The blockchain will restore balance to a market that desperately needs it — the ad market. There is an unusually large number of blockchain companies desperate to get involved. When I last took a look, I counted nineteen. This is the list: Algebraix, Adbank, Adchain, Adcoin, AdEx, AdsCash, Adshares, AHOOLEE, ATMChain, BAT, Bitclave, Kind Ads, Mass, Nexus, Papyrus, Presearch, Qchain, Rebel AI and XCHNG.
I keep an eye on them, because I do the competitive analysis work for Algebraix. But it’s probably not an exhaustive list, as I’ve not done a web sweep for a few weeks now.
The Dark Secret of the Digital Ad World
Ok, it’s clear that web users hate digital adverts, especially pop-ups and anything animated. We install ad blockers, and if anything gets through, we focus away from the ad noise in search of the signal we seek. It’s an awful environment ruined, in my opinion not by the technology but by the lack of it.
When the Internet emerged, in theory, there were two possibilities for magazines and newspapers if they wished to earn a living in the digital world. Either readers would have to pay for content or publishers would gather revenue from advertisers.
But in truth, there weren’t two options; advertising was the only logical option because a paywall was impractical for most publications. The only newspapers able to buck this trend were the Wall St Journal in the US and the Financial Times in the UK. They were specialist newspapers in that the readership placed a high value on the content and much of it was focused on the financial markets.
Later, several other newspapers migrated to the paywall model, usually providing a subscription to cover both Internet access and a physical copy of the paper.
The Hound That Didn’t Howl
The missing technology — the dog that didn’t bark in the night — was micropayments. The cost of making payments on the Internet was way too high — several dollars.
In contrast, you could charge a few cents for a click on a web ad, and with enough traffic, those small amounts would accumulate. Middlemen soon emerged to distribute ads . Nowadays they do it real-time, which is why you get the creepy phenomenon of web ads following you from website to website.
Micropayments love the Blockchain
Bitcoin transactions once cost just a few cents — even in early 2017. That was in the days before the Bitcoin war that saw two rival Bitcoins giants strive for dominance (BTC and BCH). Both claimed to be the true Bitcoin, but only one fought for low transaction fees.
Other pretenders to the low-fee crown quickly emerged. One company, SatoshiPay, whose business is micropayments, moved its operations to such a pretender, ITOA, when Bitcoin payment costs started to soar.
It’s micropayments that will revolutionize the ad market. The lack of micropayments made publishers dependent on advertisers. It distorted the market. With the advent of the blockchain, balance will be restored.
The Blockchain Ad Market
So there are at least 19 blockchain businesses focused on the ad sector. Some are niche operations, providing antifraud services or binding an advertising network to the blockchain. If we disregard these, you can identify four distinct ad market business models:
Businesses trying to remake the triangular relationship between user, publisher and advertiser. This is the largest group, of which there are at least five. Basic Attention Token (BAT) appears to be the leader.
Businesses trying to provide a Google search/adword type of capability. There are three, of which Bitclave appears most prominent.
There’s just one company, Nexus, that seems to be emulating Facebook — a social network with ads.
Finally, there’s Algebraix, which seeks to establish a direct consumer-to-advertiser relationship (like Groupon or Yelp, but also not really like Groupon or Yelp).
The situation may be analogous to the birth of the PC software market when there were at least a dozen different word processors, spreadsheet and PC databases. Only one or two survived for long, but they made a huge impact.
Why “Like a Tornado”
What the blockchain boys are doing is more disruptive than it might appear on the surface. They will gradually syphon revenues from current digital ad giants because they distribute the revenue more evenly.
There are several dynamics here:
Because of micropayments, consumers can directly pay content providers (publishers) to view content they like.
Because of micropayments, publishers will not need to be dependent on digital advertising.
As a consequence a different relationship between publishers and advertisers can emerge, (based on readership targeting) rather than one based on real-time feeds (aggressive consumer targeting).
Because of micropayments, advertisers can pay consumers directly for their attention. This will likely improve advertiser ROI.
As these dynamics play out, consumers will migrate to these advertising ecosystems and the current digital giants will shrink in size.
Read all of Algebraix CSO Robin Bloor's blogs here: https://medium.com/@robinbloor