Losses incurred due to ad fraud are expected to reach $23 billion this year and including indirect economic and social costs could reach $30bn, according to a report by cybersecurity firm, Cheq. Yet, while such costs are only expected to climb, many in the industry point to blockchain as a potential advancement in the fight against the problem.
Because blockchain by nature is transparent and cannot be tampered with, its potential to help mitigate ad fraud in the murky digital advertising ecosystem sounds promising, at least in theory. But is it the silver bullet the industry's been looking for? And how does it actually work?
"Blockchain acts as a shared ledger for transactions," says Sam Kim, CEO, Lucidity. "In industries like digital advertising where most companies are a black box, blockchain shared ledgers create a transparent and auditable record of data for all permissioned parties to access."
Essentially, as a decentralised, immutable online ledger, blockchain writes any event level activity to a record that is unable to be changed. By doing so it offers a detailed history of all intermediate transactions for every impression that is bought or sold. With blockchain, advertisers could see exactly where their digital dollars go. If they buy an ad from a publisher, the purchase record would be evident. So, ultimately, one could follow through every endpoint of the value chain, making it, in theory, a legitimate weapon to fight ad fraud.
From theory to practice
"There are quite a few 'point solutions' that are attempting to solve ad fraud," says Gowthaman “G’man” Ragothaman, CEO of Aqilliz. "The challenge is in having a unified view of all the stakeholders in the value chain, to be able to take timely decisions. Blockchain can definitely address this need – to provide a friction free unified view – to eventually combat ad fraud effectively."
But others argue that we are not anywhere near primetime for blockchain in fighting digital ad fraud.
"On its own, the technology will not be able to solve ad fraud as the current consensus algorithm in permissioned blockchain will cause a bottleneck," says Fauzi Rachman, chief technology officer, Isobar Singapore. "The ability for blockchain to operate in real-time is, therefore, a problem that will need to be tackled from a system architecture perspective."
Jordan Khoo, managing director APAC DoubleVerify, says that latency remains the major barrier to commercial adoption. "Digital advertising transactions require a 10 millisecond response interval. The fastest blockchain transaction takes 1.5 seconds. This is not fast enough to tackle ad fraud, because you need technology that operates in virtual real time." Khoo also feels that there are too many players in the advertising ecosystem who currently benefit from transactional opacity to create a groundswell of support for a blockchain solution. He says that unless the industry unites to challenge this, it probably won’t happen anytime soon. However, he does see some promise.
"Any workable technology that builds trust into the transaction relationship between publishers and advertisers has to be positive," says Khoo. "We’ve seen blockchain projects that have addressed the back-end of digital media buying, such as offering margin or fee transparency among intermediaries within the value chain, which in turn can be used for billing and reconciliation purposes. However, until latency issues can be overcome, blockchain technology in its current form cannot combat ad fraud."
But Ragothaman argues that we shouldn't allow the “real-time” need to stop us from considering the application of blockchain technology. "Even if we are able to provide three-times-a-day verification that helps the campaign management every day, it is still a huge progress from where we are today," he says.
Blockchain in the supply chain
At this point in time, there are many projects in the blockchain space that are looking to solve issues across the media supply chain. Though many remain in the pilot project stage, some have successfully executed campaigns with global brands. In March this year, Singapore-based blockchain start-up Zilliqa was able to conduct a Southeast Asian campaign for FMCG giant PepsiCo, which produced a 28% increase in cost-efficiencies for viewable impressions. Meanwhile, Japanese car manufacturer Toyota partnered with blockchain advertising analytics firm Lucidity and achieved a 21% lift in campaign performance using their first-ever verified programmatic ad campaign on blockchain.
"The participation of consumer brands and large players across the advertising industry gesture toward the technology’s legitimacy in addressing existing issues," says Amrit Kumar, Zilliqa president and chief scientific officer.
Last year, Cathay Pacific teamed up with Accenture to launch the airline’s first application of blockchain technology by issuing air miles to customers over a single distributed ledger. Thus, they allowed customers, airline partners, and the airline itself to manage member rewards in real time. "The campaign dramatically increased the engagement and stickiness of members. We saw an 80% increase in dining transactions and 10% more active users on the mobile app in just four weeks," says Michael Yung, head of digital products and technology, Cathay Pacific. "We see the benefits of applying blockchain technology into our campaigns are to increase efficiency and engagement."
Meanwhile, Vivek Bhargava, CEO of DAN Performance Group, says DAN Data Labs Engine already has a practical application of blockchain running. "It handles credits, which is a way to pay for runs on the system." According to Bhargava, credits can be bought via a credit card swipe and can be used to avail various analytical runs. The blockchain also records every action on the system, such as changes made into a Facebook account or a Google campaign. "This enables us to create a single view of optimisations done for a client," says Bhargava. "It also serves as the base for our gamification engine that is due to roll out next month, that incentivises and rewards auction marketers to optimise their campaigns often."
In addition, consortiums are being formed with the goal of leading change in the industry. These include the Mindshare-driven ‘Project Proton’, a programmatic advertising alliance launched in September 2018 which included the likes of Zilliqa Research, Integral Ad Science, Mediamath, Rubicon, and Underscore CLT. “The goal of Project Proton was to ultimately transform the programmatic advertising ecosystem by providing transaction parties the ability to interact securely with the help of smart contracts,” says Zilliqa president Amrit Kumar. The smart contracts deployed via Zilliqa’s blockchain are able to reconcile impressions from different data sources alongside payments. This March, Zilliqa conducted a Southeast Asian campaign for PepsiCo, which produced a 28% increase in cost-efficiencies for viewable impressions.
"We are seeing consortiums being formed that are seeking the required scale in blockchain advertising," says Khoo. "I would expect to see a number of commercial roll-outs being pursued in 2020."
But while there are currently some blockchain-supported ad fraud prevention platforms in the industry, most use blockchain for post-validation that are used to identify some ad fraud players, but not all. Therefore, for the time being, blockchain is still not considered as a practical solution, especially with the high costs involved in operating the technology to provide sufficient resources for real-time execution at scale.
"Since blockchain is decentralized, it’s unclear who in the advertising ecosystem is going to fund the new computing required to make blockchain fast enough to pull off real-time analysis," says Khoo. "This is a big-dollar hardware problem."
But, that said, some feel that real-time operations are not the only way to prevent ad fraud. "A strong combination of trusted sources to identify ad fraud, practical algorithms and machine learning can create an effective system to combat the burgeoning issue," says Rachman. "As an industry, we will need to look into regular auditing processes to identify ad fraud players. Eventually, with sufficient data, we should be able to optimise operations to achieve near real-time verifications."
Proponents of blockchain, like Lucidity's CEO Sam Kim, argue that blockchain’s value shouldn’t be overlooked as it fights more than just fraud. "Blockchain is a powerful technology for identifying sources of waste in a campaign. Fraud can be a major cause of waste, but so too can technical errors, breakages, and auction inconsistencies that lead to massive discrepancies in campaign measurement," he says. "When everyone reports different numbers for the same campaign, waste can be hard to spot. Blockchain reconciles data between multiple parties so brands can easily isolate sources of waste, including fraud."