LMP Lab:
Exploring the Relationship Between Blockchain
& Programmatic Advertising

By Tori Stowers

Programmatic advertising and blockchain technology are speculated to have a bright future together. So, we’ve taken a moment to talk through some basics, exploring what’s possible today and tomorrow…

What is blockchain?

The Trade Desk defines blockchain technology: “…a data infrastructure characterized as an open, digitally distributed ledger that shares permanent records of a given transaction, which cannot be deleted, revised, or otherwise tampered with. Its decentralized and immutable recordkeeping has far-reaching implications in industries where secure and accurate data sharing is crucial, such as cybersecurity, healthcare, or even politics.” (1)

A few key takeaways: The blockchain is encrypted, providing state-of-the-art security. Its entries are verified by consensus, meaning there is no need for an independent “middleman.” And once a transaction is entered, it’s part of the permanent record.

How is it being used for programmatic advertising?

When you buy programmatic inventory, you bid on audiences through a DSP (demand-side platform). That DSP then works with SSPs (supply-side platforms) to find the best inventory, which is on the individual publisher’s end. The flow of dollars from a DSP to a SSP to a Publisher isn’t 100% transparent, and therefore can lead to possible fraud, markups, data discrepancies, and inefficacies in spend.

In theory, the blockchain model would help solve for this problem by giving transparency to transaction data each time money moves through the programmatic bidding environment.

What are the current limitations of blockchain and programmatic advertising?

Right now, blockchain for programmatic buying is in its early days and there is an issue of inventory as currently publishers must opt into this buying/selling structure. DSPs are also slow to adapt as it would necessitate changes within their systems as well. There is a bit of chicken-and-the-egg situation going on in the industry with publishers saying they will opt in to more blockchain technology solutions when there is a greater demand from advertisers. Meanwhile, advertisers want more inventory available through blockchain before concentrating a large advertising spend there. Outside of inventory and scale, there are other limitations to keep in mind:

  • Many major blockchain solutions can only handle seven transactions in the same moment while standard programmatic industry handles millions of queries every second. This can make blockchain less effective in a bidding environment.
  • Secure adoption and integrations with DSPs and SSPs will be slow as they must be made one-by-one to ensure functional implementation.
  • Many in the current programmatic industry don’t think blockchain will solve the issues it claims to when rolled out to scale and that there are other solutions already in place to combat inefficacies and fraud.

What are these current solutions already in place?

  • Transparency: Depending on the partner you work with, you may have access to transparency reporting, which passes the advertiser ID in the transaction. If there are impressions in question, the advertiser could reach out to the SSPs for an accurate bidding and spend report.
  • Fraud: The industry as a whole is working to resolve this issue. Steps include adding fraud protection options for buys, along with the adoption of ads.txt, which is the IAB Tech Lab’s effort to increase transparency to impression sales.

What’s LMP’s POV?

While we are keeping an eye on blockchain, the limitations of scale and inventory make it hard to recommend to many advertisers. It will be interesting in the next few years to see if the industry’s dependence on blockchain technology solutions grows, or if it works to strengthen capabilities already in place to combat transparency and security.

Posted on November 6, 2018 in Blockchain, Media, Programmatic

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