Editor’s note: This is a series from Dianna Koltz, director of best practices and email marketing at Memolink, Inc., on how to use business standards to combat online fraud. Here’s part two, and part three.
ADOTAS EXCLUSIVE — The largest threat to online advertising is growing as the economy declines. More individuals will turn criminal, purchasing products or generating income through fraudulent means. Billions of dollars are stolen from businesses each year, and in 2009 companies will fight fraud with fewer resources.According to CyberSource, an estimated $4 billion dollars was lost to fraud in 2008 up from $3.7 billion in 2007, and 87% of merchants must fight fraud with the same or less staff in 2009. The increase in eCommerce fraud from 2007 to 2008 (and one can expect, in 2009) follows the advertisers’ shift to spend more of their budget online. Much like crime statistics, one has to wonder how much fraud is not being reported because, among many reasons, commission-driven employees are not motivated or your company lacks resources.In early 2008, I was approached by our CEO to start a new division that would address our partners’ fraud concerns—both real and perceived. He said, “I’m not going to lie to you. It’s a SOB job.” I was sold, and the Best Practices Division began.My team establishes best practices (measurable, repeatable events, processes, and procedures) and applies them internally and externally (to our partners’ online marketing practices). At its core, best practices (BPs) are a set of standards that provide transparency and clear expectations of behavior and results to everyone involved in the business process. This accountability will drive the long-term performance of the online advertising industry while maintaining profitability without additional federal regulation.The BP approach can be applied to every business model and used to fight fraud—wherever you find it. Industry norm places the onus on the advertiser to successfully qualify inbound leads as well as identify fraudulent traffic. In the past, advertisers had only two options: become an online fraud expert, or hire a vendor.Only a small percentage of companies will be successful with the first option. It is difficult to track, successfully identify through detailed analysis, and then act on the fraud trends plaguing the online advertising industry. To overcome this challenge one will need dedicated, specialized resources, and those resources will need to increase over time. Would your company approve a resource request for a “fraud department” that is outside the core competency of your business? And if approved, how would you staff it?The second option, to turn to an outsourced solution, has a separate set of challenges. Does the vendor understand your business model and your definition of fraud? Is the employee, whom you have identified to manage the vendor relationship, equipped with enough knowledge about fraudulent trends to truly maximize the solution?Both options are imperfect solutions to fight even the most common fraud: stolen credit cards, identity theft, and garbage leads, to name a few. It is an expense that we all collectively must face. We, as an industry, are losing too much money ($4 billion) to not act.I challenge you to take on the BP approach, and I will help. In the coming weeks I will share with you highlights from my own experience, everything from shifting a culture and recruiting the right candidates to starting a due diligence program from scratch, and the ROI from it all. The money that you recoup by taking on the BP approach, and doing business with BP partners, is money that could prevent job loss (perhaps your own) and increase profits, both important in today’s market.