Blockchain Will Transform the Global Economy. But what About Advertisers?

When most people hear blockchain, they think Bitcoin—one of the world’s first digital currencies. But while Bitcoin has yet to transform the global economy, experts believe that its underlying technology—blockchain—is poised to spark an economic revolution.

A secure digital ledger, blockchain keeps track of transactions involving anything of value—whether it’s money, stocks, music, art, or votes. On this shared and decentralized platform, everyone has access to the same information trails, and transactions are verified on a consensus basis.

Use cases for the cutting-edge technology aren’t just hypothetical: Last month, a house was purchased using blockchain for the very first time. Meanwhile, the U.S. State Department has begun looking at how the technology can aid diplomacy. According to McKinsey’s Don Tapscott, blockchain will soon transform every institution—in some ways more than the internet did.

So what does this blockchain revolution mean for advertising?

Blockchain’s Value for Advertisers

By enabling marketers to conduct transactions in a secure and transparent marketplace, blockchain has the potential to solve some of the industry’s biggest challenges—starting with transparency.

As digital advertising itself has become more and more complex, advertisers have been grappling with how best to validate their data and media. For years, they have relied on a plethora of third party tools in order to do so. However, with blockchain, we’re seeing for the first time an opportunity validate their own data. In other words, first party verification.

In March, a study commissioned by WPP revealed that advertisers could be wasting $16.4 billion on fraudulent traffic—twice as much as previously thought. With blockchain, the end-to-end processes of booking, buying, and placing digital advertising will be recorded and stored. And because all these transactions and audit trails would be available to the public and verified by common consensus, blockchain will help eliminate ad fraud and bring about greater transparency that many in the industry have been demanding.

MetaX (a company that builds blockchain solutions for digital advertising) and the Data and Marketing Association are already showing the industry how this could work with adChain—the industry’s first blockchain-based solution designed to fight fraud.

Another benefit of blockchain technology is that it’s incredibly secure—which means that it will allow advertisers to safely store vast collections of sensitive customer data. Its decentralized nature—which means data is spread across its network—makes it less vulnerable to hacking.

However, the technology also has some limitations. For advertisers, the most significant drawback is that blockchain isn’t fast enough to keep up with the rate of transactions or the speed of real-time bidding. In fact, it can only process thousands of transactions per second—a number far lower that the millions that occur in the digital ad industry each second.

As blockchain continues to evolve, it may develop the capacity to process a greater number of transactions in real time. But until then, the industry could find a compromise. For example, rather than recording every transaction, the industry could integrate counters that store every 100,000 transactions. Since the ad industry tends to trade is cost per thousand, advertisers will still be able to benefit.

Where do we go from here?

Integrating blockchain technology into our existing advertising ecosystems will take time. Larger players will take longer to adapt, and organizations from across the industry will need to come together and agree on a common set of standards.

But the transition to blockchain has already begun: The IAB Tech Lab has set up a blockchain working group to develop best practices for using the technology. Meanwhile, some forward-looking companies have begun to build their own marketplaces that run on blockchain technology.

These trends look set to continue: We’ll see more and more startups adopting the technology, and the IAB and other industry bodies will begin setting some key standards. Within five years, the ad industry will transition into using blockchain as a transaction leger. And within a decade, we’ll likely see it become a new industry standard. It’s time for brands and their tech partners to prepare.

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