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IBM Corp., Toyota Corp. and a growing number of startups use blockchain to try and repress online advertising fraud.
The complexity of online advertising and the struggle to keep track of advertising spending have allowed scammers to avoid detection, according to lawyers Bloomberg Law. But blockchain technology can reveal discrepancies in ad performance and allow advertisers and publishers to know how many clicks an ad actually gets, the lawyers said.
"Blockchain drastically reduces the incidence of fraud," said Matthew Savare, a Lowenstein digital advertising lawyer Sandler LLP and a member of the Interactive Advertising Bureau blockchain working group.
Digital advertising is increasingly dominating the advertising industry. Online advertising will account for 51.8% of total global advertising spending in 2020, compared to 45.5% in 2018, show Bloomberg Intelligence data.
Advertising fraud is a "big problem" for the digital media ecosystem, said Bloomberg Intelligence analyst Paul Sweeney. Fraudulent activity could cost advertisers $ 44 billion globally in 2022, compared to $ 18.7 billion in 2018, according to Juniper Research, a digital market research company.
Most advertising fraud comes in the form of automated accounts, or bots, that inflate clicks on ads and companies that offer advertising space on counterfeit websites. Fraudulent sellers sell advertising space on websites that do not exist or even real sites that they do not have access to. Traffic brokers sell low-cost bot traffic to publishers to make it look like a large number of people have clicked on an ad. A complex supply chain makes it difficult to know if an ad was published where it was expected and how many people actually saw it.
Low-quality publishers with fake websites are primarily responsible for digital fraud, said Bloomberg Intelligence analyst Geetha Ranganathan. "It's not that simple, since there's a fairly long supply chain when it comes to programmatic advertising, and in some cases even suppliers in the ecosystem are responsible," he said.
Blockchain promises to help solve the problem by making the advertising ecosystem more transparent, say lawyers. The technology allows users to view and verify transactions on an immutable and decentralized digital record. Allows participants in an advertising supply chain to track each transaction and identify and resolve data disparities.
Leveraging Blockchain
Digital ledger technology is gaining ground as advertising companies realize the benefits of having an immutable record of ad performance data. The Interactive Advertising Bureau launched a pilot program in July to explore how the blockchain can solve the challenges of digital advertising, including supply chain transparency and data discrepancies.
IBM has partnered with the software company Mediaocean to create a blockchain platform to show the advertising impact of marketers and help them detect suspicious activity, Babs Rangaiah, executive partner of global marketing at IBM iX, told Bloomberg Law.
Toyota has begun using a blockchain platform from Lucidity's advertising analytics company to track ad performance and identify miscalculations and fraudulent activity. According to Lucidity, Toyota has seen ad performance, which can include clicks and time spent viewing the ad, improving by more than 20% of the platform's use.
Many players
The digital advertising industry has had a "long history of controversy" because the players involved have difficulty keeping consistent records on ad metrics, said Laura Jehl, co-leader of blockchain technologies and digital currencies team at Baker & Hostetler LLP.
Dozens of parties – online advertising networks, digital service providers, ad exchanges and other intermediaries – are part of the digital advertising ecosystem. Everyone can measure the performance of the ad differently, and some may erroneously calculate the metrics by mistake.
The discrepancies in metrics and billing open the door to fraud, said Sam Goldberg, president and co-founder of Lucidity. "It is much more difficult to be discovered with a lack of transparency," he said.
Blockchains allow advertisers for the first time to check if they are getting exactly what they paid for, said lawyers and industry representatives.
All participants have access to a single validated data set in real time that shows how many ads have been placed, where they appear, how many times they have been clicked and what kind of audience they see, Jehl said.
The majority of participants must agree on the data so that it appears on the blockchain. Advertisers and publishers can analyze data to detect and eliminate invalid metrics, Jehl said.
"Everyone can see the same information and spend less time discussing what worked where," Jehl said.
Controversa Rampante
While most advertising disputes are solved privately, according to lawyers, such disputes can lead to costly disputes.
Facebook Inc. faces the charges in three separate cases that has inflated the amount of time users watch video ads and misrepresented the number of people an ad will reach, show Bloomberg Law data.
Google of Alphabet Inc. addresses four ongoing lawsuits on its advertising practices, the data show. Cases include allegations that Google has failed to pay web publishers for advertising revenue and has misrepresented the way it excludes fraudulent ad clicks. A lawsuit against Twitter Inc. accuses the social network of inflating prices for inventory due to the presence of fake accounts on its site.
Advertisers and other companies will continue to work to apply and develop technology to limit fraud, said Kimberly Culp, attorney and director of digital media at Carr McClellan PC in Burlingame, California.
"There is momentum in this direction," said Culp.
