Edelman, Benjamin. “How to Combat Online Ad Fraud.” Harvard Business Review 87, no. 12 (December 2009): 24-25.
Online advertisers frequently fall victim to dishonest, tech-savvy publishers. Here’s a sampling of common scams with some advice on how to outwit their perpetrators.
This page indexes my writings about Personal Rapid Transport.
Post-transaction marketers Webloyalty, Vertrue, and Affinion have attracted criticism for solicitations that tend to deceive consumers. They typically feature recurring billing programs that promise a savings or discount, but actually charge users on an ongoing basis. They promote these services while customers are finishing the checkout process at trusted e-commerce sites — a time when few users expect unrelated offers from third parties. Furthermore, they obtain consumers’ credit card numbers from partner sites — so a user may enter a billing relationship and face credit card charges without providing a card number to the company that posts the charges.
In this posting, I present key primary source documents (internal company emails and analyses and reports from victim consumers) as well as outside analyses (a Senate staff report and testimony from hearing witnesses including my own statement for the record).
Higlights of my Statement for the Record: I argue that the timing, placement, and format of post-transaction offers deceptively suggest that the offers are part of the checkout process. (3) I suggest that automatic transfer of consumers’ payment information removes a key warning that customers are incurring a financial obligation. (3-4) I examine disclosures and find them inadequate to cure the deception resulting from the substance, format, and context of the offers. (5) I point out that credit card network rules disallow key post-transaction marketing practices, and I suggest that credit card networks enforce these rules. (6-7) I suggests that low usage rates support an inference of deception, and I provide an empirical strategy to estimate usage rates from publicly-available sources. (7)
Details:
In a subsequent analysis, I cite, quote, and analyze relevant credit card network rules — finding that those requirements disallow key post-transaction marketing practices:
Payment Card Network Rules Prohibit Aggressive Post-Transaction Tactics
Edelman, Benjamin. “Personal Rapid Transport at Vectus, Ltd.” Harvard Business School Case 910-010, November 2009. (Revised September 2010.) (Featured in Working Knowledge: Can Entrepreneurs Drive People Movers to Success?) (educator access at HBP. courtesy copy.)
Personal Rapid Transport (PRT) vehiclesoften called “driverless taxis”sought to combine the best characteristics of cars, taxis, and trains, while adding features unavailable in any existing transportation system. Like cars and taxis, PRT vehicles carried small groupsoften just a single passengerwith no need to wait for a shared vehicle to arrive or for others to board. Yet PRT followed train systems in using an exclusive right of way that avoided delays from other traffic. Where would such systems be most useful? Could system designers successfully compete with well-established networks of trains, buses, cars, and roads?
Teaching Materials:
Personal Rapid Transport at Vectus, Ltd. – Teaching Note (HBP 910024)
Edelman, Benjamin. “The Dark Underbelly of Online Advertising.” HBR Now. (November 17, 2009).
The Internet is sold to advertisers as a highly measurable medium that is the most efficient way to target exactly the right customers. But online advertising is also easily subverted–letting fraudsters claim advertising fees for work they did not actually do. The trickiest frauds deceive advertisers so effectively that measurements of ad effectiveness report the fraudsters as exceptionally productive and high quality, rather than revealing that their traffic was actually worthless. This is a quiet scandal. In a time of tightening ad budgets, losses to advertising fraud come straight from the bottom line–but savings can be equally dramatic. Here’s a look behind the veil–an explanation of ad practices that have cheated even the Web’s largest advertisers. Advertising scams take plenty of victims, both witting and not, but I offer strategies to help determined marketers protect themselves.
Edelman, Benjamin. “Deception in Post-Transaction Marketing Offers.” U.S. Senate, Committee on Commerce, Science, & Transportation, November 2009.
I examine the consumer protection issues raised by post-transaction marketing offers. My key concerns:
Edelman, Benjamin, and Ian Larkin. “eBay Partner Network (A).” Harvard Business School Case 910-008, September 2009. (Revised March 2015.) (educator access at HBP. request a courtesy copy.)
eBay considers adjustments to the structure and rules of its affiliate marketing program, eBay Partner Network (ePN). In particular, eBay reevaluates affiliate compensation structure, the role of bonuses for especially productive affiliates, and the overall rationale for outsourcing online marketing efforts to independent affiliates. The case presents the history and development of ePN, ePN’s importance to eBay, and the mechanics of online affiliate marketing.
Supplements:
eBay Partner Network (B) – Supplement (HBP 910009)
eBay Partner Network (C) – Supplement (HBP 910012)
eBay Partner Network (D) – Supplement (HBP 914016)
Teaching Materials:
eBay Partner Network (A), (B), (C), and (D) – Teaching Note (HBP 910025)
eBay Partner Network – slide supplement (HBP 911039)
eBay Partner Network – slide supplement (widescreen) (HBP 914040)
Edelman, Benjamin. “Towards a Bill of Rights for Online Advertisers.” Advertising Week (September 21, 2009).
Online advertising presents remarkable efficiencies–better targeting, improved measurement and greater return on investment. Yet there are challenges, particularly when networks of intermediaries place ads through convoluted relationships, and all the more so when small advertisers cannot effectively negotiate terms dictated by advertising powerhouses. The result is a troubling mess of ads gone wrong–advertisers charged in ways they didn’t fairly agree to, and on terms they didn’t meaningfully accept. But online advertising doesn’t have to be a wild west. I propose five specific rights advertisers should demand as they buy online placements.
Advertising Week abridgement extracted from full original article:
Edelman, Benjamin. “Deterring Online Advertising Fraud Through Optimal Payment in Arrears.” Financial Cryptography and Data Security: Proceedings of the International Conference (September 2009). (Springer-Verlag Lecture Notes in Computer Science.) (Featured in Working Knowledge: Reducing Risk with Online Advertising.)
Online advertisers face substantial difficulty in selecting and supervising small advertising partners. Fraud can be well hidden, and limited reputation systems reduce accountability. But 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. I capture these relationships in a screening model with delayed payments and probabilistic delayed observation of agents’ types. I derive 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. I estimate that a leading affiliate network could have invoked an optimal payment delay to eliminate 71% of fraud without decreasing profit.
Edelman, Benjamin. “Priced and Unpriced Online Markets.” Journal of Economic Perspectives 23, no. 3 (Summer 2009): 21-36.
With forces both supporting and opposing zero prices, typical Internet-related activities–like surfing the web, web searches, and e-mail, along with behind-the-scenes practices like domain names and the allocation of IP (Internet Protocol) addresses–present a natural context to reevaluate our sense of the tradeoffs that arise between free and a positive price. In this piece, I offer a series of specific examples of resources offered without charge, for a positive price, or for a flat fee (“all-you-can-eat”). I conclude by assessing the characteristics that shape pricing structure for these resources.