ARF Young Pros Blockchain: Beyond Bitcoin was held in New York City, April 25, 2018.
Matthew Savare, Partner at Lowenstein Sandler LLP, kicked off the event with an overview of blockchain, setting the stage for the Young Pros audience to first gain an understanding of the technology before identifying its role in advertising and media buying/selling. He covered various related terminology and often provided analogies to break it down when further explanation was needed.
So, what is blockchain?
Blockchain, AKA “Distributed Ledger Technology” (DLT), is essentially a decentralized database. For all the Silicon Valley fans, it’s like Pied Piper’s new internet. It provides peer-to-peer networking, keeping track of all different kinds of transactions and offering users the ability to validate and verify. These transactions are encrypted then chunked into “blocks” and held together by a “chain” in order to identify the series of events. All parties within the controlled network have access to view the data and recorded changes. Alterations are near impossible, creating a tamper-proof, move forward only chain.
Cryptocurrencies are widely used within blockchain, but does not fuel the technology. Meaning, blockchain is not predicated on just currency and can still “live” without it. Bitcoin and Ether are common types of cryptocurrencies (think of them as operating systems: “iOS vs. Android” or internet browsers: “Chrome vs. IE”).
Concerns for blockchain surround hacking and negative use of cryptocurrency. However, the technology itself has not been hacked. The exchanges involved with digital currency have fallen victim to penetration, resulting in a company’s loss of funds.
Blockchain technology offers numerous “pros” across various industries:
- Data integrity
Examples on how blockchain can benefit companies, organizations and industries:
- Double spend issue – eliminate copies of digital dollars which lead to devalued currency
- Faster digital transactions – speed up payments through accounts like PayPal
- Food recalls – if used during the production process, origin can easily and quickly be identified to alert consumers
- Voting – data storage protection, counts
When a Young Pro asked Matthew about needed areas for change and development regarding blockchain, he enthusiastically responded “We’re not even in the first inning!”, implying that the technology and advancements are in the very early stages.
Matthew wrapped up with his POV, predicting that in 10 years, blockchain will have transformed the financial sector. He also thinks that there will likely be less emphasis on cryptocurrency and more focus on enterprise applications across industries in the near future. He noted that it’s a good sign that the US federal government is starting to embrace this technology.
Unpacking the Blockchain
Matthew Savare – Partner, Lowenstein Sandler LLP
Pooja Nayak, VP, Director for Ad Tech,Starcom, then addressed the state of the ad tech ecosystem, current challenges and the potential of blockchain for creating a more efficient direct media buying process.
Some key issues that can benefit from blockchain include:
- Discrepancies – Advertisers and Publishers often disagree on invoices, resulting in a manual, time consuming reconciliation process. Blockchain can help with speeding up this process.
- Lack of Transparency – Vendors tend to be uncomfortable with sharing details around added fees. Keeping all parties involved with smart contracts will create a more trusting relationship, resulting in increased spend/revenue.
- Privacy – Customers and clients are not confident with data sharing and have concerns of usage beyond the intended purpose (often targeting). Users can be protected through verification, consent and authorization, along with stricter rules for data collection.
- Fraud – The industry is pushing for solutions to fight fraud, specifically ads.txt. Blockchain can help combat placement on sketchy sites and ad spoofing with guaranteed safer environments.
Pooja also stated that blockchain technology is in the very early stages. While there is no unified solution as of yet, she’s optimistic that they’ll be put into action to address the many challenges the industry currently faces. Pooja suggests to invest in learning about blockchain and educating clients so they can fully wrap their heads around the implications of its use.
Ad Tech Ecosystems and Challenges
Pooja Nayak – VP, Ad Tech, Starcom
Alanna Gombert, Global CRO of MetaX, joined the ARF Young Pros via livestream as the third speaker of the night to discuss how MetaX is leveraging blockchain technology in the advertising space, and the launch of their new adChain Registry.
Alanna began her talk by giving a quick overview of MetaX’s history. MetaX originally started as an ad network, focused on using blockchain to increase transparency throughout the supply chain. That work evolved over time to culminate in the creation of the adChain Registry, a “token-curated registry,” or TCR.
TCRs, like adChain, are curated databases powered by blockchain and reliant on the engagement of their user communities, which curate the registry using “tokens” issued by the registry creator or purchased on an exchange. Based within the Ethereum ecosystem, adChain hosts a registry of trusted digital publishers vetted by the adChain community. Publishers are nominated for inclusion in the registry by adToken (ADT) holders, at which point any person who holds ADT can either vote to include or reject the publisher from the registry.
When asked how MetaX intends to stop rogue token-holders from adding unsafe websites to the adChain registry, Alanna explained the process behind submitting and approving applications for publishers. When nominating a publisher, the person submitting the application must stake a certain amount of ADT. If the publisher is accepted to the registry, the ADT that was staked is returned to the applicant, along with a bonus. That bonus incentives ADT holders to engage with the registry in a productive and meaningful way. However if a publisher is rejected from the registry, that applicant loses their original stake of ADT. The potential loss of ADT is meant to discourage fraud and “trolling” within the registry and its community.
In wrapping up her talk, Alanna touched on other potential uses for TCRs. She suggested that government entities could use TCRs to engage in more open dialogues with their constituents. Similarly, corporations could utilize TCRs to solicit feedback from their loyal customers—and reward them for their contributions. She hopes that the success of the adChain network, the first-ever TCR to launch on the Ethereum mainnet, will serve as a use case for the industry and encourage the development of more token-curated registries going forward.
Blockchain Use Cases for the Digital Advertising Industry
Alanna Gombert – MetaX
Jerry Michels, Product Manager at NYAIX, wrapped up the evening with an overview of NYAIX, the
world’s first guaranteed advertising contract marketplace created in partnership with NASDAQ.
NYAIX uses blockchain technology to power a platform for buying and selling ad inventory in a forwards market by using smart contracts. Publishers can list their inventory on the exchange, which operates like a financial exchange. Jerry explained the benefits of buying and selling inventory on such an exchange, which include:
- Re-Trading – Sometimes, marketing plans change. Rather than canceling their contracts with publishers, marketers can re-sell the inventory they’ve purchased on the exchange. If timed correctly, marketers can even turn a profit by re-selling the contract at a higher price point than what they originally paid for.
- Record-Keeping – As mentioned by previous speakers, there is a permanent record of all trades that are created and executed on a blockchain. This information is available for all market participants to view, and all participants have access to the same information. The benefit of this is that there is an accurate, transparent, and unalterable record of each transaction made on the exchange.
- Privacy/Data Security -NYAIX uses a permissioned, or “private” blockchain. This means that only those market participants with permission can access the blockchain. In addition to keeping a permanent record of all transactions, the blockchain also keeps that information safe by using advanced cryptography to secure those records and keep confidential or sensitive data private.
Trades are made through NYAIX using smart contracts. Smart contracts allow the parties involved in a trade to record the conditions, and then once those conditions are met, the trade will automatically execute. Smart contracts can be built to connect with both internal (i.e. NYAIX) and external systems, which are used to validate the conditions of the trade.
One attendee asked Jerry what happens when smart contracts don’t perform as expected. Jerry explained that this is a possibility, due to unforeseeable factors such as coding errors, or inaccurate data flowing in from external systems. He suggested that systems will have to be put into place to allow for the correction of these errors. For example, one could build terms into a smart contract that require human review before execution. Due to the un-editable nature of the blockchain, these types of fail- safes will need to be considered and written into smart contracts ahead of time. One way that NYAIX is addressing these issues proactively is by working to create templates for smart contracts that are based off the sort of standard contracts currently used in ad exchanges.
So, why should we care?
In ending the night, Jerry finished up his talk with a quick overview of why the industry should care about advances in blockchain technology, particularly for media buying and selling. He predicts that the use of blockchain will provide the advertising industry with a number of benefits, including:
- Increased trust and transparency
- More accurate data
- Fewer intermediaries involved in buying and selling ad inventory
- Lower costs for marketers and publishers
- Creation of new business or operational models (i.e. re-selling contracts that have appreciated as an alternative revenue stream)
Finally, Jerry encouraged the Young Pros in attendance to take advantage of local blockchain meet-ups to learn more about the topic and meet others involved in this evolving space!
Blockchain and Smart Contract Technology for Advertising Exchanges
Jerry Michels – Product Manager, NYIAX
By: Tiffany Ihle – Insights Manager, Gamut Media, AND
Christine Miller – Senior Research Analyst, Ad Effectiveness, iHeartMedia ARF Young Pros Advisory Board members