Digital advertising has opened up vast opportunities for firms looking to broaden their reach but the industry is also grappling with darker undercurrents hindering its growth.

Online advertising is under siege from fake Internet traffic schemes which inflate viewership numbers and lead to billions of wasted ad dollars, according to a new report.

The report from the World Federation of Advertisers estimates that, within the next decade, advertising fraud will become the second-largest market for criminal organisations behind drug trafficking.

Advertising fraud refers to the practice of selling, placing or serving advertisements that never reach actual human viewers. For instance, many such ads are "viewed" by automated bots designed to mimic human behaviour.

Fraudsters create bots that are able to surf the Internet, click on links and visit websites, making it difficult for advertisers to distinguish between actual user engagement and fake traffic.

The total cost of fraud, if unchecked, could exceed US$50 billion (S$68 billion) by 2025 - an estimated one-tenth of the US$500 billion global digital ad market, the federation report said.

Criminals are attracted to ad fraud because it offers the prospect of relatively high payoffs with low risk and little effort.

Authorities are also often not technologically equipped enough to regulate online advertising practices, the report noted.

The New York-based Association of National Advertisers (ANA), which partnered with digital security company WhiteOps to release a separate study on the state of ad fraud earlier this year, estimated that US$7.2 billion is expected to be lost globally as a result of non-human traffic in 2016.

The ANA and WhiteOps previously estimated that 2015 would see US$6.3 billion wasted on ad fraud.

About 75 per cent of companies around the world suffer some type of fraud, said Ms Miranda Dimopoulos, chief executive of the Interactive Advertising Bureau Singapore.

Click fraud, in particular, is a real problem in South-east Asia, she noted.

Click fraud is a type of fraud occurring with pay-per-click online advertising when a person or bot imitates a legitimate user clicking on an ad.

"Publishers and brands are losing money. However, forensics and third-party verification are seen to be an additional and expensive cost," said Ms Dimopoulos.

One of the things advertisers can do to guard against fraud is to make changes to the way they measure impact and reach, she said.

"In Asia, clients are focused, and often rewarded, on clicks as an indicator of campaign success and this is why clicks drive tremendous fraud traffic," she said.

Advertisers should look at other metrics such as return visits, conversions and time spent on site.

"If a traffic pattern doesn't match consumer behaviour on your website, then this is a huge red flag," Ms Dimopoulos said.

Ultimately, industry players must work together to maintain a clean and trustworthy marketplace for advertisers and publishers alike, she said.