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by Christopher Tozzi, Nov 03, 2017

How Blockchain Is Disrupting Programmatic Advertising


MadHive Nodes

Advertisements were once purchased and negotiated by humans through an inefficient, unreliable process. Then, the digital revolution enabled programmatic advertising, which automated ad purchasing but still has shortcomings.

Now, blockchain technology is upending the world of advertising once again, thanks to companies that are using blockchains to resolve the challenges and inefficiencies that are associated with traditional programmatic advertising.

A Brief History of Ad Buying

Before the digital revolution and the advent of the internet, the only way for advertisers to purchase ad space from publishers was for humans to negotiate contracts manually. This approach was inefficient and difficult to scale. An advertiser or publisher can only negotiate so many contracts in a day, and the time required to discuss, sign and implement a contract manually is not insignificant.

In more recent years, computers have made it possible to automate ad buying by having software do much of the work. Humans still have to plan ad campaigns, of course, and design the actual advertisements. But programmatic advertising removes the tedium of having to purchase ad space manually.

In a broad sense, programmatic advertising has been around for years through platforms like AdWords, which connects advertisers to content publishers automatically. However, AdWords still requires advertisers to sign up manually, so the ad buying process is not completely automatic. If you adopt a narrower definition of programmatic advertising, the term applies only to situations where the ad buying process is fully automated. Google (among other companies) offers that as well, as a newer type of advertising solution.

The Challenges of Programmatic Advertising

Whether you use a solution like AdWords or more advanced programmatic advertising platforms, the process is prone to certain challenges.

The greatest is that, although programmatic advertising is much more efficient than manual ad buying, the process usually requires the services of a middleman. In the case of AdWords, for example, people who want to run ads don’t buy directly from the website owners on which the ads will appear. Instead, advertisers pay Google, which in turn places ads for them. The requirement of a middleman is inefficient from a cost standpoint for both advertisers and the content publishers whose sites host ads.

In addition, programmatic advertising is sometimes subject to fraud. The Interactive Advertising Bureau found that as much as $8.2 billion is wasted on fraud and other flaws in conventional digital advertising processes.

Finally, programmatic advertising as most organizations use it today makes it difficult to measure campaign effectiveness. The main metrics available for tracking ad performance on a website are clicks and page views. Correlating these metrics closely with performance is challenging at best.

A Blockchain-Based Approach to Ad Management: The MAD Example

Blockchain technology can resolve many of these challenges. To illustrate how blockchain is being put to use in this space, consider the example of the MAD Network, which is building a blockchain-based ad management solution that is designed to benefit advertisers and content publishers alike.

One key innovation of the MAD Network is the creation of an ad server that uses smart contracts to allow advertisers and publishers to negotiate ad buying. Because the smart contracts are run on the blockchain, they can be enforced automatically.

The blockchain also eliminates the need for a centralized party to oversee ad buying. The MAD Network is building the ad server platform, but that is all; it is not a middleman in the ad management process. Advertisers and publishers are instead able to interact directly and automatically with agreements enforced through the blockchain.

The MAD Network also seeks to introduce innovation to the process of tracking ad effectiveness. The network will allow content publishers to sell anonymized data about user behavior on their sites and will allow advertisers to buy it. This feature provides an additional revenue opportunity for publishers, while enabling advertisers to gain more specific information about user behavior and impressions than they could by counting clicks and pageviews alone.

Because the ad buying processes on the MAD Network are all handled by software, not humans, it is easy to build decentralized applications or other tools that interact with the network for programmatic advertising.

In short, solutions like the MAD network are enabling a new generation of programmatic advertising opportunities, using the blockchain as their backbone. Advertisers and publishers alike will enjoy faster, more cost-efficient processes for buying and selling ad space.

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