At the end of last year, we announced that DCMN would be a strategic OnXCHNG partner with Kochava, as an early participant in the blockchain enabled ad ecosystem. To continue the conversation around blockchain and OnXCHNG, we’re excited to bring you an interview with Kochava Founder and CEO, Charles Manning, and DCMN Director of Mobile Products, Anil Kutty. In the interview below, Charles and Anil share their thoughts on everything from why blockchain is useful to how it will transform the ad tech industry.
What is blockchain and why is it useful?
A: In its most simple form, blockchain is a database, which has copies on multiple computers, making it widely accessible but without a single company controlling access to it. It can be used for everything from keeping track of payment transactions (e.g., Bitcoin blockchain) to advertising related data (e.g. XCHNG blockchain). Recording something onto the blockchain requires consensus among multiple-parties (called miners), who are participating in collectively managing this blockchain so the data stored is verified and not subject to falsification. This is one of the great things about blockchain since once something is recorded, it can’t be changed; it’s tamper-proof and secured by advanced cryptography.
The benefits of blockchain are that it offers independence, transparency and security, and users no longer need a central intermediary like a bank or programmatic media buying exchange. This has huge benefits in terms of costs, efficiency & reliability.
How can blockchain be applied to advertising?
A: Blockchain directly impacts advertising by enabling a number of use cases/applications in the advertising ecosystem. It can be used for the trading of media, similar to the way commodities like gold or crude oil are traded. It’s also an ideal registry for non-fraudulent publishers to tackle the rampant fraud in digital marketing. Additionally, its benefits can be extended to data-sharing among competing TV networks, incentivising users for sharing their data for advertising and as an efficient digital marketing ecosystem without intermediaries.
C: The overall promise of a blockchain is to have protocols for key services, a standard approach to smart contract execution, and a common ledger from which all actors on the blockchain participate. With this in mind, we saw huge opportunities within the advertising ecosystem to bring together the supply chain on a common ledger, facilitate key services via open protocols, and bind the buying/selling process with smart contract insertion orders. By doing these things, digital advertising goes from being opaque to transparent and goes from being splintered and fragmented to being uniform across actors. Whether advertisers (buyers), publishers (sellers), or other industry players, all parties stand to benefit from a more transparent, efficient marketplace. Advertisers in particular, frustrated with today’s cumbersome and wasteful system, are demanding that the industry move in this direction.
How, specifically, will blockchain help protect advertisers?
A: Blockchain offers not only an unbiased way to identify ad placements that perform well from verified publishers, which decreases intransparency and fraud, but it also provides decentralisation thus removing intermediaries and driving efficiency.
Blockchain offers not only an unbiased way to identify ad placements that perform well from verified publishers, which decreases intransparency and fraud, but it also provides decentralisation thus removing intermediaries and driving efficiency.
C: A blockchain system delivers appropriate transparency and openness, which as Anil mentioned, is unbiased and backed by unmorphable identities as they’re represented by cryptographic signatures. Advertisers who buy media from say, The New York Times, know when they’re interacting with inventory on The New York Times versus a spoofed site.
What are some of the current limitations to how blockchain can be applied to advertising?
A: The technology is still in its early stages but evolving quickly thanks to an enormous interest in cryptocurrencies, which has led to the surfacing of some core issues that decentralisation brings. The issue of scale is the most talked about for digital advertising. For example, payment providers like Visa support over 45,000 transactions per second, and programmatic bidding exchanges see bids on millions of impressions per second, while the Ethereum blockchain currently supports just 15 transactions per second. Scaling is a hot topic and is being addressed in the roadmap of all major blockchains. The solutions offered a compromise between three key factors: decentralisation, scalability and security. XCHNG addresses this problem in a different way, which Charles can speak about.
C: Right now, the biggest limitation is the time involved in any technology transformation to a new system or new protocol stack. From a capabilities perspective, nothing is stopping development and the facilitating shift from the current digital advertising landscape to blockchain. There is a misconception that digital advertising isn’t scalable due to sheer volume on blockchain, which has been disproven during our benchmarking test, boosting a 180,000 transaction per second, per smart contract IO. Across smart contract insertion orders, this benchmark enables millions of transactions per second across all media and exceeds today’s volume requirements in aggregate.
Which problems in digital advertising does XCHNG solve?
C: Everyone most likely has seen the Lumascape diagram showing how complex the digital advertising ecosystem is. All these intermediaries chip away at the ad spend meant to acquire and engage consumers. In addition, this complexity has inadvertently created opportunities for fraud. As a result of the way the current ecosystem is structured, advertisers are losing an estimated 50 percent of their ad spend to entities diverting from their advertising efforts. XCHNG is being built to specifically unify the ledgers that all of these actors leverage when serving an advertiser and reduce the number of middlemen in the ecosystem, which creates obscurity in media buying and indirectly leads to fraud. It boils the transaction process down to the buyer, seller, and measurement provider at minimum. XCHNG delivers appropriate transparency and openness, and the system has been architected to avoid the unnecessary burden of extraneous nodes on the system and to maximize scale for high-transaction volume applications like advertising.
What will be some of the challenges of industry-wide adoption of new platforms like XCHNG?
C: The largest challenge will be adoption, but this is true with any new emerging technology. All players within the ecosystem move at different speeds due to approvals, learning, and ultimately transitioning to a new system. We expect to see a great deal of testing from all sides prior to transitions over into the new platform. XCHNG will never fully replace or consume all media buys/sells within the ecosystem, just like email didn’t replace physical mail or how cell phones didn’t replace landlines. It’s important for the advertising industry to remember that XCHNG is an underlying technology offering access to the benefits of blockchain. It’s easy to become blockchain-ready, and transacting on XCHNG will not require a whole new set of skills for marketers.
How do you think the use of XCHNG will transform the ad tech industry in the next five years?
C: XCHNG will transform the industry by treating digital ads as a true asset class. Providing standardised, fully integrated and verifiable digital ad inventory with a common liquidity framework like this will give the ecosystem a more stable and efficient playing field and enable a secure environment for scale. The net result: we believe that XCHNG will enable the next cycle of hyper growth in the advertising industry.