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Blockchain hit the headlines in 2017 thanks to bitcoin. The cryptocurrency started the year valued at just under US$1000 but by the end of December it was nearing $20,000. However, since then it has tumbled.
While bitcoin may have the headlines, it's the blockchain technology behind it that can support ambitions beyond cryptocurrency - and could have the potential to revolutionise media buying.
From global finance and controlling the global diamond supply chain, to digital voting and ensuring food quality control, the decentralised framework of blockchain is fast becoming desirable to industries.
The hype has also turned into temporary stock market success with a number of companies adopting blockchain-related terms into their official names and seeing a spike in stock price. Whether those peaks remain after the hype dies down is yet to be seen. As an example. US-based Long Island Drinks Corp became Long Blockchain in December and the stock, which had been in decline for years and was on the verge of being expunged from Nasdaq, surged 200%.
Even Kodak, the photography company continually held up as an example of a firm that fell apart because it didn’t keep up with innovation and technological change, has announced that it is launching a blockchain business designed to keep a record of ownership and licensing rights for photographers. Its shares jumped around 40% on the news, which would have cheered investors who have seen the stock decline over the past 12 months.
Given the overarching transparency concerns and ad fraud issues within the digital media ecosystem, it’s more than feasible the digital ad buying life cycle could shift onto the blockchain framework.
As the blockchain is an incorruptible digital ledger, ‘incorruptible’ is a key word that makes it relevant for media, given the murky practices that occur in the stages of getting an advert from its origins to the end user.
It was debated back in July last year at the AdNews Live! Tackling Transparency conference where blockchain was suggested by Allure Media CEO Jason Scott as a possible solution to the transparency problems plaguing the industry.
Foxtel innovation lead and founder of tech consultancy Blonde3, Nic Hodges, said blockchain solves some interesting problems in recording and using data. Given the interaction of multiple parties along the supply chain, who may not completely trust each other, and that there are a lot of moving parts in digital advertising, he said blockchains could potentially make an impact in media in these areas.
“Blockchains could be the answer to some trust issues and may also solve some of the ad fraud issues that currently cost advertisers billions of dollars,” Hodges explained. He added he would use caution in saying blockchains would solve ad fraud though, because as soon as a solution to one type of fraud is created, “another will pop up”.
It might be a buzzword to most in media at present but, blockchains are very much in action across many sectors and look set to be even more widespread over the next five years.
Speaking at the recent Blockchain Summit 2017 in Sydney, CTO for the financial services industry at IBM Australia, Mark Ebeling, used the example of the tenant, landlord and bank scenario where paper−based documents are "king" – but this gives rise to a number of inefficiencies.
Pain points of such physical document management include possible forgery of papers; swapping papers for amendments due to multiple hand−offs and changes through the document life cycle; tracking and reporting concerns; lack of standardisation; and the cost to the organisation. All concerns that sound familiar to ad trading.
According to IBM blockchain research, with the support of The Economist Intelligence Unit, it found that nine in 10 government organisations planned to invest in blockchain. And seven out of 10 government executives predicted blockchain would significantly disrupt the area of contract management, which is often at the intersection of the public and private sectors.
Ebeling said identifying a good blockchain use case was not easy. As a rule of thumb he explained that once the business problem is highlighted, it is essential to ensure the problem cannot be solved with other more mature technologies.
Reaching maturity or fringe fad?
A positive sign of its impending growth in Australia has been the support from Senator Arthur Sinodinos, who was Minister for Industry, Innovation and Science up until December 2017. In August last year, blockchain was among eight innovations set to share in a $5 million government pot to help it become a commercial reality in Australia.
At the Blockchain Summit last year, Cindy Nicholson, Singtel's (owner of Optus) associate director for financial services industry innovation across Asia Pacific, backed the rising trend of blockchain.
“Blockchain is becoming an important piece of how we do business in the future, but where the internet was back in 1997, that’s where blockchain is today,” she said.
She added that while the attention is currently on cryptocurrencies and that blockchain is “blowing up” thanks to the Bitcoin boom, there’s no doubt the technology is here to stay given its power to transform business methods and remove the friction from many processes.
Nicholson says 2018 will be a breakthrough year for blockchain and by 2025 the technology will have reached maturity.
Philippe Denis, chief digital officer and head of blockchain at international banking group BNP Paribas Security Services, said the business had been studying blockchain technology as far back as 2011.
While admitting it’s still very much a “maturing technology”, he said blockchain is a real driver of innovation in banking practices, and therefore beneficial to all its clients.
An example of this is its Cash Without Borders venture that saw it process several live payments for two of its long−standing major corporate clients. Using blockchain, it processed and cleared for Panini Group and Amcor, payments in various currencies between BNP Paribas bank accounts across Germany, the Netherlands and the UK. The payments were fully processed and cleared within a few minutes, which BNP Paribas said, highlighted the real potential of this innovative technology: eliminating delays, unexpected fees and processing errors — paving the way for real time cash management.
Whether it’s a private/permissioned blockchain network such as BNP or a public permissionless blockchain network like bitcoin, talk of blockchain shows no sign of slowing down. With many in media, advertising and marketing still struggling with understanding elements of programmatic and even basic attribution modelling, is blockchain technology and its applications too advanced and too far ahead of the market to be a reality?
Hodges said he's extremely wary of any claims of blockchain being utilised at scale for anything more than imaginary money at this stage. He thinks it will come, but that it might not be led by Australia.
“I've been watching this space for a few years now and have yet to see anything that's more than a trial. I'd estimate that actual deployment of blockchains at scale is still three to five years off,” Hodges said. He added that “sadly, or perhaps luckily” there hasn't been a huge amount of blockchain startup activity in Australia.
“There's a few interesting trials happening around energy markets, and perhaps some of those learnings could cross over to the media space," he revealed. "Ultimately though, I expect the first interesting media blockchain trials to come out of Singapore or the US.”
Brave new world
It blocks ads and trackers that “slow you down, chew up your bandwidth, and invade your privacy” and raised US$35 million in Initial Coin Offering (an unregulated means by which funds are raised for a new cryptocurrency venture) in just 30 seconds last year.
Eich has also developed the Basic Attention Token (BAT), which is essentially a token that can be exchanged between publishers, advertisers and users. It works on the Ethereum blockchain and the token can be used to obtain a variety of advertising and attention−based services on the Brave platform. It’s measured on the attention of users.
By introducing a decentralised, transparent digital ad exchange, publishers receive more revenue because middlemen and fraud are reduced; users who opt in receive fewer but better targeted ads that are less prone to malware; and advertisers get better data on their spending.
Hodges said he is a huge fan of what Brave is doing by looking at the digital media ecosystem as a series of value transactions between a user, a publisher, and an advertiser, particularly as previously the user just wasn't part of that equation.
“Brave will face a huge scale challenge for the next few years, but I think either it, or something like it, will be commonplace in a decade,” he said.
Quick and seamless
Vanina Ivanova, CMO at AdEx Network, a next gen advertising exchange based on blockchain and smart contracts, headquartered in Bulgaria (with offices in the UK and Canada), also believes it's time to disrupt the current online advertising landscape.
Advertisers pour their marketing budgets into an array of different networks and platforms, with most of them measuring different KPIs, she said, meaning if an advertiser wants to double−check the data, they must rely on internal systems.
Ivanova said when they do, there is often no way to explain data discrepancies as ad networks wouldn’t provide additional metrics and statistics.
“This creates a perfect environment for advertising fraud, such as click farms, paying for invalid clicks/impressions, and the industry is taking advantage of it,” she said.
“Bringing the blockchain into the picture allows for unquestionable verification of ad delivery, traffic and achieved results.”
AdEx uses a blockchain−based ad exchange with distributed applications (Dapps) connected to the blockchain. Different pieces of data (such as information about payment transactions and ad delivery) are stored on a decentralised ledger.
The information is kept on different blocks on a peer−to−peer network, so no piece of it can be changed or deleted. It uses smart contracts, which are self−executing computer protocols that verify and enforce a contract between two or more parties. Again, smart contracts are written on the blockchain, so once they are deployed, their conditions can’t be modified.
While the concept of smart contracts is still very new to the advertising industry, Ivanova said the good news is that now it's a hot topic there are many articles and videos explaining it, which helps to educate the market.
AdEx recently conducted the world’s first blockchain−based auction for one million ad spaces on easyJet's boarding passes. Ivanova said the auction, held on the AdEx mainnet “was practically the first real−life application of the blockchain in the advertising industry”.
“What it demonstrated was the transparency that can be achieved for every advertising transaction, and the potential this new technology has to help us reduce ad fraud and misleading ad reporting,” Ivanova said.
AdEx is working on the development of the first version of its platform, with an AdEx prototype scheduled for release in February 2018. It will be open initially to selected companies. While she wouldn't be drawn on which companies, some of those that had expressed a wish to be a beta tester for AdEx are based in Australia.
“I believe advertisers have had enough of the current state of the advertising industry — they are just losing too much money to it," she explained.
"The same goes for publishers.This is why my team and I are positive that the adoption of blockchain for advertising will be fairly quick and seamless.”
Hype and drawbacks
But where there is hype there should always be caution. Digital law partner at EY, Alec Christie, has concerns about blockchain’s rapid rise to fame.
“Of course the hype always worries me,” he said.
When people start coming to him saying "we have a problem, let’s use blockchain to solve it", it’s a clear sign the hype is taking over, according to Christie. The real question should be "we have a problem, so what is the best way to solve it?", he said. It may, or may not, be blockchain.
But if blockchain can be used to track a product from the farm through every stage of the supply chain, right to the retail shelf, in seconds instead of days or weeks — or it can be used to securely follow bank guarantees — couldn’t it be used to track an advert from A to B or the life cycle of a real−time bidding programmatic ad impression?
Jason Scott, CEO at Allure Media, which owns the likes of Business Insider, Gizmodo Media and ShopStyle, said automated trading will gain market share by operating in a fundamentally different way “to the black box that it is today”.
“Blockchain is an example of such change. It acts as a database where transactions and related details are recorded for everyone participating in that database to see,” Scott said.
When it comes to revolutionising advertising, Scott said there are many initiatives aimed at trying to answer that question. One example is the The New York Interactive Advertising Exchange (NYIAX) being developed in the US in partnership with the Nasdaq, which will allow inventory to be sold using blockchain technology.
NYIAX began testing a pilot program in October 2016 with various participants. Scott said while the exchange’s initial focus is within the digital advertising ecosystem, when or if it reaches critical mass within digital, its plan is to extend into other advertising markets, including TV, print, radio, and out−of−home.
“This test will yield some tangible results and learning for the industry,” Scott said.
While he's excited about the potential with NYIAX, Scott believes education, revenue models, speed, collaboration, and computing power are just some of the barriers to mass and rapid blockchain adoption.
He said while automation is playing a major role overhauling and modernising how media is bought and sold, “there's a decent list” of drawbacks as to why it wouldn't work in adland. At the forefront of this is education. “Blockchain is not Bitcoin,” he explained, as many seem to think.
“Then there's the revenue models as blockchain kills the arbitrage margin option,” he said.
There is great precedent for this, although it is improving. Scott explained that collaboration is needed as blockchain requires industry−wide adoption, but another barrier could be a potential lack of appetite to adopt it, according to Hodges. Whether you are using blockchains or not, the biggest drawback to solving the big problems in digital media is incentive and a more transparent industry might not offer that.
“There's a lot of people who are perfectly happy with the murky opaqueness of the current environment," Hodges said.
"Until clients recognise the murkiness and actually jump up and down about it, it seems unlikely that even blockchains could make a dent."
The blockchain might not revolutionise the industry overnight, but anyone working in media has made peace with the fact that change will continue at pace and advancements in technology are many and varied.
“The fact that Mindshare, the largest media agency network in APAC, has embarked on a partnership with Zilliqa is certainly proof that blockchain is no longer a 'pie in the sky' concept, rather a relevant initiative that has the potential to unlock an accepted and powerful method of accountable digital trading,” Mindshare Australia’s chief investment officer, Nicola Lewis, said.
For more blockchain use cases, blockchain jargon busting and much more, see the full feature in the latest AdNews magazine.
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