Quantifying Online Retailers’ Bad Bot Problem

Bad bots present a security risk to e-commerce businesses. (I know, mind blown.) Whether through carding, credential stuffing or account takeover attacks, cybercriminals use bad bots to steal credit card numbers, logins, or other information and commit automated fraud against online retailers.

In order to solve the bad bot problem, you have to be able to fully understand it — and that starts with quantifying it. New findings from Aberdeen Research do just that. The aptly titled report, Quantifying the Impact of Bad Bots on E-commerce Merchant Profitability, uncovers the extent to which bad bots negatively affect the profitability of online retailers.

Establishing a baseline for e-commerce profitability

Aberdeen began its analysis by baselining the historical profitability of e-commerce brands over the most recent five-quarter financial reporting period. They found that the gross margins for e-commerce merchants ranged from 37.4% to 41.4% from Q2 2020 to Q2 2021.

Next, Aberdeen looked at Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) as the measure of online retailers’ profitability in this time period. They found that EBITDA was between 11.5% and 13.9%.

Taking the difference between Gross Margin and EBITDA, Aberdeen arrived at the operational costs of each e-commerce merchant’s platform. These ranged between 24% and 30% of top-line revenue.

The quantifiable impact of bad bots

Aberdeen considered two ways that online retailers are negatively affected by bad bot traffic:

• E-commerce platform costs – Total bad bot traffic results in higher costs, such as the overprovisioning of website infrastructure. It also leads to wasted expenditures on website marketing, including funds used for search engine optimization, skewed website analytics that lead to erroneous conclusions and follow-on actions, and digital ad fraud.
• E-commerce funnel costs – Bad bot traffic at checkout corresponds to attacks that have reached (Read more...)