Advertisers and brands are increasingly losing patience with ad agencies and other players over the lack of transparency in the digital advertising space. Digital ad revenue for the first half of 2017 came in at a record $40 billion, up from $31 billion for the previous year, and it was estimated to have reached $85 billion by the end of 2017.
The fight for transparency intensified in 2017 after The Times of London published a report about how the ads of big brands were appearing alongside racist videos on the giant video platform YouTube. Several brands paused their spending on YouTube advertising temporarily, until YouTube reassured them that it had taken measures to correct the issue.
The issue with YouTube speaks to the larger theme of a lack of transparency in the space. There isn’t enough information at the disposal of the advertiser regarding what they’re buying and how much they’re paying for viewed ads. Duracell, furious after finding out how much of its money goes to hidden fees compared to the actual amount it spent on ads, built its own advertising audit system, whereby it relates directly with a demand-side ad platform and a brand safety vendor-all in a bid to be more informed of its advertising moves. Simply put, advertisers are looking for a more transparent way to connect with their customer and audience.
How does traditional ad buying work?
Typically, the advertiser -the brand that’s looking to connect with its audience-contracts a digital ad agency to manage its entire ad campaign, with the advertiser having a set target it aims to achieve from the campaign. The advertiser pays the ad agency an amount that would cover both the overall cost of creating ad content and the cost of distributing the ad content to the brand’s target audience/customers. These two types of costs are what digital media experts call non-working and working spend respectively. One thing to note here is that an ad agency’s overhead cost is also part of the non-working spend.
Once the ad agency has developed the content for the desired channels, it buys ad spaces also called ad inventories -where the desired audiences would see the content. The ad agency has two options for buying ad spaces: buying directly from the publisher and buying programmatically through an ad exchange platform.
This usually long process fosters a lack of transparency-hidden fees, fraud, traffic, measurement and view ability especially with programmatic media buying. For clarity, the transparency issues here can be broken into two main parts:
- Fees and charges from vendors and other players along the supply chain.
- Fraud and view ability.
The first part is fostered by the long nature of the programmatic ad supply chain, as shown;
With each arrow in the image above, you can think of ad dollars being transferred diminishingly. And in many situations, the advertiser isn’t aware of how much each player in this system takes. According to a report from the ad industry trade group IAB, 55% of programmatic ad revenue goes to ‘ad tech’ services, while publishers receive only 45%. The findings from IAB demonstrate that non-working ad spend (ad dollars that didn’t get to the publisher) cost advertisers more than working spend. There are two problems here. First, advertisers don’t usually receive sufficient information about these costs.
The second problem is that publishers, who actually provide the platform for brands to reach their audiences, are paid less than the intermediaries.
The ad fraud and view ability part of the overall transparency issues originate from publishers selling fake impressions (fake clicks and bot traffic). Domain spoofing, whereby a publisher somehow presents his domain to be a larger publisher’s domain, is another part of the fraud problem. Ad fraud reportedly cost the U.S. advertising industry about $6.5 billion in 2017. Again, as in the case of hidden fees, sufficient information on how publishers verify their traffic, and the processes that ad agencies and other intermediaries follow to ensure that they work with publishers with verified traffic, needs to be available to everyone within the ecosystem.
This is where blockchain comes in. Indeed, blockchain in advertising is likely to be where we’ll see the most rapid adoption. They are a match made in heaven. Advertising lacks the transparency of data and process. Blockchain offers the transparency of data and process.