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Forget Blockchain; We Need Transparency

transparency

In this piece, Daniel Spears (pictured below), programmatic director, The Guardian, explains why achieving transparency is going to be tough, no matter how much marketers demand it, because of ‘opacity by design’. There is a solution, and it all starts with reporting.

A healthy market is fuelled by investor confidence, and confidence is built on trust.

If you’re an investor in the digital ad economy – whether a marketer seeking ROI or a publisher pursuing monetisation – opacity is undermining your interests.

As a result, our market’s largest investors are reducing their ad spend and participants at both ends of the supply-chain have defaulted to the position of ‘trust no-one’.

Introducing ‘opacity by design’ 

Opacity is the shroud under which non-disclosed fees and ad fraud continue to hide from our plain sight. It’s also the curtain behind which discrepancies and decimal-rounding are manipulated at your expense.

Beyond these significant issues, market-level opacity has precipitated a disconnect between price and value. This might feel familiar, because we’ve seen it before. The digital ad market has some quite incredible parallels with the sub-prime mortgage crisis; where junk bonds were packaged to attract investment, which ultimately led to the collapse of the entire US economy.

It’s why, despite marketers becoming vocal in their demand for quality (and value), their day-to-day buying behaviour continues to be governed by price. This is a direct consequence of ‘opacity by design’, and it makes for a world where participants are blocked from making truly informed investment decisions.

Why is this, you ask? Because, once enlightened by information, marketers would quickly reduce their ad spend; an act which is counter to the interest of any intermediary whose business model is predicated on volume.

Focus on the root cause, not the consequences

As long as ‘opacity by design’ exists, buyers and sellers will unknowingly attach financial incentive to negative behaviour. In doing so, they create the market for fraudulent ads, the reward for reselling, and a carrot for other nefarious business practice.

Marketers, buyers and publishers must better align in their agenda and coordinate in their pursuit of change. Whilst some important steps have already been taken, the digital supply-chain remains shrouded in mystery and the hidden horrors continue to undermine investors’ ROI.

Meanwhile, investors are inundated by point-solution after point-solution. Blockchain isn’t a solution to opacity, just as Ads.txt isn’t a solution for fraud (they seek to answer the consequence not the cause).

In order to evolve the market must focus on the root cause; investors must remove themselves from the shackles of systemic ‘opacity by design’.

Reporting today merely upholds the illusion of transparency
transparency

Daniel Spears, Programmatic Director, The Guardian

Buyer and seller reporting is fragmented and offers only partial sight – just one side of the transaction is visible and key information, such as transaction IDs, is removed to prevent any meaningful analysis of the data. As a result it is near impossible for investors to spot fraud, hidden fees, or reselling through reconciliation.

It’s worth taking a step back to acknowledge what this means – that investors in our huge, data-driven investment market don’t know what proportion of their spend converts into digital advertising stock (eyeballs).

This is not through negligence – this is a design feature of the market in which we operate today.

The solution is straightforward (and it’s not blockchain)

Buyers and sellers need a complete, reconcilable record for every ad transaction.

Brought together, these represent a record of fact, which is reconcilable after the event, such that buyers and sellers have the means to verify transactions with (near) certainty.

It’s really just a simple form of dual-book accounting; a medieval ‘technology’ which only requires the inclusion of a single additional field in buyer and seller reports. As such, we’re not talking about a major system overhaul, rather minor adjustment; investors being given access to the information which already exists in the platforms’ own core reporting.

Whilst my proposed system won’t eradicate problems in and of itself, the granular, end-to-end paper trail will surface the intelligence necessary to identify and quantify major issues.

The benefit goes way beyond advertising; this shift is good for society. By achieving traceability of funds, participants are in a position to stem the flow of marketing dollars to criminals, whilst ensuring governments have the data necessary to administer tax effectively.

As a result, negative business behaviour carries real reputational risk; making for a strong economic incentive that is absent today.

It’s time for investor action

The alternative – perpetuating the status quo – is inconceivable. Our continued pursuit of point solutions as sticking plaster only adds more layers of complexity between investors and the underlying issue. Or in a dental analogy; settling for a daily anaesthetic injection to dull colossal toothache rather than getting the troublesome root canal fixed.

This a call for evolution that gives brands, buyers, and publishers access to their complete, granular, reconcilable transaction records as basic hygiene. This is the foundation on which the digital ad economy can restore trust, reinstate confidence, and achieve sustainable long-term growth.