How Blockchains Will Increase Transaction Speeds for Media and Ad Buying

Ad Speed
Ad Speed

The internet and the age of digitalization have already revolutionized advertising: as of 2017, online advertising now accounts for more than 40 percent of marketing spending around the world. While undoubtedly marking progress, this change has also brought up various concerns around the privacy of user data, the power of bots to mimic human behavior, the widespread use of ad-blocking software, fraud and lack of transparency.

Unsurprisingly, while online advertising numbers have reached astonishing heights, the aforementioned issues have driven some of the biggest marketers in the world, like P&G and Unilever, to drastically cut their digital spending budgets . Not only that, but brands and companies are struggling with the expanding monopolies of Google and Facebook, who tend to determine the rules and prices of online advertising. But as the rise of the digital economy has brought complications, it has also garnered solutions. One of the most powerful tools now at the disposal of advertisers and marketers is blockchain technology.

Enter the Blockchain

Blockchain technology is a digital, immutable and decentralized ledger of all transactions recorded in almost real time on one network; so, in order for a new transaction to be added and recorded, consensus of the network participants is required. Essentially, the blockchain is a spreadsheet maintained across millions of computers, without central storage or a central authority to maintain it. Since you cannot change previous blockchain data, there is an organic mechanism of control: entry errors are impossible, as are manipulating, altering or destroying data. By solving the problem of double-spending, security and data tampering when it comes to transactions, blockchain technology has eliminated the need for third-party oversight.

Considering just how large and complex the advertising landscape has become, blockchains can provide much-needed solutions, transparency, accountability and integrity for the entire value chain, from publishing and aggregation to distribution and consumption.

Blockchain technology ensures spending transparency because both the buyer and seller see the entire buying and selling process: all hidden costs are eliminated. With the spread of blockchain technology, advertisers will witness democratization and liberalization of the market with instant micro-payments. They will also be able to see how much they are spending and where their ads are delivered. And publishers will benefit from the elimination of intermediaries in reaching their target audiences, earning more and ensuring fair charges.

Consumers can also benefit. The same payment system can offer consumers tokens or micro-incentives for engaging with ads or completing activities that add value. With the implementation of smart contracts - such as those that Ethereum introduced - we could witness a truly transparent advertising market, with set rules for all market participants securing accountability. in short, the promise of a decentralized ad ecosystem with transparent prices and permanent transactions could be realized.

Speeding Transactions

But transaction speed is another story. It is clear that any industry with a lot of intermediaries, such as advertising, has plenty of potential for fraudulence and a lack of transparency. The blockchain has the potential to improve transaction speeds because the technology cuts many of the unnecessary intermediaries out of the equation. The shorter the supply chain, the fewer unnecessary transactions there are.

However, with blockchain technology still in its infancy, it cannot yet offer significant improvements to transaction speeds. Though transformative, existing blockchains are still relatively slow, with most taking between seconds and minutes to confirm transactions. The reason for this relatively slow speed is because in order to write to, verify and encrypt the growing size of blocks demanded, considerable computing power is required. Moreover, for blockchains to significantly improve speeds, all players in the advertising chain and ecosystem would need to adopt the technology. In order to enable speeds that would be measured in milliseconds, some new, innovative approach must improve these essential blockchain characteristics.

The obvious solution to this would be faster computing power, which is inevitable. But to improve speeds, publishers, advertisers and exchanges would have to improve computer power substantially, which is not likely to happen overnight. It's more probable that, in time, we will see new blockchain projects with higher transaction speeds and larger numbers of transactions. This depends on the number of companies and startups getting into the blockchain landscape and developing new solutions. Until that happens, it is still early to talk about blockchain technology significantly penetrating the online advertising industry.

Solving all these problems probably won't happen right away. But it is clear that blockchain technology is here to stay. It will likely transform our ways of doing business, the internet and, eventually, all of society. This means that, aside from solving its essential issues, advertising businesses will need to accept the blockchain as a new standard - and benefit from improved reliability and transaction speeds as a result.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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