How blockchain could change the advertising industry

Digital advertising fraud costs the industry billions. Blockchain offers possible relief – and lessons for other vertical markets
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You can summarize one of the themes of our ongoing series on potential fits for blockchain in the enterprise using a single word: Trust.

Blockchain is not a fit everywhere, and even in industries where it has obvious appeal, it’s not likely to be an instant hit. But as we wrote in a recent post on making the case for the emerging technology, “blockchain could deliver value in any scenario where trust is an issue, in any transactional relationship or business process involving data or other assets.”

[ Can you explain blockchain to non-techies? Read our related story, How to explain blockchain in plain English. ]  

As Gordon Haff, technology evangelist, Red Hat, reported from the MIT Enterprise Forum’s Connected Things event, trust was a key topic during the blockchain discussion there. Haff noted that Andrew Stahl, SVP business innovation for SAP, views “… trust, in cases where one entity doesn’t already trust or directly control all the participants in the network, as a key to thinking about where blockchain might be most useful.”

Digital advertising fraud will cost advertisers $19 billion in 2018, according to Juniper Research.

So try this one on for a trust problem: Digital advertising fraud will cost advertisers $19 billion in 2018, according to Juniper Research. That’s 9 percent of total digital advertising spending, If you’re an advertiser, that’s akin to assuming that nearly one in every ten bucks you spend will vanish into the digital ether with zero ROI. Juniper Research expects ad fraud to reach $44 billion in 2020.

Bad actors and botnets take a toll

Digital advertising, which Juniper defines as “advertising on online and mobile devices,” has become a huge business – and a huge target for bad actors who use botnets and other tactics to effectively steal significant chunks of legitimate advertising spending through fraudulent clicks and impressions.

Just recently, the Department of Justice unsealed a 13-count indictment charging eight men in an alleged multi-million-dollar digital ad fraud. As BuzzFeedNews reported, the indictment followed a coordinated effort by the FBI and a group of technology, advertising, and cybersecurity firms.

So, yeah, there’s a bit of a trust problem in the digital ad space. In fact, there’s a broader issue of transparency, or lack of it, according to industry experts, particularly as money moves between key stakeholders – another sign that blockchain might be a good fit.

“In digital advertising, the current systems are opaque with little to no ability to actually prove how the money has moved between advertiser and publisher,” says Jon Gillham, CEO of Adbank. “In addition to costly and untrustworthy middlemen, the current system is easily exploited by criminals who use bots to produce fake clicks and views of ads, resulting in billions of dollars of advertisers budgets being stolen. With the inherent transparency of blockchain technology, these issues with the current advertising system can be addressed.”

Lessons for your industry

The advertising fraud problem may be a particularly dramatic example, but it offers a model for IT leaders in other industries about how to think about where blockchain might be fit in their own businesses. What problems exist in your processes or transaction flows – internally, among partners, with customers, or in your broader industry – that traditional databases or technologies aren’t doing a good job of solving? Blockchain might be at least part of the answer if trust, transparency, or a lack of interoperability and standards – or all of the above – is an issue.

[ Where is blockchain making tangible progress? See our related story: Blockchain in action: 5 interesting examples. ]

Ed Featherston, distinguished technologist at Cloud Technology Partners, notes that blockchain could help by “providing a trusted ledger of impressions that all parties agree on, and the blockchain would provide an immutable ledger of actual access/impression of the ads that is transparent and visible to all parties.”

The ad industry can quantify its trust problem with a (big) dollar figure, but keep in mind that sometimes matters of trust and transparency aren’t immediately financial but in other forms of data. This is a key reason why the healthcare industry is experimenting with blockchain, for example.

This is true in the digital advertising world, too. While it may ultimately translate into dollars, it all starts with data: impressions, clicks, and so forth. And there are too often discrepancies in advertising data today, says Nikao Yang, COO at Lucidity.

Yang sees several key applications for blockchain in the advertising industry. Here’s an interesting exercise for IT leaders: Substitute some of your industry’s critical assets and vocabulary for the ad terminology below. In fact, you don’t even have to do this in some cases, as in the first point:

  • “Provide one set of unified data for billing across multiple parties – agreed upon and available in a transparent way to all participants.”
  • “Identify any inconsistencies in data in the supply chain that result in invalid impressions and wasted spend.”
  • “Catch and eliminate domain spoofing, a practice in which a fraudulent website masquerades as a legitimate publisher and steals brand ad dollars.”
  • “Optimize campaigns away from sites with discrepant click or impression data for better performance – for example, blockchain can help identify and move spend away from sites with bot traffic.”
  • “Enforce agreed-upon advertising standards, such as what makes an ad viewable, what defines a billable impression, or what constitutes a conversion event. Technological enforcement of standards, and validating adherence to these standards in a transparent way, is critical to clean up the ecosystem.”