In a normal scenario, the provider of ad space would be a website or an application. Google would pay the owner of that space. On Youtube, that would be an ad served by Google paid to the channel owner.
Bot farm is operated by a company that displays Google ads. This bot farm fakes traffic to the bot farm owner and simulates conversion Google wants to see. Google sees the high conversion and happily serves more ads to the bot farm owner. Bot farm owner is paid by Google for displaying the ads. The person paying for the ad gets screwed.
in short, people/entities with websites employ bots to click and interact with the Google Ads on their website to generate fake ad revenue.
and the person running the ad campaign is billed for those fake interactions.
I'm guessing app ads are heavily botted because they're more costly vs. a simple ad that lands you on a website (edit: I was wrong, see reply by OP: https://news.ycombinator.com/item?id=49665323)
It’s been known for decades that third party website are just lost money.
And then, even Google own pages get clicked by bots but this time from competitors so you spend all your budget and they get cheap auctions.
What I did was create a game with an action button. Then I served ads right next to the action button. I didn’t realize people would miss click on the ads at a high rate, but they did. They fat fingered it, clicked the ad, I got paid.
I looked into it after a couple weeks because my click rate was crazy high.