Big ad­ver­tis­ers adopt blockchain to root out spend­ing waste

Tech’s se­cure, trans­par­ent na­ture draws in­ter­est from ad­ver­tis­ers wary of dig­i­tal ven­dors

The Niagara Falls Review - - Business - LARA O’REILLY The Wall Street Journal

Blockchain tech­nol­ogy has made in­roads in in­dus­tries from lo­gis­tics to health care. Now, it’s gain­ing trac­tion with mar­keters, who see it as a po­ten­tial an­swer to the pit­falls of on­line ad­ver­tis­ing.

An­heuser-Busch InBev, AT&T Inc., Kel­logg Co., Bayer AG and Nes­tle SA are among ad­ver­tis­ers that are start­ing to use the nascent tech­nol­ogy to fig­ure out whether their ads are viewed by real peo­ple, not com­puter-gen­er­ated bots, and how much of their spend­ing is si­phoned off by mid­dle­men.

Blockchain is a se­cure dig­i­tal data­base that can house a ledger of trans­ac­tions, dis­trib­uted across mul­ti­ple com­put­ers. It al­lows busi­ness part­ners to keep a record of their trans­ac­tions, stored as “blocks” and up­dated in real-time, based on an agree­ment among the par­ties. Blocks can’t be al­tered.

The tech­nol­ogy, or at least the hype around it, is boom­ing. Now the se­cure, trans­par­ent na­ture of the tech­nol­ogy has drawn in­ter­est in the ad­ver­tis­ing world, where deal­ings be­tween mar­keters, their ad agen­cies and tech venders of­ten aren’t trans­par­ent, lead­ing to dis­trust and fears among ad­ver­tis­ers that they are wast­ing money.

Mar­ket­ing-in­tel­li­gence firm Warc es­ti­mated that of ev­ery dol­lar spent world-wide last year on “pro­gram­matic” ads—a term used for ads bought us­ing au­to­mated soft­ware—just 40 cents (U.S.) on av­er­age made it to the pub­lisher sell­ing the ad space. Ad­ver­tis­ers end up pay­ing a “tech tax” to the in­tri­cate chain of venders be­tween a mar­keter and the web­site that runs an ad.

Mar­keters some­times can man­u­ally au­dit dig­i­tal ad cam­paigns, but pro­po­nents of blockchain say the tech­nol­ogy of­fers a faster, more re­li­able way to track spend­ing and rec­on­cile dis­crep­an­cies

with sup­pli­ers.

The tech­nol­ogy can also help track whether ads are run­ning on web­sites with real traf­fic and on por­tions of them vis­i­ble to or­di­nary users. That type of cam­paign in­for­ma­tion can be in­cluded in stored “blocks” along with pric­ing in­for­ma­tion.

“The ob­jec­tive here is not about sav­ings, it’s more about trans­parency to make sure we are reach­ing con­sumers in the most rel­e­vant way,” said Lu­cas Her­scovici, a global mar­ket­ing vice pres­i­dent at An­heuserBusch, one of the world’s big­gest ad­ver­tis­ers. A-B has tested a so­lu­tion from mo­bile ad-tech firm Kiip that records ad cam­paign data to the blockchain.

“I be­lieve in the next two to three years, most of the pro­gram­matic

me­dia will move to be­ing blockchain-based be­cause ad­ver­tis­ers will want trans­parency and this will pro­vide it,” Mr. Her­scovici said.

Blockchain has its draw­backs. It’s an ex­tra cost and it de­pends on a num­ber of play­ers agree­ing to sign up to a com­mon agree­ment. Big on­line ad cam­paigns that tar­get au­di­ences across hun­dreds or more web­sites can cross dozens of dif­fer­ent ad-tech mid­dle­men, many of whom might not be keen on sign­ing up to a blockchain con­sor­tium.

Al­pha­bet Inc.’s Google, the big­gest player in the on­line ad­ver­tis­ing ecosys­tem, hasn’t an­nounced par­tic­i­pa­tion in any of the ad­ver­tis­ing blockchain projects cur­rently un­der way.

Sridhar Ra­maswamy, Google’s

se­nior vice pres­i­dent of ads and com­merce, said at a con­fer­ence in March that the com­pany had a small re­search team look­ing at blockchain but the core tech­nol­ogy “is not some­thing su­per-scal­able in terms of the sheer num­ber of trans­ac­tions it can run.”

Dig­i­tal-ad­ver­tis­ing ex­changes process mil­lions of ad trans­ac­tions ev­ery sec­ond, but it can take sev­eral min­utes for trans­ac­tions to be rec­og­nized in blockchain and hours for pay­ments to be set­tled, ac­cord­ing to Isaac Lid­sky, pres­i­dent of Un­der­score CLT, a startup work­ing on de­vel­op­ing the tech­nol­ogy for the dig­i­tal mar­ket­ing sec­tor.

Still, some in­dus­try ex­perts think blockchain’s ben­e­fits out­weigh these teething pains. When ad­ver­tis­ers see how the tech­nol­ogy can be ap­plied to solve fa­mil­iar prob­lems, “it’ll take the boo­gie­man fac­tor out of the blockchain and ev­ery­one will in­stead fo­cus on the qual­ity-of-life im­prove­ment pos­si­ble,” said Josh Her­man, global in­te­grated mar­ket­ing leader at Kim­berly-Clark Corp., one of the mem­bers of a blockchain con­sor­tium at In­ter­na­tional Busi­ness Ma­chine Corp.’s dig­i­tal mar­ket­ing agency, iX.

IBM an­nounced its blockchain prod­uct in June in part­ner­ship with ad­ver­tis­ing soft­ware provider Me­diao­cean. Ma­jor com­pa­nies that have signed up to use the tech­nol­ogy to track their dig­i­tal ad spend­ing in­clude Pfizer Inc., Unilever PLC and Kel­logg.

Else­where, con­fec­tionery giant Nestlé is be­gin­ning to test a prod­uct from tech startup Amino. The prod­uct lets all ad­ver­tis­ing venders get paid at the same time di­rectly by the buyer, so long as they meet their pre-ar­ranged com­mit­ments. That’s an im­prove­ment, Amino says, on the tra­di­tional process where the ad­ver­tiser pays the agency, who pays the next vender in the chain, and so on, lead­ing to de­lays and dis­crep­an­cies. Se­bastien Szczepa­niak, head of e-busi­ness at Nestlé, says he en­vi­sions putting a re­quire­ment in ad con­tracts stip­u­lat­ing that part­ners must use a blockchain so­lu­tion.

As with other new tech­nol­ogy in the ad in­dus­try, blockchain will get wide­spread adop­tion only when prom­i­nent ad­ver­tis­ers start de­mand­ing it as part of their cam­paigns.

“I still think that it’s prob­a­bly sev­eral years be­fore there’s enough groundswell,” says Jeff Rasp, di­rec­tor of U.S. con­sumer­health dig­i­tal strat­egy at Bayer, which has tested Amino’s “Lens” so­lu­tion to track its ad spend­ing. “But I feel so pas­sion­ately about it that I’m work­ing to try to have those con­ver­sa­tions with other ad­ver­tis­ers.”


An­heuser-Busch InBev, one of the world’s big ad spenders, is one of the com­pa­nies start­ing to use the se­cure blockchain dig­i­tal data­base in on­line ad­ver­tis­ing, seek­ing more trans­parency.

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