Blockchain can solve some of the biggest problems currently plaguing the current ad tech ecosystem. Ad tech’s problems extend far beyond consumer privacy – from rampant fraud to the near complete lack of transparency. But is blockchain a Band Aid, or a real change agent? In this piece for ExchangeWire, Adam Helfgott (pictured below), CEO, MadHive & MAD Network, discusses why, with the right approach, it may be able to truly change ad tech for the better.

Everyone’s personal and professional lives are conducted online, where it seems as if every page or app we interact with is meant to vacuum up and redeploy our data for ad targeting. Though privacy is an understood right, that belief has historically been no match for corporate incentives for profit.

Until recently, invading consumer privacy has been the sensible course of action for many corporations. The rewards are high, and the risks – in the form of government-imposed data privacy fines – have been relatively low. Last September, Spain fined Facebook $1.4m (£1.02m) for privacy law infringement, and France had levied its own fine of $166k (£120.7k) against the social media giant in May as well. These sound like big dollar amounts. But compared to Facebook’s quarterly profits upward of $4bn (£2.9bn)? It’s worth taking the penalty every time.

Adam Helfgott, CEO, MadHive & MAD Network

Facebook even responded to Spain’s fine with a blasé objection at the time: “We take note of the DPA’s decision with which we respectfully disagree.” Their response to France read similarly. To them, this was the (relatively low) cost of doing business. However, that’s about to change.

On 25 May, 2018, the General Data Protection Regulation, GDPR, will take effect. Companies that do not comply with these rules, passed last year by the European Parliament, face maximum fines of €20m (£17.75m) or 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher. Based on total revenue for 2017, the maximum fine that could be levied on Facebook would be just over $1.6bn (£1.16bn). A blasé response to a figure like that seems unlikely.

GDPR is a strong incentive for companies to be more careful about the data they collect and how they use it – and it should actually help companies retain customers in the long run. That said, according to a 2017 study from SAP Research, 80% of consumers would permanently break up with a brand over unauthorised data use. If given the choice, 30% of people would rather not give away any of their data in the first place. And a whopping 90% indicated they would rather not share any of their social media data or income information.

In the current paradigm, advertising technology is more ‘effective’ as more consumers give up their privacy, and that’s the problem. Today’s advertising technology – even in the most compliant scenarios – pits consumers against companies.

But does it have to be that way? Not necessarily.

Blockchain can solve some of the biggest problems currently plaguing the current ad tech ecosystem. Ad tech’s problems extend far beyond consumer privacy – from rampant fraud to the near complete lack of transparency, and a deep stack of middlemen who collect up to 60-70% of each ad dollar like some kind of ‘acceptable’ tax on the supply chain. Incredibly, for every dollar an advertiser spends, publishers are left with only 30-40% of that dollar. It’s a broken system.

Applied in its most basic form, blockchain technology could provide at least a partial solution to many of these issues. Advertisers could more clearly see where their dollars are disappearing to in the supply chain. Publishers could to see exactly where advertisers are bidding, and potentially remove bad actors just by way of the shared ledger.

While a simple blockchain implementation for ad tech may provide a path to remediating some of the core issues, it doesn’t actually solve the problems – it just treats them. It’s a Band Aid.

It’s widely accepted that blockchain technology has the power to truly transform how we approach problems, and the ability to fundamentally improve systems. With the right approach, blockchain can deliver ad tech that’s driven entirely by first-party data, while simultaneously maintaining complete consumer privacy. Ad tech with privacy by design.

Personal data is a valuable commodity, but corporate entities must be forced to respect privacy in today’s ad environment. The impending deterrent of GDPR will help. But to repossess consumer privacy for good, we need to develop a new kind of advertising technology in which privacy and profitability coexist. Respecting consumer privacy has to make the same kind of financial sense for corporations that invading it does today.

Blockchain technology will not only eliminate the costly intermediaries in the ad tech ecosystem, giving advertisers more media for every ad dollar, but it will also enable targeting based on real first-party data. And consumers won’t have to expose their data. Ever.

With blockchain being intrinsic to ad tech, consumers will actually opt into sharing information, not just because it’s safeguarded and never actually possessed by the advertising companies or agencies, but also because it will deliver truly contextual advertising that’s actually valuable. With privacy by design, regulatory compliance becomes a byproduct of this new system.

So, is blockchain a Band Aid, or a real change agent? With the right approach, it may be able to truly change ad tech for the better.