Amid the fierce competition facing the telecom industry, sometimes we listen to stories how lack of forethought of one Telco brings on illegal traffic on the network, leading to aggressive open wars and blame games among the operators affected by the fraud. The Telecom Regulatory Authority could intervene in such scenarios and encourage a competitor to block suspicious outgoing traffic if it finds out that not enough care is being taken to avert the fraud.
Interconnect Bypass fraud is one such telecom scam costing the industry several billion dollars every year. It brings collateral damage to the networks involved, and the impact will be huge. The Telco could be imposed hefty penalty for its failure to detect and resolve the issue on time. Further, it could bring serious business implications for all participating telcos. In the process of rampant blocking of suspicious traffic, sometimes traffic of genuine customers could get blocked, leading to customer dissonance and dissatisfaction along with loss of other business opportunities.
Here’s an example of a West African Telco who suffered massively due to Bypass fraud.
Why did this happen?
The West African telecom operator had been massively impacted by off-net Bypass fraud where the network of the operator was being misused to land fraudulent calls on the competitor’s network. Over time, the problem became so grave that the Regulatory Authority of the country had to step in and take charge of things. This eventually ended with the competitors blocking both fraudulent and genuine traffic from the Telco affected by the interconnection fraud.
Investigations conducted confirmed that the huge differences between the International termination rates and local termination rates made the environment suitable for fraudsters to run their schemes. There aren’t enough KYC controls in the country to facilitate certain onboarding checks which distinguish a genuine customer from a fraudulent one.
Impact on business
There were multiple warnings and memos issued to the operator from the Regulator, indicating that the operator would have to face penalties if amendments are not made in time.
Customers flooded the operator with complaints saying that their off-net calls were being barred without prior notice and for no fault of theirs and threatened that they would eventually churn out of the network if their services weren’t restored.
The atmosphere grew so tense that instead of cooperating, the operators became more aggressive and indulged in a rat-race in trying to prove a point to the Regulator as to how better and efficient they were from the rivals in terms of detecting Bypass fraud cases.
The solution
With the understanding that Bypass scams are rampant, Telcos need to direct their efforts towards building knowledge-sharing forums where they can share insights on fraudster behavior and geographical locations from where most of the fraudulent calls are generated and what kind of products tend to get misused by these fraudsters to nip things in the bud.
Telcos should understand that indulging in rat race or blaming each other will not help solve issues arising from such frauds; rather they should adopt a proactive approach to identify and prevent such scenarios in future. Instead of the Regulatory authority dictating terms to the operators, the operators must drive the authority to create nationalized framework for user identity governance.
Vijay is a Principal Consultant in Subex’s Managed Services vertical, focusing on Fraud Management. He has over 12+ years of experience in Telecom fraud, & Revenue Assurance management professional with progressive experience in process management and managing risks in telecom business.
Artificial Intelligence (AI) is not new and it has been around for decades. However, with the advent of big data and distributed computing that is available today, it is possible to realize the true potential of AI. From what started as an interesting story line in SCI-FI movies to programs like Alpha-Go which has been beating humans, AI has been evolving. AI also has branched out into multiple sub categories such as Machine Learning, Deep Learning, Re-enforcement learning etc.
An effective Fraud Management (FM) strategy includes 3 important pillars: Detect, Investigate & Protect. We believe AI can positively influence all the 3 pillars of fraud management, from reducing false positives to helping in mining root cause analysis to creating enhanced customer experience in protection.
In this post I would like to look at the starting pillar of the Fraud Management strategy – “Detection” and look at AI’s influence in this very important step. A traditional approach to Fraud detection has been through Rule Engines which could be:
If-Else Conditions
Thresholds
Expressions
Evaluating Data Patterns
These are widely known as deterministic solutions where an event triggers an action. The biggest pros and cons with this approach is that human intervention is needed to feed the logic.
For eg: for a threshold based detection humans have to feed the rule engine that count of records above a certain threshold is suspicious.
Following diagrams shows how this looks like
After looking at the diagram above an important question arises, should this threshold value be a straight line or can it bend based on how data behaves. Now there are ways for rule engine to behave like mentioned in the diagram,
for eg, instead of having a single rule lets have multiple rules
Per Customer Category
Per Destination
Per Age of Customers
And multiply that with other dimensions in data which are
Phone Number
Caller Number
Called Number
Country Code
And multiple that with other set of measures per dimensions
Count
Duration
Value
And throw an additional billion volumes at the datasets
Quickly FM teams ends up with something like this
But what they wanted or dreamt was this
Now I am not saying FM teams are not skilled enough to fly, but a fraud team in a modern Digital Service provider should be more focused on other important factors.
So, let’s look at how a very evolved class of Artificial Intelligence known as Machine Learning looks at this problem statement. Rather than humans feeding domain information or thresholds, Machine Learning Algorithms mine data from historic fraudulent behaviors and create models. These models are then used to evaluate real production datasets to score whether they certain activity is fraud or not. An advantage is that these models are very good at looking the datasets from multiple dimensions and measures at the same time and concluding whether event is fraud or not.
This approach thereby helps in achieving multiple KPI’s of fraud management teams there by increasing efficiency.
Higher Accuracy – Because AI can learn and adapt to Business scenarios faster, AI can significantly increase True Positive ratio
Reduced time to detect – How fast a fraud event can be detected
Self-Learning – How over a period changing business scenarios and seasonality in data can be adopted to Fraud detection
Fraud Intelligence– How customer or any other entity behaviors can be learnt and categorized for better fraud detection
Proactiveness – Ability to mine for unknown patterns not seen in the data earlier
Application of Artificial Intelligence has its own significant challenges and requires a new frame of thought, however looking at the Data Tsunami that has hit the fraud management teams, it looks an AI pro approach would only help Fraud Management teams to scale further.
Product Line Manager, Fraud Management – Nithin has more than 10 Years of experience in Fraud Management. He started his career as an Implementation Consultant with Subex Ltd and has been part of many Fraud Management implementations across APAC & Middle East. He has also been a Subject Matter expert & Business Solution Consultant earlier. Nithin is currently working as Product Line Manager for Fraud Management and machine learning developments at Subex.
As the May 25th deadline for the European General Data Protection Regulation (GDPR) looms closer many organisations still haven’t made the internal changes required by the new law. For those who haven’t yet faced up to the impact of GDPR, a good starting point is to understand how the 7 Principles of this new regulation affect their business. The challenge many have found is that there is not ‘one size fits all’ when it comes to GDPR. Every organisation will have different requirements. That’s why it’s recommended that organisations urgently carry out a self-assessment to gauge their own level of compliance, which considers their own unique circumstances. Here are some of the questions organisations should ask themselves:
Has all the personal data being held, where it comes from, how it’s processed and who it has shared with been documented?
Are lines of accountability clearly documented should there be a data breach?
Has a lawful basis for the processing been identified and documented? If not then has consent been obtained from the data subjects?
Is there a process to securely dispose of personal data that’s no longer required?
Do staff receive data protection awareness training, and do they know what processes to follow to identify, report and resolve data breaches?
Do we carry out internal audits to monitor our own compliance with data protection principles?
Have appropriate technical and organisational measures to protect data during processing been implemented?
Do key people in the organisation demonstrate support for data protection?
Can we respond to a data subjects request to see the personal data we hold about them?
The ICO, the UK’s supervisory authority, are providing assistance by making a self-assessment tool available on their website. This can help both data controllers and processors to identify compliance gaps and provides recommended actions. After carrying out a self-assessment, organisations need to draw up a plan for tackling the compliance gaps identified. As can be seen from the above questions, high on the list of priorities is documentation. Documentation needs to exist that details the processes and policies to be followed, and as evidence that those processes are being followed. This is because, in the event of a data breach, auditors from the supervisory authority will be looking for documentary evidence that shows how organisation has tried to comply with GDPR. Such evidence could significantly reduce the likely penalties. The level of detail required will depend largely on the sensitivity of the personal data held, and likely risk of a breach. For example, in the case of highly sensitive data, a full Data Protection impact assessment should be carried out to understand and mitigate the risks. If companies are diligent in their efforts to protect personal data, and thereby protect the customers themselves, then Elizabeth Denham, head of the ICO, has some comforting words.
‘You will know by now that, while I am never afraid to use the stick in the cupboard, I prefer the carrot.
Education, engagement, encouragement, – they all come before enforcement.
I have said many times that we are a pragmatic regulator and that hefty fines will be reserved for those who wilfully or persistently flout the law.’
GDPR is challenging companies to put their data protection house in order, but the benefit of GDPR is that it forces companies to better understand their own processes and improve internal governance. This can lead to greater efficiencies and transparency, which can ultimately help to restore trust in big corporations that has steadily been eroded by every new revelation about misconduct and abuse of power, not to mention poor customer service. Organisations that are looking for ways to avoid GDPR should instead start embracing it as a way to restore customers trust.
Mark Jenkins has worked in the IT industry for over 15 years as a BI and Analytics consultant, and more recently as ROC Product Manager for Subex Ltd. He has designed and deployed solutions for global companies in many sectors including Insurance, utilities and telecommunications. Mark holds a BSc Hons in Computer Science from Manchester University (UK).
The second fastest-growing continent after China, Africa owes much of its recent economic growth to the use of telecommunications services. However, over the past few years, telcos in Africa have been hit by several telecom frauds. SIM box fraud, also known as the interconnect bypass fraud, is one of the major frauds affecting the dynamic telecom market in Africa. The impact is huge in terms of the loss in revenues to telcos and taxes to the government. It is estimated that Africa loses up to 150 million US dollars every year to interconnection frauds. Reports suggest that two years back SIM box fraud had brought in losses of 12 to 15 million minutes’ worth of revenue to Kenyan government and operators, and about US$5.8 million to Ghana government.
Why SIM Box Frauds Target Africa?
As per the industry reports, mobile subscriber growth in Africa is largely driven by the lower call prices and availability of cheaper handsets. The competition arising from over-the-top (OTT) providers has put an additional pricing pressure on telcos, forcing them to design new bundled offerings encompassing data, voice and SMS. Such bundles bring much lower per-minute revenue for the operators as compared to traditional services. Fraudsters operating the SIM boxes are taking advantage of this scenario to bypass the formal call termination systems that fetch higher tariffs to telcos. The calls routed through the IP networks are terminated using local SIM gateways, thus compromising the formal interconnection networks and bringing heavy losses to the telcos who have invested in building the networks. Traditionally, African countries are known to have higher interconnection tariffs compared to other regions, which further explains why such frauds are prevailing in Africa.
If I were to look at data from google trends, one can also make out that Ghana in Africa seems quite buzzy about “Simbox Fraud” as a term to be searched on Google (till Nov, 2017)
Technological advancements have also contributed for the rise in interconnection frauds. The growing sophistication around SIM box technologies has made fraud detection difficult using traditional methodologies. SIM boxes are programmed to mimic the activities of a normal call user. The equipment can have SIM cards of different operators installed, so a single SIM box can operate with several GSM gateways located in different parts of the world. The availability of SIM cards at cheaper prices and the lack of law enforcement over the sale of prepaid SIM cards have also favored the growth of SIM box fraud, further.
Globally, the difference in approaches adopted by different countries to deal with the fraud makes it difficult for operators to develop a unified strategy to fight these frauds. IP interconnection services are treated as legal in a few countries whereas they are banned in other countries due to the regulatory issues associated with such activities. For example, the Ghanaian government has declared SIM boxes illegal and made several arrests in this regard. However, SIM boxes are now available in several open markets including popular e-commerce platforms for around $1000 per unit. To make the matter worse, OTT providers like Viber are now explicitly selling their call termination capabilities to lure roaming customers to such bypass activities. Another such OTT development I recently noticed is Skype offering Free calls to mobiles and landlines in the United States and Canada from India These evolving trends convey the scale at which the SIM fraud is growing, calling for immediate action from telcos to safeguard their revenue streams.
Unified approach for addressing Sim-box fraud:
To conclude, the recent developments around SIM box fraud have further aggravated the challenges faced by African telcos. With no scope for regulatory remediation, the only way forward for them is to prevent these attacks using advanced technologies. Traditional approaches like Call Detail Record (CDR) analysis are becoming ineffective in dealing with modern SIM box strategies due to the latency and false positives associated with those methods. As the market evolves, operators are looking toward a unified approach that can help them address the crisis in a much proactive manner. The developments around machine learning and test call group (TCG) analysis have favored the growth of an integrated solution that can help telcos combat the fraud in a cost-effective manner. The approach builds the capabilities of the traditional models but integrates the advancements in artificial intelligence and self-learning rules.
Watch this space for more updates on SIM box fraud management with cognitive analytics capabilities.
Neeraj leads digital marketing for Subex with focus on Website, Search, social media, mailer automation and MIS. In addition to this role, he also looks after product marketing for Revenue Assurance & fraud Management solutions for the company. He comes with over 8 years of experience spanning across sales, product and digital marketing.
Simbox, Bypass Fraud/ Or Interconnect bypass Fraud has been one of the fastest growing Fraud Types In recent few years. As per 2017 Global Fraud Loss Survey by CFCA, Global Fraud Loss Estimate stands at $29.2 Billion (USD) annually which is 1.27% of global telecom revenues.
Source CFCA Survey Results
Simbox Fraud / Bypass Fraud has been a significant fraud issue for more than a decade now. CFCA survey results across 2009 till 2017 clearly shows an increase of more than 100% in Bypass fraud since 2013. In this blog, we shall discuss about factors that has contributed to this continuous increase in Bypass Fraud and reasons, operators have not been able to effectively mitigate Bypass Fraud.
Factors for continuous Increase in Bypass / Simbox Fraud:
Reduced barrier for entry
Buying and operating SIMBoxs has never been easier with online stores, e-commerce websites,courses, forums and instant support availability. This has led to an increased spread of VOIP based startups and subsequent increase in bypass fraud. VOIP based calling apps have also made customer acquisition easy by making them easily available on AppStore for Android & IOS users. For instance, a recent news from India covered the similar trend wherein those who wanted to make international calls from Gulf countries has to download an app called ‘dial to India’ Once this app is downloaded, they get a password for monthly subscriptions. The person sitting abroad will just dial the number in India, the call will bypass the VSNL gate and will directly route through the SIM box and will get connected from there. Read More
Reduced margins on international traffic has resulted in wholesale traffic being mixed with internal traffic. Wholesale providers have also been increasingly offering non-CLI based options which could potentially end up in Grey routes. This fierce competition had led to increase in bypass traffic particularly in countries with higher landing costs.
Reasons Operators have not been able to effectively mitigate Bypass Fraud:
Advancement in Sim-server Technology
Simbox have evolved from being a simple single box setup to a complex modular architecture. This architecture allows fraudsters to maintain all the simcards in a single place and using Antenna modules and multiplexers, fraudsters are able to distribute their operations in the market. In fact, Latest Simservers also comes with inbuilt anti-fraud detection solutions allowing fraudsters to distribute his operations in multiple locations. This makes fraud detection very complex as fraud management teams have to device multiple strategies to beat fraudsters at their game.
Regulatory Changes
Regulatory changes in certain markets have fueled increase in traffic for Bypass. Recent changes of regulations in European Union has also resulted in traffic with E.U been heavily being differentiated in price from traffic outside E.U thereby causing significant increase in Bypass traffic.
Raising Concerns in Simcard Sales
Increased pressure to maintain sales and activation of new connections have resulted in dealers colluding with Bypass fraudsters. Bypass operations requires lot of sims to be activated in bulk and lack of effective subscriber acquisition controls have led to fraudsters taking advantage of it.
Fraud Management teams further have an uphill task in the Bypass fraud space as new technologies such as virtual sim’s would only increase the impacts on bypass of international traffic. It is hence important that they adopt a comprehensive fraud detection methodology to fight simbox frauds.
Product Line Manager, Fraud Management – Nithin has more than 10 Years of experience in Fraud Management. He started his career as an Implementation Consultant with Subex Ltd and has been part of many Fraud Management implementations across APAC & Middle East. He has also been a Subject Matter expert & Business Solution Consultant earlier. Nithin is currently working as Product Line Manager for Fraud Management and machine learning developments at Subex.
It’s only a few short months till May 25th when the European Union’s GDPR (General Data Protection Regulations) become law. After many years of bureaucratic deliberation, the official text of the General Data Protection Regulations was finally published in May 2016. Although the entire document is 261 pages long, the principle subject of the GDPR is stated clearly on the front page. It is for
…the protection of natural persons with regard to the processing of personal data…
In that opening sentence are two key points. First point is that it is for the protection of natural persons. The phrase ‘natural persons’ makes it clear that this regulation is not for the protection of companies or organisations, but for protection of people, or data subjects in the jargon of the GDPR. The second point is that it is about the ‘processing of personal data’. Each of these words needs to be carefully defined, which is essentially what the remaining 260 pages of the document attempts to do.
The reason new regulations have become necessary is because the landscape of data processing has changed dramatically since the Data Protection Directive (95/46/EC) was introduced back in 1995. In those days data storage was too expensive to store anything but essential data, and the internet was mostly just a few academic or special interest websites. Then the corporate world woke up to the potential value of piping advertising and shopping direct into people’s homes and the internet has exploded into a vast shopping centre and ocean of general knowledge. Behind all that surfing is also an ocean of data about what people like and dislike, their health, what they eat, their habits, what they spend and where they are doing that spending. That data, your data, is gold dust for corporations who are trying to predict how to persuade you to spend more, but it is also invaluable for fraudsters or criminals looking for ways to steal your identity, your money, or do you harm. That is why European regulators are now trying to put a stop to the rapidly escalating problem of data breaches by threatening extremely high penalties for companies that have data breaches. For the worst offender’s fines of up €20 mn or 4% global annual turnover can be imposed. There is no doubt that a great many companies and government agencies are extremely poor at data protection, but the GDPR tries to make it clear what all organisations need to do to become compliant. Compliance comes from following what are known as the 7 Principles relating to the processing of personal data, which I’ve paraphrased below : –
Only process personal data for a lawful and fair purpose
Only collect and process data for an explicitly specified purpose
Ensure personal data is relevant and necessary for the specified purpose
Ensure personal data is kept accurate
Keep data in a form that allows for identification of individuals for no longer than is necessary
Keep personal data hidden in a secure environment
Keep track of everything, and be prepared to show regulators what steps have been taken to protect personal data
To do this companies should first perform an audit to know what personal data they hold, where it comes from, where it’s stored, who can see it and how it’s disposed of.
The main challenge is really in deciding how to keep data hidden, and how to secure the environment. Ideally all personal data should be encrypted in a data store which is completely isolated from the internet, or from physical intrusion. Access to the data should be tightly controlled and only given to authorised individuals where necessary. All access to those systems which can display personal data should be logged and the logs reviewed on a regular basis. From an organisational stand point all the processes for storing, handling and disposing of personal data should be documented and audited on a regular basis.
GDPR is intended to protect all of us from misuse of our data. We at Subex are dedicated to helping operators to comply with these new regulations which will ultimately lead to safer and more secure future for us all.
Mark Jenkins has worked in the IT industry for over 15 years as a BI and Analytics consultant, and more recently as ROC Product Manager for Subex Ltd. He has designed and deployed solutions for global companies in many sectors including Insurance, utilities and telecommunications. Mark holds a BSc Hons in Computer Science from Manchester University (UK).
RAG Sydney Conference 2018 : G’day! The upcoming Risk and Assurance Group conference takes place next week in Sydney at the height of the Aussie Summer. For me, it will be an excuse to trade the snowy landscape of Colorado for Bondi Beach and fun in the sun. Only kidding—won’t be hitting the beach but am looking forward to a great opportunity to interact with industry professionals and thought leaders in the business assurance domain.
On Day 2 of the conference, there will be two-part talk on the emerging discipline of handset and device assurance. Sujith Dissanayake and Gihan Samarawickrama from Optus will share their journey managing handsets risks, including use cases they have tackled. I have the privilege to speak next and provide an industry perspective. Operators have always been challenged to control costs and reduce risks related to network edge devices. While mobile handsets are certainly top-of-mind, devices can also include customer premises equipment (e.g. routers, set top boxes, DSL modems, ONTs), small cells, connected smart devices and even virtual assets. A comprehensive device assurance program requires controlling for revenue, fraud and complex supply chain risks. I will cover drivers and strategies for establishing a device assurance program.
Unchecked device frauds and mismanagement cost global operators billions annually. Our industry is just now beginning to pay proper attention. Let us help you ride the wave (ok, a Bondi Beach inspired metaphor!) to getting your device costs under control. If you are attending the conference, I look forward to seeing you there.
Director of Business Development for Network Analytics
Andy has 20+ years of experience in engineering management, business operations and IT, primarily with Tier 1 operators including Level 3, MCI and GTE. His responsibilities included leading IT development teams that built mission-critical network management, provisioning and inventory systems with thousands of users. Prior to joining Subex, Andy was a Senior Manager overseeing a Data Governance organization at a major Internet Services provider. Andy graduated from the University of Pennsylvania with degrees in Electrical Engineering and Economics (Wharton). He holds an MBA from the University of Colorado.
It is a well-known fact that, every time a security threat occurs in any organization, it makes it to the media and thus causing reputation damage and loss of business. We have seen many instances of such cases in the recent past.
In fact a very recent case, which was reported in the beginning of the year was with Vermont utility. According to news reports, which later proved to be false, Burlington Electric had found malicious software on a computer that was not connected to its grid control systems. Moreover, the malicious software found on Burlington Electric Company laptop matched with those on malware found in the Democratic National Committee computers that the US government has blamed on a specific country.[i]
Though the news was later debunked to being ‘erroneous’[ii], the news was initially covered in a multitude of news outlets. The fact remains that cybersecurity attacks continue to make news, negatively attack your business and brand reputation.
Unfortunately, the ground reality is that Hacking attempts are becoming more common, and the rollout of new technologies has created further vulnerabilities. It is important that businesses safeguard themselves in order to ensure that they stay out of negative limelight. In January 2014, Target admitted that hackers used malicious software to break into its networks and access credit and debit card information directly from Target’s checkout lanes through the holiday shopping season. News of the breach drastically affected the retail giant diminishing holiday sales causing Target to eventually fire its CEO in the breach’s wake. The hackers responsible for the 2013 Target data breach that exposed payment information on 40 million customers had nothing to stop them from accessing every cash register in every Target store.[iii]
Today with the world going ‘digital’, the number of potential devices, just waiting to be hacked are increasing. Experts predict that by 2020 there will be 200 billion connected devices, which in turn could result into increased probability of devices being vulnerable to such attacks.
We are also witnessing the rise of smart cities. For Instance, Saudi Arabia is investing $70 million to build four new smart cities, while in South Africa, a $7.4 billion smart city project is already underway. By 2020, the market for smart cities is predicted to reach $1 trillion, according to Frost & Sullivan, a consulting firm.[iv]
In such a scenario, imagine the magnitude of an attack on smart cities or connected infrastructure, which has implications on citizens. The negative impact this could have on brand reputation of state governments could be devastating. But an attack is indeed, possible. Last year, Cesar Cerrudo, an Argentine security researcher and chief technology officer at IOActive Labs, demonstrated how 200,000 traffic control sensors installed in major hubs like Washington; New York; New Jersey; San Francisco; Seattle; Lyon, France; and Melbourne, Australia, were vulnerable to attack. Mr. Cerrudo showed how information coming from these sensors could be intercepted from 1,500 feet away — or even by drone — because one company had failed to encrypt its traffic.[v]
Hence, it is important today for organizations and even government bodies to ensure that they are able to safeguard themselves from cyberattacks. Such vulnerabilities have huge implications on business and can cause irreparable damage to brand reputation. Stay ahead of cyber threats and, as the headline say, don’t be in the news for the wrong reasons.
Kiran is responsible for managing Subex’s IoT Security Solution, IT, and procurement. He has over 17 years of telecom experience in security, network analytics, and machine learning.
This is the 2nd part of the 3 part blog series and covers how the digital advertisement ecosystem works along with understanding how big is the problem of fraud in that ecosystem.
This 3 part blog series puts a light on relevance of Digital Advertisements in telecom space along with providing a high level understanding of it’s ecosystem and fraud risks it injects. Idea is to give readers a basic knowledge of the digital advertisement space and the inherent risks.
The 1st part of this blog series was published on Jan 21, 2016 and you can read the same here.
Part 2 – Digital Advertisement Ecosystem & the problem of fraud
Advertisement Ecosystem is divided into 9 major components, as shown in the image below:
1. Advertiser:
Advertisers are ‘Brands’. Brands which are the source of promotions for a specific product, service etc. This is the entry point of money into the ecosystem – A demand feeder.
2. Ad Agency:
Ad Agencies are the entities who plans marketing & ad campaigns on behalf of the advertiser. They are, generally, also the ad creators, or outsource the creative bit to a media agency.
Ad Agency designs the ad strategy and works with publishers, ad networks and other industry participants making the demand meet the rest of the ecosystem.
3. DSP:
Demand side platform. These are the demand side aggregation platform solution providers. They may be part of an Ad Exchange or maybe separate entities. They allow buyers of digital advertising inventory to manage multiple ad exchange and data exchange accounts through single interface.
4. Ad Exchange:
Like the stock exchanges we all are aware of, Ad Exchanges act as a advertisement digital marketplace that enables advertisers and publishers to buy and sell advertising space, often through real-time auctions/bidding.
These are the points where the demand side generally meets the supply side.
5. SSP:
Similar to DSP, the Supply Side Platform are the aggregation platform solution providers at the supply side who enable publishers to manage their advertising impression inventory and maximize revenue from digital media.
6. Ad Network:
The Googles and InMobis of the world, Ad Networks connects advertisers to web sites that want to host advertisements. The key function of an ad network is aggregation of ad space supply from publishers and matching it with advertiser demand.
The Ad Networks are commonly known to manage most of the data exchange in the ecosystem, while earning most of the revenues.
7. Publisher:
The ad space owner. This is an entity which owns the medium (website, app, content service etc.) to deliver ads to intended end consumers/ad viewers. Commonly known as the consumer touch point.
More touch points, better touch points, better the ranking of the publisher.
8. Consumer:
The ad consumers. Customers. Us. The target entity for the whole Ad Ecosystem.
9. Data Aggregators:
The data crunchers of the ecosystem, Data Aggregators serve as the independent measurement entities for the other players in the ecosystem. Aggregators collect and compile data from individual sites to derive big picture and sell to others.
The Payout Models
There are 3 main payout models in the advertisement ecosystem:
1. Pay Per Click:
Pay per click, also called cost per click (CPC), is a payout model in which advertisers or ad network pays the publisher when the ad is clicked by the consumer. It is defined simply as the amount spent to get an advertisement clicked.
2. Pay Per Impression:
Pay per impression (CPI), or “pay per thousand impressions” (CPM), refers to the payout model where advertisers or ad networks pays a publisher each time an ad is displayed on its inventory. CPI is the cost or expense incurred for each potential consumer who views the advertisement, while CPM refers to the cost or expense incurred for every thousand potential consumers who view the advertisement(s).
3. Pay By Lead:
Cost per Lead (CPL), also known as cost per conversion, is a payout model where the advertiser pays for each specified action which the advertiser can consider as a business ‘lead’ with verified interest – for example, a form submit (e.g., contact request, newsletter sign up, registration etc.), feedback, double opt-in, sale etc.
The influencer of each payout model, which governs the actual payout while governing the quality rating of a publisher, is CTR (Click Through Rate).
Click through rate is defined as the rate of consumer taking the intended action – click, form fill, registration etc. over the advertisements being displayed to him.
In simple terms, higher the CTR of a publisher, higher is its quality rating. This when mixed with volume of ad traffic, directly influences the revenue for a publisher.
CTR also helps gauge the quality of ads itself – in terms of its creativity, contextuality & relevancy.
Role of a Telco
While traditionally Telcos have been playing a role of an advertiser, they have been slowing growing as publishers too, utilizing their web portal space for the purpose.
But, as I wrote in the first part of this blog series, Telcos are now riding on a significant ‘ad capable’ inventory being generated by their next generation product & services, specially content related.
This significant inventory at their disposal has a capability of turning Telcos into a small or mid sized Ad Network, while setting up advertisements as one of the key revenue source or service adoption enabler over the coming years.
Fraud Risk Levels in Advertisement Ecosystem
Before we move to the 3rd part in this blog series, let’s look at the existing fraud levels in the Advertisement Ecosystem.
Let me tell you, if you are all concerned about the 1-3% fraud loss levels against traditional telecom services, the fraud levels in the advertisement domain is going to give you sleepless nights.
To give you an example, one study by MediaPost reveals that, if a company has an online display ad budget of $100,000, then only $8,000 of that ad spend has the “chance” to put advertisements in front of human eyeballs.
That means, if you are paying $0.10 per impression, then the $10,000 that you will pay for 100,000 impressions will result in “chance” of only 8,000 human views—meaning that the effective Cost per Impression will actually be $1.25.
Pushes an organization’s ad investments of the track completely, isn’t it ?
Below are some industry statistics around existing levels of advertisement frauds published by the likes of SunTrust Robinson Humphreys, Ad-fraud prevention firm Pixalate & Forensiq:
Now, if a Telco’s Fraud Management team were to analyse frauds in the digital advertising domain, it will need to focus on 3 different areas:
Safeguarding your organization’s marketing investments & sales targets: It is more relevant when you see the Telco you are working for, as an advertiser or a brand.
Protecting the revenues from AD business & also safeguarding your publisher rating: This is relevant when a Telco acts as a Publisher or an Ad Network
Lastly, your own subscriber’s satisfaction & security levels: Now, this one is a bit confusing. But, to understand how advertisement frauds affect Telco’s end subscribers directly, let’s watch a short video courtesy Forensiq:
As shown in this interesting video by Forensiq, advertisement frauds not only impacts a Telco’s investments and expected revenues, but also influences customer satisfaction directly.
Recently Three, a leading telecom operator from the UK & Italy, decided to install network level ad-block solution with the below mentioned intent:
“Irrelevant and excessive mobile ads annoy customers and affect their overall network experience. We don’t believe customers should have to pay for data usage driven by mobile ads. The industry has to work together to give customers mobile ads they want and benefit from.”
If Three are successful, I can only imagine similar actions becoming widespread over the coming years or the sane players of the advertisement ecosystem gearing up to counter the problem of fraud like never before.
Clearly, there are two sides of the coin – while advertisements open up new exciting revenue avenues for Telcos, the fraud problem in the ecosystem is so widespread that it has potential to disrupt the whole revenue model built upon it.
In the next part of the blog, we will cover the most interesting bit and understand the presence of digital advertisement fraud risks in the ecosystem along with looking at a few case studies. You will not have to wait far too long, that I promise!
Abhijeet is currently working as Principal Consultant with Subex.
He specializes in Telecom Fraud Management and his 360 degree experience in this field includes extensive exposure in Fraud Operations Management, Consulting & Advisory, Risk & Health Assessments, Business Development – Product & Managed Services and Analytics.
Out of professional life, he is a blogger, tech enthusiast and a traveler.
Look around you and you see posters, hoardings & stand-ins. Look at whatever screen you carry or face and you will see videos, popups & banners. These are “Advertisements” and they are everywhere!
I will not be going overboard when I say advertisements are the fulcrum of relationship between every business and its consumers. Organizations put significant investments into their marketing functions which in turn enables advertisements.
While earlier advertisements were statics in nature – channel run time, physical hoardings etc., they were easy to track to ensure the investments are protected. But, with the advertisements becoming digital, increasingly dynamic & internet driven – There has been an increasing need for measuring & protecting the advertiser’s or brand’s money and even the publisher’s real estate which is used for ad delivery & consumption.
Like it or not – In Telecom space, Digital Advertisements are coming to steal sleep off every fraud manager’s eyes.
From the risk perspective, the domain is complex and different from the traditional Telecom frauds, but the most important point is that advertisements from the internet space bring fraud exposure levels which are much higher than what Telco’s are used to. And containing that, will be a real challenge!
This 3 part blog will put a light on relevance of Digital Advertisements in telecom space along with providing a high level understanding of it’s ecosystem and fraud risks it injects. Idea is to give readers a basic knowledge of the digital advertisement space and the inherent risks.
This is the 1st part of the 3 part blog and covers why telecom industry is looking at Digital Advertisements as their next enabler.
Part 1 : Digital Advertisement and Telcos: A match made in heaven
When we think about internet or technology, there are 4 names which cross mind – Google, Apple, Facebook & Amazon.
What the 2 of these 4 giants, Google & Facebook, have taught us that AD revenues are a big deal when it comes to the digital world. With Apple & Amazon also planning to jump the advertisement bandwagon, the belief only gets stronger.
No surprise that Google & Facebook earn 90% of their revenues from advertisements. Also, most of the Apps, specially communication apps also have advertisements at the centre of their revenue model.
Considering this, it was just a matter of time our own Telecom industry shifts its focus on exploring the digital advertisements as one of their primary source of revenue.
The likes of Verizons, Axiatas & Singtels have already invested big in the area of advertisements.
Also, some other leading operators like Vodafone, Telefonica, Etisalat and France Telecom have also openly agreed for a bright future of advertisements in telecom industry.
Digital advertisements: Attracting attention within Telcos
If you look at telecom industry as an advertiser, you will find telcos spending 10-15% of their total yearly revenues as marketing budget, out of which 46% is only on digital advertising like website banner ads, video ads etc.
That is quite higher than any other comparable industry sector.
And if we believe certain studies conducted by industry experts like Adobe, spend on advertisements is only set to grow:
It only shows that telco industry agrees that this spending will only increase with mobile advertisements leading the pack.
What will drive this spending on Advertisements further ?
Now lets look at what are the factors which are going to drive the investments in the area of advertisements further.
If you look at the areas marked in yellow in the chart below, you will find that digital Advertisements are among the fastest growing revenue streams for Telecom Industry.
And, if you look at the elements which are marked with red circles, you will see a list of services on which telcos are currently betting big on.
These services, which include M2M, Gaming, Music, Video etc., interestingly are set to become the “enabler platforms” to drive advertising revenues further.
And not only that, these services also ensure that Telcos have sufficient advertisement inventory for them to upgrade from just an advertiser to become a big ticket publisher or a small AD Network.
This is the reason why you will find that these services have “Ad Delivery” inbuilt as a core functionality within their framework.
Digital Advertisements are key to make upcoming & exiting product & services more affordable to a Telco’s subscriber base and in turn boost adoption
Apart from this, we all are aware that content services are set to become a big ticket to monetize the large investments Telcos have been making towards infrastructure & quality of data services.
There are researches from the likes of eMarketer which indicate that content is set to make up 66% of the total traffic in Telco data pipes by the year 2017.
Driving on content services, advertisements are set to attract 100 billion dollars in next 1 year and an increase of 233% increase mobile ad spending in next couple of years.
Now, there is little doubt that advertisements are set to become one of the major source of revenues for Telcos or power that next big idea which will be a star of their upcoming annual report!
In the next part of the blog, we will understand how the digital advertisement ecosystem works along with understanding how big is the problem of fraud in that ecosystem. You will not have to wait far too long, that I promise!
Abhijeet is currently working as Principal Consultant with Subex.
He specializes in Telecom Fraud Management and his 360 degree experience in this field includes extensive exposure in Fraud Operations Management, Consulting & Advisory, Risk & Health Assessments, Business Development – Product & Managed Services and Analytics.
Out of professional life, he is a blogger, tech enthusiast and a traveler.
