Newsweek raided, caught making fake website traffic in order to charge more for advertising
Newsweek was caught creating false ad traffic that resulted in its customers being overcharged up to 100 per cent.
Both the Chairman and Finance Director of Newsweek Media Group resigned after a regulatory investigation of fraud was made public.
The key executives who quit were husband and wife. Etienne Uzac was Newsweek's former Chairman. His wife, Marion Kim, was Finance Director. They resigned Jan. 31st.
The company made their resignation public Tuesday in this news release:
Newsweek was raided on Jan. 18th by the New York County Manhattan District Attorney's Office. Photos of the scene are posted at the top and bottom of this post.
Eight computer servers were removed from Newsweek's headquarters in New York City. Until the investigation has been completed, there are no other details.
Social Puncher, an independent company that serves as an industry watchdog in the digital ad market, was the company who caught Newsweek's fraud.
The Director of Investigations for Social Puncher, Vlad Shevtsov, wrote the report. He called Newsweek's advertising practices fraudulent. To make matters worse, Shevtsov caught Newsweek trying to hide it.
"The effectiveness of the campaign was very low, close to zero," said Shevtsov.
An estimated seven billion dollars a year is wasted on online ads that people never see, according to the Association of National Advertisers. The trade group published studies last year and in 2014 describing fraudulent business practices. They warned marketers that fraud levels are "relatively unchanged."
AppNexus, NMG, and SpotX, are companies that sell video ads. They have ended their relationships with Newsweek and the publisher’s International Business Times websites.
More than $40 million in federal contracts went to GMMB, a Democratic political ad agency for the Barack Obama and Hillary Clinton Presidential Campaigns. GMMB then paid Newsweek Media Group.
Government agencies who are victims of the fraud are the Consumer Financial Protection Bureau, the U.S. Dept. of Housing and Urban Development (HUD), the New York State Dept. of Health, the U.S. Dept. of the Treasury, and the Louisiana Economic Development (LED),
Newsweek created fraudulent internet traffic by creating their own websites and using the fake audience to attract advertisers. They also charged legitimate publishers to direct traffic to their sites.
“Newsweek Media Group does not engage in any kind of traffic gaming techniques,” the company said in a statement about the ad scam. Newsweek has admitted that code creating the false traffic has been deleted and that two employees responsible for it have been fired.
One Newsweek staffer was told to "get a million hits a month, or the company could fold.” Payroll checks at Newsweek have already bounced.
Newsweek published "Madame President" the day after Donald J. Trump was elected President of the U.S.