A 7-Figure Ad Fraud Scheme Running on Roku Underlines Murkiness of CTV

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Roku has yet again found itself at the center of an ad fraud scheme that likely cost premium brands and political advertisers upwards of seven figures, according to new research from Pixalate.

Marketers were led to believe their ads appeared against brand-safe content on the streaming service, such as The Three Stooges, when in reality they were buying ads in screensaver apps or apps for lonely pets when their owners aren’t home, Pixalate has found. A spokesperson told Adweek the scheme netted “at least a seven-figure dollar amount.”

This is the second time in three months that Pixalate has discovered an apparent ad fraud scheme running on Roku. The streaming service said it was not aware of the report until Adweek reached out, as Pixalate had not contacted the company before releasing its report.

“We recommend that OTT ad buyers buy directly from Roku or trusted publishers on the platform. When buying from other sources, and especially open exchanges, the buyer may be better served to use technology that can help with verifying the source of the ad requests,” a Roku spokesperson said.

Joe Barone, managing partner for brand safety in the Americas at GroupM, said CTV is still a relatively immature medium that struggles with transparency issues and a lack of standardization. While it’s a fast-growing business, he said, it still doesn’t compare to the scale and trust that come with traditional linear TV.

“Right now, we’re looking at a big bucket of invalid traffic,” Barone said. “It’s not just fraud. There’s content that’s emanating from outside of U.S., redirects to user-generated content, and straight fraud like spoofing. … There are a number of different things adding up to [problems] we don’t want to pay for.”

Consequences for three players

Pixalate found spoofing, or misrepresentation of inventory, occurred on over a dozen apps from at least four different developers. All of these apps listed Monarch Ads as one of their monetization partners.

Marketers including like Lexus, Geico and Jaguar apparently thought they were buying within apps filled with content from the public domain, such as episodes of The Three Stooges or The Andy Griffith Show, which were built by developer Aragon Creek.

Instead, their ads were being placed in passive-experience apps on Roku CTV devices, such as screensaver-like apps, like a virtual fireplace or fish tank, or apps to help entertain lonely pets, like Relax My Dog.

Pixalate also found that spoofed inventory was passed through several ad-tech companies, including Rubicon Project, FreeWheel, The Trade Desk, SpotX and Amobee.

Monarch Ads is a subsidiary of Barons Media. Aragon Creek and Barons Media have the same owner: Jim Larkin.

Pixalate did not explicitly point blame at Larkin or his companies. Larkin said that while his two companies share Monarch Ads as an ad server, Barons Media and Aragon Creek operate independently. He added that he’s suspended operations Aragon Creek while he investigates the matter.

Roku said the apps from Aragon Creek have been removed from its platform.

The scheme started around October of last year and, as of last week, is apparently still active, according to Pixalate.

Barone said a big issue in CTV is a misrepresentation of inventory and ads running in opaque environments.

“Very often with CTV buys, you’re basically… buying blind,” he said, since marketers don’t get granular, show-level data when buying CTV programmatically.

Jalal Nasir, CEO of Pixalate, said CPMs on CTV average $25, meaning the margins are higher for fraudsters than they are on desktop and mobile.

“Connected TV also lacks measurement guidelines, technology, and experience, especially on the buy-side,” said Nasir. “The opaque supply chain and high CPMs make CTV a breeding ground for fraudsters to exploit.”

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