Blockchain can disrupt the digital advertising ecosystem to introduce trust and transparency in the system.
Digital ad spend has been steadily rising the world over, with the last decade buzzing with activity on this front. However, the digital advertising landscape is riddled with fraud and populated by intermediaries. For publishers, advertisers, and consumers, the current model of digital advertising is inefficient and fraud prevention measures are also not cost-effective. Blockchain can disrupt the digital advertising ecosystem to introduce trust and transparency in the system. In addition, advertisers and publishers can create mutually beneficial revenue models by eliminating intermediaries. In this paper, we explore the possibilities blockchain technology offers in the digital advertising space.
Tech companies, publishers and media buyers have begun experimenting with marketplaces built on blockchain—a digital ledger that records transactions using encryption for security and accountability. And although it’s still uncertain whether blockchain is a game changer or a pipe dream, some say the system has the potential to create the kind of transparency that advertising desperately needs by cutting off bot traffic and protecting brands from unsavory content.
With promises of smart contracts, global and secure payment systems, token-based communities and transparent record keeping, blockchains are hot.
Online advertising is often bought programmatically — using automated technology — it can be unclear exactly where ads are placed and according to some estimates, vast amounts of money are being wasted. The Ad Maze report in the Wall Street Journal is only the most recent illustration of the number of middlemen (and resulting lack of transparency) between you and your intended audience. One Forrester analyst even claims that publishers who remove middlemen can increase cost per mille (CPM) from $1 to $5. Ad agency The&Partnership calculated that 29 percent of the $27 billion spent on this kind of advertising globally in 2016 was on “invalid traffic,” equivalent to $7.8 billion.
The long-term effects of blockchain on ad tech will be a topic at today’s IAB Programmatic Symposium.
Can blockchain address the unintentionally unwieldy and opaque supply chain in ad tech? Yes. Establishing transparency and trust requires a central and secure way to record, review and execute a deal. Today, deals are typically stored in formats and locations that are disparate and nonstandard. Initially creating standards and enabling collaboration are essential steps on this path.
How blockchain actually works
- Public blockchains are open source distributed record systems:
- Anyone can participate without asking anyone else, simply by downloading the code and starting a local node on their systems.
- Blockchains record transactions publicly, but this does not necessarily destroy anonymity.
- Everyone with a node on the system holds a complete record of all transactions (blocks), all connected or linked (chain).
- Blockchains are append-only … which typically means that transactions are irreversible.
The result is that blockchain enables the transaction of business between parties who do not need to trust each other and do not require an intermediary or trusted third party to supervise the agreement.
It’s worth noting that truth in blockchain is typically consensus-derived based on a foundational set of rules, but if a majority of nodes on the system decide to add additional rules, they can under certain circumstances.
Cryptocurrency acts as a type of monetary reward, but can be customized to incentivize stakeholders only for the activities that benefit others in the ecosystem. Location-based advertising is a pertinent application for this technology because it can better align the interests of those being targeted and those doing the targeting, nurturing a mutually beneficial connection between them. Innovative companies are pursuing this concept with enthusiasm.
Major Advantages of Blockchain-based Solutions
- Ultimate transparency: Every change made on the blockchain ledger becomes public. It is verified, approved and seen by all members. Such openness of the network and peer support adds accountability and builds trust. This puts tremendous power into the hands of the customer, thereby enhancing the customer experience (CX). Some companies, such as the Babyghost fashion line, have even used the blockchain to tell a “story” about their product, including who modeled it on the runway. In that sense, the blockchain does more than create trust, it builds a brand.
- Immutability: Once a blockchain node is created, its data cannot be modified retroactively without the alteration of all consecutive blocks. It is only possible if the majority of members agrees to change the ledger simultaneously. Each transaction must be approved by most of the participants in order to be bundled into the ledger.
- No third-party intermediaries: Blockchain-based transactions allow direct exchange of digital and physical assets between parties. This dramatically reduced or even eliminates the counterparty risks and allows partners to save up on transaction fees.
- Enhanced data quality: Blockchain data is consistent, complete, accurate, updated, verified and widely available. In the past, advertisers gained information about customers through various disparate sources — one might tell the age and sex, another there salary, or the kind of car they drive or where they like to dine. But by using the blockchain, advertisers will now have the ability to build a customer profile directly from the customer — gaining all the information the customer is willing to share in one swoop. This allows for an even greater ability to market to the customers’ needs, and to spend advertising on only those customers who are most likely to buy your product.
- Distributed nature: Blockchain runs on the network of computers. If one unit fails or an error occurs, the digital data would not be lost, because it is replicated on thousands of other computers. There is no need for lost data restoring or backup solutions since the data is decentralized and never stored in one place.
- Cybersecurity: Transactions in blockchain are associated with unique “keys” – strings of numbers that define the user and that user’s digital wallet. Cryptography is used to secure a user’s private key and offer full control of the identity and transaction history.
- Real-time transactions: While bank transactions take a day or two, blockchain transactions allow instant payments.
- Digital tokens: One example of successful blockchain implementation is bitcoin – cryptocurrency which is quick, cheap, and more reliable form of currency. By tokenizing their services, businesses reward people in their local area who complete tasks that inherently create value, like posting on social media, writing a brief review and so forth. LBA platform tokens can be spent at these retailers like cash, with more freedom than a mere coupon. Those consumers who work hard to contribute, participate and spend their tokens frequently are tracked by the immutable ledger and given a score which allows them to borrow more tokens to use in their favorite stores. Such a self-sustaining system recycles value in an airtight manner, meaning merchants don’t have to breakeven to win loyal business, and can get tangible advertising results in exchange for a small discount. Most vitally, however, Blockchain can offer merchants access to irrefutable data that can optimize their efforts. Because of the way the technology is built – with transactions being recorded in an immutable and open ledger – user data remains protected. It also offers businesses the ability to fully trust their results as there is no middleman or filter distorting the view. This gives merchants the ability to better fine tune their promotions, and offer more relevant deals to customers based on transparent data.
- Endless possibilities: With blockchain, users can create markets, store registries, move funds, keep records of immutable values such as currency, identity, trails of products and other data.
Creating Ad Exchanges:
Enhancing Transparency in the Digital Advertising Ecosystem Ad exchanges that provide a programmatic interface for online bidding of advertising content between demand and supply side platforms can popularize the use of blockchain. Using blockchain, they can act as change agents to create a transparent digital advertising ecosystem. A case in point is the blockchain-based ad exchange platform created by Nasdaq. Built on Nasdaq technology, the New York Interactive Advertising Exchange (NYIAX) provides a blockchain-powered electronic marketplace for publishers, advertisers, and media buyers to buy and sell future advertising inventory as 2 guaranteed contracts. NYIAX provides media buyers the advantage of a transparent and trusted market to buy and resell future advertising inventory. It provides publishers the capability to target higher revenue by holding higher CPMs and lowering fees. Advertisers benefit from a new way of discovering and purchasing inventory, and the ability to secure premium inventory in advance as a result of the higher transparency and forecasting capabilities enabled by blockchain.
Examples of blockchain in marketing.
Here are some of the prominent blockchain startups and companies in the marketing world:
- AdChain – an open protocol on the public Ethereum blockchain that helps people to build decentralized digital advertising applications
- AdEX – a decentralised ad network based on blockchain and smart contracts technology
- Basic Attention Token – a token that can be exchanged between publishers, advertisers, and users on the Ethereum blockchain
- Bitclave – a decentralised search engine powered by blockchain that compensates users rather than advertisers
- Indahash – an influencer tech platform that launched a cryptocurrency in late 2017 with which brands can pay influencers
- KR8OS – a marketing analytics and attribution platform build on blockchain
- LeadCoin – a blockchain network that allows companies to sell unused leads to others
- MadHive – a decentralised ad network built on blockchain and a platform for data exchange and collaboration
- Mavin – a microinfluencer network that is due to launch its own blockchain coin in the coming weeks
- MetaX – a company that builds blockchain-based protocols and decentralised applications for the digital advertisers and publishers
- Papyrus – is a decentralised online advertising ecosystem that uses blockchain and aims to improve the programmatic advertising industry
- Provenance – is using blockchain to help producers, suppliers, and retailers to track and monitor supply chains
- Status – a decentralis ed mobile operating system with built – in chat and wallet functionality
- Truth – a media agency built on blockchain technology and run by The Marketing Group that promises advertisers full transparency
The Marketing Group launched the very first blockchain-enabled advertising agency. The company says their goal is to eliminate the spam-filled advertising tactics that dominate the current market.
Other companies see opportunities to promote more radical change.
Algebraix Data, for example, has announced it’s creating a Personal Secure Vault that will give consumers more choice on who has their data and what advertisements they see. According to the company, their vault will store consumer information securely and allow those consumers to sell their information to select advertisers.
The goal of blockchain-fueled advertising agencies is to put power back in the hands of consumers. Ad-blocking software has over 200 million users and counting, but blockchain technology could make these tools obsolete. Blockchain will allow consumers to take control of the ads they see and, hopefully, give advertisers a modern, sophisticated means to producing high quality leads.
Whether these opportunities for the blockchain blow up remains to be seen. After all, there are many companies who stand to lose in this new blockchain marketing paradigm—and they’re giants (think Google and Facebook). Still, if we believe that digital transformation is all about the customer’s experience then blockchain’s entrance into the marketing world will not be short lived. It will mean fewer unwieldy pop-ups when browsing and closer connections with the companies we want to support. And it will empower customers themselves to choose which marketers they wish to hear from — all while getting paid for it! Yes, the concept of the blockchain has the power to disrupt our world on many fronts, but marketing is definitely one of the most exciting fields out there right now, and while it might seem overwhelming to those companies still learning how to use mobile apps to schedule their Facebook ads, at least for now, it seems that it is here to stay.