Blockchain technology can demystify the digital advertising supply chain, in turn helping to tackle ad fraud and create more valuable impressions. It can provide media companies with new ways to monetise with the option of micropayments and consumer donations. It can provide consumers with better access to finance, greater online privacy and control and rewards. But it is a powerful tool that can also be used to increase a goverment's power and surveillance.
Let's dive in.
So what is blockchain?
Blockchain is essentially a technology process that allows digital information to be recorded and distributed, but not edited.
A blockchain is an immutable digital record of data, in which each set of information (the ‘block’) is bound together chronologically by a set of rules and managed by a network of computers (the ‘chain’) rather than a central authority. Before a block can be added to a chain, the information within it must be verified by the network of computers. The information within the ledger is open for anyone to see, so blockchain is by its nature transparent.
‘Blocks’ store information in the following way:
- Blocks store information about transactions like the date, time, and value of a purchase.
- Blocks store information about who is participating in transactions. A purchase is recorded without any personally identifiable information (PII) by using a unique ‘digital signature’.
- Blocks store a unique code called a ‘hash’ that distinguishes them from other blocks.
- Blocks store the ‘hash’ of the previous block to create the ‘chain’.
The technology is best known for trading cryptocurrency, but a blockchain ledger can be used to trade anything of value. This has led to the creation of different forms of blockchain networks. While Bitcoin operates a public ‘permissionless’ blockchain in which anyone can read information about the chain, this is often not suited to business uses. So there are private, semi-private and consortium blockchains that are run by either single entities (centralised) or a pre-selected group to limit information sharing.
Now we understand the fundamentals, let’s look at some use cases.
The advertising supply chain
Blockchain technology has the potential to improve transparency and accountability, reduce wastage and weed out bad actors across any supply chain, including food, ecommerce and digital advertising.
Clients are open and keen to run tests on blockchain. We have done several trials to measure different metrics—viewability, video ads—but no brand has fully committed. Now it is a discussion of how to make it standard practice. That will come next, says Aqilliz CEO Gowthaman “G’man” Ragothaman.
There have been several projects to implement blockchain technology within the media supply chain, including the oft-cited PepsiCo campaign which produced a 28% increase in cost-efficiencies for viewable impressions. To read more about how blockchain is being used to fight ad fraud, see "Beyond theory: is blockchain a legitimate weapon to fight ad fraud?" But many supply chains require human input at various parts, which means room for error.
“There has been a huge amount of effort into implementing blockchain into the supply chain but I haven’t seen anyone audit that yet, and in theory there are potential interruptions throughout the chain, like following a QR code on a supermarket trolley, you can’t be sure no one has intervened in that process,” says Colin Miles, the director of blockchain ID company NextID.
“The blockchain is consensus-based, it is not absolute, so trying to put it in a database solution where human input is required means you cannot be 100% sure at this stage that the information is true and verified. Even a 1% error for margin is worrying.”
Gowthaman “G’man” Ragothaman, the chief executive of blockchain solutions provide Aqilliz agrees there are blockchain use cases in the market that do not follow the technology’s basic principles: “A pure blockchain should have both authentication and authorisation. For me the acid test is when the blockchain is authorised by everyone else as well. If only one person has tallied it, it is not blockchain.”
The same challenge exists in digital advertising. This, coupled with the fact that blockchain demands a total reimagining of current digital ad buying processes, is why no brand has fully committed to the technology yet.
“Clients are open and keen to run tests on blockchain. We have done several trials to measure different metrics—viewability, video ads—but no brand has fully committed. Now it is a discussion of how to make it standard practice. That will come next,” says Gowthaman.
He adds that scalability is a common thorn, and that there is still a lot of education in the industry required in order for brands to truly understand the benefits of blockchain.
“The biggest challenge is explaining scalability, there is a big misconception that this tech is not suitable for the adtech business because we are dealing with real time bidding and billions of impressions. But the authentication layer of blockchain need not be on the chain, you can track it down to a Merkle tree, and daily reconciliation is much better than doing it every 30 days as it is now,” he says. I won’t go into what a Merkle tree is, but if you're interested here's a useful blog.
As well as improving business processes, blockchain can also empower consumers. It can provide greater transparency of how a consumer’s data is being used, greater online security, greater access to services, and even provide consumers with a new revenue stream.
Data regulations like GDPR and CCPA were designed to limit personal data collection processes and protect users online, but blockchain has the ability to take this further. For example, Microsoft in May launched the first decentralised identity network by a major tech company, which replaces identifiers such as usernames with IDs that are self-owned and stored on the Bitcoin blockchain, so internet users can login to different services and verify their identity with the ID rather than being required to hand over personal data or fill in lengthy forms.
Taking this further, not only can blockchain enable users to have better control over their data, but they can also be rewarded for giving it away.
If I have consented to give a company access to my data to be used for advertising purposes, I should technically be accorded a portion of the revenue that is derived and choose what data to give up, says Bolt Global co-founder Christel Quek.
Speaking on a panel at All That Matters in September, SAP digital government lead for Southeast Asia Claudia Chan predicted that consumers in the future will be able to access a portal to control and bargain with their data permissions, with blockchain the likely technology to facilitate this.
“All these data privacy regulations come down to a lack of trust. We are seeing governments trying to nurture ideas for data exchange or trust platforms—we foresee that in the future whether it is banks, telcos or Facebook, there will be platforms that will act as data management services to provide users with access and control, so you can wake up everyday and can see who is using your data. Then you can bargain, if you are a high spending consumer you can exchange for services, or you could terminate that access by using regulations that are set into a platform. Blockchain is one way to achieve that,” Chan said.
Bolt Global co-founder Christel Quek says personal data is becoming one of the most valuable commodities in the world, and yet its value is lining the pockets of platforms like Facebook rather than being shared with those who have given it away in the first place.
“If I have consented to give a company access to my data to be used for advertising purposes, I should technically be accorded a portion of the revenue that is derived and choose what data to give up,” says Quek.
But as is the case with businesses, there is a considerable amount of consumer education on blockchain, data and identity that needs to be done before this becomes a reality.
“It can be empowering for consumers but a simple system has to be designed for a user so it can be easily monitored and tracked,” says Quek.
“With all these privacy concerns today, I don’t think the question is about whether people are willing to share their data, because most people don’t mind if they get something out of it, like using a platform for free. The challenge has always been what more can platforms like this do for the end user, is there a way for the user to really control and monetise their data effectively. It will completely overturn the current business model of advertising,” she adds.
Miles adds: “It is a long process for people to understand enough to manage their own identity". He points to the fact that Brave browser already offers a programme to reward viewers from watching ads, but still has a tiny share of the overall browser market (it has 8 million monthly active users compared to Google Chrome's over 1 billion).
As well as utilising blockchain to reward consumers for their data, several businesses are applying blockchain technology to pay people for services. This included the Bounties Network, where anyone can be paid a ‘bounty’ for performing tasks like promoting a brand online, designing a logo and remixing a song; Folkspaper, a social media platform where content creators are tipped in cryptocurrency; and Bolt Global, an entertainment platform which pays content creators and rewards viewers for watching ads with tokens that can be exchanged for mobile data plans, for example.
Not only does this benefit consumers, it is also an effective customer acquisition and retention tool for media businesses, and can serve as an additional revenue stream.
With many publishers struggling to create sustainable online business models on the free internet, blockchain could help scale reader donations, a revenue stream already being employed by the likes of The Guardian and Wikipedia.
Subscription services like Spotify and Netflix could use blockchain technology to lower the barrier to entry for people who can’t afford a full monthly subscription, by offering micropayments for access to one song or one TV series.
“By leveraging the blockchain applications such as smart property, smart contracts and micropayments, media companies can start to build innovative business models that not only offer new monetisation strategies for their digital assets but also streamline critical business activities such as relationships with business partners and distribution of revenue across the value chain,” says Folkspaper founder and CEO Ivan Linn. “These developments could create completely new ecosystems for content creation and consumption.”
Currently the most widely adopted use of blockchain is in cryptocurrency. Cryptocurrencies use blockchain technology to cut out the middlemen in a transaction, enabling almost fee-less money transfers around the world, among other benefits. It also has the potential to provide previously unbanked or underbanked people with access to the financial system for the first time, a vision that is apparently behind Facebook’s Libra digital currency (although Congress had some doubts).
Bitcoin was the first digital currency in 2009 but there have been dozens of new cryptocurrencies developed since. Now several governments are pushing to create a central bank cryptocurrency to protect their national currency.
For China it makes sense, they have built an incredible distributed economy in many countries around the world. Instead of forcing everyone to accept the Chinese yuan in these markets, having a digital currency will help them get around — value can be exchanged across borders seamlessly, says Quek.
Central bank digital currencies provide governments with greater control and surveillance than the likes of Bitcoin, which is totally unregulated and uncontrollable, and for obvious reasons are easier to push through regulatory red tape.
“China’s digital currency itself is going to be a stablecoin version of the yuan. That is a lot more manageable from a regulatory point of view, whereas as we have seen in America they can’t find a regulatory place for Libra because it is not pegged to one currency but several,” says Miles.
The Communist Party of China (CPC) is rapidly pushing ahead with creating a digital currency and has issued a directive to its tech companies and multinationals to develop the blockchain technology to facilitate this. But there has been scepticism as to the motives behind the CPC’s digital currency push. While Bitcoin is decentralised, the CPC’s blockchain will be highly centralised and can be easily controlled and surveilled.
But Quek believes China’s blockchain push is more motivated by growing international influence.
“Some people say it is about tracking, but they [CPC] have been able to track financial transactions for years with platforms like WeChat Pay, where users tie their bank accounts with their social-media information,” says Quek.
“I believe it is about expanding their international influence. For China it makes sense, they have built an incredible distributed economy in many countries around the world. Instead of forcing everyone to accept the Chinese yuan in these markets, having a digital currency will help them get around — value can be exchanged across borders seamlessly.”
Regardless, blockchain is a powerful tool that was developed to create a trusted, accountable digital system. In the wrong hands, it does have the ability to create the opposite.