There’s an audible buzz rising around blockchain technology and how it will disrupt certain industries—digital advertising payments being one industry that is ripe for an overhaul.
Since the first digital ad was placed on a website in 1994, digital advertising has ballooned into a $224 billion global industry, with mobile claiming $58 billion in the U.S. alone. Half of all ad spend, however, is wasted on combating ad fraud and mediation.
The industry’s size and hyper growth—particularly in mobile—have revealed complexities, inefficiencies and pockets of obscurity. The ecosystem’s problems include: a drain on advertising budgets from middleware, mediation and fraud mitigation; lack of traceability, which leaves opportunities for fraud; inability to protect device and personal identification at scale; and verifying contracts for ad buying is a laborious process, with no automated mechanisms available.
The current practice for advertisers is to reach as wide an audience as possible by purchasing ad space in frequently visited digital publications and platforms.
Because the need to provide fresh inventory is challenging, some publishers may deliver low quality and/or potentially fraudulent inventory to fulfill contracts. Without using another third party to verify for quality, there is little advertisers can do to protect themselves. For an advertiser to receive the best quality, fraud-free inventory, contracts between themselves and publishers must be verified and enforced in a better manner.
Blockchain can restore trust between advertisers and publishers by providing an open source, transparent, decentralized and verifiable framework. The transparency inherent in blockchain technology incites accountability among its participants and holds the power to revolutionize the digital ad industry.
The technology is an open-source, crypto-based ledger system of record that aims to simplify, standardize and decentralize the transaction process for ads. At the heart of blockchain solutions, like the XCHNG system, is the smart contract, which allows buyers and sellers to transact directly and provides opportunities for verification.
Through the use of blockchain technology, buyers and sellers outline their terms in a smart contract. The smart contract can be subjected to additional layers of verification and enforcement by optional service providers on the network, such as the measurement provider, ratings provider, payment provider and arbitrator.
Each party adds a layer of trust but also benefits from the system through various incentives, be it competition in an open market, increased credibility as a provider or access to new financial opportunities. The payment process is, of course, a major incentive to honor the contract. The payment provider is responsible for releasing payments to publishers as contract terms are met. Additional incentives for payment providers include offering accelerated payment to publishers for a fee, which would in turn incentivize publishers to deliver.
Blockchain is a remedy to another major concern in the digital advertising space—privacy and personally identifiable information (PII). Blockchain enables ad buyers and sellers to circumvent the reliance on personal data by allowing a direct relationship between consumers and advertisers based on need—not on a consumer’s private information.
Blockchain provides decentralization, which will enable digital advertising to become a true open market—one that upholds verifiable contracts, delivers high-quality content and protects consumers’ identifying data.