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How blockchain will fix the digital ad industry

  (IMAGE: SHUTTERSTOCK)

(IMAGE: SHUTTERSTOCK)

Has Facebook’s data breach caused ad executives to find alternative avenues to reach their intended masses? Christian Ferri, president and CEO of BlockStar, believes blockchain technology has an answer. Ferri believes blockchain technology will allow consumers and users to submit their data, be more transparent with brands and ad executives, and allow users the choice to opt-in and out of ads. This could be one of the most practical ways blockchain could reach the masses.

The concept of using blockchain for non-financial transactions is a difficult one, largely because it takes a decentralized network of thousands people running powerful software to create and maintain the blockchain. Running that software comes at a cost. Whatever the blockchain application, how do companies that don’t also offer an ICO (whether it’s in the food industry or healthcare or social media) strategize to grow their platforms from an enterprise perspective?

It’s also a rough time for ad tech startups. Venture capital money going into ad tech startups is falling sharply, helping push a wave of consolidation. Financing reached a high of $2.92 billion in 2015, but this year, it’s on pace to be less than half that, according to CB Insights. And the number of independent ad tech companies has fallen 21% since 2013, to 185 as of the second quarter of 2018, according to LUMA Partners, which analyzes digital media and marketing.

Some fear that the contraction could also mean a slowdown in innovation. Advertising has long been an attractive area for startups. During the last 10 years, the ease of forming companies and the availability of cheap venture capital led to a flood of ad tech startups, pushing boundaries on where and how ads were delivered. They introduced technologies like the automation of ad buying, and header bidding, in which many ad exchanges bid on publishers’ space simultaneously, according to the New York Times.

“From a blockchain network we’ll see change in a couple of ways,” Ferri points out. “One is the speed. Right now we’re at like 1,000 transactions per second.” Compared to the 24,000 per second that Visa is capable of handling, this is considered infantile.

In terms of blockchain innovation, however, it’s an exciting time for many pioneers. “Sidechains are like a 2.0. There’s even some 3.0 solutions. It’s all still in beta. You’re going to see bidding for digital transactions, and the costs are going to go down. You’re going to see a better price. A second thing that is equally or more important [with blockchain] is the transparency,” says Ferri.

“If an advertiser says they’re going to hit 20,000 impressions, they’re going to hit it, and you can see it. Right now we have click through rate, or cost per impression. Are those organic searches? Or are those paid? Can we separate the two for instance? 50/50 or 70/30? You’ll get a better, more accurate report, and also in turn create more trust from the ad industry.”

A sidechain is a separate blockchain that is attached to its parent blockchain using a two-way peg. The two-way peg enables interchangeability of assets at a predetermined rate between the parent blockchain and the sidechain. The original blockchain is usually referred to as the main chain and all additional blockchains are referred to as sidechains.

As far as sidechains are concerned, Ferri says, “It’s like Maslow’s hierarchy of needs. They have to be debugged, secure, to create the foundation of trust, and that’s when you’re going to see the big results.”

A company that BlockStar consults for, Sapien, seeks to create a social news platform that gives users control of their data, but you have to use a SPO token in order to access and use the platform. “Blockchain and crypto are hard to separate right now,” Ferri agrees.

There are plenty of other platforms using blockchain to create a whole new social media news platform like Steemit, Sola, Indorse, onG.social, PROPS Project, among others.

Should the Facebooks and Twitters of the world should be responding? “Yes, I think so,” says Ferri. “I think there’s a connection there from multiple aspects. Identity management, you are who you say you are. Ownership of the data, and you permission company or individuals."

One of the perennial issues that continues to dog blockchain technology, however—especially as it reaches into enterprise solutions—is distinguishing between the technology and cryptocurrency. Muddying the waters, many of these blockchain social media platforms require a token in order to use.

“We’re keen in the space, and we’ve been in it for several years now. We’ve been working with medium-to-small size companies. We’re helping to consult as former consultants that understand the complexities of business that can help companies enter the blockchain-era. Our services, in turn, help democratize the world and the future customers. We help the company’s tokenize.”

Why? According to Ferri, companies have “dormant areas.” Maybe it’s a patent that nobody’s using, or an empty building. You can tokenize it. You might get some cash flow from it, but also a buy in from the community. It can help a company be seen as caring about the community and others.

Ferri admits that crypto can be a pain right now. “It’s like the early days of using money to pay for a phone. It sure wasn’t an iPhone. Part of the evolution is the technology,” he says.

So, with Bitcoin and other cryptos going down and (for the time being at least) staying down, how are such companies supposed to get people excited about purchasing virtually unknown tokens? “The early adopters are going to have to drive it. These companies are depending on the pioneers,” says Ferri.

“You can tokenize virtually anything. You need to appeal to the pioneers that are looking for something new and exciting, and it needs to be easy enough, and they can become the champions of this new movement. I see this movement taking off pretty soon. Think about every company right now that has to go through this regulatory bottleneck.”

“The power is to the people at first. We tend to group up. It’s human behavior. It’s a wide open time right now for digital advertising. 10 years down the road we’ll tend toward the regulatory,” says Ferri.

For now, the consolidation in the venture capital world may be a necessary contraction, but once blockchain technology reaches a tipping point—with or without tokens—there should be another infusion of funding and, as a result, innovation.