The rise (and fall, and rise, etc.) of cryptcurrencies like Bitcoin and Ethereum brought mainstream attention to blockchain technology. And advertisers and online publishers hope blockchain-based ad buys could expose bad actors in digital media.
Despite the hype, however, the number of advertising dollars transacted through blockchain technology is near zero, and blockchain ad tech startups remain in closed beta and test phases.
Blockchain ad platforms must overcome a number of challenges before mass adoption, like getting conservative global brands to try out cryptocurrency tokens or convincing tech platforms to build for budgets that don’t exist yet.
Supply Chain Hopscotch
Blockchain technology is caught in a digital media paradox: Buyers don’t test platforms without inventory scale and media companies won’t add integrations without seeing demand.
Many blockchain ad startups began with brand deals, in part because brands have other potential use cases for blockchain tech, like tracking inventory from product supply chains.
With a blue-chip client in tow, all its supply chain partners will align for testing, said Will Luttrell, founder and CEO of blockchain ad platform Amino Payments and a co-founder of Integral Ad Science. T-Mobile is Amino’s only public brand partner, for instance, but it can audit all campaign tech and data contributors.
“The current bottleneck is platform integration,” Luttrell said, because exchanges and ad tech companies do most of the heavy lifting on software integrations.
DSPs are particularly difficult to corral because their engineering teams are back-logged and blockchain experimentation isn’t a priority, said Ken Brook, co-founder and CEO of the blockchain ad startup MetaX. “Though that’s shifting as DSPs start to see blockchain as a potential differentiator.”
The ad analytics company Kochava announced the blockchain development platform XCHNG earlier this month, and sees itself in pole position to develop a full-ecosystem blockchain solution because it has existing accounts and ad tech partners, said founder and CEO Charles Manning.
XCHNG won’t go live until late 2018 or even 2019, he said, but blockchain-first startups have “a huge burden even to get into demonstrating proof cycles.” And while scaling inventory is another mountainous task for blockchain startups, XCHNG has lined up Kochava supply partners like AppLift, Chartboost and AerServ (recently acquired by InMobi).
And others see agencies as the quickest route to marketing dollars. For instance, the blockchain platform MadHive has been transacting data for OTT campaigns via a partnership with its main client Tegna, a marketing services company.
Currencies
Blockchain adoption is plagued by daunting jargon – like talk of “decentralized nodes” and “immutable ledgers” – but a bigger challenge is the distrust of cryptocurrencies among potential partners.
Before blockchain growth can really take off, “there’s a major education process that needs to happen around currency,” said Manny Puentes, founder and CEO of blockchain ad tech company Rebel AI. Potential partners respond to the blockchain transparency pitch, he said, but if the discussion is bogged down in cryptocurrency people tend to tune out.
Major holding companies won’t pay for media with any kind of cryptocurrency, at least in the near term, Manning said. Yet, crypto tokens are necessary to execute actions on a blockchain, so vendors have to be able to convert their cryptocurrencies to hard dollars.
Amino has an internal cryptocurrency called Grain, each one-billionth of a penny, but talk with clients is anchored in US dollars.
Kochava’s XCHNG has one confirmed payment partner, Payability, to turn its platform tokens into dollars so clients never have to deal in cryptocurrency.
While most startups bury their internal tokens to avoid discomforting clients, others are eager to force the crypto conversation.
“The only way to change behavior of stakeholders is to change incentives,” said MadHive CEO Adam Helfgott about the decision to hold an initial coin offering and channel partners through its MADToken currency.
Companies trying to force legacy payment models onto a blockchain system are taking the easy route to product inferiority, Brooks said. “You’re not unlocking value if you don’t embrace the key aspects of the technology, and for blockchain you need to have the cryptoeconomics.”
