The Internet is more than just a threat to privacy

Reactions to Facebook's privacy breach have varied: from shock at the scale of the data breach to everyone struggling to believe what was inside Silicon Valley's massive database. But the privacy breach is just one part of a systemic disease plaguing the internet. The real problem begins with what some call the original sin of the internet - offering free software and content in exchange for the hope of unprecedented growth. Advertising is seen as a way to pay for this.

The plan works for Facebook and Google, which control 87% of digital advertising, according to Bloomberg. But their success masks a fundamental truth: Internet advertising is broken. It degrades the user experience, leaves publishers hungry for revenue, and massively deceives audiences for the benefit of advertisers. It’s a situation that prompted Procter & Gamble’s chief brand officer to declare last year that “the days of giving digital [advertising] a free pass are over.”

Internet advertising started out in a primitive way. But over time, a host of intermediaries have evolved and coalesced into a surveillance economy. Today, there are a multitude of agencies, trading desks, demand-side platforms, network switches, and yield optimizers between end users, publishers, and advertisers. The middlemen track user behavior in an attempt to increase revenue.

One inevitable result of such a system is that users end up being viewed as a resource to be exploited. For example, when you visit TMZ, the celebrity reporting site, you are being followed by as many as 124 trackers, according to Crownpeak testing. Your data is being stored and used exclusively to craft promotions that shadow your behavior on the internet. You become the product. Some claim that your data isn’t “sold,” but access to content certainly is.

The advertising duopoly of Facebook and Google also collects gigabytes of personal data: Google collects where you’ve been, what devices you’ve used, everything you’ve searched for or browsed, photos of your kids, emails, contacts, and more. Facebook knows where you’ve logged in and has access to your webcam and microphone, emails, messages, call logs, and more. The scale of the breach prompted our company to develop the privacy-oriented Brave browser, which will soon offer a consent-based advertising model that rewards you for surfing the web.

The disadvantages of Internet advertising go far beyond privacy leakage. Studies have shown that half of the data displayed on mobile devices comes from downloaded ads and trackers, which significantly increases the data on fixed mobile devices. According to the New York Times, the huge amount of data increases the loading time of mobile pages by at least five seconds. Browsing ads consumes up to 50% of mobile battery life.

Security is another cost. The scale of malware and ransomware caused by fake ads and other techniques is hard to measure. But security firm Confiant found last year that a rogue group managed to create 28 fake ad agencies, bought about 1 billion malware ad views, and reached 62% of ad-based websites. Major media sites such as The New York Times and the BBC have run ads containing ransomware.

Publishers have fared no better in their Faustian bargain for digital content, a deal they hoped would lead to wider distribution and more revenue from the duopoly. Newspapers have been particularly hard hit, with total ad revenue falling from $49 billion in 2006 to $18 billion in 2016. About 96% of the growth in digital ad spending last year went to Google and Facebook, according to Zenith.

Some revenue is split among ad tech middlemen (including network partners, exchanges, trading platforms, verification vendors, and data management platforms) who band together to deliver targeted ads that collect data and drain battery. Users try to protect privacy with ad blocking software, which is installed on more than 600 million devices, according to PageFair. This further reduces publisher revenue.

Ad blockers and various ad technologies can also harm brands. This opaque system makes it difficult to know which ads are served and viewed. Regardless, marketers must keep spending budgets. As a result, according to Juniper research, ad fraud will reach $19 billion in 2018, or about $51 million per day.

For a solution, look to blockchain technology. Blockchain can not only help increase revenue, but also deliver transformational changes to brands, publishers, and users. In short, it is an immutable database that records transactions and generates trustworthy data.

In advertising, blockchain’s reliable data could radically shrink ad tech and provide the foundation for consent-based ad models. Improved reporting and transparency from blockchain could obviate the need for companies and even some data vendors to focus on measurement, verification, and more. Companies like Brave are using blockchain to build software that allows for a more direct relationship between advertisers and publishers because the software works before the ad is generated. (Earlier this month, Brave announced a partnership with Dow Jones Media Group as a division of the newspaper’s parent company.) Anonymous data on the blockchain or on devices could even replace the need to mine individual user data. Users should be compensated for their attention and treated as customers again.

The internet doesn’t need to be characterized by predation and parasitism. It can once again be a place of bounded possibility. Innovation got us there, and it can get us out of it.

Mr. Eich is Brave’s Chief Executive Officer and Mr. Brown is Brave’s Chief Business Officer.

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