Will Digital Advertising Ever Govern Itself?

“We’re going to have to preserve our industry ourselves by making the right changes to focus on quality and preventing shady tactics so that advertising can thrive. We have to get ourselves out of the subprime advertising crisis. Trust me, no one else is going to do it for us.”

That was the call to action made in 2014 by Joe Marchese in his article entitled “The Coming Subprime Advertising Crisis.”

The article’s title was a reference to the housing crisis of 2008.

Marchese saw in digital advertising much of the same problems that created the housing crisis of 2008: a market that rewarded the wrong things; people and organizations that made a lot of money off them; and little to no ability (or interest) from the industry in question to police itself.

It's four years later — and we’re about to prove Marchese right.

Fraud is rampant, costing advertisers millions of dollars. In its 2019 Predictions Report, Forrester estimates the “dollars wasted on invalid impressions will grow to $10.9 billion by 2021. Brands have pulled significant budgets from major ad tech partners due to a lack of buying transparency. 

Lawsuits are common, citing malpractice or outright fraud. As of last month, the FBI began a criminal investigation into digital advertising’s media-buying practices. The FBI investigated the subprime housing crisis 10 years ago, too. The result was a flood of legislation, including the Housing and Economic Recovery Act of 2008, that greatly expanded the federal government’s ability to regulate the financial industry.

Which begs the question: Will digital advertising be forced to bow down to similar regulation? Or can digital advertising prove it can successfully govern itself?

So far it hasn’t, but not for a lack of trying. The Interactive Advertising Bureau (IAB) is advertising’s leading governance bod and has been at the forefront of drafting guidelines, standards and best practices that foster industry transparency, while curbing many of its sins - namely fraud.

The Difficulty in Self-Governing

The problem is that many of these guidelines are just that — guidelines. They suggest how things should be done, but have few ways to enforce what they suggest. Expensive audits and authentications don’t prevent future abuses, either. Without any incentive to follow these guidelines, companies across the digital-advertising supply chain will continue to grade their own homework.

We’ve seen the effects of this. Auction games like bid caching create a scenario in which advertisers don’t get what they pay for. Multiple clicks from the same session ID artificially inflate campaign performance metrics. Discrepancies between SSPs and third-party ad servers also cause confusion.

Advertisers don’t have confidence in the media they buy. Everyone has their own set of numbers, so billing disagreements are common and take weeks (or months) to resolve (if ever). Evaluating advertising performance is more akin to a guessing game than an actual science. And because no one knows what’s really going on, fraud is easy to hide.

In an era where we’ve become obsessed with only managing the symptoms of digital advertising’s malfeasance (namely wasted money, lawsuits, bot fraud, and more), we need to finally focus on curing the cause.

A Mechanism for Enforcement

While innovation races full steam ahead to bring transparency to the advertising world with decentralized business models to break apart black boxes, little has been written about how these new technologies can codify and enforce ad-measurement standards.

We need a way to universally and transparently enforce measurement standards. As Marchese said over four years ago: “No one else is going to do it for us.”

Except now, the government just might. So before it gets to that point, let’s consider the two major components needed to fix this mess.

We need universally agreed-upon standards. We have some, including a MRC standard for viewability, OpenRTB for programmatic buying and others. But there is still ambiguity surrounding how to compute common metrics like impressions, clicks and more.

Until we standardize those metrics, especially when multiple vendors touch the same impression, we’ll still be at each other’s throat at the end of every campaign.

We need a mechanism to enforce universally agreed-upon standards. Codes of conduct can only promise so much here. We can’t keep suggesting that companies follow strict measurement guidelines and hope that behind closed doors, that’s exactly what they’re doing.

Since we still struggle to trust each other, perhaps technology could be the enforcer.

Smart contracts could act as unbiased arbiters that ingest and compute signals from all members of the supply chain. Based on agreed-upon standards, these signals would be judged as either valid or invalid automatically.

That means all metrics, and how those metrics are computed, are guaranteed to be consistent. Advertisers would finally have assurance that no one is artificially inflating (or deflating) numbers, no one is playing auction games, and every event reported actually happened.

If we can rid our industry of fraud ourselves with codified, enforceable standards,  maybe we prove once and for all that we can govern ourselves.

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