Among the myriad challenges faced by advertisers and marketers, ad fraud stands out as a persistent threat that erodes trust and hampers the effectiveness of campaigns. Ad fraud takes various forms, from click fraud and impression fraud to the creation of fake traffic, resulting in inflated costs and diminished returns on investment. The lack of transparency and accountability in the current advertising supply chain exacerbates the issue, making it challenging for advertisers to ensure the legitimacy of their investments. A recent Juniper Research report estimates that 22 percent of advertising expenditure, amounting to close to $84 billion, was lost to ad fraud in 2023 worldwide, and is expected to rise to $172 billion by 2028. There is also a narrative that predicts fraudsters potentially leveraging AI (as it evolves) to deepen and widen their impact.
Over the years, many tools have attempted to mitigate ad fraud. In the recent past, blockchain technology has emerged as a beacon of hope, with a potential to provide a secure and transparent solution to the growing challenge of ad fraud.
Openness and accountability
At the core of blockchain’s impact on ad fraud lies its inherent transparency and traceability. Unlike traditional advertising systems, blockchain operates as a decentralised and distributed ledger, recording every transaction and interaction across a network of computers. This transparent ledger ensures that all stakeholders within the advertising supply chain can verify the authenticity of each ad impression and click. In a blockchain-based advertising system, advertisers gain unprecedented visibility into their ad spend. They can trace the journey of each ad impression, ensuring that it reaches the intended audience without being manipulated by intermediaries.
Smart contracts as fraud prevention tools
Blockchain’s smart contract functionality introduces a powerful tool for automating and enforcing agreements within the digital advertising space. Smart contracts are self-executing ones with predefined rules, enabling advertisers and publishers to automate transactions and ensure contractual terms are met. In the context of ad fraud prevention, smart contracts play a crucial role in setting conditions for valid transactions. For example, a smart contract can stipulate that payment is only made for verified ad impressions or clicks, automatically identifying and rejecting fraudulent activities. This automation reduces the risk of human error and strengthens the overall integrity of the advertising supply chain.
Decentralisation: Bolstering security against fraud
Traditional advertising systems, being centralised in nature, are susceptible to hacking and manipulation. Blockchain’s decentralised architecture addresses this vulnerability, making it resistant to discrete points of failure and malicious attacks. By distributing data across a network of nodes, blockchain enhances the security of the advertising ecosystem, safeguarding against unauthorised access and tampering. Advertisers, publishers and users have greater control over their data and transactions, reducing the likelihood of fraudulent activity. This decentralised approach fosters a more resilient and secure digital advertising environment.
Tokenisation and incentivizing honesty
Blockchain introduces the concept of tokenisation, creating digital tokens that represent value within the advertising ecosystem. These tokens can be used to incentivise honest behaviour among participants, creating a positive reinforcement mechanism that discourages fraudulent practices. For instance, advertisers can reward publishers and users with tokens for providing genuine traffic and engagement. This incentivisation model encourages stakeholders to adhere to ethical practices, contributing to a healthier and more trustworthy advertising ecosystem.
Barriers to widespread adoption
While blockchain certainly shows promise, there are some hurdles that will need to be overcome to truly leverage its for ad fraud prevention and take it mainstream. Public blockchain networks may struggle with scalability, leading to slower transaction processing and higher fees, which could limit the efficiency in preventing advertising fraud during peak times. Complex integration into existing advertising systems and potential resistance to change may also hinder widespread adoption. Moreover, evolving regulations and uncertainty in the legal environment for blockchain and cryptocurrencies may result in advertisers hesitating due to concerns about legal and regulatory implications.
Blockchain transparency may clash with privacy concerns, especially with sensitive advertising data, resulting in reluctance from advertisers and users if privacy is perceived as compromised. Lack of understanding among stakeholders about how blockchain works and its application in fraud prevention would result in slow adoption due to a lack of awareness and comprehension. High volatility of tokens used in blockchain systems would make advertisers cautious due to the risk of value fluctuations in transaction tokens. Lack of standardisation and interoperability among different blockchain platforms makes it difficult to achieve a unified approach to fraud prevention. Since some blockchain networks, particularly proof-of-work systems, consume significant energy, environmental concerns may discourage adoption without more sustainable alternatives.
It is estimated from the report referenced above that $47 billion of ad spends in 2028 are potentially recoverable using fraud mitigation platforms. Also, some global brands in recent years have saved millions of ad dollars by preventing ad fraud using emerging tools and blockchain technologies. While blockchain holds immense potential in mitigating ad fraud, overcoming barriers stated above is crucial for its mainstream adoption. The stakes run into billions of dollars, and collaborative efforts to address scalability, enhance integration and educate stakeholders about the usage of blockchain can pave the way for a transparent and secure future in digital advertising.
Rajesh Ghatge is the CEO of Wondrlab Technologies. He is stringing together a solution stack across design, data, and technology in an outcome-driven ecosystem.
Views expressed are personal.