Digital advertising fraud is a massive issue in the business world.
Ad fraud takes $1 for every $3 spent on digital ads.
In fact, ad fraud is such a serious issue that 37% of surveyed advertisers would gladly pay a premium to ensure the traffic they’re paying for can be tied to a real human being.
As someone who has built an entire career on the Internet, I’ve been aware of ad fraud at every step of the way. It’s the reason why I’ve never been eager to pump money into digital ad campaigns, and would rather take the longer road of figuring out how to drive organic traffic. When you know the machine is broken, why keep putting quarters into it?
Despite the fact that there are plenty of profitable businesses built on arbitraging web traffic and converting potential customers through digital ads, the industry is still in need of a massive overhaul. And one of the issues keeping advertisers from being able to defend against fraud is validating the credibility of the actions being paid for: clicks, views, etc. So many of these metrics can be automated by bots, and it’s hard to know what’s real and what’s not.
Over the past year, I’ve become fascinated by blockchain technology.
I’ve immersed myself in it. I’ve written handfuls of whitepapers for emerging companies in this space. And I’ve been brought on as an advisor to companies like ShipChain, RedPen, MagnaChain, and more.
From supply chain tracking to author credibility, to providing SDKs that allow developers to launch current and future games on a public blockchain, the use cases are endless—and I truly believe we are witnessing the next great tech advancement. But one use case I think desperately needs attention is digital advertising fraud. And blockchain technology is a profound solution to a seemingly impossible problem.
Here are some mind-blowing statistics, provided by PPC Protect:
Ad Fraud Statistics
- The ad fraud botnet “Chameleon” costs advertisers over $6 million a month (Spider.io, 2016)
- Marketers lost $7.2 billion to digital ad fraud in 2016 (WhiteOps, 2016)
- 1 in 5 ad-serving websites are visited exclusively by fraud bots (The Verge, 2017)
- For every $3 spent on digital ads, fraud takes $1 (Adage.com, 2015)
- Levels of fraud are not constant throughout the year. Fraud is invited whenever and wherever digital advertising demand outstrips supply. (WhiteOps, 2017)
- US brands will lose $6.5 billion to ad fraud in 2017 (Marketing Week, 2017)
- Display ads examined by Integral Ad Science found 8.3% of all impressions were fraudulent (Integral Ad Science, 2016)
As it stands, Advertisers and media companies tend to work with an ad network for sourcing ads. The ad network will build a book of clients and media sources, collect a large upfront payment for ads, and then monitor the placement and performance of the ads with the media source.
Google AdSense is the largest of these providers, but tends to pay less and have more ease of access. Other ad networks specialize in certain types of content or companies. Through the process, they all take a massive portion of the ad spend.
When you think about how blockchain can provide a solution here, the technology can enable advertisers and media companies to work together. Ad viewing can be verified on the blockchain, and have payments dispersed automatically with smart contracts.
The barrier to entry, of course, will be initial market adoption and building tech that is fast enough to satisfy speed requirements.
Traditional media buying refers to buying ads on TV, radio, billboards and so on that require some sort of sales system. However, traditional media buying is currently bogged down by paperwork and other inefficiencies, along with imprecise practices such as surveying and “sample families.”
The solution here would be to solve for as many of those inefficiencies as possible—and not in a way where the same recording process that happens on paper, happens on a screen. That’s not an efficiency improvement. That’s a minor upgrade to an outdated system.
As an example, I know AdBit is launching a blockchain solution to connect traditional media buyers directly with media providers, tracking the transactions with smart contracts. This will give buyers greater peace of mind, knowing that they are actually getting the ads they pay for, as well as receiving better information on the campaign performance—with the intention of improving the ad-buying experience to help media owners more successfully monetize their audiences.
While the previous two solutions focus on connecting media owners with ad buyers, there is also potential for a decentralized ad exchange. In this system, an advertiser can specify a price and demographic, and have their ads hosted automatically. This would be similar to Facebook Ads, but could allow better tailoring for advertisers to find customers across a larger landscape.
Building a decentralized autonomous organization (DAO) that regulates the exchange of ad units and ad tokens could help address this problem. One of the biggest road bumps here is the necessary transaction speed requirement. When someone views an ad space, the advertiser needs to pay for the ad slot within a fraction of a second. As blockchain speeds increase and decentralized exchange undergoes more strenuous tests, this will likely be a major solution to help both advertisers and content providers make more money.
A favorite use case of many blockchain enthusiasts is the ability to sell your own data on blockchain. The idea here is that companies such as Facebook and Google get paid for your viewership and information. On the blockchain, however, advertisers could directly pay users for their personal data, rather than going through the intermediary.
However, this use case would take a while to be established, and to build the necessary network effects for success. In the long run, companies would need to shift from working with a middleman to working with each user’s data set. Additionally, there would need to be enough companies spending money on the platform for users to be incentivized to partake.
As blockchain speeds increase, smart contracts improve, and more companies adopt blockchain technology, expect to see interesting opportunities within the advertising sphere.