Digital advertising is everywhere. From banner ads to highly targeted adverts on social media, it’s impossible for the average user to navigate the web without being exposed to some form of advertising. Although many people may associate these adverts with being invasive, there are many positives of digital advertising, which have helped an enormous number of start-up companies grow quickly through well targeted advertising campaigns.
Despite the importance of digital ads for online commerce, there are still some critical issues with the current models of advert delivery; which has drawn criticism from lobbying groups and regulators. Many of these issues, as we’ll explore later, center around privacy or user information, data transparency, and unfair censorship of adverts.
As a result, many advert technology, or ‘AdTech’, companies have emerged to improve online advertising, some of which are using powerful new technologies such as blockchain to deliver enhanced ad services. But why is the digital advertising industry ripe for disruption?
Current issues with digital advertising
One of the biggest sources of controversy for the world of digital advertising is that it is dominated by tech incumbents; such as Google, Facebook, and Twitter. These behemoths of the digital world enjoy the largest share of ad revenues, have the most powerful tools at their disposal to deliver targeted ads, and boast a huge range of active users to advertise to. In 2018, Google generated over US$116 billion in advertising revenue, while Facebook earned US$55 billion.
Together, the giants of Facebook and Google have become known as the ‘digital duopoly’, exerting heavy influence over the realms of online marketing and steering the digital advertising industry significantly in their favor. Some critics have cited anti-trust concerns for digital advertising on these leading platforms, claiming that both companies have garnered an unfair advantage over competitors and have too much say in which ads can run.
Likewise, there have been privacy concerns that large tech companies are using their user’s data in ways which invade privacy and violating data usage policies. A landmark case which highlighted how much power these tech incumbents wielded was uncovered in early 2018, when it was revealed that Facebook had been working with research agency Cambridge Analytica to harvest vast amounts of personal data, and used this data to target users with politically motivated adverts. The event saw US$100 billion wiped off Facebook’s market cap in a matter of days, but this was short-lived, with Facebook quickly bouncing back from the scandal.
At the same time, digital advertising faces a multitude of issues from fraud. Current platforms do little to protect against malicious manipulation of ad delivery, which uses bots or spoofed traffic to make advert interactions look greater than they actually are. Likewise, as most user data collected via social media and cookies is stored in centralized data silos, there is a tangible risk for data protection.
Blockchain to disrupt online advertising
Known for its open-source and transparent technology, blockchain has the power to democratize the online advertising industry. As digital advertising often has a complex ad delivery process, blockchain may help deliver higher resolution data about where an ad has been served, who has seen it, and what action they have taken.
Similarly, in a huge boon for data protection, blockchain technology also enables peer-to-peer transfer of data and information. As blockchain networks are distributed between full nodes and network participants, and therefore data is not siloed like in centralized ad platforms, there is far less risk of data loss or security breach. This same feature allows blockchain advertising participants to transact with a greater level of trust and transparency than their traditional counterparts.
Leading online virtual private network (VPN) provider, NordVPN, are among the first companies to adopt blockchain-based advertising. Many existing advertising platforms don’t allow adverts for VPN services, as they obscure IP addresses of their users and makes it harder to deliver targeted ads. Instead, NordVPN used blockchain based advertising network, AdEx, to run their campaign. AdEx uses their own blockchain technology to deliver digital ads. Using cryptography, individuals are allocated an identity on the blockchain so advertisers can track who is viewing and interacting with ads. NordVPN’s campaign generated a huge 238% ROI, proving a powerful use-case for blockchain based advertising.
A future for blockchain AdTech?
Disrupting the digital duopoly of Facebook and Google will require serious growth across the blockchain AdTech industry. Nevertheless, this sector is growing fast and there are proven use cases where blockchain-based solutions are outperforming traditional advert services.
As we’ve explored, for companies which experience censorship through traditional advert delivery networks, blockchain AdTech may be widely adopted to circumvent advertising restrictions. As a result, it’s highly likely that in the short-term, blockchain and digital advertising will continue to develop in parallel.