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Advertising = More Money into the Steem Economy
Online advertising is a billion dollar industry. Bringing that industry to Steem has the potential to dramatically increase the amount of capital flowing into our ecosystem. More money in the Steem ecosystem translates into more money for users, more money for investors, and higher STEEM prices.
By including an advertising system new money flows into the ecosystem, what makes advertising great is that money can only flow on one way meaning no money would be lost by including ads.
Users: The Life-Blood of the Steem Economy
Many content creators on Steem struggle to earn sufficient income due to the lack of attention from large stakeholders, as well as the inability to monetize content after the seven day payout period.
This is true, and it makes the quality of content go down since after that 7 day period your hard work won't be valued anymore.
What if content creators were able to further monetize their content through the use of ads? This is nothing new. Platforms like YouTube already offer this. Typically though, these platforms take a majority cut of the money. The content producer only earns a small percentage of the overall revenue taken in from the advertisements.
Youtube for example usually takes 55% of the ad reveneue, therefore posting on DTube or DLive if Steem were to become mainstream would be much more profitable for the average user.
I am a firm believer in the mission statement that was written in the Steem whitepaper: Rewarding the users for the contributions they make to the platform.
Such vision is the goal of Steem and every user of this platform should aim to help in the process of making it happen.
If a user is generating content that is worth thousands of dollars to advertisers, why shouldn't they keep 100% of the ad revenue?
Later in the post
100% of the Ad Revenue - How is that Possible?
There are two parts to this:
1-A standardized protocol for the advertising system to run on the Steem blockchain.
2-UI changes to websites (like steemit.com, SteemPeak, Busy.org, etc.) to display the ads.
Part 1: Standardized Protocol
In order for the advertising system to work across multiple UIs, the data stored in the blockchain would need to follow a consistent format, so that all UIs would know how to render the data.
This is something that will need to be discussed with the various developers in the community (especially the ones running their own UIs), so this proposal is by no means 'final', but let me offer a simple prototype to illustrate how the system would work:
Prototype Protocol:
Advertisements will be based on a time-based, payment weighted bidding system.
Time increments can be purchased in one hour increments, up to a maximum of 7 days.
To purchase ad space, the advertiser sends STEEM to the user whose content they want to advertise on, using a specially formatted memo.
Advertisers can purchase space on a user's entire blog (i.e. all of their posts) or on a specific post. To advertise on an entire blog, the memo should contain a * in place of a specific link to advertise on, and the payment will be divided equally among all of the posts that are active during the purchased time period.
Advertisers will only be able to advertise links to other Steem blockchain posts.
Here is an example of how the memo could be formatted:
ADVERTISEMENT:<num_hours>|<link_of_post_to_advertise_on>|<link_of_advertisement>
Some additional variations that could be integrated into the protocol include:
Allow users to refuse advertisements via their settings.
Allow users to specify a minimum payment amount via their settings (i.e. ads will only be displayed if they are at least 0.1 STEEM/hour).
Allow users to specify whether they will allow NSFW advertisements on their posts. A global black-list would be needed for advertisers not complying with the rule.
Allow users to set a threshold to only allow ads from advertisers who have a history of completed ads above a certain STEEM amount (i.e. only allow ads from advertisers that have already purchased over 300 STEEM in previous ads).
Standarization of the way the ads would work is one of the most important things for it to work, otherwise the whole system would become a complete mess with different versions and methods for different UIs.
When it comes to the functioning of the protocol itself the main priority is (from my perspective) to give full control to the user on the ads placed on his/her content, reaching such level of decentralization in which each user would have full control on which ads to be accepted on their posts would be the ideal goal.
Part 2: UI Advertisement Rendering
Each individual UI will choose whether or not to display the advertisements, and how to render them if they do. UIs that decide to display the advertisements will be giving the content creators on their platform additional incentive to produce high quality content.
To determine which advertisement gets displayed at a particular point in time:
Collect a list of all advertisements that are active for the current time, and enforce all of the soft-consensus rules for the protocol.
Sum up the total amount of payments that are active for the current point in time.
Take the percentage of total payment for each advertisement to determine it's chance of being displayed.
Randomly pick one of the ads to display based on the weighted percentage.
To illustrate, let's say that a particular article has three advertisement bids:
Advertiser A has bid 5 STEEM for their ad.
Advertiser B has bid 3 STEEM for their ad.
Advertiser C has bid 2 STEEM for their ad.
For simplicity sake, all three adds were placed at the exact same time, and are each for 24 hours worth of time.
Each time that a post is rendered on the UI, the UI picks one of the ads to display. Ad A has a 50% chance of being chosen; ad B has a 30% chance, and ad C has a 20% chance.
I really like the chance system for choosing which ads to be displayed, another method which most ad networks use and could be used is to establish a bidding system based on the CPM (cost per 1000 impressions), giving the higher CPM bidder priority to display their ads until its budget runs out or a new bidder with a higher CPM bid would come.
Such model has proven to bring the most revenue therefore rewarding even further the content creator.
Additional thoughts
A different form of distribution
Each stakeholder owns a percentage of the blockchain the same way as stocks work with companies but in a decentralized manner, usually ad networks or platforms such as Youtube take a cut from the content creators profit that can range from 20-60% approximately, such cut is taken by the company in order to make profit.
Stakeholders benefit from having ads on the platform since it brings new money (people buying Steem to purchase ads) but if a small percentage of the ad revenue was burnt stakeholders would further benefit (and content creators too).
Burning a percentage of the ad revenue
Instead of taking a cut of over 50% by simply burning 5% or even less of the ad revenue Steem would benefit long-term due to the decrease of supply and the increase in demand, here's how it benefits both stakeholders and content creators:
Stakeholders
For the stakeholder having more content creators creating good content and attracting new visitors would become an important factor since each time somebody spends Steem on ads their percentage of Steem would become bigger and overall their portfolio would be more valuable.
Content Creator
For the content creator it would be an increase on their cut since they usually received 45% of the ad revenue and now they would receive 95% of the ad revenue, additionaly when receiving that ad revenue in the form of Steem they are becoming stakeholders too and the coins they hold become more valuable as more content creators such as them join to the platform.
Conclusion
Adding an advertising system to Steem would benefit everyone, additionaly by burning a few percentage of the ad revenue stakeholders are more motivated to get more content creators and viewers on board and content creators have a higher chance of keeping their coins instead of selling them for FIAT, for content creators it would be a straight upgrade from today's current reward system since they'd receive money from both upvotes and ads.
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