Distribution

Blockchain and Ad Tech: How it Affects You

Blockchain has clearly established itself as the hottest buzz word in the ad tech world for 2018. Whether or not it is the silver bullet promised to marketers is still unestablished, however industry heavyweights appear to be betting big on its adoption. IBM and Mediaocean recently announced a blockchain consortium focused entirely on integrating blockchain tech into major media buying tools suggesting it is here to stay. The hype is understandable, as agencies look for technical solutions to the growing complexity and risk of programmatic advertising.

A quick refresher on how we got to this point: ‘blockchain’ doesn’t refer to a company or a tool, but rather to a type of computer program. For those that remember the heady days of mp3 sharing, the closest comparable technology is P2P programs such as Napster or Kazaa. The difference is instead of sharing music between computers, you’re sharing a master record of money transfers between all users on that blockchain. Just like with sharing music, each computer downloads and uploads small pieces of each record from hundreds of other computers rather than from one source. This makes the system very tough to fool, as any attempt to fraudulently change numbers in the blockchain will be rejected by the system, when compared to the hundreds of other copies of the transaction on the chain. Most famously this tech was used to power Bitcoin and create a currency separate from the major banks of the world. The idea being that if all users of Bitcoin use their computers to process transactions on the blockchain, then no one will need to pay bank fees when sending money from one person to another.

As Bitcoin grew in popularity, other industries caught on to the promise behind using blockchain-style transactions to protect themselves from fraud. Somewhat ironically, major banks such as Goldman Sachs and Bank of America are working on a project to integrate blockchain (a tech designed to bypass them) into their own IT infrastructure. IBM is betting a large amount of effort on a “Hyperledger” managed by the Linux Foundation, which is a project aiming to create a single source for all tech companies to store their blockchains.

Currently, there are two major pillars of the ad tech space that are viable use cases for blockchain tech. The first is simply for billing and reconciliation of purchases order and media IO’s. The idea being that every step of the media negotiating process, from RFP to invoicing, would be logged in a blockchain ledger. This would prevent any party during the process from claiming they are looking at a different version of a document than the other parties. All versions of a document would live in the blockchain, keeping everyone honest. This is fairly close to the original intended purpose of blockchain (financial transactions) and seems like a promising direction for the tech.

The second use case is more complicated: programmatic display advertising. The concept here would be logging all actions of a real-time bidding system (requests, pre-bid criteria, bids, ad calls) into a blockchain tracking the entire programmatic ad space. On the positive side, this would finally provide true transparency into the programmatic system and allow any member of the chain to dive deep into what’s happening on each ad call. On the negative side, this would generate a staggering amount of information and require huge amounts of computer processing power to maintain. Since blockchain was designed to handle financial transactions, a real concern is that any implementation designed to monitor every ad impression would buckle under the load and slow down the entire ad serving ecosystem. Programmatic display calls can number in the billions per minute while financial transactions tend to number in the thousands.

Ad tech executive Marc Guldimann was quoted in Business Insider saying “Blockchain is really just a dumb, slow database… People are trying to use it to solve problems it’s not suitable for.” So, what should an enterprising tech-savvy marketer to do? All signs point to waiting it out. Time (and market forces) will weed out applications of blockchain tech that won’t work and bolster that ones that will. If your company has real problems with transparency in the IO process it may be worth adopting the tech early, or you can wait until it is integrated into your billing platform of choice. Regarding blockchain uses in programmatic display, investing in these applications should be for the most risk-tolerant clients only. An ambitious engineering team can possibly rework the tech to handle the lightning fast RTB world, but it does not appear to be a solved problem yet. Stick to applying the tech to the domains it’s designed for and you can’t go wrong.

Nick Lambeth is Director of Measurement and Analytics at Engine Distribution.

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