Blockchain-powered programmatic ads could shake up the mobile industry
In the first of my articles on blockchain and cryptocurrency, I explored how cryptocurrency is changing the way mobile apps are financed and monetized. In the second, I switched the lens to examine the pros and cons of blockchain and cryptocurrency from the developer’s perspective.
To wrap up the series, I’d like to lay out one argument to consider when asking why blockchain and cryptocurrency will or will not evolve to become a successful and disruptive force in programmatic advertising: computing is becoming more decentralized, and blockchain (the underlying tech behind cryptocurrency) is, too. Although using blockchain for programmatic advertising has yet to be proven, it has the potential to reshape the programmatic advertising industry.
Decentralization is the trend
Let’s start by defining decentralization, and unpacking the factors that make a decentralized, blockchain-style approach to computing attractive to many in the mobile ecosystem, including users, developers, and brands.
In computing, decentralization means moving computing resources off a central server and instead storing and managing data across a network of user-controlled computers that run independently of each other. The core effects are a reduction in latency, more efficient data transfer, and greater overall resilience (i.e. no single fail point) vs. centralized computing systems.
The underlying technology of decentralization consists of a distributed database constructed of data blocks that contain timestamps and link to a previous block, making it an ideal technology on which to build and run a P2P system for transactions and exchange (like a programmatic ad market). These are market-shaping deviations from the way traditional centralized platforms work and monetize.
When centralized platforms are young, they are eager to attract developers, users, and marketers. But this relationship changes for the worse as centralized platforms grow. As investor Chris Dixon wrote in his Medium post, “Why decentralization matters“:
“When they hit the top of the S-curve, their relationships with network participants change from positive-sum to zero-sum. The easiest way to continue growing lies in extracting data from users and competing with complements over audiences and profits. Historical examples of this are Microsoft vs Netscape, Facebook vs Zynga, and Twitter vs its 3rd-party clients. Operating systems like iOS and Android have behaved better (but) still take a healthy 30% tax, reject apps for seemingly arbitrary reasons, and subsume the functionality of 3rd-party apps at will.”
Developers and investors are tired of wrestling over data control, and they’re frustrated from dealing with the ramifications of security breaches over which they have no control, so it makes sense that they see decentralized computing as a green pasture.
Blockchain, of course, uses this decentralized approach as the basis for how data is stored, accessed, updated, and shared. Cryptocurrency is the example we’ll focus on here, but there are also active use cases for decentralized platform approaches in cyber security, supply chain management, insurance, healthcare, energy management, and many other industries.
The early indicators are promising
As pervasive as the programmatic advertising discussion can seem to us in the mobile space, you can’t overstate the opportunity that lies ahead. We’ve only recently hit the tipping point where mobile ad spend has surpassed desktop.
That’s not changing, but there will be a few more rows on the spreadsheet soon: programmatic ad budget for voice-activated assistants, programmatic ad budget for dynamic insertions into podcasts, programmatic ad budget for in-app video AR ads, and so on.
These growing channels will be one future outcome of evolving programmatic ad markets, and they’ll be fueled by evolutions in a variety of other technologies, like larger and better connected data sets, rapid iterations in AI and machine learning, and, with an excellent sense of timing, cryptocurrency.
MadHive, EnvisionX, and Ternio are a few early entrants that are finding ways to create and incentivize cyrptocurrency-based programmatic ad markets, but there are more to come. Kochava, an attribution and marketing analytics platform, is also planning to launch its blockchain digital advertising platform XCHNG in early 2018 to increase transparency between buyers and sellers of ads.
With publishers and advertisers seeking to increase margins and simplify the buying and selling process, the freedom offered by blockchain methods could dovetail nicely with the broader evolution of programmatic ads.
Timing may be right
Cryptocurrency is digital and pricing is transparent, so both the buy and sell sides of the sometimes confusing programmatic ad market stand to benefit from crypto-powered markets. Settlement for cryptocurrency transactions is also real time—a huge plus for cash-strapped developers. There are also (for now) fewer parties between buyers and sellers in the cryptocurrency programmatic market, meaning everyone’s take can be a little bigger.
However, big questions remain, like when will cryptocurrency-powered transactions go mainstream? What are the long term impacts on CPM, cost of acquisition, average revenue per user, and the other things app publishers and brands collectively care about? These are big questions, but the market’s need to answer them will not restrain the greater need to start delivering crypto-powered experiences. In other words, we’ll show our math later, but we need to build right now.
Decentralized platform computing technology offers developers a new playground as well as a new set of challenges. In parallel, blockchain and cryptocurrencies are finding new applications in a variety of markets, recreating the way apps are financed and monetized, and changing how programmatic ad revenue is divided.
On the whole, it is difficult to be pessimistic about the future opportunity for crypto-powered programmatic ad markets. The timing couldn’t be better.