Why blockchain is the medicine, not the cure for advertising's problems

Some technology companies like Gravity4 and IBM are starting to use blockchain for clients, but it is not widely adopted yet because it is still too theoretical, can’t be scaled yet and cannot be used across diverse types of transactions.

However, many experts that The Drum spoke to believe there are merits to use blockchain currently, especially when it comes to clearing up fraudulent advertising inventory and improving transparency in the marketplace.

Noam Neumann, vice president of technologies and data at Mobfox, a mobile advertising platform, explains that because blockchain tech cuts out the middle men, many believe that is where its value lies in advertising. He adds that exchanges exist for a reason and as not everyone in the industry knows one another, exchanges bring all the parties together for a transaction.

Even as he expresses his doubts that blockchain’s future lies in direct deals of media transactions, he is quick to point out that blockchain has the potential for data tracking and transparency. “It’s important to note here as well that integration for data sharing is still a long while away—blockchain has to deal with its latency issues, and the industry has to become more accustomed to dealing with other parties one on one.”

Ben Feldman, vice president of technical operations at NYIAX, a Nasdaq partner, underlines the opportunity for blockchain to link multiple processes, such as linking contract creation, delivery verification, and accounting, while allowing for audit-ability.

He explains that this includes everything from today's direct sold campaigns to programmatic, allowing publishers, advertisers, and associated intermediaries to understand when an impression is delivered, and understand the costs involved. “At the same time, there is immense potential for other use cases, such as involving users directly in the conversation of value exchange, through the permissioning of their data in return for content or to assist in attribution. As we've seen with the advancement of the internet since it's early days, there are many use cases which will grow out of new developments, and blockchain will likely be involved.”

Both Neumann and Feldman agree that that there are as many brands and marketers who are still unsure about not using an intermediary, as there to those who have misconceptions about blockchain and are either quick to jump on the bandwagon or shun it completely.

Neumann highlights the fact that many believe that blockchain brings more transparency and openness to each media purchase. “That’s where I believe the misconception lies—it’s not the transactions that are the issue, it’s the reselling, the lack of governance, and the workings of the whole chain that allow for fraudulent activity,” he says.

Blockchain is not a solution for everything, adds Feldman, stating that in time blockchain transaction speeds could allow for real-time bidding to be handled. “This time might come sooner than we expect). The industry will still need a method of targeting, bidding, and verification. In essence, a ledger to track that the campaign is targeted against the right audience and eventually reached that audience, with every step, and source of verification, identified. Upon verification the services rendered, a transfer of value can happen. The secure ability of blockchain to transfer value between independent parties is handled through encryption, such that both parties are protected.”

Jessica Chapplow, ecommerce and emerging platform manager at Wavemaker (formerly MEC), points out that modern technology has always faced a trust barrier for people initially: “Will electricity burn my house to the ground? How do I know whether the ATM will count my money correctly?’, she says.

However, Chapplow believes that for brands, blockchain can be a trusted intermediary and also a way of guarantor of brand values. “Eliminating human fallibility and the temptation to “bend the rules,” encoding brand values into a blockchain can provide brands with a customer-verifiable way to ensure that experiences are consistent, open, and transparent. A company that is so committed to a certain set of behaviors that it is willing to code them into software immutably will yield a competitive advantage,” she explains.

Acknowledging that some have expressed concern with blockchain tech after China banned bitcoin and JP Morgan criticised cryptocurrencies, Feldman and Chapplow are keen to stress that blockchain is not a currency, and that China and JP Morgan have no quarrels with blockchain at the moment.

“Blockchain itself is not banned in China, nor condemned by JP Morgan,” says Feldman. “In fact, JP Morgan has been associated with Ethereum activities, so while they may have concerns over the the validity of Bitcoin (their recent comments seem to be a bit controversial), they are definitely bullish on blockchain. I strongly believe that in an industry as un-regulated as the advertising industry, the immutable ledger components of blockchain provide a lot of value to begin with.”

Adds Chapplow: “The more you get to grips with this technology the easier it is to see that it’s not a currency. It’s a digital asset where not just information, but anything of value – money, music, deeds, art, votes, intellectual property, and even scientific discoveries – can be moved and stored securely and privately.”

When it comes to the topic of transparency in advertising, can advertisers, demand-side platforms, supply-side platforms, publishers and safety vendors use blockchain to eliminate advertising fraud, guarantee viewability and ensure brand safety?

For Mobfox’s Neumann, he opines that theoretically, players in the advertising industry can use blockchain to find the media they are looking for, who is selling or buying it and validate its legitimacy. He believes that if the ad industry collectively moves all communications in ad tech to a blockchain platform, then there will be no need for any transaction validator, such as impression pixels.

“Yet I’m pretty sure this is not the solution—fraud can be decreased, and transparency increased in advertising, only if players’ intentions and stakes change—only if they’re willing to work hard and give up some competitive advantage,” he adds.

Concurring with Neumann, NYIAX’s Feldman says that while blockchain can certainly assist in reducing fraud, increasing brand safety, and helping with viewability, the technology itself is not a cure all for the ills of advertising. “Fraud will always be a game, and staying in step with the bad actors is the best anyone can do regardless of the technology. With that said, blockchain in conjunction with well-designed business and product functions can certainly help,” he explains.

Chapplow, on the other hand, believes that having an open access ledger that tracks the complete journey of an ad impression is the transformative advantage of the blockchain. “I wouldn’t be surprised to see the use of blockchain for deal IDs and private marketplaces (PMPs). Deals and private marketplaces have evolved as a workflow solution to the contract problem, and they create a virtual connection between select publishers and advertisers,” she says.

Even though blockchain will most certainly improve transparency in advertising, both Chapplow and Feldman warns that there are potentially multiple dangers and drawbacks if the tech is not studied and implemented properly.

“In advertising, blockchain is a double-edged sword. It’s biggest asset decentralisation, is also its biggest weakness, as the speed (or lack of) in processing each block works much slower than how real-time bidding works because Ethereum-based blockchain processes 20 transactions per second,” explains Chapplow. “This is similar story for the confirmation time (amount of time it takes for a transaction to be accepted an added to a block then added to a public ledger), current confirmation times for a transaction are still only in minutes or seconds.”

“Compared to the millisecond response times required to return an ad, blockchain has a long way to go before it could be considered an efficient tool for real-time fraud prevention and validation,” she adds.

Feldman believes that the dangers are an overreliance on blockchain by brands, saying: “The reality is that blockchain is a great tool, but just like a hammer is a great tool, it doesn't work well as a screw driver. The immutable nature of blockchain means that business practices, which previously have allowed for changing entries at will, won't have that luxury, and may need to be re-designed. At the same time, there are some complexities when it comes to public and private keys, which need to be understood and implemented properly.”