The measurability of the online ad economy is an inch wide and a mile deep. As such, the tidal wave of data that has accompanied the development of online advertising provides only an illusion of greater transparency.
This matters because opacity permits market bubbles to form. In the mortgage crisis, the complexity of the market in exotic financial instruments made it challenging to see that the underlying mortgages were extremely likely to default. If buyers had known that AAA-rated mortgage-backed securities contained so much bad debt, it would have been challenging to get anyone to buy the assets.8
Modern online advertising remains deeply opaque on three fronts. First is the ever-increasing automation of the marketplace. Second is the creation of dark pools of liquidity where advertising inventory is bought and sold outside the public eye. Third is the dominance of platforms, like Facebook and Google, that have frequently introduced new layers of opacity into the advertising marketplace.I. Algorithmic Trading
Programmatic advertising delivers the vast number of ads that you see online today. In order to function, the entire system depends on a real-time auction between advertisers that takes place while a web page is loading. Making this real-time bidding (RTB) process seamless requires extreme speed.
Ad exchanges have achieved this speed through automation. Advertisers and publishers alike program systems that autonomously offer and price ad inventory in the marketplace. Advertisers can precisely define the kind of attention they would like to bid for, specifying audience parameters, maximum bid prices, timing, frequency, and certain kinds of inventory.9 In turn, publishers can set minimum prices, rules for advertiser eligibility, and other preferences on the sale of their inventory.
This highly automated arrangement has allowed online advertising exchanges to deliver mind-bogglingly large quantities of inventory night and day, unceasingly. As in the financial markets, algorithmic trading has become the rule, rather than the exception.10
This blend of speed, automation, and scale has introduced new opacity into the marketplace even as it has allowed those marketplaces to substantially expand. The vast number of transactions taking place can make it impossible for anyone to monitor precisely where an ad ends up and why. This is a problem even for the professional buyers and sellers of ad inventory themselves. One New York Times investigation quoted Alex Treadway, then chief operating officer of the conservative website The Daily Caller, saying, “There is so much junk between us and the companies that buy ad space on our pages it will blow your mind … It would take us weeks of research to figure out which ad network provided [an] ad.”11
Consider the chronic challenge posed by “brand safety”—the industry term for avoiding having advertisements show up next to objectionable content. YouTube has been the subject of multiple embarrassing news reports highlighting that brands advertising on the platform occasionally find their ads alongside extremist videos. In 2018, CNN reported that ads from more than three hundred companies on YouTube were placed next to channels that promoted “white nationalists, Nazis, pedophilia, conspiracy theories and North Korean propaganda.”12 This included major brands like Adidas, Hilton, and Hershey. This is not an isolated incident. The issue has been a long-standing concern among advertisers as the programmatic advertising ecosystem has matured over the past two decades.13
The persistence of this problem is not due to a lack of interest in resolving it. A survey in 2018 showed that brand safety was one of the top concerns among professionals within the industry, next to worries about “transparency” and the European Union’s General Data Protection Regulation.14 A 2017 survey of its members by the Association of National Advertisers found that 78 percent of respondents were “either concerned or very concerned about brand safety issues in programmatic buying.”15 The fact that brand safety remains an ongoing challenge even among platforms run by the most well-resourced companies in the world suggests how structural this opacity problem is.
To date, the primary approach has been to use human review in an effort to weed out these errors. The scale of the modern online advertising ecosystem makes this at best a partial solution. Mark Zuckerberg, commenting on Facebook’s decision to hire more content moderators in 2017, declared, “No matter how many people we have on the team, we’ll never be able to look at everything.”16 There is hope that recent advances in artificial intelligence might be able to ensure greater brand safety, but it is unclear whether these systems will ever have the context sufficient to address these issues in a comprehensive way. AI systems are able to recognize specific, concrete targets within images but remain extremely limited in understanding broader context. This makes AI a promising tool for dealing with problematic content where the boundaries of what is prohibited are clear, but a highly limited tool when dealing with more general categories of objectionable content.17 AI will not serve as a cure-all to brand safety writ large.
In the programmatic advertising marketplace, it can be challenging to know where an ad will end up and why. This risk to brand safety pressures well-positioned buyers and sellers to look for safer ways to place ads online. This pressure, ironically, has introduced another compounding layer of opacity in the marketplace for online advertising.II. Dark Pools
Not knowing where and why ads end up in the places that they do is a big problem. But in the attention marketplace, advertisers sometimes do not even know whose attention is available, much less the price that they should be paying.
“Dark pools” are a major phenomenon in the financial markets, accounting for some 14 percent of all equity volume traded in the United States.18 These are, in effect, private stock markets run by investment banks and other financial institutions about which no public information is available. These structures ostensibly serve to allow buyers and sellers to execute large-scale transactions without triggering reactive fluctuations in price on public exchanges like the Nasdaq.
Dark pools are controversial in the financial sector because the opacity they create provides opportunities for abuse. When the public markets no longer reflect
