Blockchain ‘likely to happen’ where transactions are expensive or complicated: Parsec
Blockchain is fast becoming the buzzword of 2018. Mass adoption of blockchain in advertising is likely happening in segments of the industry where transactions are expensive due to a lack of trust or complicated reconciliation, and most importantly, use commoditized buying metrics like clicks or video completions, according to Parsec chief executive, Marc Guldimann.
Parsec is currently building models for several types of advertising exchanges on blockchains under the PAX brand. Here he talks about some of the issues around blockchains in the advertising industry.
What is blockchain and how does it work in practice?
Most blockchains have three features; basic functionality is asymmetric cryptography used to verify the origin and content of messages and a common ledger shared across participants in a blockchain. Once a message is verified the network updates it’s ledger based on the instructions contained in the message (eg “send Sam 10 bitcoins”). The third feature is software that can update the ledger, called smart contracts.
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The goal of blockchain tech is to create decentralized transactions, marketplaces and eventually organizations.
In theory, blockchains make markets more efficient by compressing supply chains into direct buyer/seller relationships. In reality, this compression hasn’t happened outside of trading cryptocurrencies
What are its main value propositions?
The main value proposition of blockchain is more efficient transactions thanks to cheaper trust, harder fraud and easier auditing. As blockchains proliferate, middlemen who don’t add value will get squeezed. Blockchains are also easy to verify and audit, which makes them attractive to digital advertisers who have to deal with large discrepancies and expensive audits.
The decentralisation of organizations is a much loftier value proposition of Blockchain. Now that we have digital currency and software that can spend it, the theory goes, that same software could control an organization using economic incentives.
What sources of tension in the media trading industry will Parsec use blockchain to help resolve?
Parsec’s goal is to build an efficient marketplace for high quality brand advertising, with an economic incentive for quality. Blockchain will play a part in this by making transactions cheaper to execute and easier to track.
The middleman take-rate in digital advertising is astronomical - with estimates ranging from 30-80% depending on media. It’s unclear how much of this is caused by a lack of trust between counterparties, rent-seeking by middlemen or simple gaming of metrics. Blockchain will impact the first two directly, and the third by requiring the industry to shift metrics in order to leverage the blockchain for transactions.
How are the applications of blockchain and advertising related to the innovations and programmatic that has been mostly around real-time bidding (RTB) to date?
RTB is an interesting lens to look at blockchain through as the technologies are nearly antithetical. RTB inspects of every unit of advertising to determine a willingness to pay - a truly amazing technological solution to the problems created by what could be the most broken metric any industry transacts on - the impression.
Precise and consistent metrics are required in order to transact on a blockchain. This is because the efficiency of a blockchain relies upon the certainty that a transaction will happen given a set of conditions. A blockchain can’t replace a middleman that is gaming an opaque metric.
For all the advantages blockchain brings to digital advertising, it’s most tangible short-term impact may be to force our industry to look for better metrics to transact with.
What are the applications that have been tried so far in digital advertising?
Attempts to distribute data on a blockchain are bound to fail, as blockchains are some of the most inefficient databases ever. If the data in question isn’t related to the current state of a market that transacts via smart contracts, it’s far better to use an API or distributed ledger to publish data.
Some other corner-case uses of blockchain that involve using token curated registries for functionality similar to ads.txt. Like many early applications of blockchain, it doesn’t really make sense once you cut through buzzwords. Subjective metrics like brand safety aren’t well suited to curation via a blockchain.
The most interesting applications are those that allow consumers to take control of, and potentially sell, their personal data, and futures markets for media.
Parsec are a sponsor for Programmatic Punch NY, a one-day event that will give you insightful and practical advice on the latest developments in programmatic trading.
The event will take place on March 28 at Ogilvy and Mather, NY. Tickets can be purchased here.