The biggest players in the current digital economy, Google, Facebook and Amazon, form a “triopoly” with a firm stranglehold over audience reach and targeting capabilities.
According to a recent story in the New Yorker, Google controls about 90 percent of search advertising and Facebook controls nearly 80 percent of mobile social traffic. Amazon has amassed extensive data collections, as well. With the exception of Chinese companies Alibaba, Baidu, and Tencent, no other entities have been able to gain more than 3 percent of the global digital advertising market.
Despite the monopolistic power of these digital giants, blockchain technology has emerged as a potentially equalizing force that could empower advertisers and publishers to regain control of their data and achieve targeting capabilities at least on par with the triumvirate of Google, Facebook and Amazon.
A peer-to-peer distributed network for the advertising ecosystem would allow advertisers and publishers to share data using a secure and transparent digital ledger. By gathering data from disparate publishers, a network effect could be created — challenging the likes of Facebook, Google and Amazon. But there are obstacles impeding mass adoption of a distributed network in the ad tech ecosystem: Companies are not accustomed to sharing data and, beyond that, many brands and publishers have lost control of their data to intermediaries. Blockchains offer solutions to both of these issues.
A blockchain is inherently peer-to-peer, meaning that it facilitates data exchanges without the need for third-party verification. Presently, advertisers and publishers rely on a host of intermediaries to verify and execute transactions; intermediaries effectively control the data. Because data is “gold” in the digital economy, the intermediaries are not incentivized to share this data, and advertisers and publishers end up spending inordinate amounts of time and resources tracking and verifying transactions. There is very little trust between parties regarding the accuracy of the shared information, in part because there is no easy way to assess honesty in the current programmatic marketplace.
The benefit of data being shared and recorded on a blockchain-backed network is that the distributed ledger would be immutable and nearly impervious to hackers. Any transactions recorded on the blockchain would need to be validated by a certain percentage of the nodes, or users, in the network. Once a transaction has been recorded, the action cannot be reversed. For a malicious actor to attempt to change any data recorded on the blockchain, s/he would need to successfully hack into a majority of nodes on the network; given the dispersed nature and quantity of nodes participating on the network, this level of interference would be nearly impossible. The capacity to record data exchanges on the blockchain — and trust that these transactions are authentic and accurate — is immensely valuable to brands and publishers, as it means they would no longer need to contract third parties to repeatedly verify transactions. On a blockchain-backed network, a transaction only needs to be verified once.
There is a strong economic incentive for adopting a blockchain network for ad tech, but equally strong is the psychological hurdle of sharing data, especially with competitors. Education about the benefits of data sharing and the increased security enabled by blockchains may be the best antidote to fears about data leakage and piracy. For instance, the Ethereum blockchain’s smart contract functionality allows users to set permissions that can be accessed with cryptographic keys, empowering brands and publishers to determine who can access their data and when. Additionally, data is not stored on the blockchain itself; instead, digital signatures act as indicators that point to where the data is actually kept. Certain rules, such as expiration dates, can be applied to cryptographic keys to prevent data leakage, as well.
Once brands and publishers realize the promise of blockchain technology to regain some of their lost margins from intermediaries and potentially provide targeting capabilities on par with the digital giants, there won’t be any stopping the shift toward distributed networks for ad tech. Groups like AdLedger, a consortium of advertising and publishing executives committed to deploying a blockchain-based, peer-to-peer network ad tech, are already developing the application programming interface (API) that would facilitate secure data sharing.
This article was written by Adam Helfgott, Co-Founder and CEO of MadHive, on Oct 03, 2017