An issue that current ad market faces
Ad and commerce are the representative markets in the IT industry.
Until now, it was common that consumers acquire information through ads and purchase items or service through commerce. However, the future direction of technology anticipates the direction to break the border between ads and commerce and converge them. The annual global ad market size is over 670 billion US dollars and the annual global e-commerce market size reached over 1,890 billion US dollars. Now connection and convergence of these two markets anticipate an economic big bag that will go beyond our imagination and investment are concentrated on this by a lot of corporates, including R&D and M&A.
In particular, the slump in the overall offline retail market and closing out of lots of retailers due to Amazon became a social issue while Google and Facebook renew their highest ad revenue record every year. Most of the SNS and online platform companies succeeded through the business model of creating added value by collecting and utilizing personal data and this is now widely accepted as a proven business model.
However, as customers receive almost no benefits, although corporates create more profits by using personal data and even sometimes customers become victims of personal information leakage, there raise doubts on the legitimacy of the business model using personal data. Now is the time that requires structural innovation for fair distribution of added value created by consumers’ activities for them to enjoy more benefits in the larger market and ecosystem as consumers contribute to growing the platform becoming a main agent of content creation as the most important contributor in the ecosystem.
The issue ad market faces is not just infringement of personal information. According to WSJ, on Aug. 25 in 2017, Alphabet, the holding company of Google executed refund mentioning about ad fraud issue in the letter sent to hundreds of ad companies. WSJ said Internet ad industry is estimated to waste 6.5 billion US dollars due to fraud.
Compared to other hacking, ad fraud can make high profits with low risk. Hacking is a critical crime but there is no clear penalty on ad fraud and the procedure to prove the fraud is complex, it is difficult to punish. Therefore, hackers are concentrated on this area and crimes are evolving continuously. For now, lots of ads are exposed by bot, not by a human. This meaningless value is input as performance and exaggerated results are reflected on ad performance. As a result, performance and unit cost decrease. Therefore it is necessary to establish a new system solving the ad fraud issue and enabling the target marketing that is to be executed accurately to the actual targets, not by a bot.