Facebook's coming blockchain problem

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Much has been written about the Russia-Facebook advertising scandal of 2017. The episode has revealed the first (and maybe only) achilles heel for Facebook CEO Mark Zuckerberg.

His profit-making machine depends on being one of the two main outlets (the other being Google) where the world spends its $500 billion+ in advertising dollars. Yet, as we saw earlier this year with Google’s YouTube video issues, brands are willing to forego the potential massive reach of these platforms when they are associated with things they find unsavory. In the YouTube case, brands didn’t trust Google to keep their reputations intact.

In the Facebook example, people are losing trust in Zuckerberg’s ability to not totally destroy their society.

Ben Thompson put together a brilliant write-up of the challenges facing Zuck in a post called “Trustworthy Networking.” It’s well worth the read.

The first issue is that Facebook is delivering these ads at a pricepoint so low (less than $30) that it would be prohibitively expensive (in fact, suicidal) for the company to manually review them. It’s not feasible.

So, as Thompson says, Facebook needs to “harden the operating system” (an expression he borrowed from Bill Gates’ memo on “trustworthy computing” following the massive number of viruses prior to the release of XP2).

Facebook is seeking to repair trust by:

  1. Increasing the requirements for authenticity (more documentation, etc.)
  2. Making advertising more transparent (more tools and tech to catch the bad ads)

It’s a good step — for now. The effort will increase Facebook’s costs, although it’s unclear by how much.

But despite these efforts, Facebook has a trust problem and will continue to have a trust problem because:

  1. It has a massive audience that is a honeypot when it comes to attractingthe attention of bad actors
  2. Policing those actors at scale will continue to be expensive and increasingly so. Facebook will have to prevent “lone wolf” attacks via digital ads that can create a PR-and therefore brand-related headache at best and a market cap destroying moment, at worst.
  3. Facebook is centralized. At the end of the day, Zuckerberg is saying, “Hey, you can trust us to get it right.”
  4. Transparency and being a closed enterprise eventually become conflicting goals.

Ultimately, as we saw with Equifax, sometimes private, centralized, controlled organizations don’t want to be transparent about things that are going on “in-house.”

And the idea that we should all just “trust Zuck” to do the right thing? That should make you nervous. After all, now he and his programmers get to decide (even more than before) who gets to run ads and who doesn’t. Which means you are going to go even more into what Thompson calls the “filter bubble” that Facebook designs for you, without even realizing it.

Blockchains, though, can fix the huge inefficiences and downright fraud of existing ad tech infrastructure.

In the ultimate battle between “trust Zuck” and “trust code,” I think Zuck loses. Yes, it could take a LONG time to get to a blockchain-based ad infrastructure, but we are going to have more of these Russian ad-buy scandals in the future, not fewer. Criminals will figure out how to get around the new systems as they got around the old. It will be advertising whack-a-mole until we decentralize the infrastructure.

Rather than a centralized system that relies on people and processes to provide transparency and trust, blockchain is a decentralized system that can provide transparency and trust without fallible people in the middle.

A decentralized ad tech protocol with independently verified actors whose behavioral attributes and reputation are built over time is going to, ultimately, give people the real transparency they want and need to understand exactly who is paying for the ad they are seeing and whether or not that individual or company is trustworthy.

This is one of the reasons that ad tech is the most crowded part of the Blockchain Marketing Technology Landscape and why we are seeing more new entrants emerge, like Qchain, and Xchng.

The Economist called blockchain a “trust machine.” It will be exceedingly ironic if the thing that causes Facebook to falter is code that outperforms a world-class programmer and businessperson like Zuckerberg.

Jeremy Epstein is CEO of Never Stop Marketing and author of The CMO Primer for the Blockchain World. He currently works with startups in the blockchain and decentralization space, including OpenBazaar, IOTA, and Zcash.

 

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