How Does Blockchain Amplifies AdTech Industry

April 2018

Ad Tech is one of those industries that is always in an active search for the next big technological breakthrough. The reasoning behind that is simple: new technologies open up further and better opportunities for doing more sufficient advertising business.

Considering how problematic are issues of privacy and transparency are in advertising, blockchain seems to be a reasonable technological solution with the most potential to make a positive impact.

You know an old saying, “When the future comes — embrace it!”.

At the moment, there is no technology more enigmatic and prospective than blockchain. Everyone has their own opinion on it and its business prospects. There are numerous predictions, innumerable numbers of various pitches, and mind-boggling levels of enthusiasm surrounding this technology.

What’s the deal?

According to the hype, blockchain is nothing short of being lord and savior of every industry imaginable (and a couple of theoretical too). If you go through the think-pieces and overviews, blockchain is seemingly applied to everything. And yet there is not much specific about it — more on reasons why later.

Sure, blockchain reimagines the way banking is performed over The Internet via cryptocurrencies. It also reshapes the entire medical and insurance management, decreasing third parties’ influence in most operations. But it is too soon to say anything definite about its long term prospects.

For now, blockchain is in the fad stage, and only after it will pass, we will see the real worth of blockchain as a technological solution. But before that happens, understanding blockchain is what we need, along with the knowledge of what it can bring to the table.

But first, let’s sort things out.

What is blockchain technology?

Blockchain is a network of distributed data blocks linked and secured with a little help of cryptography’s fine art. It was introduced in 2008 by none other than Satoshi Nakamoto (aka nondescript bitcoin dude). Originally designed as a cryptocurrency transaction framework, it slowly moved beyond to the different areas and is now used in such fields as medical care and insurance systems.

In a way, a blockchain is a new form of a database. Just like a regular database, blockchain allows us to store, validate, authorize, and transmit data over the internet.

The difference from a regular database is that it is not situated on a server somewhere elsewhere — blockchain is a distributed network of data without a centralized authority. It is installed on specific computers by involved parties to enact operation. There is no “ground control” per se. It is all Side A and Side B, and so on.

Once implemented, Blockchain is set in stone and can’t be modified in any way. In such networks, block transactions contain data on all prior blocks, i.e., blockchain.

Blocks cannot be deleted, just added, and every change is easy to spot in the records. Since you are aware of all involved parties and every action is recorded — it is easy to see who does what, when, and how.

This feature creates an incredible transparency level that raises the process’s trustworthiness on a new dimension. And that is what blockchain very attractive to Ad Tech Industry.

How blockchain is changing advertising

Ad Tech is a kind of industry that embraces many nascent technologies and makes them work for its benefit, thus evolving them and the business to new heights. Sure, this attitude is spurned out of necessity. Still, it does not negate that the ad industry is relatively open-minded in adopting and developing new technologies. Blockchain is no different in that regard.

To understand how blockchain can be applied in the ad tech industry, we need to understand the industry’s problems at the moment. There are two of them, and the implementation of blockchain can greatly ease both. One is transparency. The other is privacy. There are other issues, but these are the two most prominent.

Blockchain advertising’s maximum transparency and relative security of privacy is something of a glimmer of hope for an Ad Industry battered by Ad Blocking and compromised by Privacy issues (among other challenges).

Let’s take a look at what exactly Blockchain can bring to the table.

How does Blockchain work in AdTech Industry?

As you know — lack of transparency equals a lack of trust. The fact of the matter is that many things are happening in the dark during ad tech operations.

With the help of blockchain — a certain level of clarity can be achieved. The thing is — every involved party works with the same information. That and the fact that every action is visible creates a precocious constraint.

Also, none of the blocks can be modified — the only thing one can do inside a blockchain is to add new blocks. Everyone sees everything. This makes any activity relatively easy to track and analyze.

Even more-so — every change must be verified by all involved, which drastically limits the chances of getting away with malicious intent

Trust issues are running rampant in the ad tech industry. The fact that one needs to rely on strangers’ kindness is not particularly reasonable, but it is the business’s reality. And as such, it needs to be resolved.

Hopefully, the transparency of blockchain can seriously increase the trustworthiness of operations between all involved parties. That is especially important in dealing with third parties, such as DSP, SSP, and Ad Exchanges.

What is the problem with third-party providers? Publishers and advertisers can’t see the specifics of how their money is used. This issue is complicated by often sketchy legal contracts and the general unwillingness of third party companies to disclose their fees in full scope.

But what implementation of blockchain to financial transactions can give is clarity. Everyone involved will see precisely what goes where and why and which quantity. And that is a huge step forward in terms of building trustworthy relationships.

The concept of smart contracts is brilliant. Plain and simple — it is a foolproof mechanism. If something is not right — it will not proceed.

In essence, a smart contract is a piece of blockchain code stored within a system that defines the agreed conditions of operations. A smart contract contains a specific pattern of actions that can be executed if all requirements are met. Any changes should be verified by all involved. Otherwise, nothing will happen.

This thing helps in multiple directions. First of all, it seriously limits the capabilities of ad fraud to get into your system. On the other hand, smart contracts can give users a say in the targeting operation.

One of the biggest virtues of Blockchain is that everything is visible, and thus you have an idea of what others do inside the system. This alone can seriously limit numerous fraudulent activities, such as bot traffic, domain spoof, and pixel stuffing.

All you need to do is check the numbers of impressions, assess their nature, and verify their validity. Blockchain can provide an additional checkpoint before the financial transactions that will partially limit ad fraud-related losses.

But it is essential to understand that blockchain on its own can’t save you from ad fraud. It can help, but you also need other tools.

Privacy is probably the biggest issue in the industry right now. While industry players pretended that it is not an issue for quite a while, privacy concerns and direct actions to protect it actively choke the industry via Ad Block and other tools.

While Blockchain is an open protocol by default, it can be used to benefit user privacy. There are two ways it can pull it off.

The first is due to transparency, and we already covered this earlier. The second way is a little bit more sophisticated.

Here’s how it works. Instead of gathering data to one store, it is possible to store data on user devices via blockchain. Then, verification mechanisms kick in and either confirm or deny further proceedings when it comes to targeting. It can be overbearing for the user, but it will surely give him more control over his personal data.

Challenges for Blockchain In Ad Tech

The biggest challenge that holds back any significant development of blockchain technology is lacking scalability. The fact of the matter is that blockchain is simply unable to handle such an amount of operations. It is too slow. For example, Bitcoin is currently capable of processing around 2–3 transactions per second. In the case of ad tech real-time bidding operation, you need to process 2–3 million events and more. That’s a bit of an operational gap, right?

Here’s why — blockchain is decentralized. It is stored directly on the devices of involved parties. Another important thing is that it is continually growing. For example, once upon a time, the bitcoin blockchain was sized 25 MB. Now it is 160 GB. That’s a lot. And that what slows things down over time.

However, this slowness is justified. The thing is — you need to verify every operation. And that keeps in line with every single action inside the system.

One of the possible solutions for the problem is through the diverse use of smart contracts. This will allow us to automate operations to a certain extent and make things faster.

Another big challenge for the full-scale adoption of blockchain in ad tech is the lack of standardization. Why it matters? One word — compatibility. Standards are like a universal language: their existence guarantees compatibility and rapid development of the technology. Standards enable a combination of various solutions into one superior.

At the moment, IAB is actively working on the guidelines, but it is a long way to go. Sure, there are custom solutions here and there, but lack of standardization means none of them are compatible with each other. This also means that a joint effort to evolve the technology and explore its further possibilities of use is virtually impossible.

Sure, there are custom protocols, cases when the inventory doesn’t meet the specifications, and companies still working on OpenRTB 2.3 — released in 2014. This might become a severe issue with the blockchain, as its ecosystem relies heavily on the standardization rules and agreements.

While blockchain is undoubtedly a trendy buzzword, it doesn’t mean that many experts are active in the fields. Some people can write about blockchain concepts, possibilities, and opportunities. But talk is cheap (unless it is a Keith Richards album). It is the action that matters.

And the reality is — there are not many of those who can do a thing or two with blockchain and not break into tears. In fact, demand vastly exceeds supply. And those who have expertise on the subject are most likely already employed.

This is a natural problem for any nascent technology. Basically, blockchain is still in the early adoption stage when the industries are yet to embrace the technologies and their possibilities.

Conclusion

At the moment, blockchain is still an emerging technology with nothing particularly definite in its fold. While it is undoubtedly established as a viable technology that can solve some biting issues here and there, there are still not many practically feasible and economically justified solutions for full implementation. However, that is more of a question of time than an actual problem.

In the context of the Ad Tech industry — blockchain is something of a dream in the process of a very slow realization. It will take a lot of time until it takes off. The concepts are there, but the solutions are not there yet. Because of that, the only thing we can all do is wait for more things to come.

Writer, translator.

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