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When can we expect blockchain to change the ad tech industry?

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When it comes to digital marketing and the ad tech industry, the bright promise of a decentralised future has led to a spate of blockchain initiatives.

The technology provides a solution to the most pressing industry challenges – such as ad fraud. Bot traffic, together with spoofed domains, has been a huge headache for everyone involved in the ad tech industry. According to recent market stats, it consumes up to $7.2 billion per year – while click fraud is growing up to 50% each year. The whole principle behind the decentralised system and blockchain technology eliminates the core of the problem.

What’s more, blockchain reduces transaction costs, enhances viewability tracking, and provides the means to achieve complete transparency for all parties involved. To be more precise, blockchain allows creating a system where every transaction is recorded, ensuring that there are no hidden fees and cuts. As of now, there is no way for an advertiser or publisher to determine the number of additional fees.

Blockchain is poised to be a cure – yet the industry is far from utilising its benefits at large, with ad tech estimated to welcome blockchain solutions with all the perks by 2020. There are five main issues that might halt the implementation of blockchain technology in the ad tech industry:

Decentralisation in a nutshell

The ad tech industry is highly fractured, with hundreds of companies offering their services. Some of them are yet to implement programmatic at full scale. There won’t be any decentralisation benefits unless we reach a point where every major industry player adopts the blockchain.

Taking into account how long it took to shift to programmatic buying, it will take two to three years to get everyone onboard – and now there are queues to get access to programmatic solutions. There are companies that have budgets and are ready to spend them on programmatic technology, but they have to wait for months before all the technical issues are solved. The blockchain is even more sophisticated, leading to a more complicated connection between the nodes and storing a decentralised ledger.

The operational gap

The obvious issue with blockchain technology implementation is the operational gap. It has been noted on various occasions how the blockchain is not ready to handle the massive amount of operations per second required for real time bidding (RTB). The original technology was designed to allow 10 transactions per second, while with real time bidding the volume could reach 3 million transactions. Currently there are solutions, such as Intel’s Coco Framework, which speed up the limit to 1,600 requests per second.

While the progress is visible, it will take some time until the technology breaks the gap and is ready to handle real-time bidding operations. One of the goals of the suspended SegWit2X fork on Bitcoin was an attempt to increase the block size, which could lead to a transaction capacity boost. The fork was called off due to the lack of consensus. As blockchain technology is heavily influenced by the Bitcoin ecosystem, its adoption will lead to similar issues affecting the ad tech industry.

The third-party issues

The ad tech industry struggles to deal with unclear pricing and fees, trying to solve the transparency issue. Nevertheless, lots of third-party companies enhance the industry ecosystem, providing access to unique supply or demand, data, as well as filtering the bandwidth overload.

The nature of the blockchain system allows excluding the influence of third parties. Yet with the blockchain being applied to a fractured ad tech ecosystem, we are faced with the need for another third party; an entity which will be responsible for the support and maintenance of the whole system. Therefore, the biggest asset – the decentralisation of the blockchain – will be hindered by the influence of such a company.

There are always questions, like which chain should be used, who controls and verifies the transaction, which brings the monopolisation issue into the spotlight. Another thing to think about is whether miners are needed to do this.

Standardisation

The ad tech industry still lacks organisation and standardisation. While there are organisations like the IAB working on the guidelines, their application is still on the go. As pointed out earlier, there are hundreds of organisations and technologies working in the digital advertising industry, and sometimes it might be hard to find a confluence. There are custom protocols, cases when the inventory doesn’t meet the specifications, as well as companies still working on OpenRTB 2.3 – released in 2014. This might become a severe issue with the blockchain, as its ecosystem relies heavily on the standardisation rules and agreements.

Solid education

The hype around the topic has led to blockchain becoming a buzzword. PR teams tend to use it without a second thought, bringing confusion to the industry. Marketing professionals are often interested in the blockchain – yet they don’t see the scope of possible applications of the technology, the potential return, as well as how exactly the blockchain works. Educating the industry is one of the major priorities here.

The IAB has already created a working group to develop education guidelines for the possible use of blockchain technology in advertising. Currently, the group is working on setting the priorities, best practices, and technology standards.

Bottom line

Despite all the issues, there are already solutions that are implementing blockchain for ad tech. There was already a rise of ICO startups, as well as companies offering ready-to-apply blockchain solutions. The general belief is that R&D and experimenting should not be expensive. The companies should strive to grow the business, not to struggle with endless code lines.

Hence there are opportunities such as ad exchange blockchain ad stack. There is no point in spending millions on blockchain solutions unless it is beneficial to the business. Yet unless we achieve the trading singularity, where every party is involved within a blockchain system, we will not get the full benefits of the technology. It will take up to three years to come close to that point. Nevertheless, the perks of blockchain are visible, and implementing the technology for diverse digital advertising aspects and processes may be beneficial for ad tech companies.

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