Digital Advertising: A Broken System
13 Feb 2018
The digital advertising industry is growing rapidly. Research firm Magna expects spending to grow by 13% to $237 billion in 2018 and as the number of mobile users in the world continues to grow, this trend is not expected to be slowed anytime soon. According to a Statista report, digital advertising spending is going to shoot up to $335 billion in 2020.
However, while companies are increasingly spending larger portions of their budgets on digital advertising, few are actually receiving a reasonable return on those investments due to middlemen, fraud and the high prices being charged by the two media giants Facebook and Google. As a matter of fact, more than half of the revenue is swallowed up by Google and Facebook. According to an eMarketer report it is estimated that around 60 percent of the US digital advertising revenues were paid to these two, creating a duopoly market. The remaining part of the market is instead affected by the strong presence of middlemen. In many cases, these middlemen are reaping more than 50% of the returns from a company’s digital advertising investment without providing any real value.
Furthermore, a high percentage of advertisers and publishers are losing their digital ad investments to online ad fraud, driven by bots. These bots can automatically generate millions of ad impressions that are charged to marketers as a viewed promotion, despite not having been seen by an actual human. A report on Adweek.com suggests that the economic losses due to bot fraud are estimated at $7.2 billion globally. With the duopoly of ad tech giants and the overwhelming presence of ad fraud, a small minority of ad revenues are actually benefiting advertisers themselves.
In addition to ineffective and wasted ad spending, obstacles such as the high price of internet data plans for mobile users are blocking digital marketers from being able to reach the rapidly growing population of smartphone users. For instance, more than a billion mobile users lack access to the internet because they cannot afford data services, and the traditional revenue per user for mobile operators is decreasing. However, the spend on mobile advertising continues to grow exponentially — today, 50% of digital ad spend (about $102 billion) is spent on mobile and that percentage is expected to increase to 70% in 2019. If mobile operators and marketers do not figure out how to ensure wider access to the Internet via smartphones, this spending will not be effective.
So — how do we solve these challenges? How can advertisers and publishers ensure that their investments in digital advertising are effectively reaching the intended audiences, rather than being wasted on middle-men and fraud?
Joors together with partners TalkPool, TrueChain and Starfish Mobile International are planning to implement blockchain and AI technology in this space. The blockchain technology together with machine learning could create more efficient ad exchanges which lower the costs and raises the quality.