AppNexus CEO Brian O'Kelley: 'For me, the crypto ICO is a terrifying trend'
Brian O'Kelley, AppNexus chief executive, shares his views on blockchain – the adtech buzzword of the contemporary landscape. He discusses: "bitcoin-mania" and its resemblance to the dotcom boom; offers advice for marketers contemplating such technology; and elaborates on his own early attempts to harness it.
The Drum: You've said that blockchain was one of the better technologies to help bring transparency to the supply chain, but now the phrase seems to be used haphazardly. Why do you think this has sprung up in the marketing sector recently?
Brian O'Kelley: There is a very real need for transparency in the digital media supply chain. Just as any industry matures, things like transparency and efficiency become more important, so I think that's what's driving the interest in these technologies.
Blockchain has become a major buzzword, just like cloud was 10 years ago, there were all these startups pitching 'Cloud! Cloud! Cloud!' And, today it's kind of inevitable [with this technology], but I think the hype is real in the sense that blockchain has some really interesting benefits.
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Those include the ability for companies to have a joint view of transactions so that everybody sees the same thing, and it really takes away the central middleman in a way that creates a lot of value. But that itself does not solve problems.
Why I'm excited about it is that it's another building-block technology that we can use to prove trust and transparency. I think that pretty quickly we'll figure out where it makes sense, and we'll start using it in those places. Then a lot of the hype will fall away, and then it won't be anything special to use blockchain.
TD: Some would argue that blockchain is a simple technology over-complicated by a lot of people because of its initial ties to cryptocurrency in the finance industry. Would you agree?
BO: Undoubtedly, and I've been through a couple of these bubbles now. Back in the late 90s, if you had an internet startup, you could raise an incredible amount of money. If you didn't call your startup an 'internet startup', you were crazy –even if it was nothing to do with the internet – now we're seeing the same with bitcoin.
I mean, we now have something called bananacoin. It's literally people who were going to build an organic banana plantation, and they were like: 'OK, we're going to make banana points.' And all of a sudden they had raised $20m, I mean, 20 years ago, that would have been banana.com, right?
TD: What are some of the big blockchain misnomers out there that annoy you?
BO: For me, the Initial Coin Offering (ICO) [an unregulated means by which funds are raised for a new cryptocurrency venture] is a terrifying trend. It's not blockchain exactly, but I mean there's no way I'd raise $20m for my banana plantation on a Kickstarter fund. The idea of an ICO is 'hey, I just want to kickstart my idea!' I mean, it just seems crazy to me.
I think it's dangerous because a lot of people get caught up in a lot of hype. A lot of the blockchain ideas I see out there for the advertising ecosystem are really speculative. I think that a lot of the people out there fail to deeply understand the issues and technical complexities. There's a lot of noise, but there's a handful of companies with good ideas how to use some of the blockchain technology, and the industry definitely needs it.
TD: Where do you think the industry is as with its understanding of blockchain? From the partners that you speak to, do they understand it, are they coming to you with questions?
BO: I think the biggest question we get is: 'Hey, I've been pitched by about 10 blockchain startups in the last week. Are any of them real?'
My advice would be that every time they say the word 'blockchain', you ignore it, and ask yourself, what do they actually do? So if I say I'm a startup that does blockchain for privacy, then ask yourself if solving this problem, would it actually help your business?
So, I'm not saying you shouldn't use blockchain, but lesson be clear, it has to solve real problems for your company today. Just like you shouldn't invest in 'an internet company', because it's an internet company, and you shouldn't put your company in the cloud if you don't know what that is.
If that's the case, then you probably don't need a blockchain solution, but if one of these companies can solve a problem that you actually have today, then jump on it.
TD: Can you list some questions that marketers should ask when they are being pitched by a blockchain startup?
BO: One thing I'd say is which of my actual real business problems today do you really help solve? If they say it's around supply chain transparency, then ask: 'how does that work? How much do I have to pay for it? How many adoptions do you have? How does that work end-to-end?'
The fact that it's blockchain should be irrelevant to that conversation. Marketers, in general, don't need to be experimenting with cutting edge technology, they need to experiment with cutting edge solutions. What I would recommend they ask is: 'does it solve the problem I have today, or does it solve a problem that I might have?'
If it's the latter of the two, then just say: 'Sure, let's talk again in a year'. [See more here].
TD: AppNexus is working with Amino Payments – a blockchain payments system – are you able to explain that partnership and share an update on how that is going?
BO: Amino has two pretty cool solutions right now today: one of them is that they can insert very simple encryption into the digital supply chain so that at the end of the transaction the publisher and the brand can see every step. And because of the encryption, everyone can see it, and validate it, to see that everything stands up.
So if the buyer puts $1 in at the top, then the DSP takes $0.10, and the SSP takes $0.10, but the publisher still only gets $0.50, then you know that you've got a problem. They can see if someone is not telling the truth.
They can also help you see what the true price of your vendors is. For instance, if your contract with your DSP says it's for 8%, but you're actually paying 30% because of hidden fees, that's a pretty clear flag. So that solves a pretty clear problem for the marketer right now, and that's auditing the supply chain.
One interesting thing about Amino is they don't use a fully distributed blockchain, they use a private ledger and the reason that's so important is because it would be incredibly expensive given the early state of blockchain to go all the way to a full blockchain. And I don't think that's a problem, in fact, I think that's a smart way to solve the problem.
If you think your problem is important, don't wait for technology to catch up, find a way to make it work. Now they have, I think, six of the top 10 largest digital brands in the US live right now.
What we're doing in pilot is pretty amazing until the real technology – I think every marketer will end up having an Amino-like solution that helps them audit the supply chain.