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What Is Blockchain? And How Will It Affect Programmatic?

December 13th, 2016   ||    by Todd Wasserman

What is blockchain? Many execs involved in programmatic advertising may soon be asking this question as blockchain emerges as a technology with potentially disruptive capabilities. Just as programmatic is revolutionizing the way advertising is bought and sold, blockchain may revolutionize programmatic by opening it up to more publishers and advertisers and streamlining transactions further still. Proponents say this technology—the same that underlies Bitcoin—can be used to make it possible for publishers to sell ads directly online without a middleman, or at least with less interference.

So, What Is Blockchain?

Blockchain is a decentralized ledger of transactions that forms the foundation of digital currencies like Bitcoin, The Wall Street Journal explains. In blockchain, transactions are essentially linked together in a data chain and can’t be tampered with.

Bitcoin, the most popular cryptocurrency, is based on artificial scarcity (users receive newly minted Bitcoins only after they lend their computing power to record transactions via blockchain.) And like Bitcoin, there’s no central authority controlling blockchain: It’s computations are made using algorithms from a distributed network of computers across the globe.

Cheaper Transactions

What is blockchain’s benefit for advertising? Faster and cheaper transactions. One of the first firms to apply blockchain to programmatic was BitTeaser, an ad network formed in 2015 by techies in the U.S. and Denmark. BitTeaser provides a mechanism to place ads via digital cash.

Users can buy ads and pay for them using Bitcoin, Dogecoin, or any number of cryptocurrencies. By allowing ad buys through basically cash transactions, BitTeaser and other firms like it shed many of the barriers to entry for small publishers—like a bank account. That may not be an issue in the U.S., for instance, but it rules out many small publishers in the developing world.

For larger advertisers, blockchain merely removes another layer between buyers and sellers. It’s not clear how much of a cut BitTeaser takes from transactions, though. On its website, the company claims publishers get the “highest percentage per click.”

Less Centralization

In addition, blockchain also provides ad-delivery verification, since it tracks all digital ad transactions. As MediaPost has pointed out, blockchain could even help create a massive identity graph of all consumers by combining blockchain technology with multikey encryption, which could take away some of the centralized data-based power of media and marketing companies.

The biggest change blockchain could effect is to streamline transactions between buyers and sellers. Programmatic has eliminated insertion orders and the haggling between human representatives that used to slow the process down. However, as MediaPost has also pointed out, the process still requires invoices, accounts payable and receivable, and a lag between placement and reception of funds. Using Bitcoin or another cryptocurrency based on blockchain could remove these barriers as well, making the process faster still.

Broadcast TV is still learning to embrace programmatic, so it’s likely that if blockchain takes off, it will do so via display advertising first. For TV, moving to a virtual currency for transactions may seem like one change too many. But if the ultimate result is faster and cheaper transactions, odds are the market will eventually find a way to embrace developments like Bitcoin and blockchain.

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