Why Blockchain Won’t Fix Online Advertising’s Biggest Problems - Yet

22 July 2019

Original content provided by BDO Global

Ask just about any group of online advertising executives, creatives or technical staff about the future of the industry, and the conversation is likely to gravitate toward blockchain technology. Some see it as a saviour capable of fixing some of the industry’s biggest challenges while simultaneously disrupting existing business models. Others see it as flash-in-the-pan, destined to underdeliver - except when it comes to the costs of ultimately doomed development projects and half-finished solutions.

Given a few years, we could well find ourselves as acolytes of blockchain in advertising. - if it manages to overcome several unresolved challenges.

Online Advertising’s Big Challenges

The list of challenges facing online advertisers and advertising agencies is long. To mention a few of the biggest issues:

  • Google, Amazon and Facebook have a vice-like grip on online adverts, sharing almost 70% of US digital advertising revenue between them. Many other markets see a similar dominance by ‘the big three.’ These huge, siloed platforms dictate how advertisers and agencies can engage with potential customers. They also have control over the user data that could potentially enable better targeted, more relevant advertising.
  • The previous point may be a contributing factor to the rise in ad fatigue, which has led to the rise of ad blockers across the world.
  • GDPR data protection regulation, launched last year by the EU, also makes it harder for the advertising industry to target ads to specific customer segments. Other, similar legislation will likely be rolled out in other markets over the coming years.
  • Online advertising suffers under a massive fraud problem. Digital advertising spend in 2018 was a whopping $111.14 billion. In 2019, it will account for 55% of all media ad spend. Advertisers lost roughly $19 billion of net spend to ad fraud in 2018.

The reasons above are part of why advertisers and agencies are looking to blockchain with eager eyes.

Blockchain’s Case As Advertising’s Saviour

One argument for blockchain’s ability to ‘save’ online advertising is that it can efficiently connect advertisers and publishers with desired target audiences while simultaneously lowering costs. Sounds good? Well, as the main sales pitch it should. And judging by the rapidly growing number of start-ups in the space, it is gaining traction. The start-ups’ solutions meet the previously mentioned challenges by:

  • Infusing the advertising space with greater transparency. Advertisers and agencies can follow what adverts are shown, when, to whom more accurately than today.
  • Presenting adverts to individuals and customer segments that they are actively interested in - and have opted into viewing.
  • Giving users control over what data they share with advertisers, as well as insight into what said data is used for. As a result, ad blockers become less of an issue. As a further incentive, some blockchain companies are looking to remunerate users for the time they spend looking at adverts.
  • Potentially eliminating fraud and administrative challenges such as double-spending issues where digital resources are sold more than once.
  • Streamlining payments and settlements in an industry that struggles with long payment terms.

In short, blockchain-based online advertising systems can potentially increase transparency, efficiency and control over large parts of the advertising chain for everyone from potential customers to advertisers and agencies.

Early Successes For Blockchain

Both companies and advertising agencies are adopting blockchain-based systems. For example, Toyota has invested in blockchain-based advertising by partnering with the blockchain advertising analytics firm Lucidity. Toyota’s goal is to minimise the impact of fraud on its digital ad purchases.

IBM is working on a version of its enterprise blockchain solution, Hyperledger Fabric, with digital advertising firm Mediaocean as well as firms like Kimberly-Clark, Kellogg’s, and Unilever. The goal is to record impression level data as well as related transactional data such as purchase orders and payments to better understand the customer journey and impressions.

Advertising giant Havas is developing blockchain technology, while Nasdaq has launched an advertising exchange based on blockchain.

Fenestra, a UK company that uses blockchain as the foundation for its independent advertising and media platform, has partnered with several leading media agencies to provide clients with greater transparency for, and thereby increased trust in, their ad and media spending.  

Why Blockchain Isn’t Ready - Yet

So, there are plenty of companies offering solutions, willing buyers, including major corporations, and huge upsides. In other words, blockchain is set to rule online advertising, right? The answer is, in fact, no. At least not yet.

Yes, companies are busy putting it to good use across the online advertising space. However, many agencies and advertisers, including those mentioned above, are doing the equivalent of dipping a toe in the water and are far from diving headlong into blockchain as the fundamental cornerstone of their advertising strategies.

One reason is that the technology is still far from able to handle the vast amount of data that online advertising generates. For example, Ethereum, one of the most popular blockchain platforms, can process relatively few transactions per second. Online advertising involves millions of ad impressions – and related transactions - every second, so the technology cannot keep up. Secondly, while there are many different platforms and start-ups in the space, they don’t have a foothold on big advertising platforms. The market is, in other words, very limited.

Changes Keep On Coming

The issues are far from the same as blockchain being a lost cause for advertising.

For one thing, big tech is proactive in the space. Google is building search tools for blockchain while Facebook is readying a launch of its own cryptocurrency - not to mention its pivot towards being a privacy-first platform.

Particularly the latter move is one that could lay the foundations for more use of blockchain technology and may be an incentive for Zuckerberg & co to pursue blockchain-based advertising solutions.

Then there is the fact that there is $19 billion worth of revenue just waiting to be saved by the companies who find ways of eliminating online ad fraud.

Blockchain also holds great promise when it comes to one of the hottest ongoing debates in the media and advertising industries: how to increase transparency and increase trust amongst consumers, clients and the general population.

The technology is also evolving at an incredible pace. Something that also applies to the number of data transactions it can handle. Add the fact that blockchain could streamline not only interactions between advertisers and potential customers but also payments within the advertising space, and there are plenty of arguments backing up blockchain’s potential in advertising.

Just a few years ago, even having a conversation about blockchain’s potential to ‘save’ online advertising would have been close to unthinkable. While still early days, and much work needs to be done, it is worth noting that same conversations flourished about the potential of apps when Apple launched the App store in 2008 with just 500 apps.