Sahm Adrangi, of Kerrisdale Capital, delivered a presentation on ad fraud at the Kase Learning conference in May of 2018. Kerrisdale Capital was launched nine years ago and manages approximately $180 million. The business was built around short activism and started publishing research on shorts in 2010 around the era of Chinese fraud when short sellers eliminated up to $20 billion of fraudulently invested capital. Kerrisdale Capital now focuses mainly on complex sectors in the United States.
During his presentation, Sahm Adrangi discussed a short activism campaign on St. Joe, a land developer located in the Florida Panhandle that is estimated to be worth half of the market valuation that was published on QuinStreet. Sahm Adrangi explained that he likes ad fraud because it allows investors to combine social good with short activism. He also discussed opportunities that exist in the ad fraud arena.
According to Wikipedia, ad fraud is when online clicks, advertisement impressions, data events or conversions are represented fraudulently in an effort to produce revenue. Essentially, display ads are placed on fake websites where bots from computers are viewing the ads instead of humans viewing the ads. This results in advertisers being less willing to spend money to advertise online, which negatively impacts the online advertising landscape. This issue also reduces the revenue of legitimate publishers.
Sahm Adrangi explained that ad companies benefit from this kind of fraud, which is possibly the reason why they are hesitant to adopt new detection schemes that can prevent fraud. Sahm Adrangi also explained how the same type of fraud occurs with video ads. This happens when videos are playing in the background of videos being watched, yet the unseen video gets charged to the buyer of online advertising.
Adrangi shared other examples of this pervasive issue during his presentation. The findings of research conducted by Kerrisdale Capital is found on their website and subscriptions are available to those interested in reviewing their research.