Blockchain Advertising: The Future of Advertisement
The problems with traditional, centralized digital advertising
The global advertising market is big – in 2017 the industry was worth $534 Billion, in 2018, according to Statistica.com, it’s expected to be worth over $550 Billion and has an annual growth rate averaging around 4.3% a year. This growth is predominantly driven by digital advertising, i.e ads on the internet-such as on Google, Youtube and social media sites. The global budget for online advertising is now bigger than that for TV advertising, and in 2017, advertisers worldwide spent just under $230 Billion on internet ads alone.
Advertisers are currently limited to going through third party ad agencies, acting as middlemen. These ad agencies used to charge huge mark-ups onto their prices, but because there was so much demand for advertising, they were able to get away with it. Ad agencies were also able to negotiate bulk purchase discounts for advertisers. Ad spend has dropped hugely – ad fraud – where bots are used to create fake impressions or clicks- has damaged trust in the industry, ad blocks now are used by 20%, reducing the potential market for ads, and as digital readership is so international, it is hard for advertisers to reach their target audience which might only be in one country. As such, digital advertising has become more and more inefficient and ineffective for advertisers.
The best example of an ad agency is Google Ads (AdSense). Publishers – website owners, bloggers, content creators – register on the AdSense platform. Advertisers pay Google, and Google decides which ads will be shown on which websites, in exchange for a large commission. Advertisers currently cannot reach to publishers directly. They have no control over their ads, all they can choose are the length and dates of their campaign, and their budget. Publishers get paid by Google, or by the ad network (the middleman), not by the advertisers. The current system is not as profitable as it could be for publishers, because the middleman, in this example Google, takes a large cut, and also does not offer the degree of flexibility needed by advertisers.
The problem of ad bots and ad bot fraud in digital advertising
Many- possibly even the majority – of digital ads never reach real people. They were clicked on by bots. Digital advertising fraud and scams are big business. Ad fraud now costs advertisers an average of $51 million a day, according to Juniper research, or around $19 billion a year.
There is an industry standard in advertising – the Cost Per Mille or CPM- the cost you pay for 1000 impressions. The more times publishers need to show an ad to get 1000 impressions, the more it costs them, and the less profit they make. This has led many publishers to cheat and use bots to create fake impressions. Without AI, it’s almost impossible to tell the difference between bot impressions, and human impressions, and so advertisers are still expected to pay.
The current digital advertising system gives the advertiser the set number of impressions or clicks agreed on, on which, payment is released to the content creator or publisher. In general, clicked ads pay more than viewed ads or ‘impressions’. Bots are a computer software designed to view and/or click on ads. Viewed ads pay a lot less than clicked ads, but with the help of bots, you can make it look like millions of “real people” view those ads every day. There are even advanced bots which can click on the ads and increase the profit. Thousands of bots can be hired at any time by unscrupulous publishers to create impressions and click on ads 24/7.
Anyone can, in theory, get a website made, register on the AdSense (or other) platform, get ads put on, hire a hacker with either access to lots of bots, or who can create these bots, to view these ads, and then get paid. Unfortunately, many publishers do a large and professional scale version of just that, and the current advertising system hasn’t managed to come up with any ways of protecting advertisers from this.
Advantages of Blockchain in Advertising
Blockchain brings a number of immediate advantages to solving the digital advertising problem. Blockchain and use of smart contracts allows for a platform where advertisers can be connected directly to publishers and can create agreements and make payments for these actions without needing a middleman- this saves in time and fees.
Blockchain also brings increased data privacy. Blockchain allows data to be tracked to a digital address rather than a name. Users can decide what data they share and who with. This gives users the potential to earn money for sharing their data, if they choose. Whereas traditional browsers track everything, with blockchain and open source tech, such as for example the Brave browser, the user has much more anonymity.
Blockchain makes data more transparent- such as the amount of traffic a publisher receives.
Data stored on blockchain, and also thanks to AI, allows advertisers to show ads to a much more targeted and selective audience, allowing them to reach many more targeted people for the same spend, or save significant amounts of money.
There have been a number of attempts to create a tokenized platform to combat ad fraud or to put advertisers direct to publishers. These platforms are powered by cryptocurrencies known as ‘advertising coins or tokens’.
What Are Advertising Coins?
Advertising cryptocurrencies are designed to work on their platform, as a form of payment. Basically, they are bought by advertisers and paid to publishers for their service.
- Publishers and content creators register on the decentralized advertising platform, hoping to make some money from selling adverts. They can list the details of their website- the traffic and visitor stats, the theme of the website etc., and what spaces they have available for adverts, as well as how much they want to earn for that space. This is usually listed in the token currency of that particular platform.
- Advertisers also register on the platform- generally stating their advertising needs and what they are willing to pay for that, they can also usually check the listings/ offers made by the publishers/content creators such as website owners and youtubers. Once they found a candidate to publish their ads, they send an offer. It looks like this: “We are representing this company/brand and we would like to publish our ads on your website. However, 100 tokens seem high – can you lower the price?”
- Once the parties agree on the price, the advertiser buys the required amount of tokens and sends his ads to the publisher. The tokens are kept on an escrow account. They get paid to the publisher only after the agreed conditions are met. For example, the publisher gets the tokens only after the ads are seen by e.g. 1,000 people.
- Tokenised advertising platforms run smart contracts on blockchain, so tokens are transferred automatically as payment for advertising deeds executed. After the transfer, the publisher can convert them to Fiat currency via exchanges.
So, what is the advantage of a system like this? First of all, there is no middleman. The advertiser and the publisher can communicate directly. The advertiser gets more control over his ads. The publisher gets paid more because he is not forced to share his profits with a middleman. And such a system is more resistant to ad bots.
How Do Advertising Coins Fight Against Bots?
Short answer: We are not sure.
Long answer: All of the advertising coin projects claim that they can effectively fight against bots and they are more efficient when compared to regular systems. However, none of them provide the “details” of how they actually do this. Although, this is understandable: If they share all the details of their abuse prevention mechanics, it will be easy to develop new bots that can counter them. Nevertheless, this does not change the fact that we know almost nothing about how do they fight against bots. Advertising coin projects are new and none of them are fully released yet. We will have more information about this matter once they are launched. Some of the projects use new methods in this fight, such as creating a white-list that contains “trustable” publishers.
Some Examples of Advertising Coins?
Here is a summary of the main advertising cryptocurrency projects around today:
AdEx – similar to AdBank – connecting advertisers to publishers, but bigger trading volume. Read More
Basic Attention Token (BAT) – the currency for the amazing Brave browser, allows users privacy whilst browsing and the option to block ads, or to be paid in BAT for watching ads. The browser is massive, so BAT also has the potential to be. Read More
AdChain with its AdToken – is working to prevent ad fraud. Read More
AdBank – a decentralised market place connecting advertisers direct to publishers. Read More
AdHive – automated ad placement Read More
AdShares – similar to AdBank and AdEx – connecting advertisers and publishers- but a project on a much smaller scale with very low trading volumes. Read More
ATM Chain – a project aiming to record use of watching public adverts, in China – they already have some contracts but risky. Read More
Commodity Ad Network (CAN) – seems almost dead. Read More
ADZ Coin – the currency for ADZ Buzz platform, a content aggregator site- but with very low trading volumes. Read More
|Works On||Ethereum blockchain||Ethereum blockchain||Ethereum blockchain|
|Launched?||No, in beta||No||No, in beta|
|Allows Listings and Bids?||Yes||No, just provides a white-list of trustable publishers||Yes|
|Aims For||Website advertising||Website advertising||Website advertising|
|Also Rewards Users?||No||No||No|
|Also Rewards Token Holders?||No||No||No|
|Project Name||AdShares||Basic Attention Token||AdHive|
|Works On||ESC blockchain||Ethereum + Brave browser||Ethereum blockchain|
|Launched?||No, in beta||No||No|
|Allows Listings and Bids?||Yes||No, works like AdSense||No, the system automatically selects publishers|
|Aims For||Website advertising||Website advertising||Video + social media advertising|
|Also Rewards Users?||No||Yes||No|
|Also Rewards Token Holders?||Yes||No||No|
Well, advertising coins may be the solution to all these problems.
‘with Blockchain, advertisers will have the capability to build a customer profile from the data customer is willing to share in a single scoop. This actually allows to market to customer needs and spend advertising budget only on customers who are most likely to buy your product and thus save a million bucks in ad spend each year.’
Blockchain brings more data privacy ‘With the use of Blockchain, each interaction would be traced to an address rather than a name. Blockchain can bring a level of transparency into the data and information sector which at present is not accessible to Digital Media users. You can decide which information to pass on and whom it is being sold to. This will certainly build a revenue model for Digital Media users who would be directly compensated for the information they are sharing.’
‘Blockchain technology not only connects advertisers with the publishers, it also makes sure that users are genuine and that the publisher charges the advertising company only for genuine clicks’.
Do decentralized advertising platforms help?
What are the best decentralized advertising platforms?
Do they need their own cryptocurrency?