Blockchain Will Save Digital Advertising
By Ken Brook, Co-founder and CEO of MetaX
In December 2016, WhiteOps, one of the digital advertising industry’s leading fraud solutions, released findings regarding Methbot, a Russian-based organization estimated to be costing online advertisers $3–5 million per day, or over $1 billion per year.
That $1 billion figure — and the extent of the advertising fraud it represents — caught headlines from The Daily Mail to the New York Times. Advertisers demanded to know their exposure. Vendors scrambled to respond as audits were issued. Payments were withheld.
Many of us know that this $1 billion figure is disturbing, but unfortunately not surprising. The truth is that the tactics used by Methbot represent just one type of fraud and just one perpetrator who got caught. The reality is that the actual problem is much, much worse. The source of the problem? Our own creativity as an industry.
The Flawed Backbone
Digital advertising is based on a fundamentally open and decentralized system (i.e. the Internet). This openness has fueled creativity — from the way we deliver ads to the way we target audiences and track performance. It has powered the digital advertising sector to grow to over $175 billion in annual estimated spend.
This creativity and innovation makes the advertising space exciting, but it also creates gaps, inconsistencies, and a lack of transparency. In short, the ecosystem has developed a “flawed backbone.” The characteristics that make it innovative also make it vulnerable:
· A small set of standards = Perpetrators can exploit gaps
· No central marketplace (e.g. NASDAQ) = Impossible to monitor and enforce standards
· Limited certification for responsible players = Perpetrators masquerade as legitimate participants
· No reporting requirements or penalties mandated by a central entity (e.g. SEC) = Perpetrators manipulate ecosystem without repercussions
Given recent trends, one can imagine fraud will balloon from $8 billion to $20 billion by 2020. Advertisers will lose faith in digital advertising, impacting budget allocations. Government regulation will step in, taking away the industry’s ability to self-regulate
The industry needs an upgrade to its backbone that addresses the gaps and unifies the way fraud is identified and eliminated. It needs a solution that provides the transparency to identify fraud, while protecting the proprietary information of participants.
It needs a common data set and common language that is universally understood and has inherent buy-in by all participants. It needs to leverage this common language to work together to eliminate the fraud. Blockchain is this solution.
What is Blockchain?
Blockchain is a distributed ledger of events that is shared among participants. Think of it as a huge shared database — in this case, a database of all data related to an advertising impression. Each time an impression serves, the relevant data for that impression is encrypted and broadcast to the blockchain participants.
When enough participants receive and approve the impression, it is added to the blockchain as a verified event. This is called updating by consensus. Once an impression has been updated by consensus and added to the blockchain, it is immutable (i.e. it can’t be manipulated by another party). It becomes part of a permanent ledger that all participants can access.
How Does Blockchain Address Advertising Fraud?
While the relevant data for an individual impression itself is encrypted, the participants involved in that impression must be transparent. Thus, it addresses the advertising ecosystem’s current lack of transparency (i.e. fraud perpetrators can’t hide). Also, because the data surrounding a given impression has been verified by a consensus of participants, that data becomes a common language that everyone understands and trusts. It becomes the single source of truth.
When everyone is using the same trusted data, it would eliminate the countless hours of back-and-forth and disputes over who’s analysis of the fraud is more accurate. Moreover, because the data set is universally trusted, it also provides clear standards that can be set by an independent governing body. These standards can then be incorporated into the blockchain itself, making them inherently enforceable through the technology for the benefit of the entire ecosystem.
Basic blockchain vs Advertising-Specific Blockchain
It’s true basic blockchain has limitations when it comes to scalability. If blockchain is going work for digital advertising, it needs to be able to intelligently process billions of transactions per second. It also needs to provide this data in real-time in order to combat fraud.
A viable implementation of blockchain can’t require the industry to change their core infrastructure overnight. If a blockchain solution is going to see adoption, it needs to facilitate a transition that allows all industry participants to adopt with the technology they use right now.
The right blockchain solution will combine deep digital advertising domain expertise with cutting edge blockchain technology. Some of the best minds of both sectors are already aggressively working to develop an Advertising-Specific Blockchain that addresses these issues.
Over the next 18 months, we’re going to see some exciting, positive changes coming for the digital advertising industry. We’re going to see the capabilities of blockchain unlocked for the sector, ensuing that situations like Methbot never happen again.
