The digital ad ecosystem needs improvement. It’s no wonder that multiple blockchain projects aim to disrupt a market that is being dominated by an oligopoly of Facebook and Google. A couple of weeks ago, I already wrote about BitClave who are building a decentralized (product) search engine on top of Ethereum. There is also Basic Attention Token (BAT) by Brave, AdEx and a couple of other blockchain startups that target the digital ad market. This week’s ICO, Qchain, is in good company.
While both BitClave and Brave try to disrupt the digital ad ecosystem with rather ambitious plans, Qchain wants to keep it simple. They plan to take the current media buying model to the blockchain, thereby freeing it from the oligopoly of Google and Facebook and improving on a couple of other serious flaws. In their own words, Qchain’s vision is to “build a suite of open and transparent applications that provide decentralized and secure solutions for digital advertisers, in-house marketers, content publishers and everyday Internet users alike.” Why do we need this?
Digital ad spending has grown to $544 bn. in 2016 worldwide. Google and Facebook account for more than 50% of these expenses. When it comes to display advertising, Google is outperforming everyone with its own ad exchanges, Adsense and DoubleClick. There are a couple of other large ad networks and they all serve one goal: bringing together advertisers looking for ad space and publishers who sell ad space. The current, centralized marketplaces take a large share of the pie in the form of fees. That’s the first problem of the digital ad ecosystem today: advertisers pay too much for ad space and publishers are fighting hard to survive because their ad revenue just isn’t enough to sustain enough editorial quality.
The second major problem is that the ad ecosystem is bloated with an endless number of different actors who also claim their share of advertiser’s money. I already used the following graphic in my text on the BitClave ICO but will post it here again so that you get an impression of how vast and ridiculously complicated the digital ad ecosystem is:
All these players claim to bring crucial added value to the ecosystem. Many services are indeed helpful, some even indispensable, but again, it makes buying and selling ad space on the internet complicated and expensive. There is obviously room for optimization.
Qchain’s main product will be a decentralized ad exchange as an alternative to the large ad networks that take away a big chunk of publisher’s earnings. The company thereby uses one of the main advantages of blockchain technology which is the redundancy of middlemen. Instead of paying Google or Facebook to match your media spending with publishers, you will be able to buy ad space directly from publishers using smart contracts. As in many other blockchain projects, Qchain has its own token with which advertisers will be able to pay for their rented ad inventory.
The way it works is pretty straightforward: advertisers and publishers meet on the Qchain platform by searching their counterpart according to different criteria. Qchain built a very user-friendly interface that you can try out here. More information on the demo can be found on their blog. The way it works should be familiar to anyone who has ever used any kind of internet marketplace: You choose whether you are an advertiser or publisher, then you filter the results according to different ad/publisher categories and the price you would like to spend/earn. The front end then displays ad inventory or ads that match your criteria.
When you buy media as an advertiser via Google AdExchange today, you have a variety of options to choose from. This shall guarantee that your ad will be displayed either on a website that fits your branch or is targeted to a group of users that will most likely be interested in your offering. It’s supposed to avoid wastage. However, as an advertiser, you don’t get to see where your ads appear as the large ad networks often use what is called Real Time Bidding (RTB). In this model publishers and advertisers are matched automatically depending on a variety of criteria. This happens for every single impression and it’s one of the reasons why you see Ad “1” when you go to a website while your friend sees Ad “2” on that same page. There is practically no connection anymore between advertisers and publishers.
This automated way of buying media online has caused a debate on what we call brand safety. Because advertisers have little control over where their ads end up, they risk seeing their name on pages that are not in line with their brand’s values. Ads by large companies such as Mercedes-Benz which have appeared in front of extremist YouTube videos have sparked an intense debate on that topic. I myself write for a large German blog that has been accused of being racist/extremist which made advertisers panic and blacklist our site, leaving a deep dent in the revenues. Some YouTubers have experienced a similar thing when YouTube, accused of displaying ads in front of extremist videos, altered its algorithm which suddenly cut off even harmless channels from advertiser’s money. If only there were a way to connect with advertisers directly, all this wouldn’t be a problem. Advertisers would know where their ads appear and publishers could target their inventory directly to those advertisers that suit their audience best.
There is one more advantage of taking media buying to the blockchain: it gives advertisers and publishers full transparency. If an advertiser wishes to check how well his ads perform on the different websites, he can do so since the ledger is publicly available. It also prevents a third big flaw in programmatic online advertising which is ad fraud. Bad actors will have a harder time faking ad impressions if the ecosystem is built on transparency.
Besides their main product, the decentralized ad exchange, Qchain also plans to build its own data management platform. In order to avoid wasting impressions on people who will most likely not be interested in the advertised product, marketers use a vast amount of data for targeting the right audience. Let’s stick to the example of Google. The reason for the success of its ad exchange is that Google collects and analyzes huge amounts of data on every person who has ever used one of its services. That data is being collected without consent, and it is worth a lot. So much that users might want to monetize their digital traces themselves. In that aspect Qchain, BitClave and Brave pursue the same goal: offer users a way to tokenize and sell their data.
Qchain is not the first project involved in bringing the ad ecosystem to the blockchain. Along with AdEx, they seem to stick to the basics: build a functioning ad exchange that, if successful, will make media buying cheaper, more transparent and safer.
Disclosure: This is not an advertisement for the company’s ICO. I am not taking part in any bounty program. Also, this is no investment advice. Information might be inaccurate or miss out on certain parts. Do your own additional research if you’re interested in investing.