Ad-supported businesses are reliant on the revenue that they generate from the ads that run on their apps and websites. It’s no surprise then that discussions around deductions and clawbacks are some of the most emotive in the publishing space. Every few weeks, a thread seems to blow up with a disgruntled publisher claiming fraud and threatening to sue Google or another major SSP, or a Google partner who “stole” their earnings – but is this something that legitimate publishers need to worry about?
Why Deductions Happen
SSPs, like Google, make corrections when they believe that the reported revenue is not accurate. Occasionally revenue is underreported and there are minor upwards adjustments. More frequently though, it is originally overreported and the corrections become deductions. This happens when the SSP realises that impressions or clicks have been reported that they later learned were not valid. An example of this would be if the publisher had been credited for bot traffic.
Deductions often happen either throughout the month, or between the month’s end and the date payment is issued. This results in the publishers receiving less revenue than they may be expecting.
When Deductions Become Clawbacks
Deductions become even more problematic when the amount that needs to be deducted is greater than what is still owed to the publisher. This is most common with Google, because of the short payment terms they offer, but can play out with any SSP.
Google’s terms allow them to deduct up to 90 days of revenue if they suspect invalid activity. This is exactly what they do if they suspect that an account is allowing their advertisers to be defrauded: They terminate the account and deduct up to 90 days of revenue. As Google pays roughly 22 days after the end of the month, that deduction will often be larger than the amount outstanding to the publisher, which is where clawbacks can enter the picture.
If the publisher is working directly with Google then the account will be terminated, no further payment will be made and a negative balance will show on the account. If Google wishes to recover that balance then they would have to pursue it through offline means.
When a publisher works with a third party (like OKO or any Google Partner), the partner receives a single monthly payment to cover all of the publishers that they work with. This gives Google a very effective way to ensure they are never going to be carrying the payment risk. This covering of revenue loss from the broader balance is often called a clawback.
So, Who Carries the Payment Risk?
If Google can remove up to 90 days of payment, and have their own backs covered, who is left exposed? The answer depends on the payment terms that the publisher and partner have agreed upon. If the publisher received payment on Net 90 terms then the publisher is shouldering all of the risk. If the payment terms are any faster than Net 90 then the partner is risking being out of pocket if publisher activity causes a clawback to happen.
Why Are Deductions Made So Late?
None of these problems would happen if Google and other major SSPs were able to make deductions as the month went on. If reporting was continuously and meticulously updated through the month, then overpayments wouldn’t be made, publishers would know precisely what they are earning and clawbacks wouldn’t be a thing. So why doesn’t that happen?
To some extent, it does. Minor corrections are often made throughout the month. Some invalid activity is filtered out even before it is ever reported, but it cannot all be caught quick enough to do this. Sometimes, invalid activity only becomes detectable once there is more data to analyse. When this happens it can sometimes show up that the activity has been happening for a while, which is when the 90 day deductions are made.
What Happens to the Money in These Scenarios?
When Google detects invalid activity within the current billing cycle, they do not charge the advertiser for it. This means that no real revenue is generated, despite what the reporting may show.
If the advertiser has already been billed, then the clawed back funds are returned to the advertiser. Google maintains that it never keeps deducted funds.
What Proof Are Publishers Given?
One of the biggest causes of complaint when deductions and clawback occur is the lack of evidence of invalid activity provided by the SSP. The fraud teams at Google, for example, see secrecy as an absolute requirement for the way they protect advertisers. Even other Googlers are unable to find out the exact reasons why specific deductions are made. Similarly, Google offers no means to appeal these decisions. Their decisions are final.
This can be very frustrating when dealing with deductions, particularly when the publisher is innocent and genuinely wants to protect against future invalid activity. It is undoubtedly an unfair way to police things, but it is the way Google chooses to do this and we all agree to that when we opt to work with them, or any other SSP.
Is This Legal?
When you read reports of publishers facing clawbacks, words like “theft” and “fraud” are often thrown around, so you may be left wondering how Google and their partners can act in this way. The use of deductions and clawbacks is absolutely normal in digital advertising and covered by the agreements that we all enter into. When a publisher starts monetising through Google Ad Exchange, for example, they will sign an agreement with Google and another with the partner they work with. Both will explain the responsibilities of the publisher and how corrections are handled if and when they occur.
Most publishers facing deductions know this. However, it doesn’t make the reality of losing up to three months of revenue any easier. It’s not entirely unexpected then that these publishers will often make a lot of noise online in an attempt to secure a different outcome, particularly if they feel that doing so will embarrass Google or their partner into paying up (Spoiler alert: This never works).
Could This Happen to You?
With the amount of noise created when a disgruntled publisher goes public, it can seem like this is a common event, but it actually isn’t. In the vast majority of cases the publishers will know that they have been taking risks, but maybe didn’t realise how significant the risk was.
Most 90 day clawbacks we have seen appear to be related to one of the following:
- Deliberate fraud
- Non-human traffic: Buying traffic from poor sources, bots, etc.
- Incentivised / rewarded traffic
- Deceptive behaviours
- Ad arbitrage with low/no-value content
These are clearly not issues that most publishers need to be concerned about. If you are in doubt, then the best advice is to be open and honest about your concerns with your Google partner. Google partners are strongly incentivized to reduce risks like these for publishers. Not only do they share the risk of deductions, but SSPs like Google also expect their partners to be actively working to avoid issues like these.
Although SSPs can be frustratingly opaque around issues like this, they do tend to get the decisions right. If you are reading reports of deductions and “fraud”, remember that most of those who complain most loudly were very aware of the risks they were exposing themselves and their partner too.