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Is it a bullshit blockchain? Examining its current value for digital advertising

Blockchain is the largest word of 2018. There have even been suggestions that could be the solution to programmatic flaws, but many are skeptical.

Although we understand that blockchain can bring much needed transparency, it will not be effective until most players in the digital advertising industry are on board. From agencies to SSPs and publishers, supply chain transparency is required in every transaction, otherwise it will not work.

There was a lot of excitement when the Interactive Advertising Bureau (IAB) released its first blockchain whitepaper which highlights how technology can improve buying and selling of video ads (among other use cases). However, the clamor around technology is rapidly creating an ecosystem created with confusion and overpromising that could slow down adoption and erode the trust it hopes to build.

It is not to say that blockchain will not become useful. One day, it could solve advertising problems and certainly promises to create a more transparent adtech ecosystem, but will have to face many challenges along the way.

Here's what happens if the blockchain is a viable solution:

Must speed up

In automated trading, ad exchanges work incredibly fast. According to the IAB guidelines, real-time auctions must take place in less than 100 milliseconds, with SDRs processing instantly millions of transactions. Currently, blockchain is simply too slow to keep up with the rate of ad requests.

At the moment, bitcoin transactions – the cryptocurrency for which the blockchain was invented – take about 10 minutes to validate and bitcoin can process only four to seven transactions per second. The Ethereum average transaction takes 15 seconds to validate per block.

Perhaps the upcoming technologies like Hashgraph could offer a faster solution?

Needs common standards

Blockchain is still in its infancy, bringing with it many challenges of regulation and jurisdiction. It needs common standards. While the IAB Tech Lab established a working group to develop best practices for the use of blockchain in digital advertising, and the Linux Foundation started the project HyperLedger to help drive technology blockchain capable businesses, still remains a lot of confusion and gaps.

The current programmatic supply chain includes multiple components such as advertisers, agencies, trading desks, DSPs, data providers, audit companies, ad servers, SSPs and publishers. While blockchain can remove some intermediaries, validate transactions and build trust, the effective use of technology will require all actors to work together and use the same processes, which will potentially need industry to settle with a supplier of technology and will take time to settle, just like the evolution we have seen follow metric providers, where we still do not have a de facto standard.

Must be a cheaper alternative

While the launch of the "First-ever" mobile blockchain ad saw Anheuser-Busch InBev save up to 30% on average spending, blockchain transactions can be expensive.

The expense of the blockchain is due to its decentralized structure that depends on several parts keeping the register and adding blocks to avoid eroding trust. Each party supports the cost of maintaining the ledger and with the billions of transactions in adtech, this cost could be significant. Since DSPs and SSPs are currently trying to reduce the voltage on server loads, the introduction of blockchain could be counterproductive.

It must be clear not to confuse

The definitions of the blockchain vary wildly, creating confusion and slowing down adoption. What is the blockchain? Is cryptocurrency associated or not? Is the ledger public? And how do legal jurisdictions define and regulate technology? At the moment, blockchain leads to more questions than you answer.

Furthermore, while the blockchain is intended to provide transparency to prevent tampering, it has its own challenges. The decentralized nature of blockchain makes it susceptible to different types of bugs and hacks, potentially eroding the confidence it should create. There were lots of examples of these types of problems in bitcoin and other public cryptocurrencies.

There are still some flaws in the program despite the fact that it is a consolidated technology, because in reality the sector is still in its infancy and we are still unlocking its full potential. In the same way, blockchain sounds great in theory, but it will take time to learn how to use it to the fullest and for the whole ecosystem to fully adopt it.

There is certainly a lot of buzz around the blockchain with various companies and industry bodies that explore its potential in digital advertising. It will probably contribute to reducing fraud, improving customer privacy and simplifying the industry. But at the moment the blockchain is still in its infancy and has not yet been addressed today by the challenges of advertising technology. Is Blockchain a burden of BS? If we look back at this article in a few years, it could be a different story.

Jesse Demmel is chief technology officer @sovrnholdings and can be found tweeting @jdemmel

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