Some marketers will tell you that fraud is just the cost of doing business. What that really means is that those marketers don’t care if an ad is more expensive than it needs to be. Have 20% fraud in your campaign? That means your costs will be 20% higher. And it also means you run a much greater risk of side effects, like increased risk of TCPA violations.
It must be nice to have all that extra money in your budget to waste. But if you’re like most marketers, you have to be sure you spend every dollar wisely – so what fraud costs you and what it costs to catch it has to be a priority.
Click fraud is directly responsible for increasing your cost per click, your cost per lead and, accordingly, your cost per sale. Those metrics (CPC and CPL) are part of every marketer’s performance tracking, but there are additional costs that must be factored in, too.
Lead generation fraud is on the rise right along with click fraud. It occurs when a fraudster fills out a contact form using stolen data (easily bought on the dark web after all the recent data breaches). You then follow up on these details because everything checks out. The person you call will argue that they didn’t consent and could (rightfully) threaten legal action. You just violated the TCPA even though you thought you were doing everything right – and those violation fines add up fast.
It’s not difficult to calculate and verify the direct increased campaign costs caused by click fraud, but the indirect costs can be more difficult to predict if you haven’t done your research. And once the wave of lawsuits hits you, it will be too late to prevent them.
Based on tens of millions of clicks and leads analyzed during the first 6 months of 2021, we’ve seen that new clients that use Oxford BioChronometrics start off with an average lead fraud rate of 8% or more (click fraud is much higher). Once affiliates and other traffic providers start seeing that these companies are tracking their lead performance, we see lead fraud rates improve to around 1.3%. They know they’re being analyzed, so they can’t sell their low-quality leads to an unwitting client anymore.
These rates are already high enough to make a successful campaign unprofitable. And when you add in the cost of litigation risk, you’re likely to lose big.
Ask yourself: What percentage of an average sale is spent on marketing and other costs? The lower those overhead costs, the better and more profitable your campaign can be. Your margin doesn’t have to be fixed, though. You can lower it by detecting – and not paying for – fraudulent leads. You do not have accept fraud as a sunk cost.
Let’s look at the actual math.
This picture shows you the relative costs – and drives home how a small investment in fraud detection saves you a lot of money.
Let’s say that only 1% of the leads from your campaign are fraudulent. Your click fraud will be higher, of course, at least 20%, but not every fraudulent click will create a lead. Those fraudulent leads each carry with it TCPA violation fines and settlement – adding about 15% of your campaign costs on top of the 20% extra that click fraud causes.
So, what you’re really facing is an additional 35% cost that eats into your margin.
These tables map it out for you.
Click to enlarge the picture so you can see the numbers – they’re real, and this could be your next campaign.
Start with the cost of clicks so you can calculate the cost per lead and per sale. The cells below the red headings show the prices without fraud detection. The green heading shows the same campaign and costs, but for a campaign using Oxford BioChronometrics fraud detection.
To calculate the true price of a click you need to remove fraud from the equation. If you don’t have Oxford BioChronometrics fraud detection you’ll easily pay 20% more per click.
Knowing your click-to-lead conversion rate lets you calculate the average price per lead. In this example, without fraud detection you get 8,000 leads for your $1,250,000 budget. But with fraud detection, you will be able to either get a refund or credit traffic which will either lower your costs or increase your conversion ratio. This means your average price per lead goes down by 25%, from $156.25 down to $125.00 per lead with fraud detection.
Fraudulent leads trick many old-school detection solutions because fraudsters use proxies or VPNs to match their Internet geo-location with the stolen contact details they use to fill out the forms. This is extremely important to account for: you can think you did everything right, but as soon as you call a fraudulent lead that used stolen real data, you have violated the TCPA. Now get ready for the fines – an average of $1000 for each case! That’s a lot of money for you to lose.
The last step is calculating the total price per sale. If you don’t use OxBio fraud detection, your price per sale will be a lot higher because of all the fraud you’re paying for – not to mention TCPA settlements and fines. Look at the numbers above: the price is almost doubled by fraud! When you use OxBio fraud detection, you only pay for real clicks, real leads and real conversions to a sale without any TCPA settlement costs.
This example is based on real client data using realistic, current prices from the first half of 2021. If your solution is out of date – or if you think you can just coast along without a fraud detection solution – you are wasting your budget, driving up your costs and eating into your margin. For a fraction of the money you save (typically less than a dollar per sale!), you can protect yourself, save more and perform better.