Trust is scarce in the digital advertising industry. Data discrepancies, fraud, and supply chain budget misallocations contribute both to waste and a prevailingly tense environment amongst digital advertising agencies. Blockchain technology can help ad executives breathe easier with the knowledge that their money is well-spent and their data is well-managed. With enough use cases penetrating the space, honest players can benefit and agencies can realize greater value.

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The Problem

Digital advertising operations and finance are slow-moving things. Claims and reconciliation on average take more than a month, and this constitutes an extreme waste of time for clients looking for quick requisition of ad placement and payments to that effect. Worse, the industry is highly centralized, with Google and Facebook dominating the market through their control of 73% of all ads. And because ad performance is tracked and measured in the form of impressions—the number of times any ad is viewed or clicked on by a consumer—the industry is highly vulnerable to fraud in the form of adbots and false traffic generation scams, to name a few forms of malicious behavior in the industry. These issues are seldom clear to even experienced ad executives, and even more seldom resolved in a way facilitating less malicious behavior. The combination of these factors have eroded trust between agencies, including on issues relating to budgetary allocation and data integrity, to an all-time low.

 

The Solution

 

Blockchain, a distributed, trustless database constituting an immutable, consensus-based digital ledger, blows open data, transactions, and records. For this reason it is the prime technology poised to improve the advertising industry. With blockchain technology, specifically the Ethereum blockchain–powered by self-executing, or “smart” contracts–claims and reconciliation can be made invulnerable to fraud and accelerated by coding the value signifiers vital to those processes as impressions on smart contracts, and then immediately executing those over an entire advertising supply chain. Moreover, the open-source and transparent nature of blockchain technology can allow ad executives to audit digital advertising supply chains interacting with their lines of business to track the sources and associated impressions of all ads and the customer paths attributed to them. In sum, blockchain enjoys enormous potential to reshape the digital advertising industry for the better, and use cases like Lucidity are using its capabilities to improve the advertising industry by illuminating the entire programmatic advertising supply chain and bringing it open-source to show where impressions are coming from and where they are going.

 

The Market

 

The digital advertising market is a $250 billion global industry, with an estimated 73% controlled by Google and Facebook. 2017 IAB data shows that the top 10 digital advertising companies control a total of 75% of all advertising revenue online; the next 25, 8%; the rest of the industry, a mere 18%. Tracking impressions is done not only by legitimate agencies but also by malicious actors, with 51% wasted daily on fraudulent impressions created by such actors. In addition, 2017 ANA data also shows that ≥9% of desktop display and 22% of video spending is not authentic, showing that the digital advertising industry, despite its largest players’ greatest efforts, is highly compromised.

 

Blockchain’s Traction Within Digital Advertising

 

Blockchain technology’s key attribute is disintermediation, which is why every time it touches an industry, the speed and nature of the business surrounding it becomes faster and more transparent. While various solutions track pricing and metrics across vendors, solutions like Lucidity are developing and deploying bleeding-edge innovations in blockchain technology to scale speed, introduce transparency, and increase the versatility of transactions across vendors, allowing ad agencies to use this new technology to clarify budgets and save money, since knowing where your money is going helps in saving it.

 

Sam Kim, Miguel Morales, and Sam Goldberg, the heads of the Lucidity team, are former ad agency professionals who lived the problem they’re now trying to solve: poor data quality and questionable digital advertising campaign data. Once Miguel realized blockchain data could unify the digital advertising supply chain around campaign analytics data, he and the rest of the current team got together and started working on Lucidity. Lucidity’s technology is founded on the Lucidity Protocol, which uses smart contracts on the Ethereum blockchain to track, verify, and reach consensus on all advertising data for members of the digital advertising ecosystem. It creates publicly auditable impressions that are trackable and executable over all points in the digital advertising supply chain simultaneously.

 

When an ad agency uses Lucidity, it is able to see every impression it and its partner vendors in an ad campaign create, their origins, their endpoints, their progress along the digital advertising value chain, and when they get to the desired place. In short, Lucidity has created a scalable, working, open protocol using the Ethereum blockchain to solve issues in programmatic advertising overall, rather than a platform designed just for a closed advertising network.

 

Yet some may dissent about the value of such a solution. Programmatic ad campaigns generate millions of impressions and transact for them in a single second, while the Ethereum blockchain can only process only about 20 transactions every per second. With such a discrepancy in processing ability, it’s not difficult to understand why some are hesitant to trust the technology. Lucidity uses sidechains—private blockchains built atop of a main root chain—to give blockchain-based ad transactions more computational flexibility. As an outgrowth of using sidechains, Lucidity also uses sharding, a practice that decentralizes verification and processing, via nodes across an entire blockchain to speed up transactions and increase transaction scalability. The industry has noticed: in June, The Block Awards recognized Lucidity as The Blockchain Startup of 2018, and the company has partnered with the Interactive Advertising Bureau (IAB). Lucidity is also one of the few companies to successfully implement Plasma.

 

Use cases like Lucidity are penetrating the industry, adding value, transparency, and verifiability in an otherwise opaque industry. Yet to be successful, they will need to address issues around transaction scalability, transparency, and speed. Those that do will not only compel ad giants to sign up but also help blockchain technology come one step closer to mainstream usage.

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What are your thoughts on the potential of blockchain technology to reshape digital advertising? Let us know by posting in the comments below!