Will blockchain upend digital marketing, eliminate advertising fraud and usher in a new MarTech ecosystem fuelled by revolutionary business models and bulletproof transparency? Don’t hold your breath.
However, while the current limitations of the technology suggest that such changes won’t happen any time soon, don’t discount its impact over the long haul — and do expect incremental gains in the meantime.
As we will all be hearing a lot about blockchain and marketing over the next 12 months, Which-50 decided to get our reality check in early.
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Blockchain’s great promise for marketers is proof and, by extension, trust. That is a crucial issue in the digital marketing world, where both of these qualities sometimes get left behind in the rush by innovators to bleed the edge.
Industry leaders we spoke to as we prepared this report all recognise the promise, but they also cautioned that there are serious limitations yet to be overcome — and the hype has once again run ahead of reality.
Gartner’s Rajesh Kandaswamy and Fabio Chesini, in a paper called How to determine if you need a blockchain project and if so, what kind, argue that the noise surrounding the technology obfuscates the difference between where blockchain can work versus where blockchain is needed.
- What is blockchain? (Wikipedia)
That’s a view shared by AdRoll founder Adam Berke. Now a strategic adviser to the performance marketing company he helped grow to over $US300 million worldwide, Berke told Which-50, “In general, there’s a temptation right now to try to shoehorn blockchain into every possible industry whether it makes sense or not. The concept of a distributed, cryptographic ledger is absolutely an ingenious invention —that doesn’t mean it makes sense for every use case.”
According to Berke, “Often, the unique properties of a blockchain (it is distributed, and ownerless, for example) aren’t actually needed for the use case in question, and often times the current limitations of blockchain make it a suboptimal choice.”
Still, for businesses like AdRoll and others in the advertising and marketing technology sector, the blockchain question is gaining momentum.
That is especially so as it relates to digital advertising. In the US, the Interactive Advertising Bureau formed a blockchain working group earlier this year and the outgoing head of IAB Labs, Alanna Gombert, declared that blockchain would replace data as a key area of focus.
In a statement announcing the working group which was released last month, the IAB acknowledged that blockchain technology is already being utilised in the digital advertising space, and identified nine such initiatives.
- AdChain is an open protocol on Ethereum’s public blockchain. Its stated goal is to allow for building of decentralised applications, specifically for use in the digital advertising ecosystem.
- Adex is a decentralised ad exchange that utilises Ethereum to address problems like fraud, privacy, and consent in the digital advertising space.
- Amino combines technologies from blockchain, payments, and AdTech to bring transparency, integrity, and auditability to online advertising.
- Ethereum is a blockchain based, publicly available open source distributed computing platform that provides a decentralised virtual machine and its own cryptocurrency tokens called “ether”. These attributes make Ethereum an attractive base for the generation of smart contracts and serves as the foundation of other applications.
- Faktor is a blockchain-based identity management platform that can be utilised by publishers, advertisers, and individual users.
- Hyperledger is an umbrella project of open source blockchain initiatives that was started and managed by the Linux Foundation.
- Kochava is introducing the XCHNG platform, an open-source digital advertising framework based on blockchain technology enabling the industry to operate on common rails.
- NYIAX, a guaranteed media contract exchange, bridges the space between the financial and digital advertising ecosystems utilising blockchain in partnership with NASDAQ.
- Rebel AI secures digital advertising and protects publisher identity and brand spend using machine learning, blockchain, and encryption technologies.
- The Basic Attention Token (BAT) utilises the Ethereum blockchain to create a token that can be used to obtain a variety of advertising and attention-based services on a purpose-built platform.
It is no surprise that many of the initiatives are focusing on fraud and accountability. With ad fraud set to reach $US44 billion by 2022 according to Juniper Research, and to grow into the world’s second-biggest black market by the middle of the next decade, there are huge returns available to any company that can tackle the problem.
But ad fraud is hardly the only concern.
Time to disintermediate … again
Jeremy Epstein, author of The CMO Primer For the BlockChain World, writing in a blog on ChiefMarTech, explained why advertising will most likely be the first function to be attacked.
“Simply put, the number of middlemen and amount of friction makes it ripe for blockchain-based disruption.”
In his book he elaborates, writing “Any industry that is full of intermediaries has a lot of value lost along the transaction path, and lacks transparency and trust is an industry that is ripe for blockchain-driven disruption.”
He argues, and others agree, that there is a huge amount of inefficiency in the digital advertising supply chain.
Industry analysts say that intermediaries carve out 56 cents from every digital advertising dollar spent, leaving brands with a minority share of the value from their investment.
Forrester Research, meanwhile, suggests that on the other side of the transaction, publishers could increase their CPMs fivefold by cutting out the middlemen, according to Epstein.
Despite this, there is very little industry analysis from companies likes Gartner and Forrester about the direct impact of blockchain on marketing. At best there are oblique references to it in wider discussions.
Darren Guarnaccia, now a strategic advisor to Cognigy, but formerly the chief strategy officer and executive vice president of Sitecore, says “Blockchain is really about trust when you boil it down. Think of it as a bulletproof way to record things such that everyone using it has absolute faith in its truth and accuracy.”
“There are certain scenarios where there is scepticism about the validity of certain kinds of data, such as in advertising. Did that ad really get shown? How do you prove that? By using blockchain technology, all parties can see what really happened, and have the absolute faith of the veracity of the information.”
Anywhere there is a dependency of trust and multiple parties involved, blockchain can add value, he said.
Steve Lucas, CEO of Marketo — one of the big four marketing clouds — agrees that blockchain can have a big impact on the way digital advertising is distributed and measured, but he identifies some significant limitations in the technology at the moment, as do Berke and Guarnaccia.
Lucas told Which-50 “Speed is definitely a challenge for blockchain’s application in marketing systems, given the raw volume and velocity of data. Visa’s network can process 56,000 transactions per second, but blockchain currencies, as a point of comparison, process a small fraction of that.
“Blockchain technologies will have to accelerate orders of magnitude more in terms of interactions per second to keep pace with some of the biggest ad or marketing systems.”
Berke offers an even starker comparison based on his own data. “At AdRoll we process hundreds of thousands of bids per second. Bitcoin, currently the most robust blockchain, processes three or four. There are ways to close the gap, but it strikes me that the driving force (at the moment) is to make blockchain fit the use case as opposed to the use case demanding the technology.”
Timothy Whitfield, Director of technical operations at Group M in Australia, echoed these concerns. “The programmatic landscape requires super-fast responses between the SSP and the DSP world. For instance, in a programmatic auction, there needs to be a response within about 40 milliseconds. AdTech companies would need to ‘productise’ blockchain and make this something that can fit into the rest of the programmatic AdTech landscape in order for it to enter the mainstream.”
Part of the problem is that blockchain relies on encryption technology, which adds a heavier load to any processing task, says Guarnaccia.
“Blockchain is also immutable — meaning once it’s written, it can’t be changed. That’s a good thing from an archival standpoint, and knowing that data can’t be altered later, but if you need to constantly update existing information, or collect massive amounts of raw data, you’ll always be creating new data, instead of updating existing data. This can lead to large costs of storage over time,” he says.
Praneet Sharma, the co-founder and CTO of Method Media Intelligence — which advises clients on how to maximise the return from their AdTech investments and has a strong practical knowledge in ad fraud — said “I like to point out that the main blockchain networks cannot and should not handle the scale of digital advertising.”
Instead, he argues that a good capability would be to “side-chain” information into a separate blockchain and merge it back into the main one. “This is required for impression-level tracking. For other things, like supply verification, the transaction rate is not of much concern.”
Hakuna matata
Of course, making things run faster more cost-effectively is bread and butter for the industry that gave us Moore’s law. Already there are alternatives to blockchain emerging, like swirlds which grew out of the hashgraph community and which claims to have overcome many of the technical limitations of current blockchain implementations.
Those claims are set to be tested in the real world in the next year, as the company has partnered with a consortium of credit unions under the CULedger umbrella to help application developers to build distributed applications that can be used by businesses in that sector.
But if it is too early to test the claims of blockchain proponents, by comparison, the hashgraph community is still positively embryonic. For that reason, we will leave them to gestate for a while and check back in a few months.
Opportunities
While blockchain’s current limitations will slow its immediate impact on the world of advertising technology, the executives we spoke to all saw wider opportunities ahead.
Marketo’s Lucas says that over the long term blockchain could profoundly improve brand-buyer engagement scenarios in an ad-saturated world. “For example, blockchain tech could incent some customers to opt in and pay more attention to specific messages from marketers if given buyer actions like reading an email were prosecuted.
“In some ways, this is the opposite of today’s model, but it’s interesting to consider the paradigm shift as we’ve reached a point of over-saturation in the digital ad space.”
Guarnaccia, meanwhile, said blockchain is like a very secure database with the added benefit of having an archival mechanism built in. “The fact that it can allow multiple parties to have access to information in a peer to peer way has many implications.”
He suggests, for instance, it could lead to companies being more willing to expose and share data with customers and partners more readily. “I expect to see blockchain being deployed as a part of more MarTech platforms and solutions over time, given its ability to make data more accessible to others.”
Berke says blockchain might actually loosen the stranglehold that advertising has on the internet publishing sector by finally solving the problem of third-party expense which has inhabited the emergence of micro-transaction solutions.
“The major cryptocurrencies are having their own problems with transaction costs right now, but the promise is still there. If we were able to pay pennies for articles — podcasts, for example — it could alleviate the demands placed on advertising to be the only proven monetisation model for digital content.”
