Blockchain technology is all the rage now. With its history as the technology behind bitcoins, its potential for banking and peer-to-peer transactions and the transparency of supply chain transactions, blockchain technology is heralded as the next Internet innovation.
advertising industry, there is real potential for technology that helps make it more effective and efficient. Currently, online advertising is full of fraud, which does not bode well for its growth. Many large budget advertisers, such as Procter & Gamble, have cut online advertising spending due to this problem. Blockchain can turn it over.
To understand the problem that afflicts online advertising, it is necessary to understand how the sector currently works: advertisers usually make purchases of ads on the Internet in three ways:
- They buy advertising space directly from web publishers, who have your sales team that sells inventory.
- They buy inventory through an advertising network.
- They buy through ad exchanges using bids in real time.
In advertising platforms, publishers support inventory with details about visitors that could be targeted on their sites. The advertiser then makes an offer for them and the winner can view their ads. Unfortunately, advertisers often do not know that their display ads are shown to the right target or are even shown. This is because there are scammers who enter the exchange claiming to represent the publishers and sell their inventory, which instead sell spurious stocks and pocket advertisements. This lack of transparency and verification reduces the legitimacy of the market.
How can blockchain technology help to make the online ad market more legitimate?
Blockchain is basically an electronic ledger in which a network of participants can enter any transaction that takes place between two of them. It is open and available to everyone, so it provides transparency.
So, an advertiser can see where the inventory actually came from and if it's legitimate. Each transaction is verified by several other participants in the network and related to previous transactions, creating a chain and once a transaction is entered and linked, it can not be deleted or changed. So the transactions are immutable and can not be fraudulently tampered with.
In addition, the transaction database is distributed and networked, so there is no single centralized database that can be maliciously attacked. Transactions reside in different distributed databases and are concatenated, so these dangers are minimal. So, if players on the market commit themselves to clean up and adopt blockchain technology, then every transaction can be transparent, advertisers can see who the legitimate inventory providers are, fraudsters can be eliminated and technology can facilitate the transparency of the supply chain  This means that advertisers can see exactly where their dollars are spent, which players have commissioned and what percentage of the budget has been allocated to publishers hosting display ads. If the blockchain can also be used at the customer level to control its identity and allow permission-based targeting, advertisers can take advantage of reducing waste and making targeting very efficient.
Of course, there are some caveats. The concatenation and verification process takes time, about 1,000 times longer than the speed of real-time bidding transactions (which is in milliseconds). Therefore, unless the technology does not improve in terms of process speed, it can not be used for ad exchanges using real-time bidding. It could still be used for aggregate transactions and for transactions that provide guaranteed inventories, but the main problems in online advertising do not originate there. Thus, it may take some time before the large-scale implementation of blockchain technology.
The biggest concern we will have to deal with in the future is the question of cooperation. With the transparency comes the danger of disintermediation. If advertisers and publishers see intermediary costs, there will be pressure to squeeze costs out of the process, and this may not benefit all brokers. Thus, self-preservation concerns can prevent all players from immediately cooperating in the adoption of this technology.
Fortunately, these concerns can not prevent technological innovations from gaining ground over time. In one way or another, we are obliged to see the blockchain technology that has an impact on the online advertising market soon. What remains to be determined is how much industry can afford it.
P.K. Kannan is the Marketing Science Dean of Robert H. Smith School of Business at the University of Maryland and a leading industry expert in data marketing, analytics and behavior consumers.
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