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Fake, fake, fake

Tim Boreham
Friday, November 23, 2018

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Tech Mpire (TMP) 8 cents

Nineteenth Century US department store magnate John Wanamaker famously said that half of the money he spent on advertising was wasted, but the trouble is he didn’t know which half.

The same can be said for the digital world, although the problem is more about intermediaries in the advertising chain concocting audiences that don’t exist, via fraudulent downloads.

A variation on the rort is media buyers directing ad spend (knowingly or otherwise) to unsuitable publications or those that don’t exist.

Yep, we’ve all heard about fake news. Now we’ve got fake ads.

According to Juniper Research, $US19 billion ($26 billion) of all online ad spend is fraudulent and the figure is forecast to grow to $US44 billion by 2020.

But expensive problems present monetisation opportunities of their own: Tech Mpire has launched TrafficGuard, a software-as-a-service (cloud) portal for advertisers and their agencies to weed out fake downloads and to identify safe sources for their ads.

The company claims that in 40 milliseconds, Traffic Guard can tell whether it will be fraudulent or not based on factors such as the speed of the download (if it’s too fast it’s not likely to be a human) or the location of the download.

“We are the Norton Antivirus of the mobile world,” says CEO Mathew Ratty. “Our pitch is making sure advertising spend shows maximum return on investment by blocking fraudulent downloads at the click level.”

The problem is prevalent when a company launches an expensive marketing campaign for a new app.

“There’s a heap of money being made in apps but that has given rise to fraud,” Ratty says.

“For example, Uber says ‘get me one million downloads in New York City’. In the background, machines or algorithms are downloading apps.

“But the downloads never open and the app is never used. So Uber spends $1 million promoting an app and half has gone out the door.”

In fact, Uber is suing Fetch for $US40 million ($55 million), alleging the mobile ad agency generated false clicks on its online ads.

Tech Mpire so far has signed on two clients for Traffic Guardian: Canadian performance marketing group ClearPier and US ad agency Omnicom. With the latter, TechMpire has exclusive rights for the Middle East/North Asia region, where Omnicom is expanding.

Tech Mpire recently sold its 90% owned revenue-generating business, Mpire Network, to Canada’s ClearPier for $900,000, plus a maximum profit share of $6 million over three years.

This performance marketing business generated $13 million of revenue in 2016-17 and ebitda of $3 million. But by its very nature, it presented a conflict of interest with Tech Mpire’s fraud-busting activities.

In the latest June quarter, Tech Mpire reported revenue of only $1.5 million, bearing in mind the company launched the cloud version of TrafficGuard in July.

Tech Mpire recently carried out a $2.39 million entitlement issue at 4.5 cents apiece, boosting cash from $4.05 million to $6.49 million.

Ratty says it’s a dynamic business because the nature of the fraud is ever changing. “Fraud is like any other virus,” Ratty says. “The fraudster will go somewhere else and mutate the fraud. We are constantly adjusting our algorithms to look for fraudulent behaviour.”

The company’s selling point it that while other mobile measurement platforms such as App Flyer exist, they will notify that download fraud has occurred rather than prevent it.

Disclaimer: The companies covered in this article (unless disclosed) are not current clients of Independent Investment Research (IIR). Under no circumstances have there been any inducements or like made by the company mentioned to either IIR or the author. The views here are independent and have no nexus to IIR’s core research offering. The views here are not recommendations and should not be considered as general advice in terms of stock recommendations in the ordinary sense.

Published: Friday, November 23, 2018

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