How disruptive Blockchain is for the Digital Advertising Industry?

If the Tata group has employed 1000 persons in its’ blockchain unit, it is time to sit up to ask what Blockchain is and is Indian advertising ready to embrace blockchain?

The global blockchain technology market has almost doubled from USD 1.2 billion in 2018 to 2.2 billion in 2019. Further by 2023, it is estimated to reach USD 23.3 billion

In keeping with this changing scenario, in 2019, the number of companies worldwide offering Blockchain solutions for ad-buying also rose to 290 from a mere 22 in 2018. With clients like Unilever, Toyota, Kellogg’s, Pfizer, Disney, and Kimberly-Clark exploiting ad-buying blockchain solutions to eliminate middlemen in advertising, these 290 blockchain companies are successfully offering Programmatic & Decentralized Advertising, Content Marketing, and Social Media Marketing. The trend continues to rise as advertisers who are spending millions have begun to recognize the wasted advertising dollar spending due to the current programmatic advertising that automates buying, selling and placing advertising.

What is a blockchain?

Blockchain stores and secures data to be shared across networks and users. It is a decentralized, distributed digital ledger used to record transactions across many computers so that the list of records (called blocks) linked using cryptography, cannot be modified retroactively, without the alteration of all subsequent blocks/consensus of the network majority.

How does blockchain work?

Every blockchain has three parts:

• people/ companies dealing with one other,
• a relationship/common interest between all parties, and
• rules that form the basis of all transactions.

 

The blockchain technology system:

i. Every new transaction generates a hash which is a combination of numbers and letters eg. 263fb1aa85489991a2ef832ef10308a0. A cryptographic hash function is an algorithm that provides a hash value to the data.

ii. Transactions get entered in the exact order in which they occur.

iii. Every new transaction hash depends on the previous transaction’s hash.

iv. Any transaction away from the rules will create a completely new hash.

v. The nodes (computers in the network of participants) check to make sure a transaction has not been changed by inspecting the hash.

vi. Every node has its own copy of the general ledger (the blockchain) and with consensus algorithms like Proof of Work and Proof of Stake that allow limited fault tolerance.

vii. Once the transaction is approved by the consensus mechanism of the nodes then it is written into a block.

viii. The Blockchain updates itself every 10 minutes.

Why blockchain in Digital Advertising?

Advertisers have now started to realize that programmatic digital advertising is not able to provide them with adequate and precise information on what they’re buying and how much they’re paying for the viewed ads. In this ad buying, the product/ brand advertiser pays an ad agency to create the ad content and to distribute it on different platforms to reach the target audience/customers. According to IAB Programmatic Fee Transparency Working Group, 55 percent of programmatic ad revenue goes to ‘ad tech’ services, while publishers receive only 45 percent. Which simply means,

i. The advertiser’s ad dollars are being transferred diminishingly

ii. The advertiser is not aware of how much is the cost at every stage in the system.

With the worldwide digital ad spending reaching close to $333.25 billion in 2019 (50% of the global ad market), the blockchain solution is being viewed as an intelligent answer to maximize the spending on digital advertising and to form a direct connection between advertisers and consumers.

Will blockchain reduce mistrust in digital advertising?

A digital ad campaign includes video ads, banner ads, social media posts, blogs, podcasts, influencer marketing, etc. Today there are at least 23 participants in the ad ecosystem that get an ad from the Marketer à to the Publisher à to the Consumer à to return data from the advertisement campaign à back to the Marketer. Each of these 23 points can pose a point of loss of data or potential fraud, making it difficult to measure the true effectiveness of the ad campaign.  Also, adding to the risk is leaving sensitive data open to misuse or theft.

As per Statista, digital advertisers have lost close to USD 19 billion in fraud in 2018 which is estimated to reach USD 44 billion in 2022 since the bulk of advertising ends up being served to bots instead of the targeted potential customers.

Blockchain’s core technology in digital advertising is a distributed digital ledger used by participants like the digital agency, ad networks/sellers, advertisers (with demand-side platforms like Amazon DSP, Spotad, Verizon Media DSP, Adobe Media Optimizer DSP, etc.) who collaborate together to measure ad impressions and related data. Blockchain runs algorithms called consensus mechanisms to detect any anomalies and do not record such data.

Advantages of Blockchain in Advertising:

(a.) To the digital advertiser

i. It reduces the markups as it cuts down the intermediaries in the advertising chain.

ii. Advertisers have access to shared pools of relevant data, already vetted by other participants and proven with the chain, making target ads more accurate and less expensive.

iii. Instead of paying for a general ad space basis user browsing history, the company can contract ad buying solutions for conditional space to show their ad specifically to potential buyers based upon their data-sharing preferences.

iv. Blockchain’s ledger-like system offers ad companies accurate key performance indicators like clicks and likes.

v. It separates bots (56% of all website traffic is bots) from genuine customers to publish ads directly in the users’ browsers than on the site.

vi. It offers complete transparency between advertisers and publishers.

vii. Since charges are on the block sheet it creates an ecosystem to reduce fraud

viii. Since every transaction is recorded, it provides complete transparency even with anonymity.

ix. Once a transaction is recorded and updated on the Blockchain it cannot be altered.

x. No one person or organization can turn off a Blockchain.

xi. Blockchain solutions are used for smart contracts where they automatically enforce obligations, rules, and penalties around the specific agreement.

(b.) To the Consumer

i. Since blockchain distributes shopping/search history data to the entire network and does not save it on a single company server, user information cannot be misused or sold to other parties.

ii. It facilitates target customers participation by rewarding them for viewing the ads (often in the form of tokens)

iii. Time stamping of date and location help certify the backstories are genuine.

iv. It provides complete anonymity to the user.

Conclusion:

The blockchain technology is setting new standards and changing the world of digital marketing. The decentralized peer-to-peer network platform between advertisers, publishers and users offer better opportunities to tackle excessive markups and ad frauds in the digital advertising industry. By tracking everything and eliminating middlemen, it simply means goodbye to confusing online ad spend and welcome trusted ad buying.