Blockchain is an emerging technology that has the potential to shift the way all digital transactions occur – including the buying and selling of ads. Like any sexy new term in the ad tech industry, it is getting a lot of premature buzz (to officially induct the term into adtech, we will assign it its very own acronym—BCT). Underneath the hype, there is the potential for this technology, if applied right, to disrupt our industry and potentially fix some of the hardships within the ad tech ecosystem.
What is Blockchain?!
Blockchain technology (BCT) is most popularly known as the technology behind Bitcoin, a digital currency that emerged in 2013. The technology uses encryption techniques to verify the transfer of bitcoin digitally, without a bank or third party company.
Typically when assets are transmitted in the digital world (be it money, files, images) an intermediary is needed to record the transaction and ensure successful change of ownership. For example, if I wanted to send my friend $30 digitally, I either need a bank or a third party like Venmo to authorize the transaction and properly transfer the money. In that case, Venmo acts as the trusted third party that maintains records that no individual can alter or copy, thus making it safe for individuals to transact online. BCT essentially eliminates the need for that third party.
Using a distributed ledger (like a shared digital record book) blockchain records all transactions between parties. It is encrypted to ensure that the assets cannot be altered or copied. Each action that occurs by one party is a block, and when linked together, it creates a chain of blocks—hence blockchain.
Enter Ethereum. Ether is a newer cryptocurrency (est. 2015) that, like bitcoin, is built on BCT. But Ethereum has one huge differentiator—smart contracts. Smart contracts allow rules to be put in place that must be met before a transaction can occur.
So what does that have to do with adtech?
In an industry full of middlemen and walled gardens, the promise of an open, transparent way to exchange data and inventory with any party is like Christmas morning for marketers. If operationalized properly, BCT has the power to improve adtech in three major ways:
1. Reduce the middlemen—and the tech tax
Currently, the ad tech space is cluttered with intermediaries facilitating the transaction of impressions from publisher to advertiser. DSPs, SSPs, ad networks, and resellers pass impressions and dollars from one to another, each taking a cut of the dollars along the way (read: tech tax). BCT provides the ability to transact between two parties without a third party needed to broker and moderate the transaction. Therefore, blockchain could effectively eliminate the need for middle men, not only making transactions more seamless, but also cutting out the fees that are transferred through the supply chain.
One vendor capitalizing on this is the New York Interactive Advertising Exchange (or NYIAX). NYIAX was built to help reduce the number of hands in the supply chain. Using Nasdaq proprietary BCT, they allow advertisers to secure inventory futures to either use or resell later. By the end of this year, advertisers should be able to go into the NYIAX platform and secure publisher impressions to be filled in the future. When the time comes, the advertiser can either fulfill those impressions with an ad, or resell them on the network.
2. Provide end-to-end transparency and cut out fraud
Most brands are pushing to get more transparency into their ad tech ecosystem to better identify where their dollars are going. Currently, because impressions and money changes hands so many times before becoming available in a DSP, the buy side doesn’t have a view into what parties are taking what cut of our ad dollars.
The promise of BCT’s distributed ledger is that all touchpoints from advertiser to publisher will be recorded and made available to participants. It leaves an audit trail that is not able to be altered or masked.
MetaX recently launched adChain, a smart contract on the Ethereum blockchain that enables the industry to weed out fraud from ad supply. Essentially adChain is a registry of sites that have been voted by the community as non-fraudulent. It taps into the developer community with economic incentives to identify and rid the chain of fraud. MetaX is currently working to integrate the adChain with DSPs and publishers for a private beta in 2017.
3. Break down the garden walls
First party data is arguably one of the most valuable assets an advertiser or a media company owns. That is the very reason that the walled gardens exist—so that companies like Facebook and Google can monetize their valuable data, without letting it out of their walls. When BCT and smart contracts come to fruition, they will allow for data assets to be shared without risk of the data being stolen or compromised.
In Cannes, Comcast Advanced Advertising Group announced the launch of a tool to do just that. Called ‘Blockchain Insights Platform’, the tool would allow media companies to create encrypted keys to certain data sets and provide those keys to advertisers who have contracted to use that data for a specific purpose. This allows media companies like NBC Universal, Disney, and Cox Communications to seamlessly pass audiences for use in advertising, without actually handing over their valuable data files.
Not Ready for Prime Real-Time
Some have called BCT the next internet – a new open platform that will transform how we do everything digitally. But such a seismic shift will take a significant amount of time, and the application of BCT to ad tech is still in its infancy. Currently, it takes up to 30 minutes for transactions to be recorded on the ledger—far from the milliseconds required by the real time nature of Programmatic.
Despite this, startups and large media conglomerates are diving in head first. They are all using the technology in different ways, but it is worth noting that almost all are still in alpha or beta phases. What is exciting is that no one company can come in and build it alone (read: Google). It is something that must grow and be adopted by all parts of the industry for the promise to come to fruition.
So don’t go converting your ad dollars to Ether just yet, but keep an eye on developments over the next year or two—because this will change the game.
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