Can Online Advertisers Fight Click Fraud With Blockchain?

By Monica Eaton-Cardone, Chargebacks911

While the major app retailing platforms that are supported by companies like Apple, Google, and Facebook are relatively secure, they’re not immune to abuse.

Back in August, for instance, Facebook took its first legal action against two app developers—JediMobi and LionMobi—whom the company suspected of click fraud. A statement from Facebook alleges that the developers created Android apps infected with malware. This hidden, malicious software faked user clicks on the social media platform's ads. It’s a practice commonly known as “click fraud.”

Click fraud involves a third party deliberately clicking an advertising link, such as a banner ad, while having no intention of purchasing the item advertised. It’s a serious problem for digital advertisers.

While the two app developers allegedly used malware that infects users’ devices to passively rack up ad traffic, a click fraud scheme can be carried out through a variety of different methods. Click farms, for instance, are operations that are often based overseas, and involve perpetrators manually clicking on hundreds—even thousands—of ads every day. There’s also hit inflation, in which a link can be used to direct users to an ad page for a split second before redirecting to their intended destination.

So, why do people do this? Well, it can be a very lucrative scheme. In fact, click fraud cost advertisers roughly $7.2 billion in ad revenue in 2016. Merchants now lose about one-third of all digital ad spend to click fraud…and the problem is growing at a rate of 50 percent each year. All totaled, the problem is expected to cause total losses of over $15 billion by 2021.

But, although things seem bleak for online advertising, the situation is far from hopeless.

Blockchain Could Be The Answer

The prevalence of click fraud—and the dearth of meaningful solutions to the problem—has led some to question whether platforms like Facebook are actually complicit in the scheme. It’s not that they’re complicit; rather, it’s just that rooting out hard-to-detect fraud on such a massive scale is a daunting task, even for a massive company.

Conducting the level of in-depth review necessary to identify it just isn’t realistic at this point given the massive number of uploads added each day.

Fortunately, blockchain could present a solution to this problem.

Currently, ads are typically sold via an intermediary ad network. It’s a cloudy process, offering little insight on who clicks on ads or why. One of the greatest advantages offered by blockchain technology, though, is transparency. Because the transaction record is mutually accountable and reconcilable, there’s little risk of mistakes or abuse of the system.

The technology could have multiple applications for the digital ad space. For instance, it could largely supplant ad networks, cutting out the middleman between companies, publishers, and visitors. With ads sold and tracked using a blockchain system, it could also be easier to trace the customer’s journey and develop more useful insights for targeting purposes.

Also, with a centralized network, there’s the prospect of ad serving being interrupted by technological failure, natural disaster, or other disruptive force. Blockchain, however, is a distributed system. If one or even multiple nodes in the network go offline, the system can still function as normal.

It sounds like a radical idea, but there is some precedent for this. In 2018, Toyota employed a blockchain system to identify and blacklist suspected ad fraud. The company managed to significantly increase their campaign performance as a result.

Potential Downsides To Blockchain Ad Buying

Besides Toyota, a variety of other advertisers played with the idea of blockchain-enabled ad buys in the last few years. None have really embraced the concept in the long-term, though. According to one recent study, only 11 percent of digital advertisers have completed even a single ad purchase using a blockchain.

The widespread reluctance to embrace this ad model isn’t attributable to any single issue. Instead, it’s a variety of factors contributing to the resistance.

Some individuals have concerns about the general energy efficiency of blockchain systems. That same study shows that speed is more of a roadblock for others, as 55 percent of respondents felt the technology was too slow to be effective for media purchases.

This is possible; after all, a blockchain is a network of separate devices, and as more nodes are added to the blockchain, there’s the possibility of slowdown, especially as devices age.

The simple truth is that no one really wants to be the guinea pig to test out new technologies. We may be enamored with new innovations…but that doesn’t mean we want to put our money on the line.

Other Strategies To Contend With Click Fraud

It may be a while before we see any true, widespread embrace of blockchain as a tool for ad purchases. In the meantime, though, there are some strategies advertisers can embrace to help mitigate the risk posed by click fraud:

• Understanding Fraud: Criminals use many different tactics to engage in ad fraud beyond simple click abuse. Methods like cookie stuffing and IP spoofing are also common avenues of attack.
• Use Smart Metrics: If you use targeted, well-thought-out metrics to track activities, you’ll be better positions to spot suspicious activity.
• Advertise Only Where Reputable: Some sites may be cheaper to place ads…but they also attract more fraud. Don’t be afraid to exclude some sites, or even regions that don’t fit with your brand.
• Make Use of Social Ads: Social media platforms have an abundance of user data. Thus, ads can be targeted using much more in-depth understanding based on the individual user.

While blockchain may be the future of online ad buying, there’s still plenty to do now to mitigate risk. Optimizing your threshold for ad spend, targeting your potential customers more effectively, and carefully monitoring advertising results can help you identify and weed-out bad traffic.

About The Author

Fintech expert Monica Eaton-Cardone is cofounder and chief operating officer of the global fraud prevention and chargeback mitigation company Chargebacks911.