The recent Adledger conference on the intersection of new technology and digital advertising included a panel of experts discussing how blockchain might improve the online programmatic market. The panel included a handful of professionals representing brands, publishers and agencies, and they all seemed to appreciate the stakes. To their credit, despite having come up the ranks in the legacy era, they can all be considered pioneers on account of joining an organization like Adledger and being open to reinvention of their industry.
The conversation was lively, but there was a sort of tension in it, because most were trying to argue that blockchain would indeed change their industry, without actually changing it. Let me explain.
In case you aren’t familiar, programmatic advertising is where online content sites auction off “eyeballs” to brands looking to advertise. In between sit a morass of intermediaries who supposedly provide an important service while taking a cut, as demonstrated in the picture above. Everyone gets paid on volume, and neither the party paying for the service nor the one providing it has much visibility into what happens in the middle. As often happens in markets with low transparency and poor incentive structures, fraud and abuse run rampant, and the middlemen end up eating a lot of the value.
The problems with this market remind me of the securitized mortgage market before the crash, and some of the experts I’ve talked to within the industry don’t disagree. Research shows that up to a third of all money spent goes to fraudulent bots and domain spoofers, and even the “honest” work being performed by the intermediaries takes such a chunk of the profits that it is collectively known as “the tech tax.” If there was ever a market in need of transparency, provenance, consensus and “a single source of truth,” it’s this one. Thus the birth of Adledger itself, and a handful of blockchain startups trying to apply the tech, or even just specific aspects of it, to the industry.
Which brings us back to that panel. While everyone on stage agreed that the current market has its problems, and that blockchain could be a force for good, nobody wanted to admit the obvious fact that success means eliminating some of the folks in the middle. One panelist even said that he doesn’t care for the pejorative use of the word tax, “so long as everyone is doing something valuable.”
I appreciate where he is coming from, but his thinking misses the broader point that you don’t need to be doing something “not valuable” under the legacy model to be a candidate for disintermediation in the new one. In fact, I would argue that most companies that have been disintermediated throughout the ages were doing something highly valuable. That’s why they were targeted. (“Your profit margin is my opportunity,” and all that)
I experience this tension in blockchain conversations regularly. On the one side you have the people who value the transformative nature of the tech, and on the other you have those who don’t want anyone to lose their job or go out of business. Sometimes both ideas are held by the same person. The cognitive dissonance is understandable, but unsustainable.
Lest we forget, the whole point of this technology is to decentalized and disintermediate. Great for users, but bad for intermediates. Just as you can’t have “Peer to Peer Electronic Cash” without eliminating those that traditionally sit between sender and receiver, you can’t have blockchain-enabled programmatic without cutting out some of the boxes pictured above. Otherwise, one shouldn’t bother. The trade-offs of moving to a distributed ledger of some kind are too significant to try to dump your current industry stack into it.
So the next time someone proposes a blockchain solution to a legacy problem, it’s worth asking who they are going to put out of business. And for those sitting smack dab in the middle (here’s looking at you shared economy platform) I recommend considering the old poker adage about taking a hard look around the table and seeing if you can spot the patsy.