What You Need to Know About Dark Pool Sales Houses

No one said ad tech wasn’t a little murky. Last August, the industry watchdog Check My Ads and data supply researcher Zach Edwards uncovered evidence that unscrupulous publishers had discovered a way to circumvent blocklists in order to ultimately drive more ad revenue. Called “dark pool sales houses,” the strategy involves a ring of publishers acting in concert to take advantage of the lax regulation governing ad exchanges. Since identifying the issue and calling attention to it, Edwards and the Check My Ads team have watched the problem only worsen, rather than improve, as the strategy has grown popular among back-channel actors. Nandini Jammi and Claire Atkin, the co-founders of Checky My Ads, found that publishers have been siphoning marketing spend from unwitting advertisers by improperly sharing the account IDs used in the transparency framework ads.txt, which connects ad buyers and sellers in programmatic ecosystems. Ads.Txt Could Save Ad Tech—If It Wasn’t So Convoluted The problem touches every entity in the advertising ecosystem, from publishers to exchanges to marketers, and its implications range from upsetting––as in, misallocated ad budgets––to the criminal––as in commodities fraud. In any case, it’s a bad look for an industry trying to bolster its credibility. “The problem with wholesale houses sharing direct IDs is that they end up defrauding the advertiser,” Jammi told Adweek. “They paid for a direct relationship with a media outlet, but that’s not what they’re getting. They don’t know whether their money ends up with a car enthusiast website or Breitbart.” Fraud has remained a persistent problem for the digital advertising industry and has led to an estimated $51 million in losses every day in 2021, according to Juniper Research. By 2023, that number is predicted to reach $100 billion annually. So, how do dark pool sales houses work? When a publisher opts to work with a particular ad exchange, it receives an account ID to identify it to the advertiser. These IDs function like a username, and the exchanges use them to transact. There are two types of account IDs: direct and reseller. A direct ID indicates that the ID represents a single publisher; a reseller ID indicates that the ID represents a third-party, often an SSP, licensed to buy ad inventory for a variety of publishers. Most publishers use direct IDs, but some holding companies, like Condé Nast, might share one ID across their titles. When doing so, they will give one brand a direct ID and label the other brands as resellers. This is called “pooling,” and it is legal because ultimately the websites are all owned by the same company, Condé Nast, and share the same bank account. However, in a “dark pool,” unrelated publishers share direct IDs, which leads ad exchanges to incorrectly treat these groups as lone publishers, according to Edwards. In doing this, these domains are mislabeling their inventory, perhaps willingly, perhaps mistakenly. Either way, direct IDs command higher CPMs than reseller IDs. “This mostly affects big buyers, the people who apply filters and have specific strategies to optimize quality,” Edwards said. “If they are being lied to by the people they are handing money to, they are being defrauded.” The team is confident that this grift is occurring on a substantial scale, but due to the opaque nature of the pools, exact figures are hard to come by. How did we get here? Con artists have been devising ways to scam the digital advertising industry since its creation, said Robert Webster, the founder of Canton Marketing Solutions. When the industry transitioned to programmatic around 2010, so did the schemes, and as the automated ad industry has ballooned in value, so too has its share of fraudulent activity. The problem is largely twofold. First, the scale of the programmatic ad industry makes precise regulation challenging. Second, entangled incentives among ad exchanges, marketers, SSPs and other figures encourage lax oversight. Media buyers are paid to spend advertising budgets, so scrutinizing where that spending ends up runs counter to their profit motive, Webster said. “The fraud never gets fixed because the people who benefit from it would miss the money,” Webster said. “SSPs should tell you who they've paid on your behalf, but they don't. And there is no good reason why they can't.” Why do websites create dark pools? Unscrupulous publishers have adopted dark pools as a response to ad exchanges blocking their URLs, most often for publishing misinformation or otherwise brand-unsafe content. After being shut out of these exchanges, the domains turn to under-the-table arrangements because they would be unable to generate significant ad revenue otherwise. Because the technique allows shoddy sites to masquerade as top-flight publishers, they can command higher CPMs than they would normally be able to. Pooling together also enables these publishers to share data with each other, which allows them to offer better targeting and enjoy higher CPMs, according to Jammi. It also puts consumer data in the hands of bad actors, some of whom have agendas beyond simply making money. When it comes to domains like RT.com, whose underpinnings are more explicitly political, access to user data can help inform potential retargeting campaigns that could have real-world ramifications, Jammi said. What can marketers do about this? The industry is pushing for more transparency at every element in the supply chain. Marketers and publishers need to hold ad exchanges responsible for the clients they work with, putting the ultimate onus on the companies whose laissez-faire regulation makes them susceptible to exploitation in the first place. Jammi and Atkin suggest that a “free and easily accessible ads.txt directory across all domains in the global advertising inventory” be made available to the public, allowing marketers to easily cross-reference their spending to see where it ends up. Webster proposes a solution similar to the one Ebay has employed for decades: seller ratings. If an exchange has facilitated a dark pool sales house or other manipulation of inventory, they should publicly disclose their mistake. That way, marketers can make informed decisions about which exchanges value transparency and which hope only to meet minimum required standards. “If we removed this garbage and gave advertisers more confidence, they would spend more money,” Webster said. “Advertisers should be able to control who they pay.”

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