Blockchain technology can become a solution to the main problems of the digital advertising market – fraud and wasteful expenses – which will increase the level of transparency and trust in the industry. Experts from Boosty Labs, a company offering high-quality outstaffing in Ukraine and world-wide, share their thoughts on this topic.
In our digital age, the advertising market has reached an annual turnover of 150 billion dollars. And it is growing at an average of 6% per year. This expansion has been a huge benefit to advertisers: new platforms and channels have made it possible to deliver the right content to the right audience at the right time.
But the growth of the industry has greatly complicated it. There are many players on the market with different roles and value propositions, each of which seeks to get into the pocket of the advertiser.
Advertisers have another headache: it is very important for them to track attribution accurately (in other words, they need to attribute each additional revenue to the advertising source). Without this knowledge, they cannot optimize their marketing spend.
More to come: view and click-based payment models have attracted a lot of scammers to the advertising market. Advertisers are losing about $18 billion annually, a figure that is expected to quadruple in the next three years.
It’s time for advertisers to think about how to increase the effectiveness of digital advertising.
This is where blockchain technology can help.
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Problem #1
In the past, to create an advertisement and place it in the media (on television, radio, billboards, in newspapers and magazines), advertisers turned to advertising agencies. Although this model was simple, it lacked flexibility in terms of targeting and it was difficult to track return on investment in it.
Then digital publishers came along in the late nineties. Search engines, e-commerce sites and social networks have created their own platforms for selling advertising opportunities, changing the usual paradigm. They provided clients with audience targeting tools (such as keywords and demographics), visual reach analytics, and cost effectiveness. And the auction model began to control the prices for advertising placement.
When each digital publisher acquired its own platform for the sale of advertising services, another player appeared on the market – advertising exchanges. They have become intermediaries between digital publishers and ad agencies producing content. Exchanges have made life easier for advertisers who wanted to work with several sites at once.
After that, other players entered the market, including payment intermediaries and anti-fraud specialists.
Although each player in the market has a unique proposition, together they have created a very complex environment that requires advertisers to spend more money and threatens the return on ad spend.
Problem #2
The most important question for advertisers remains the same: which ads bring in the most sales? You need to know the answer in order to evaluate the profitability of advertising costs and decide which sources to invest in next.
In the digital world, ad performance is measured in terms of clicks and views. But which ones bring in every new dollar of profit? It’s actually hard to track this down. Did they buy our product because they saw an ad on Facebook or YouTube? Or was Google search brought to our site?
Everything is clear when the buyer comes from a link with a UTM tag. Then the click source can be linked to the sale automatically. But this direct path is just one of many that users take.
Everything is complicated by the variety of consumer devices (laptops, tablets, smartphones, and so on) and the complex nature of the market, which we talked about above.
Problem #3
The cost of digital advertising is mainly determined by the number of views and clicks. Each of them contributes to the cost of the campaign, that is, increases the costs of the advertiser.
This business model was invented based on the behavior of ordinary users. They respond to an ad that grabs their attention and leads them to the advertiser. So the transition is converted into a sale. However, the vulnerability of this model was quickly discovered by Internet scammers, and the number of abuses only grows over time.
Three types of advertising fraud are common today:
- Bots and click farms (sometimes on fake sites). These are programs and people, respectively, who simply jump from one advertisement to another, view, click (or simulate a click), and so on in a circle. That is, they act without genuine interest and intention to buy something.
- Hidden ads. This is when real users do not see ads, but the illusion is technically created for advertisers that their ads are being viewed.
- Traffic hijacking. The user is shown an ad for brand A, but when he clicks on the link, he ends up on the site of brand B, which pays per click.
While there are platforms and intermediaries that help fight scammers, dishonest schemes still remain a burden on advertisers that only grows over time.
Blockchain Opportunities
These three problems of the advertising market have a common root. This is a lack of transparency. There is no trust in information passing through the value chain. Blockchain offers a new mechanism to help solve these problems and transform the industry.
Let’s start with what a blockchain is. In fact, it is an electronic system for recording information (transactions, contracts, and so on), which has proven to be invulnerable to outside interference.
But the main innovation is not in the technology itself, but in its application. The blockchain has five principles that create new opportunities:
- Distributed access. All participants have the same access to the original data. Now only one side will not be able to control them, and intermediaries will no longer be needed.
- Decentralization. Unlike a centralized data warehouse, a blockchain consists of many network nodes, each of which has direct (peer-to-peer) access to others.
- Transparency. Each transaction is visible to all participants, but identification data can be hidden.
- Immutability. Once a transaction is recorded and confirmed, it cannot be changed. This ensures mutual trust between all parties.
- Automation. It is possible to create procedures based on domain rules (“smart contracts”). They will be called automatically based on the nature of transactions, reducing or eliminating manual work and ensuring that business rules are enforced.
Thanks to these principles, blockchain appears to be a powerful tool that can solve the problems of digital advertising.
It’s time to end the intermediaries
Blockchain allows for the transparency that is so needed in the advertising industry. Toyota has already proven this by partnering with advertising analytics company Lucidity to deploy a blockchain-based advertising solution.
They managed to optimize ad spend and achieve a 21% increase in its effectiveness.
By tracking which user actions lead to sales, companies can partially or completely refuse the services of intermediaries, such as advertising exchanges or search engines.
Due to the inherent transparency of the blockchain, it is easy to imagine a direct relationship between a brand and a digital publisher. Eliminating intermediaries in the advertising supply chain will lead to significant cost savings. We are talking about commissions, transaction fees, “facilitating payments” and spending on consumer data brokers. Overall advertising costs will be reduced by 30-35%.
An added benefit for advertisers: blockchain enables a fact-based financial mechanism. With it, payment occurs only when the results are received. For example, the payment starts automatically as soon as the service is rendered. This is done through smart contracts that automate business logic on top of blockchain data.
Determination of advertising effectiveness and demonstration of ROI
Blockchain allows you to reliably track the data of advertising interactions and their participants. This information helps advertising agencies and advertisers better target the right audience.
Before the advent of blockchain, advertisers ran campaigns based on a limited understanding of consumer behavior and preferences, which also differed from site to site.
Although the overall ROI could still be positive, this strategy was suboptimal: it was possible to guess for a long time which campaigns stimulate sales, but it was not possible to accurately determine this. For example, it happened that 10% of advertising campaigns provided 90% of sales. So 90% of the advertising budget was wasted.
Thanks to the blockchain, all transactions from the creation of an advertising campaign to a click and a purchase are easy to track. The advertiser has all the information to apply more sophisticated optimization algorithms and take their ads to the next level.
Once integrated with a marketing platform, campaigns can be automated to increase sales and ROI. For example, advanced marketing automation platforms use artificial intelligence to learn when ads work best (which days and times), which audience responds best to different types of marketing communications (such as SMS or email), and so on. And then the platform itself adapts new campaigns to improve response rates.
Using this model, advertisers can choose the right mix of publishers and channels to deliver the best ROI based on their target consumer or audience segment.
Another way to increase the effectiveness of advertising is to control the frequency of its display to the same consumer. Blockchain allows you to record and track everything that each unique user sees. This makes it easier to control which ads go where. This optimized targeting can be used for campaigns in different channels, from email newsletters to coupons and vouchers.
Blockchain provides data transparency throughout the digital advertising delivery chain. Armed with this data, analytics tools can recommend solutions to maximize ROI.
Blockchain will help identify fraudsters
Whether it’s bots or click farms impersonating real consumers, hidden ads or fake websites, it doesn’t matter what kind of fraud it is, it all exists precisely because the data in the advertising market is opaque.
The openness and transparency that blockchain brings will help distinguish real user actions that can result in sales from fake views and clicks. In blockchain systems, advertisers and publishers are assigned unique identifiers to prevent spoofing (this is when unverified ad networks and fake sites pollute marketing traffic data). Advertisers can easily track which ads are shown to whom and for how long, and analyze each link in the digital delivery chain.
In addition, platforms that work with blockchain technology will help identify suspicious sites and applications with a high level of bot penetration. The resulting blacklists will allow advertisers to redirect their advertising budget to high-quality sites and not waste money.
Current market trends
Blockchain can solve some of the serious problems of the advertising industry. But there are three more trends that can change the digital advertising market, affecting information technology processes in general:
- Data privacy. The introduction of the General Data Protection Regulation (GDPR) and Google’s recent move to opt out of third-party cookies convinces that privacy and security are more important than advertising revenue.
- Custom control of ads. Newer browsers (like Brave) allow users to decide which ads they want to see, how often and for how long, and also prevent ad interaction tracking by making behavioral retargeting impossible.
- Bonuses for viewing ads. Ad control is getting tighter, so users are now rewarded with loyalty bonuses if they respond to ads (which they choose).
Blockchain is ready to change the market
Thanks to the blockchain, trust and openness can finally reign in the advertising market.
New models of efficiency and effectiveness will help you optimize your advertising budget and increase your ROI.
By planning ad spend smarter, advertisers can better get their offers to the right people.
Eliminating the services of intermediaries will reduce transaction costs. And reducing the number of parties will draw attention to advertising scammers. Without them, the industry will take a deep breath.