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Anomaly detection

Anomaly detection

Anomaly detection (or outlier detection) is a statistical technique for identifying outliers in a set of data points. An outlier is a data point that deviates from the rest of the dataset. Anomaly detection allows abnormal events or user behaviors to be detected, spotting errors before they cause damage. 

Anomaly detection algorithms help pinpoint areas for infrastructure optimization, improving marketing strategies, or fraud detection.

Use cases of anomaly detection

Examining the use cases of anomaly detection across different industries helps understand its value and impact. 

Improving advertising and marketing operations

Anomaly detection is a tool marketers use to detect unusual website traffic, pinpoint errors in marketing campaigns, or discover growth opportunities that improve ROAS. The technique is widely used in ad fraud detection systems by notifying brands and agencies about abnormal spikes in clicks and downloads. 

Preventing human error in healthcare 

Statistical anomaly detection techniques help healthcare providers guard against data entry errors, improve patient experience, and increase operational efficiencies. The technique allows institutions to discover areas for improvement (long waiting time, patient flow bottlenecks, etc.)

Financial fraud detection

The financial industry leverages anomaly detection to detect fraudulent patterns associated with unauthorized transactions, money laundering, and other illegal activities in real time. 

Quality control in manufacturing

Anomaly detection helps manufacturers discover faulty products before they hit the market and prevent equipment malfunction to keep production running without downtime. 

Retail and e-commerce

Anomaly detection helps discover abnormal patterns in customer behavior, predict or prevent customer churn, and identify unauthorized transactions or inaccurate reports. 

Types of data anomalies

System anomalies are broadly classified into two categories: intentional and unintentional

Unintentional anomalies are not caused by external activity. They result from poor data collection (e.g., a faulty sensor) or filtering (e.g., noise in the dataset). While they don’t signal an underlying malicious intent, unintentional anomalies should be removed to avoid dataset distortion. 

Intentional abnormalities have an outside cause that leads to atypical activities. Some causes of intentional anomalies can favor organizations (e.g., seasonal sales spikes). Others, like a spike of clicks and downloads associated with mobile advertising fraud schemes, are alarming, 

Flagging intentional anomalies brings teams closer to discovering their causes and either finding a promising trend or taking preventive measures. 

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FAQ

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What is anomaly detection?

Anomaly detection is a data analysis technique that helps identify data points or events that deviate from a normal distribution of a dataset. These outliers can be caused by errors in the dataset or external events (fraudulent activities, technical errors, seasonal trends). 

What does an anomaly detector do?

An anomaly detection system helps detect abnormal events in real time, preventing associated productivity and financial losses, security breaches, or reputational damage. 

What are the examples of anomaly detection?

Anomaly detection is widely used across all industries for finance and advertising fraud detection, quality control, elimination of security breaches, streamlining operations, or identifying growth opportunities.

Which algorithms are used for anomaly detection software?

Anomaly detection heavily relies on machine learning anomaly detection algorithms. Techniques like K-nearest neighbor (KNN) and local outlier factor (LOF) are widely used for outlier analyses. 

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