. And the reason they still think that is because in the days of TV, advertising, reach and frequency were very key drivers of advertising effectiveness, right? You wanted to reach a lot of people with your message. And then frequency, obviously, you don't want to be, uh, too frequent, right? You don't want your ad to run too frequently.

Richard Gillis, Unofficial Partner 9:44

Hmm.

Dr Augustine Fou 9:44

In digital, the reason that no longer holds, right? The whole reach and frequency argument that we have seen fraudsters and bad guys generate unlimited inventory, right? So unlike on tv, there's a finite number of 32nd spots. There's a finite number of 15 second

Richard Gillis, Unofficial Partner 10:03

Hmm.

Dr Augustine Fou 10:03

be purchased right there. There's a limit to the supply. In digital, there's no limit to the supply due to fraud. So over the last 15 years, uh, that I have observed digital, uh, there's been a tremendous amount of money shifting into digital, from tv, from print, from radio, from offline billboards, to the tune of hundreds of billions of dollars. would think if there's that much demand. into digital, if there's a finite supply, like literally the, the people going to a legitimate publisher like New York Times, Washington Post, CNN, that the prices should go way up, right?'cause the demand went skyrocketed,

Richard Gillis, Unofficial Partner 10:47

Yeah.

Dr Augustine Fou 10:48

the supply was finite. But that didn't happen. In fact, the opposite happened. At a macroeconomic level, we saw that CPMs, the prices for these digital ads have declined for the last 15 years, and that means the supply outgrew the tremendous growth in demand, right? The supply grew even faster. How is that possible? We did not triple or quadruple the number of humans on earth. We did not go beyond a 24 hour day right in our solar system. So how is that all possible? you know, if you look at some of the Pew Internet, uh, data in terms of humans', usage of the internet, social media, and mobile, that has all been maxed out since 2013. Right. So humans consumption, humans usage of the internet, social, mobile, have all been flatlined. It hasn't grown much, but yet the amount of inventory that is now bought and sold through digital advertising, these programmatic platforms is in the hundreds of trillions of ad impressions. So you can see, okay, all of it's made up. Outta thin air, even if those fraud detection companies could not detect it. there's one other data point I just published recently. looked at 250 public US companies, and we looked at their revenue growth from 2009 through 2024. So over a 15 year period, most of the largest of those advertisers did not grow at all, shifting tremendous amount of dollars into digital. Thinking that they were showing the right ad to the right person at the right time. So all of this hyper targeting, all of this personalization did not lead to sustainable long-term growth in revenue. In fact, when they shifted all that money into digital, they started to neglect. and awareness. So now you're targeting the people who have heard of you before and who have purchased from you before, and you're neglecting the other 99% of the market who simply don't know who you are. So they're, they're, you know, forgetting to do the basic blocking and tackling of advertising where you have to fill the top of the funnel by generating awareness first, and then you can use digital to start harvesting some of that demand. But by overspending in digital, some of these largest advertisers have simply not grown because they've neglected to do the awareness

Richard Gillis, Unofficial Partner 13:18

So the debate within the advertising effectiveness space, whatever you know, is that presumably has fallen hugely. Have they, how do they explain the failure of advertising to reach its audience, to generate, you know.

Dr Augustine Fou 13:35

They, they haven't. In fact, uh, we only now have the 15 years of revenue data to show them that the compound annual growth rate has been nearly zero. So what has happened is that the digital reports, the attribution reporting that you get from the platforms from which you buy, the ads appear to show. Very high roas return on

Richard Gillis, Unofficial Partner 13:59

Mm-hmm.

Dr Augustine Fou 13:59

or ROI, right, return on investment. But unfortunately it's not, it's not fraudulent, but they're just incorrectly reported. And what I mean by that is they are claiming credit for sales that had already occurred. So very few advertisers have done the following, but I encourage them to do so. If you take up all of the. Conversions or sales, that one platform like Google Reports, and then you look at all the conversions and sales that another platform like Facebook reports, and then you look at a third, you say YouTube, you're doing YouTube, advertiser, maybe TikTok, and you look at all the conversion that they're reporting to have driven, you're probably gonna get four times the number of sales you actually got. In that time period. So essentially the attribution reporting is flawed, so it makes it look like you're getting sales while you're doing the digital advertising. It's actually not causation. It's not because you're of your digital ads, you cause those sales. that gets to a very fundamental thing that advertisers need to refocus on, which is incrementality, right? Were those sales incremental? means would they have happened in the absence of the advertising? The answer is, most of the sales that these platforms are claiming credit for would've happened anyway. It wasn't due to the advertising, right? So using just a very simple offline analogy, right? If you think about soup and soda, if you think about paper towels, toilet paper, they, they're sold in grocery stores. Okay? So over here you're doing digital. Over on in the stores, the sales of soup and soda, toilet paper and paper towels keep happening. So now you're happily attributing those sales to your digital advertising. What most advertisers have not done is actually turn off that digital advertising to see if the sales of soup and soda, toilet paper and paper towels continue.

Richard Gillis, Unofficial Partner 15:58

One of the case studies was Procter and Gamble, wasn't it? That was a moment. And I was wondering, I was gonna ask you about what the impact of that was.'cause you had this sort of hiatus where they, you know, massive, probably arguably one of the biggest advertisers in the world. just tell me about they, they turned off their digital ads or it felt like a case study.

Dr Augustine Fou 16:14

billion, yeah, they spend 2 billion annually in digital advertising. They turned off 200 million, so one 10th of it.

Richard Gillis, Unofficial Partner 16:21

Right.

Dr Augustine Fou 16:21

basically they saw no change in sales. Now, all these other proponents of digital found other explanations for that. Oh yeah, it's, it's not related. And it was like cost savings or whatever. So they tried to explain it away, and my question for them is, okay, well if there's no change in the sales, why didn't you do another one? So they never followed that up with anything else. since then we have other case studies, right? So before that, there was an eBay case study where they basically in the US turned off all of their search spending, paid search spending in the West coast, and they saw that there was no change. The traffic coming from the west coast. Okay. So they were essentially bidding on terms that people would've used to search for their, uh, search for items on eBay and come to eBay. Anyway, that was a Harvard Business School review from 2011. And since then, Airbnb has done the same. They have said, and there's a work article on this where they said, we have overspent on performance marketing. We're actually gonna cut all that out. They actually did that during COVID, right? They stopped all the performance advertising and then simply observed that the traffic came back to 95% of their, uh, original levels with no additional spending. they basically, from that point forward, said, let's go back to branding. And you see Airbnb doing a lot more TV ads. that's actually allowed them to grow again. And there's one other case study off the top of my head. It's from Adidas. Uh, they actually said we've overspent on performance marketing and we're going back to branding. So there's been a few of these case studies. They're kind of sparse, but those are good lessons where the marketers themselves have realized, you know, when we're trying to do this hyper targeting, this ultra personalization, trying to get the right ad in front of the right person at the right time, it's too surgical, right? There's a lot more people who are simply not aware of your brand yet, or who need to get inspired by your new products, right? They're not even aware of the new products, the new shoes that Adidas has. You need to get your ad in front of those people. I've actually written an article about this. I call it the Greenfield, Instead of targeting the 1% that has already purchased from you before, what about the other 99%? If you actually just start showing ads to the other 99%, that's a group. That's 100 times larger than the people who have already purchased from you before. So even if 1% of those converted right, you've basically doubled your sales. So the, the message for advertisers is make sure you don't neglect doing the greenfield advertising, right? Going back to brand and trying to get your ad and brand in front of other people who have not purchased from you before. So some of that's gonna solve the fraud problem as well, because you gotta make sure your ads are shown to humans. And sometimes TV or maybe outdoor billboards are just as effective or more effective than the surgical digital ads.

Richard Gillis, Unofficial Partner 19:16

So loads of questions. So one question is. There's a question about the client, as in they are looking at this picture. And I used to think when I worked at a, you know, within an advertising agency, people would quite often say, oh, well the client doesn't either, doesn't care or doesn't understand and let's keep them blind to this little ruse that we have.'cause we're making a lot of money at the agency and. Increasingly, you sort of think, no, they're not stupid. They know it, but there's an incentive for them also to keep this game going. And just to jump it over to sport, just the analogy of sport is, is fan numbers. So there's a whole sort of question of how many fans a club has, how many a league has. We're about to have the NBA come over to Europe and open up franchises. They're gonna be, someone will pay 700 million for them predicated on a global fan base. Survey and I can sort of, it's analogous. It's not, you know, it's, it's similar but not I.

Dr Augustine Fou 20:13

Yeah, I, I can, I can tie those two together.'cause over the years, you remember when Facebook first came out, a lot of these brand advertisers, I remember most famously Burberry, they set up a Facebook page and it's like, oh. We want to have more likes and you know, fans, so those big advertisers literally went out and started buying likes. Initially, it started off as the right idea. Let's pay a social media agency to get us more people to our page and have them like our page. But then it'd say, oh, well we can just go buy likes by the thousands. Right? There are vendors who are willing to sell that to us. so essentially that gave rise to the first cottage industry of fraudsters who would set up a lot of Facebook accounts so that they could just go and supply the likes to whichever brand wanted to buy them. Right? So that was the first wave. And over the years. Whatever metric, right? Whatever quantity metric you wanted to game, you could literally go buy those things, right? So you can literally go online and Google for this, right? I want more views for my YouTube channel, okay? Just go buy them. I want more followers on my Instagram account. Just go and buy them, right? I want more listens to my stream on Spotify. Just go and buy them. It is 100% bought traffic. It is 100% automated. It's not real. But over the years when everyone has come to accept those numbers that, like you said, more fans, bigger numbers, uh, mean higher valuations. Everyone bought into that concept of bigger numbers equals better. lot of that is rooted in just video game play, right? So higher scores are always better than lower scores, right? Higher scores win. it's that basic kind of mentality that now pervades, uh, marketing. So sports marketing, whatever,

Richard Gillis, Unofficial Partner 21:59

Are we addicted to to the massive numbers because you got, it's really hard to come to market with a story that hasn't got a enormously incredulously large number.

Dr Augustine Fou 22:09

Yep. And the growth rates. Right. So that's what Silicon Alley has based all of their valuations on. They can be losing money, but if that hockey stick growth rate looks like a hockey stick shooting straight up, they can get future valuation, that's worth a ton of money. So that's been the kind of bill of goods that we've been sold for the last 15 years. It doesn't mean that it's actually gonna drive real sales for advertisers. I think you're right. Some of these advertisers are finally waking up to the fact that the super large numbers don't mean anything if the vast majority of them are basically bots that are following your account bot views on your YouTube, right? It's not actual engagement. It's not real people to begin with. So none of that's gonna actually translate into real business outcomes.

Richard Gillis, Unofficial Partner 22:54

one of the, the counter then is brand over performance marketing. So that's one solution to this, but in a way. Brand is a sort of ruse in itself, isn't it? You are, you are saying. Right. Okay. As long as we do some big, like Nike is always that adida story. Nike similar type of thing where there's a, you know, one CEO comes in and says, we're gonna stop doing, we are gonna do more performance marketing.

Dr Augustine Fou 23:19

Yeah,

Richard Gillis, Unofficial Partner 23:20

Digital, blah, blah, blah. And then he gets the sack and then the next person comes in and says, now we're gonna go back to

Dr Augustine Fou 23:26

do something different.

Richard Gillis, Unofficial Partner 23:27

Nike storytelling and brand.

Dr Augustine Fou 23:28

Yep.

Richard Gillis, Unofficial Partner 23:29

brand is a bit of a ruse because it's sort of a bit less, it's intangible and therefore never promises to be measured in quite the same way. The promise of the internet, and going back to its initial, you know, ad tech initial, uh, iteration was. attribution and it was, that person is there and you are seeing, they're receiving the ad and therefore you can trade with them, you know, who they are. All of those stories I've, you know, I'm assuming you've lost faith in that story, but it's also, brand is also problematic in some ways.'cause I could sort of see, okay, I'm gonna come in now and an ad agencies is lovely'cause I go in and say, right, I'm gonna sell them these massive great campaign ideas and they're gonna just. Go that way because they're not gonna get caught out in the same way, possibly. But they don't really need to be caught out in the same way because, you know, brand is,

Dr Augustine Fou 24:21

goes back to one, one more of the misaligned incentives. So I've seen this over the years where the marketers, uh, if they're given a budget, say$50 million, a hundred million dollars. Their job is to spend it before the end of the

Richard Gillis, Unofficial Partner 24:34

yeah.

Dr Augustine Fou 24:34

spend it all before the end of the year. And they're always definitely afraid that they are not able to spend it all because then that will mean they'll get less budget to use next year. So in some cases, again, it's a philosophical thing. I've seen too many marketers, uh, are just desperately trying to spend it all instead of actually looking at what it drove for them. Right. And so similar, the agencies are set up, their job is to help. The marketer spend it all. So there's been cases where, you know, you have 10% of the funds left over in the last month of the year. I've heard of these cases where the agencies are desperately going to the programmatic platforms and say, can you help me spend this last 10 million?'cause I need to spend it before the end of the year. Just make some stuff up and let me spend it. Those are all misaligned, its incentives and it's usually hidden from view'cause nobody's willing to admit that. Right. So there's a couple of things to to think about here, and I really differentiate between the theory of digital advertising and the reality of it. theory is the right ad to the right person at the right time. That all still works. You can do that. And the best way to do that is

Richard Gillis, Unofficial Partner 25:39

Sure.

Dr Augustine Fou 25:40

When the person types in the search term, they are telling you. they're looking for, when they're looking for it. And if you can get them either organic content or literally a paid ad, both of those are useful to them at that time because that's when they need that information to inform their own purchase decision. But that doesn't happen that often, right? It happens when that person is ready to buy and are looking for something, right? So the. The other part of the branding is that, oh, now when you say, okay, we need to go back to awareness and branding, then the agency interpret that to say, oh, let's go buy you as many YouTube views as possible. Right. YouTube ad views as possible, as many, uh, Facebook, Instagram impressions as possible. And that's where they actually need the fraud to get those large numbers so that they can actually spend all that money.

Richard Gillis, Unofficial Partner 26:30

Mm.

Dr Augustine Fou 26:31

So that's where the branding right. In theory you want to go back to more awareness, but in practice, if all of that awareness is just bought accounts and fake views, it's not gonna generate the outcomes. So again, the advertiser still has to be very wary of what they're buying and still have to ask very hard questions of the vendors, right? Whether it's the agency, uh, agencies, the ad tech companies, or whoever they're buying from to make sure that they're actually getting their ads in front of humans so that it can have some kind of business impact.

Richard Gillis, Unofficial Partner 27:02

So I'm gonna push this then into the, uh, there's an obvious AI question. Now I am spending a lot of time on Claude, and I'm thinking, okay, I'm asking that questions. That's the interface that I'm dealing with, rather than the Google front page and what that. Means, so I'm trying to sort of see, follow your through, assuming there are bad actors and there will always be bad actors. There's assuming that there are clients at the other end who want my attention in some way. At the moment it feels like it's a, a different relationship, but I'm wondering how you think it's gonna evolve.

Dr Augustine Fou 27:39

yeah, it, it's actually pretty simple. So if you're spending time on Claude or Chat, GPT or, or Gemini, or any of these AI agents. That means you're not spending time on websites or YouTube or any, any other place. it's simply an extension of what's been happening to regular sites like New York Times CNN Washington Post for the last 15 years. Humans have found ways to get news in other places, so they're literally not spending as much time on these publisher sites. So that has led to 15 years of revenue decline. fewer visitors visit and they're looking at fewer pages per visit, the number of page views goes down for these legitimate publishers. So when they're spending time on other things now it's compound AI's compounding the problem because if you ask chat GPT for a recipe. It'll just show it to you right there. You don't literally need to click through to a recipe site. So that recipe site, which relied on traffic to get advertising revenue, simply lost your page views, right? They're not getting that anymore. So that's one aspect of it, but there's also some confusion in the marketplace about humans visiting the content sites versus AI crawlers. so for example, when I'm chatting with chat GPT, sometimes it will show me a source link, right? So it's cited the source as where they got the answer and I click through on it. That's actually me visiting the page and there's usually a UTM source equals chat gt.com.'cause. Chat, GPT appends that to the click through. that's actually me, the human, that's totally fine. That is different than when chat GPT sends crawlers out to basically harvest or steal the content from large publishers. Right. So in that case, the, the type of traffic that I can see in my data is that it's enormous. It's almost like a DOS attack. It's so tremendous. On a certain day, or maybe every week they come and they're just scraping all the pages on mass so they can steal as much content as possible. different phenomenon, right? Those are 100% bots and sometimes they don't even disguise themselves, right? It's clearly coming from Amazon data centers, Google Cloud, Microsoft Azure, and it's literally just bots.'cause they don't even care. And even if you have robots txt to say, no, we don't want these AI crawlers on our site. They just ignore it and steal your content anyway. Okay, so hopefully I'm, I'm making it clear that some of the visits are actually humans clicking through after they chat with chat GPT. Those are fine, but then others are just enormous spikes in traffic because the ais are sending their crawlers to, to steal the content for AI training purposes, and that's different.

Richard Gillis, Unofficial Partner 30:20

There's, there's a sort of, you mentioned earlier, and, and as a journalist, I've, this is a question I've been asking for 25 years, which is why there isn't a flight to quality. When everything is a, you know, when lots of bots are going to fake sites, you mentioned the New York Times, but we, you know, and again, just to throw in the sports analogy, sports entities are framing themselves as publishers. Effectively. Their content houses, their media houses. They're generating content, they're looking to engage with fans and all that. Grow new fans in new areas around the world. So it is sort of analogous, but why hasn't the price of. The New York Times or you know, other, a set of a premium set of publishers gone through the roof, because that's the proof point

Dr Augustine Fou 31:08

no one values that. Yeah, so, so basically, if you think about the advertisers, the buyers, right? And their agencies, both of them are chasing large quantities. At the beginning of programmatic advertising, right in the 20 10, 20 13 timeframe, programmatic is when we really just went to help. prior to that, the advertisers would sit across the table from a Disney plus, A-E-S-P-N-A Hearst or a Conde

Richard Gillis, Unofficial Partner 31:35

Yeah.

Dr Augustine Fou 31:35

York Times. They would sit across the table from a publisher and actually negotiate the media buys from them. But once the programmatic ad exchanges came along, the buyers are no longer negotiating with the publishers. They're saying to the exchange, here's$50 million, go spend it for me. Right? And for the exchange, all of these middlemen, they're toll takers, they basically make more money when there's more volume that flows through their pipes. Whether it's good quality or not. So again, we go back to the addiction, right? When the buyers are addicted to super large quantities and super low prices, when you tell them, oh, you should go back to buy from New York Times, because those ads are actually shown to humans. Say, well, there's so little quantity, right? There's just not enough for me to buy and the prices are so much higher. But this gets me to, I, I use a very simple math equation to explain this. 10 years ago, 15 years ago, you were buying ads at$30 CPMs.'cause you were buying from real publishers that have editors and journalists and cost of content. Now you're buying ads for$3 CPMs. You think you're saving money, but no, CPMs are a price. They're not a cost. So at$3, you're buying 10 times the quantity. So you're still spending$30, you didn't save any money. Because you're buying$3 inventory. not from New York Times. They can't afford to sell it to you that low. So essentially you're buying complete crap off of the exchanges. So now, right, you didn't save any money. It's just been a misnomer. Right. The agencies keep talking about cost efficiency and what they mean by that is they always refer to CPM. is a price. It's not a cost. again, that's why they said, oh, we can get you much larger quantities and we can give you cost efficiency.'cause the CPMs look lower. the advertisers need to wake up from that stupor and realize that the CPMs are a price. You're not saving any cost by buying 10 times the quantity at one 10th. This price,

Richard Gillis, Unofficial Partner 33:44

it feels like, it's a solvable problem. Do you know what I mean? It, it feels like it shouldn't be like this and that we've got enough evidence now. And instinctively the story you're telling feels right. So I'm just wondering. okay, well if it is a solvable problem, why isn't it not being solved?

Dr Augustine Fou 34:03

and let me kind of differentiate between solving it for the industry solving it for specific advertisers who

Richard Gillis, Unofficial Partner 34:10

Yeah.

Dr Augustine Fou 34:11

I've been trying for 15 years to help the industry get out of its own way and stop wasting money. Nobody wants to hear it because there's too many vested interests. Just to recap what we said already before in this

Richard Gillis, Unofficial Partner 34:24

Yeah.

Dr Augustine Fou 34:25

the advertisers want to spend in full, the agencies want to help them spend in full, programmatic exchanges are middlemen, so they want more volume to pass through their pipes, right? The verification vendors are happily purchased because, uh, they report 1% fraud. Don't worry about it. Just keep spending. Okay, so everyone has an incentive to keep the current game going. since the pandemic, since 2020, there are certain advertisers that have basically woken up from that stupor and said, no, no, we haven't seen any kind of growth. Despite shifting so much into digital, they're now looking at their own outcomes and saying, okay, this is not working. And these days. Advertisers realize, okay, the stuff that these vendors, these verification vendors have been telling us can't be true. know there's more than 1% fraud, right? Your gut tells you it's more than 1% fraud. So now when they're starting to ask harder questions, and they also realize that budget crunches are coming, right? They're not gonna have as much money to spend, so that means they have to make the current dollars work harder. when they're starting to ask questions. Now, not all of them, right, but. Certain advertisers saying, you know, can you come help us audit our campaigns and see what's going on because we really don't think it's working and, but everyone keeps telling me it's working fine. So that's when I go in, use my platform and say, oh, well of course it's not working because 90% of your ads are shown to bots. But even though I can show them that, I said, don't worry. Because now that you can see the problem, you can go do something about it. Right. Like you said, the problem is easy to solve if you know you have a problem. If you were using those legacy verification vendors and they kept telling you it's 1% fraud, don't worry about it. There's literally nothing you would do to try to fix that 1%.

Richard Gillis, Unofficial Partner 36:12

They're worried about the moment, aren't they? They're worried about the moment. It goes from massive number to real number and it's such a cataclysmic drop that it makes them,

Dr Augustine Fou 36:21

can't,

Richard Gillis, Unofficial Partner 36:22

it just hard to justify.

Dr Augustine Fou 36:24

So what I tell these advertisers is, okay you're not to blame. It's the tools. Right before when you were using the verification vendors and they kept telling you 1% fraud for the last 10 years, you couldn't see that you had a problem. Now that you can see the problem, okay, it's 90%, it's very scary. We're not gonna solve the 90% fraud overnight. But what we can do is put a transition plan in place because again, for the marketer, it's kind of embarrassing if they had to go back to their CEO and CFO and say, whoops, we spent all this money and 90% was wasted. what we do now is like, okay, let's go look for the top 10 bad guys. And what I mean by that is the most egregious, the highest volume ones, because when you take out the top 10 bad guys. That's gonna have the most significant impact on your campaigns, right? It's gonna reduce the red, and then wait a month, next month, go take out the next top 10 bad guys. So as you start doing this, your quantities are gonna drop, your CPMs are gonna go up, but it's a managed process. So for some of these advertisers, again, they can't solve the 90% fraud overnight. They can plan for it for the next 12 months, for the next 18 months, so that they can put in place this transition plan to explain why we can buy far fewer ads, pay higher CPMs, still save money and drive better outcomes. That's kind of how the, the sa more savvy advertisers are doing it right now. Right? They're putting a transition plan in place so that they can kind of wean themselves from this addiction to big quantities and low prices that are not real. It's not rooted in reality in any way. Right. And once they do that, they're gonna actually start to see their sales come

Richard Gillis, Unofficial Partner 38:11

And what's your sort of view of the platforms, you know, the sort of monopoly platforms that, at the center of this really in terms of the digital advertising market.

Dr Augustine Fou 38:21

bottom line is none of those platforms are gonna help you, right? Because again, they all are toll takers. They make more money when there's more volume that flows through. So if you don't care about it enough to take your own action. Don't rely on the platforms to do anything for you. will say that Facebook, for example, they regularly have to delete 1.5 to 2.5 billion fake accounts per quarter just to

Richard Gillis, Unofficial Partner 38:49

Wow.

Dr Augustine Fou 38:49

keep up with the amount of fake accounts that are on their platform. So they are doing something. They're not doing that for you, right? So you, the advertiser, you, it's your budget. you have to be careful about your spending, right? The platforms are gonna just let you spend it'cause they're gonna make the money. But there's also simple, non-technical things that you can do to save yourself 90% of the obvious fraud. So when you're advertising on Facebook. Make sure you turn off Facebook Audience Network. FAN.'cause that's where it's all the outside sites and apps. They're just used to drive enormous quantity and therefore drag down the CPM, right? So those are not real. You're wasting your money. Similarly on Google search, if you're gonna use Google search, make sure you turn off Search Partner Network. Which are all the sites outside of Google that are running those ads. Google things. So you want your ads on the main property of Google, right? Not on all these outside sites. So again, by turning off the audience network, you're saving yourself 90% of the obvious fraud. Similarly, on YouTube, turn off Google Video Partners, which is everything outside of YouTube. Humans are logged into YouTube all day long. Not those outside sites. So again, you want your ads to be where the humans are. And finally, TikTok. Turn off Pango, which is their audience network, which are again, thousands and thousands of sites and apps that have nothing to do with the the TikTok app, right? Humans are on TikTok. If you want to get your ad in front of those humans, make sure it stays your ad. Stay on TikTok. Otherwise, it's wasted to all of these outside sites and apps that nobody's ever heard of before. So that's just a recap. That's a non-technical. No cost way of saving yourself 90% of the budget waste, right? It's gonna help you cut out a lot of the quantity, and none of that quantity was relevant to you anyway, because your ads were not shown to humans in the first place. So again, you know, like you said, there are easy ways to solve it, but only if you want to, right? else in the industry is gonna want you to because that means they're making less money off of you.

Richard Gillis, Unofficial Partner 41:02

They're not coming for you. There's a, just finally, just gimme a sense of your, just optimism, pessimism in relation to just the internet because the internet. Yeah, I call it the internet. I sound like my granddad. But there is a, just the promise of it is just so alluring and the reality just feels for, increasingly for people I think is just disappointing, isn't it? And and you get that sense of being played the whole time, being gamed by people.

Dr Augustine Fou 41:31

I think I'm gonna be still on the optimistic side. So I've been in digital since 95, so the, the very earliest days, so 30 years now. So I will say, I'm gonna go back to being an optimist now in light of what I've seen in the recent years. So let's just think of it as we've been wandering in the wilderness for the last 15

Richard Gillis, Unofficial Partner 41:50

Hmm.

Dr Augustine Fou 41:50

right? With all this fraud and advertisers shifting money in and literally funding criminals. But now after the pandemic, more and more advertisers are getting back to a more rational, realistic state to say, okay, you know, we're overspending in digital. It's not driving real sustainable revenue growth for us. Let's look at what we can cut. Let's look at what we can do better, and let's not just blindly trust what the platforms tell us.'cause they're gonna say, oh yeah, your ROAS is awesome. Your ROI is awesome. If that's due to a flaw in the reporting, it's not real. And then don't just blindly trust the ad tech vendors and say, oh, it's 1% fraud. Don't worry about it. Keep spending. Okay? Because they want you to keep spending. Look at your own business outcomes. I was just talking to an advertiser yesterday. I was so happy.'cause they're constantly focused on optimizing for outcomes. they're like an insurance aggregator, so it's, it's great. They can actually see the outcomes and they work backwards from there. If there are certain sources of traffic, they're literally not driving outcomes. They're gonna either pay less for it or cut it, cut it out entirely.'cause it's not of value to them. But too few advertisers are focused on that. And it kind of goes back to something we mentioned earlier, which is incrementality. these sales or conversions actually caused by the advertising? Right? Would they have occurred in the absence of advertising? If your answer is no you know, in the absence of advertising, they would still occur. Those are not something you need to spend more money on advertising, right? It's kind of a self-fulfilling prophecy. Those sales would've happened anyway, you're spending on the advertising. So now the reporting looks like, oh, you got all these sales, but it wasn't cause and effect. So again, you gotta break out of that circular logic and all these bad habits of buying super large quantities at super low prices to then get back to your realistic digital marketing. I am optimistic that more and more advertisers will now go back to real digital marketing, and I am optimistic that humans who spend time online will be better able to differentiate the AI crap and the AI slop that they're seeing and start to be more skeptical, right? It kind of goes back to a personal habit of mine, like when I see something online, I don't just trust it immediately. In fact, you should not trust it immediately. Go Google and see if there's any other news sources that have written about that.

Richard Gillis, Unofficial Partner 44:05

No.

Dr Augustine Fou 44:05

if you can corroborate it, then you can maybe start to trust it. like these days with the Iran War and everything, there's so many fake videos come, you know, supposedly of that, that it's actually very hard for humans to tell. But it's actually good practice for us because we have years of fake videos on YouTube now we have these AI generated things. Humans need to better differentiate what's real or not. And if they're able to. Dan, I remain optimistic about the promise of digital, and hopefully we can get back to those good

Richard Gillis, Unofficial Partner 44:36

Okay. Good place to end. Listen, Dr. Augustine f thank you so much for your time as ever. Fascinating.

Dr Augustine Fou 44:42

Thank you, Richard.