Powered by RTL Group | October 2018

How Blockchain Could Disrupt the Advertising Industry

With the advent of programmatic, the media industry has experienced dramatic changes in terms of ad volume, player numbers and technologies. Blockchain, while still at a developmental stage, is one of these innovative technologies which could definitely trigger a genuine paradigm shift in the advertising business.

Blockchain offers a way to rationalise multiple aspects of the new advertising experience and responds to the specific challenges faced by the media industry, while also contributing to a fairer and more accountable environment.

6 problematic challenges in the media advertising industry that Blockchain could end.

1. No more intermediary fees 

About 47%1 of publishers’ revenue is currently being lost to multiple intermediaries when processing the ad through the programmatic value chain. A Blockchain peer-to-peer model would allow advertisers to directly and simultaneously deliver a single request to all publishers, thus removing any need for intermediaries. This would result in higher profitability for both publishers and advertisers thanks to lower delivery costs.

2. Accurate accounting between intermediaries

When publishers and ad serving platforms, ad measurement or ad verification tools try to consolidate their impressions, it often leads to discrepancies and unsatisfying compromises. With Blockchain, every impression is recorded in a shared ledger, solving the problem of tedious reconciliations.

3. Standardized taxonomies 

At least two forms of taxonomy could be positively affected by Blockchain. Firstly, brand designation: at the moment a brand can be recorded under different names when dealing with a partner, which is not able to efficiently reconcile information, for example, from “CocaCola” and “CocaColaCo”. Secondly, the audience taxonomy for vendors, sellers and partners rarely matches: the same information might be called “HEADCOUNT” in one place, and “Household Head Count” in another. Blockchain enables a consensus-based taxonomy, resulting in much more fluent and efficient communication between ad-tech players.

4. Ad fraud prevention 

Ad fraud will represent an estimated $19 billion loss in 20182 for advertisers, of which 63% is driven by video ad fraud3 and around 20% is attributed to OTT.4 Through its transparency, immutability and its consensual ledger, a Blockchain-based environment is fraudless by design.

5. Consumer’s identity and data connection

Correctly reconciling data with a specific user ID is a complex process, given that IDs vary across the different providers of the programmatic value chain. By relying on a unique and anonymous ID, Blockchain offers a 100%-identity match, allowing for the perfect reconciliation of users’ disseminated data, while also granting secure and open access.

6. Balance Google and Facebook’s domination over digital advertising

Google and Facebook’s cumulative digital advertising market share hit a staggering 58.5%5 in 2017. The main reason is that they offer marketers the ability to reach vast audiences through their proprietary channels. Achieving similar reaches by aggregating multiple individual channels would be laborious, too costly and too challenging for smaller advertisers. A Blockchain-based advertising marketplace completely disrupts this paradigm by moving the current advertising channels out of a silo: in a Blockchain open market all publishers and advertisers are just one single request away from each other. Favouring one channel over another is meaningless because they are all accessible at once. Blockchain thus offers brands a straightforward and competitive alternative to the duopoly’s as-yet unrivalled reach.

Promising use cases focus on video advertising rather than display
While display and video advertising work very similarly, the latter presents some structural features which make it an even better fit for Blockchain technology.

Advantages of implementing Blockchain for digital video / OTT inventory over display advertising include:

1. A lower volume of transactions per second which is more in line with current Blockchain treatment capacity.

2. Standards and transactional processes are better established in a market with fewer and better identified suppliers, leading to easier implementation and potentially faster deployment. Plus, the content delivery networks involved in the advertising supply chain are already shaping a peer-to-peer network.

3. Players’ interest in innovating is fostered by the youth of the market and the higher profit margins of video inventories.

However, a few challenges need to be raised and addressed:

1. Because of these higher margins, convincing publishers of the benefits of cutting out intermediaries is not as straightforward as with display advertising.

2. Shared taxonomies, definitions and standards are a prerequisite to agree on in order to enable “smart contracts”.

3. The implementation’s success might require adoption and participation from many players in the OTT ecosystem.

Nevertheless, pros outweigh cons here, and the video domain seems quite promising. As a result, numerous recent projects have been launched that offer the full value of Blockchain technology to both publishers and ad-tech players: from intermediaries (Freewheel’s BlockGraphTM), and innovative browsers or video players (Brave and Verasity), to completely disruptive marketplaces (XCHNG or NYIAX).

Sources: 1Programmatic: Seeing Through the Financial Fog, ANA, 2017; 2Forrester. com. (2018). Forrester : Marketing : Poor-Quality Ads Cost Marketers $7.4 Billion Last Year; 3WIRE, B. (2017). Juniper Research: Ad Fraud to Cost Advertisers $19 billion in 2018, Representing 9% of Total Digital Advertising Spend; 4Loechner, T. (2018). Programmatic video ad fraud: Over 20% of OTT impressions are invalid. [online] Blog.pixalate.com; 5eMarketer. (2018). Data Suggests Surprising Shift: Duopoly Not All-Powerful – eMarketer.

 

Discover the TV Key Facts publication here