The following is a guest post by Joshua Swartz, Oscar Capel, Hemal Nagarsheth and Dnyanesh Katakdaunde of consulting firm Kearney. Opinions are the authors' own.
While digital advertising has delivered a number of benefits such as precise targeting, low costs and ease of fine-tuning a campaign, there are three key areas where advertisers experience unnecessary and oversized loss. First, through fraud. An estimated $18 billion in annual loss due to fraud. Second is the notorious difficulty of tracing backward along the customer journey to attribute a purchase to a specific ad. Finally, the army of intermediaries necessitated by the current digital ad business model.
Technology exists today that can simultaneously address all three problems. Blockchain, with its ability to record information and keep it from being manipulated, is the proposed solution for eliminating the losses occurring across all three fronts. A triple win.
While the idea of using blockchain isn't new, adoption has been slow. What's getting in the way? Inertia. Entrenched interests, the status quo, getting buy-in from all stakeholders, fiefdoms that are being protected, or an unwillingness to change because "this is the way we've always done things." A litany of reasons add up to a general impasse. But transformation doesn't happen by itself, and if the past decade has shown us anything, it's that there's much to gain by disrupting oneself.
Why blockchain? Why now?
Here's why blockchain has been floated as a solution. All of the above challenges have one theme in common: lack of visibility or trust in information flowing among the different participants across the value chain. Being an electronic system of recording information such as transactions, contracts, distributed transactions and other data exchanged between multiple participants, blockchain becomes a single source of truth, as it's impossible to manipulate. Decentralized, transparent, immutable and automated, it's a formidable tool that can and should transform the digital ad industry.
Consider that all participants have equal access to underlying data, while the blockchain eliminates intermediaries and prevents any individual party from owning or controlling any of it. Rather than operating from a "primary" data store, blockchain is composed of many nodes in a network — all of which have direct (peer-to-peer) access to one another. Every transaction is visible to all participants. The fact that once a transaction is recorded and confirmed it cannot be altered ensures trust. And manual work is greatly reduced or eliminated by rules-based algorithms that can be created and triggered by transactional characteristics.
Blockchain makes it possible for participants to exchange assets without an intermediary — across borders and in a secure and private environment. There's no centralized order book, as exchanges are coded directly into the blockchain. Because they reside on the global network, assets do not need to be local. Together, these attributes make blockchain a nearly impregnable model to address and manage the challenges, particularly ad fraud, that digital multinational advertisers currently face. Indeed, it's already being used by some forward-thinking companies.
For example, Toyota partnered with advertising analytics firm Lucidity to deploy a blockchain-based ad solution that optimized ad spend and drove a 21% lift in performance. With this newfound visibility and ability to track consumer activities leading to sales, the auto manufacturer found it could reduce or eliminate the need for intermediaries such as ad exchanges and search engines.
To address the "Why now?" question, the pandemic has made advertisers and consumers alike more reliant on digital commerce than ever before. Blockchain offers more assurance that as we delve further into the world of virtual commerce, we're preserving as much of our hard-earned revenue as possible. And while we always aim for operational excellence, whether in pandemic or "normal" times, perhaps the bigger point is that COVID-19 has given us a chance to reassess the way we do almost everything. So amid the ongoing "COVID pause," there's never been a better time to rethink the way digital advertising should be managed.
Disintermediating the players
With built-in transparency, it's easier than ever to imagine a relationship directly between the brand and digital publisher. This is potentially huge news for advertisers. The disintermediation of middlemen who have played a vital role in the advertising value chain could result in substantial cost reduction in processing fees, transaction fees, payment facilitation, consumer data costs and elsewhere. Together, they could amount to a reduction of some 30% to 35% in total ad spend.
As another added benefit for advertisers, blockchain would also allow for an evidence-based funding mechanism, such that payments are triggered only once results have been delivered — via smart contracts, for example, which provide business rule automation atop blockchain data. Another gift that commands proof of whether an ad campaign is working.
Attributing ad effectiveness and demonstrating ROI
Blockchain's ability to trace back information in a trusted manner enables ad agencies and advertisers to make better decisions, such as how to more effectively target the right audiences by bringing visibility into the entire supply chain. The transactional visibility from campaign to click to purchase gives advertisers the data they need to run complex optimization algorithms and smartly target their campaigns. Once integrated with a marketing platform, campaigns can be automated to efficiently maximize sales and ROI. With this new model, advertisers can better choose the right mix of publishers and channels to deliver the most compelling ROI based on the targeted consumer or segment.
Another way to improve advertising effectiveness is to control the frequency with which a particular ad is presented to the same consumer. Blockchain creates an opportunity to record and track every ad served to every unique consumer, thus allowing for better control of which ads are served to which consumers, how often and when. This approach and optimized ad targeting could be used across channels for email campaigns, coupons and vouchers — and most importantly, gives advertisers consumer-level visibility from click to purchase.
Shining a light into the shadows of fraud
All advertising fraudsters share one trait in common: They thrive on data opacity. As levels of cybercrime continue to rise throughout the pandemic, blockchain's transparency and visibility shine a light and reveal genuine clicks that lead to sales — differentiating them from fraudulent clicks. With blockchain, unique identifiers assigned to advertisers and publishers prevent "domain spoofing" — those unverified ad networks or fraudulent websites that pollute marketing traffic data.
Advertisers can transparently track ad displays, how long an ad ran, the participants involved and every step of the digital supply chain. Blockchain-based platforms can help to blacklist sites and apps deemed to have high levels of discrepancy and bot infiltration, so advertisers can redirect their ad spend toward higher-performing sites and eliminate wasteful spending.
Blockchain will transform digital advertising
Blockchain brings visibility and trust, allowing advertisers to make better decisions about ad spend while giving consumers a better, more tailored experience. It has the potential to substantially reduce transaction costs and prove ROI while eliminating the massive industry burdens of fraud and legacy intermediaries. The advertising world has become an increasingly digital place, and even more so through the massive COVID-driven shift to e-commerce, so the time for blockchain is now.