Is blockchain bullshit? Examining its current worth to digital advertising
Blockchain is the biggest buzzword of 2018. There have even been suggestions it could be the solution to the flaws in programmatic, but many are sceptical.
While we understand blockchain can bring much needed transparency, it won’t be effective until the majority of players in the digital advertising industry are on board. From agencies all the way through to the SSPs and publishers, supply-chain transparency is necessary at each and every transaction, otherwise it’s not going to work.
There was much excitement when the Interactive Advertising Bureau (IAB) released its first blockchain whitepaper highlighting how the technology can improve the buying and selling of video ads (among other use cases). However, the hype around the technology is quickly creating an ecosystem wrought with confusion and overpromising that could slow adoption and erode the trust it hopes to build.
It’s not to say that blockchain isn’t going to become useful. One day, it may fix advertising woes and it certainly has promise to create a more transparent adtech ecosystem, but it faces many challenges along the way.
Here’s what needs to happen for blockchain to be a viable solution:
It needs to speed up
In automated trading, ad exchanges work incredibly fast. Under IAB guidelines, real-time auctions need to take place in fewer than 100 milliseconds, with DSPs processing millions of transactions instantaneously. Currently, blockchain is simply too slow to keep pace with the rate of ad requests.
At the moment, transactions in bitcoin – the cryptocurrency for which blockchain was invented – take roughly 10 minutes to validate and bitcoin can only process four to seven transactions per second. The average Ethereum transaction takes 15 seconds to validate per block.
Perhaps upcoming technologies like Hashgraph might offer a faster solution?
It needs common standards
Blockchain is still in its infancy, bringing many regulation and jurisdiction challenges with it. It needs common standards. While the IAB Tech Lab has set up a working group to develop best practices for the use of blockchain within digital advertising, and the Linux Foundation has started the HyperLedger project to help drive enterprise-capable blockchain technology, there still remains a lot of confusion and gaps.
The current programmatic supply chain includes multiple components such as advertisers, agencies, trading desks, DSPs, data providers, verification companies, ad servers, SSPs and publishers. While blockchain may remove some of the middlemen, validate transactions, and build trust, effective use of the technology will require all actors to work together and use the same processes, which will potentially need the industry to settle on one technology provider and will take time to settle in, much like the evolution we saw metrics providers follow, where we still don’t have a de facto standard.
It needs to be a cheaper alternative
While the launch of the “first-ever” blockchain mobile ad saw Anheuser-Busch InBev save up to 30% on media spend, blockchain transactions can be costly.
The expense of blockchain is due to its decentralised structure which depends on multiple parties maintaining the ledger and adding blocks to avoid eroding confidence. Each party incurs the cost of maintaining the ledger and with the billions of transactions in adtech, that cost could be significant. As DSPs and SSPs are currently trying to reduce strain on server loads, introducing blockchain could be counter productive.
It must be clear not confusing
Blockchain definitions vary wildly, creating confusion and holding back adoption. What is blockchain? Is cryptocurrency attached or not? Is the ledger public? And how do legal jurisdictions define and regulate the technology? At the moment, blockchain leads to more questions than it answers.
In addition, while blockchain is intended to provide transparency to prevent tampering, it has its own challenges. The decentralised nature of blockchain makes it susceptible to different types of bugs and hacks, potentially eroding the very trust it’s supposed to create. There have been plenty of examples of these types of problems in bitcoin and other public cryptocurrency.
There are still flaws in programmatic despite it being well-established technology, because in reality the industry is still in its infancy and we are still unlocking its full potential. Equally, blockchain sounds great in theory but it will take time for us to learn how best to use it and for the whole ecosystem to fully adopt it.
There’s certainly a lot of buzz around blockchain with various companies and industry bodies exploring its potential within digital advertising. It will likely help to reduce fraud, improve customer privacy, and help to simplify the industry. But right now blockchain is still in its early stages and a long way from addressing ad tech’s challenges today. Is blockchain a load of BS? If we look back at this article in a few years, it may be a different story.
Jesse Demmel is chief technology officer @sovrnholdings and can be found tweeting @jdemmel