Advertisers rip a page from Wall Street playbook to curb fraud

Bloomberg

An online advertisement for Lancome lipstick or a Lamborghini might not appear to have anything to do with the technology guts of modern financial markets. But with fraud rampant, some of Wall Street’s hottest buzzwords are being uttered on Madison Avenue.
About a fifth of digital ad spending—an estimated $16 billion this year—will wind up in the pockets of scammers, phony “publishers” who accept payments but then never display anything, according to ad verification company Adloox.
With help from Nasdaq Inc., which runs the famous Nasdaq Stock Market, a startup called NYIAX Inc. is trying to solve manipulation and transparency problems that are all too familiar in the financial sector.
To understand what it wants to do requires some knowledge of how ad sales work these days. When a brand or agency wants to get an ad placed, they can do it the old-fashioned way, reaching out over the phone or negotiating via email, but there’s also automated ad exchanges that pair up advertisers with publishers in tiny fractions of a second. It’s just like the modern stock market in that sense.
In 2016 about 47 percent of US display ad spending went to these exchanges, called real-time bidding platforms for short— that’s up from 11 percent in 2011, according to research firm EMarketer.
“What makes ad fraud so attractive is how not very well prosecuted it is compared to other crimes,” said David Wells, a senior malware analyst at Integral Ad Science. “I think that within our lifetime it’s very hard to say ‘yes’ or ‘no’ if it can be completely solved.”
NYIAX is trying. It’s about to open a futures exchange that uses software similar to what powers Nasdaq exchanges. It’s equipped with an extra trendy feature: blockchain, the nearly immutable and public ledger that drives bitcoin and other digital currencies.
This should strip away some of the anonymity that begets fraud on other digital platforms, helping NYIAX guarantee anyone offering ad space will follow through on their commitment, making it safer and practical for publishers and advertisers to find one another. “They’re real tired of the way things are running now,” NYIAX CEO Lou Severine said in an interview at its New York headquarters.