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Why the advertising world needs blockchain...

March 9, 2018

 

Everyone’s talking about how blockchain is disrupting industries left, right and centre, so thought I’d do some digging and find out what it means for the digital advertising world… Here's what I found out...

 

Advertising has had a rough time of things over the last few years, but if we are honest it probably deserved it. We haven’t exactly been treating it well. We’ve abused it, cheapened it, powerful people have built Empires off the back of it, and people have actually taken their own lives as a result of it.

 

And we act surprised that consumers actively block ads (615 million devices globally), and choose services that shun advertising such as Netflix and Spotify.

 

Given that; firstly, Google and Facebook account for over 50% of global ad revenue, and that 90% of their total revenue is derived from advertising, and secondly, the fact that the vast majority of the 500 billion dollar global ad revenue are controlled by just five holding groups, it is no surprise that disruption in this space is going to be difficult, and rather than radically alter what advertising is, these organisations are simply trying to outsmart the consumer with “new” ways of putting ads in front of people.

 

This is not a conspiracy, just capitalism at work. Why revolutionise if it could destroy your bottom line. We also have to remember that the modern age of communications is less than 50 years old – a blink in the eye in the grand scheme of things. It was only in 1966 that Carat became the first independent media agency, and Google first went live in 1998 and Facebook in 2004.

 

There is no doubt that we are living through a technological revolution and the ad/media/comms industries is being brought dragged along. The irony is that the ad dollar is funding much of the disruption that is taking place!

 

Right now, the advertising world, especially in the digital media space, is a mess. Trust is at an all-time low, margins are slipping, driven mostly by almost zero confidence in programmatic advertising. And again, almost completely justified.

 

Buying a digital banner on a website is now almost so difficult it is laughable.  If for example I want to spend $1,000 on advertising on nzherald.co.nz I need to budget not just for the actual banner but a combination on the demand side of; ad serving, ad trafficking, ad tracking, DMP, DSP, third party data, pre-bid verification, post bid verification, reporting dashboards, agency fees as well as a bunch of opaque costs on the supply side including SSP technology costs, publisher DMP costs, and exchange fees. And this doesn’t even include costs like attribution and econometric studies which are designed to help save money. In some cases, of that $1,000 I wanted to spend on nzherald.co.nz as much as $700 could go to third parties, meaning that only 30% of my actual budget would actually materialise as banners. Nuts right!?

 

Now some say that this is simply the cost of doing business in the modern world. I, and many others vehemently disagree. We need to make this simpler. Much simpler.

 

This is where blockchain comes in. Yes, the technology that brought you bitcoin, is also ripe to disrupt the advertising world. And the how is beautifully ingenuous. Well, on the surface. But, go with me.

 

Blockchain’s purpose is really simple; reduce the middlemen. In the financial sector bitcoin is about creating a currency with no need for banks. Just a virtual wallet that you can share with anyone on the planet.

 

In the digital advertising world blockchain could create a marketplace that puts advertisers directly in touch with publishers, without the need for a whole raft of middlemen clipping the ticket. This is done by creating a “smart contract” between advertiser and publisher that could simply state; “if the below conditions are met;

·   ad has been served

·   ad has been engaged with by a human (definition clearly agreed upon)

·   the demographics of the viewer meets the given criteria,

then payment would automatically be transferred from buyer to seller.”

 

Now, let’s be honest, right now this would be hard to achieve but in an industry where only really the middlemen win it is going to be massively in the interests of both publishers and advertisers to make this happen.

 

In essence, the blockchain mechanism provides both parties with the visibility, audit trail, trust and immutability they need. Let's be frank, what’s the role of Facebook or YouTube, for example, when you no longer need that to be centralised? Content producers and consumers can connect through the blockchain protocol.

 

The single biggest hurdle to this nirvana will be convincing consumers to share the data required to power this kind of system. But it’s not impossible. We are right now at the start of the addressable media evolution, from cookies to people based IDs, and there are myriad companies building products and services on blockchain technology.

 

Having researched many of the main players the most interesting of which for me is MetaX who enthuses that it’s systems “gives you control over your data and inventory to maximize the value of every impression”. In essence promising; transparency, verified impressions, auditability, and universal data.

 

Blockchain technology will disrupt advertising. That is not for debate. My view is that in the near future brands will choose to interrupt and buy attention using blockchain versus the current status quo of creating content that’s good enough to earn attention. This will fundamentally shift the relationship that brands have with consumers. Again.

 

The biggest shift however will be for agencies. I’ve worked in media agencies for the last ten years, and seen the internal attitudes, politics and perception towards true transparency, and although they understand that they need to evolve, and some want to, they don’t really know how. But they must, and they must do it quickly because if they don’t then clients everywhere will be asking the question that every agency dreads; “What value do you add?”

 

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