In depth: Can blockchain revolutionise how media is traded?

Pippa Chambers
By Pippa Chambers | 12 February 2018

The February issue of AdNews has hit desks. Here's a  free chunk on our report on blockchain. You can subscribe to the print edition or download a digital version here. The full content is exclusive to the magazine, so the only way to read it is to get a copy - don't miss it. 

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.

Familiar concerns

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

The inventor of Javascript and co-founder of Mozilla and Firefox, Brendan Eich, believes the cur­rent internet advertising system "is broken" and hurts advertisers and publishers. He said digital ad­vertising is overrun by middlemen and fraudsters, which is why he launched the Brave web browser in 2016.

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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