Ad Fraud and AdEx
With estimates of 30% to 50% lost to ad fraud globally, online advertising has become a wasteful, broken ecosystem. We’re actively working to change this.
Recently, AdEx presented to an assembled audience of marketing and advertising executives in NYC to talk about the industry in general, and how blockchain solutions might be able to help.
We asked everyone to perform a thought experiment and imagine that a publisher owned the nearby street corner adjacent to the building we were in, and they had 100 people with sandwich boards. They have lots of foot traffic on this corner— about 10,000 people a month pass by, and they say they can target ensure that our sandwich board people only show the right ad to the right person. So, as the advertiser, we say great, and we pay our money and get our ads on those people with sandwich boards.
I ask the crowd assembled, how do we know the people passing by are looking at our ads? I say, actually there’s a robot factory down the road, and they are making some pretty great human-like robots and how can we tell them from the real humans in the crowd? I tell them about how I had to hire someone to watch the foot traffic to see if it matches up with what the publisher told me . I share how my report is really different form their report on the number of people who looked at my ads — and so on.
Modern digital advertising, at least from the advertiser’s perspective, is supposed to lead to higher-quality engagement. We can now deliver custom, individual advertising, one person at a time, by the millions. That’s certainly cool. And I think it’s something we should reflect on as being ultimately a more efficient system of advertising — as opposed to the mass, generic, non-dynamic advertising of the traditional media we are used to. If the internet were indeed an information super highway, it would be like the billboards showed each passing person something different as they cruised by our website, and indeed, they do.
In an overarching and fundamental way, the main driver of the business model of the internet and of our digitally-experienced lives is advertising. It is the extra push that companies use to sell more product. Online advertising is a relatively cheap, seemingly efficient way to do it. But with estimates of the total average fraud exposure anywhere from 30% to 50%, it’s become a wasteful, broken ecosystem.This amounts to an atrociously large cost of doing business that only erodes people’s trust in the whole enterprise.
That’s a pretty big problem.
At the most basic level, the reason it’s this way is that the digital advertising system today has some fatal, gameable flaws, which we already intimated with our thought experiment above. The bases of most of the problems of the digital ad industry are the 1) indirectness of the relationship between publisher and advertiser; 2) the lack of a an agreed upon standard settlement (payment) layer, and 3) dovetailing with both the rife and profitable opportunity for fraud.
You see, in order to get that mass granularity — where the right person sees the right ad at the right time, publishers and advertisers have increasingly used a host of intermediaries to achieve this (see diagram below). The problem with this picture, however, is that there is no common standard between them all. There’s no good standard in reporting, and no way to verify said reporting. Much of the fraud and waste in digital advertising is carried out through these various channels and processes interposed between advertiser and publisher.
How does AdEx prevent all this?
In simplest terms, AdEx allows for the relationship between publisher and advertiser to be 100% direct — there are truly no intermediaries. There’s also no debate on advertising events and/or ad delivery (impressions), since the event and/or impression is the payment term itself. When an impression occurs, the publisher is paid directly by the advertiser. This is how advertising is supposed to work.
Instead of advertiser/publisher relationships needing various third-party observers to get them to agree on the actual number of impressions and/or events that happened, these impressions and/or events can be verified in real time. This is can operate as a very effective and new layer for combating fraud because there’s no disconnect between publisher and advertiser when it comes to registering the impression. We’ve talked about this in the past.
Because there’s a single, canonical source of information, there’s no need to argue. There’s always a common standard in reporting because advertiser and publisher register the same event and/or impression. In addition, because each event and/or impression is a micropayment in real time, either party can immediately stop the campaign if something seems off.
For the first time, a publisher and advertiser can work in an environment of 100% transparency and trust.