If you still haven’t heard of blockchain, distributed ledger, cryptographically secured chains, and smart contracts, we strongly recommend you to read this article. Get to know the key trends, challenges, and opportunities of the blockchain-based systems that may impact your business strategy in 2018.
What Blockchain is and How it Works
Blockchain is a digital ledger ("digital node") with data that is replicated, synchronized, and shared across multiple servers, computers, and users all around the world. The data is stored in a chain-like configuration where the history of every transaction is bundled into ‘blocks’, which can only be built upon, but never altered or copied. It is a peer-to-peer network of members that verify every transaction, record it publicly and chronologically.
The blockchain network is opposite of the centralized financial systems that have a traditional consolidated repository of all client’s transaction data. The single owner of the database is extremely vulnerable because all the information is stored in one place, which makes it easy for cybercriminals to hack into.
With blockchain, you may say that data in a distributed ledger belongs to everybody and nobody at the same time. If somebody would try to hack the system, they would need to change data in the majority of participants, which is nearly impossible since there are thousands of them. All the members using blockchain keep the digital ledger up to date, therefore the network is incorruptible.
Why Digital Advertising Industry Needs Blockchain?
Digital advertising ecosystem is a massive network of DSPs, SSPs, ad exchanges, ad networks, data management platforms, ad servers, and agency trading desks. It is hard to imagine how many supply and demand partners exactly transact on a daily basis through Real-Time Bidding auctions. Let’s not forget about private marketplaces and direct deals. Altogether that might be billions of transactions every day with millions of dollars sent there and back.
All these media buyers and sellers have to pay fees to middlemen, technology vendors, and intermediaries. Those platform fees, service fees, payment processing fees, and transaction fees cost a fortune. That’s quite a lion’s share of the marketing budget. But wait, it’s not only about money. Advertisers and marketers express concerns about the lack of trust, transparency issues and growing ad fraud problems that devastate the programmatic partnerships.
All these difficulties require immediate resolutions. Blockchain technology promises fundamental changes and tremendous profits to the AdTech industry. Let us consider some of them.
Major Advantages of Blockchain-based Solutions
- Ultimate transparency. Every change made on the blockchain ledger becomes public. It is verified, approved and seen by all members. Such openness of the network and peer support adds accountability and builds trust.
- Immutability. Once a blockchain node is created, its data cannot be modified retroactively without the alteration of all consecutive blocks. It is only possible if the majority of members agrees to change the ledger simultaneously. Each transaction must be approved by most of the participants in order to be bundled into the ledger.
- No third-party intermediaries. Blockchain-based transactions allow a direct exchange of digital and physical assets between parties. This dramatically reduced or even eliminates the counterparty risks and allows partners to save up on transaction fees.
- Enhanced data quality. Blockchain data is consistent, complete, accurate, updated, verified and widely available.
- Distributed nature. Blockchain runs on the network of computers. If one unit fails or an error occurs, the digital data would not be lost, because it is replicated on thousands of other computers. There is no need for lost data restoring or backup solutions since the data is decentralized and never stored in one place.
- Cybersecurity. Transactions in blockchain are associated with unique "keys" - strings of numbers that define the user and that user’s digital wallet. Cryptography is used to secure a user’s private key and offer full control of the identity and transaction history.
- Real-time transactions. While bank transactions take a day or two, blockchain transactions allow instant payments. Digital tokens. One example of successful blockchain implementation is bitcoin - a cryptocurrency which is a quick, cheap, and more reliable form of currency.
- Endless possibilities. With blockchain, users can create markets, store registries, move funds, keep records of immutable values such as currency, identity, trails of products and other data.
How Blockchain Reshapes Online Advertising
Fighting Ad Fraud
Blockchain has the potential to eliminate the growing discrepancies between what advertisers are paying for and what they actually get. With blockchain-based transactions, media buyers can easily track the number of impressions that are being delivered and verify whether those ads were targeted to the right audiences and served in the right place and at the right time.
Since all members of the blockchain network are approved and verified by other participants, bad actors and cybercriminals have no chances to get into the system. Therefore, every impression you buy comes from an authenticated publisher with a validated domain. This technology allows minimizing such fraudulent activities as bot traffic, domain spoofing, pixel stuffing, and ad stacking. Read more about inventory fraud here.
Enhancing Viewability
Modern blockchain solutions provide comprehensive tools to trail campaign’s performance metrics related to how much was spent, who viewed the ad, what were the engagement and conversion rates. Such precision is beneficial for brand safety since advertisers can always be sure their ads appear in reputable places only.
Finally, blockchain provides enhanced viewability tracker tools. Media buyers can be 100% sure that the ads they are paying for are viewed by real audiences. They simply don’t get billed for the impressions that were served in the places that are not available for the human eye or generated by bots. Read more about ad viewability here.
Data management and user privacy
Blockchain ledgers contain data that comes with complete security. All members of this peer-to-peer network can access and review information on who did what, when and how. This complete transaction history from the day one is replicated all over blockchain ledgers, approved by all participants and secured by the latest cryptography.
With such levels of public security, strangers and cybercriminals have zero ability to access the data, copy it or hack it. Transaction information is secured and protected by all members of the chain. Every ledger gets a unique public key in the block, which is then distributed all over the participating nodes with links to previous and following blocks. Data leakage or data theft is impossible because blockchain networks have no single point of failure.
It is worth emphasizing that along with Blockchain implementation the scandal with users data on FB got a big response in 2018, so it might be useful to read about its updated rules and data issues in Best Facebook Ads Course.
Smart contracts
A piece of code which is stored in a blockchain network is called a smart contract. It describes the conditions on which all parties of the transaction agree on. A predefined pattern of actions determined by that contract can only be executed if all conditions are met. If these changes to be made to the contract, they have to be approved by all other members at the same time. Smart contracts are self-executing and fully self-enforcing.
This technology facilitates future contracts and allows buying and selling of any kind of commodity at a predetermined price at a specified time in the future. Applying this to digital advertising, we may say that advertisers would be able to purchase ad impressions at a forward price from futures exchanges. Isn’t it mind-blowing?
