How Blockchain Will Fuel Growth and Innovation in Ad Tech

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Ad tech is a fundamentally opaque and complicated ecosystem. Advertisers and publishers are increasingly unhappy with the lack of transparency, diminished profit margins and decreased control. We ultimately need to develop new infrastructure that’s driven by innovative technologies, such as blockchain, to solve the problems of ad tech.

Blockchain has become a catchall phrase, at the core, it’s a decentralized ledger, or foundational technology that records several transactions as a block. Blocks are serialized into a chain (forming the blockchain) and can include cryptocurrency and smart contracts. These blocks are continuously time-stamped and verified by a peer-to-peer network. Once added, the data cannot be altered, making it a single source of truth.

Over the last few years, we’ve seen blockchain-powered ad platforms and some blockchain-enabled programmatic. Blockchain is expected to be a $176 billion industry by 2025. Industry leaders like IBM, SAP and Infosys are investing heavily in the technology.

So what are the most impactful uses in ad tech? Let’s take a look at how blockchain can help create effective targeting, make consumers safer, shed light on transparency in programmatic, and democratize data for the consumer and advertiser.

Applications in ad tech

1. Identity Graphs with Blockchain Cryptography

A lot of interesting developments will come from Identity graphs implemented via blockchain technology. Historically connecting consumers across different platforms relied on device IDs and cookies. It’s critical to understand your audience(s) and resolve users’ identity across devices for effective digital ad campaigns. One of the benefits of blockchain cryptography is the ability to match data in a deterministic way without sharing or exposing the data to outside parties unless wanted. The verification of user identity across devices and platforms, while maintaining privacy controls, is every marketer’s dream. Brands need a clear way to link consumer data, especially given Google Chrome’s announcement to sunset third-party cookies. It will become increasingly harder to maintain consumer data. Blockchain is the innovative layer of tech needed to create this.   

2. Media Buying and Programmatic Ads via Smart Contracts

Blockchain can serve to expedite multiparty payments in automated advertising, enabling near-immediate payment to the publisher with block-chain powered online ad platforms. This will be a huge relief to publishers who don’t usually receive payment for net 60 or net 90 day cycles. Companies can also use blockchain for deal IDs and private marketplaces (PMPs). Through blockchain, all impressions are verified through a smart contract. Smart contracts define agreed upon terms in software, in this case between advertiser and publisher, all conditions must be met for the transaction to be completed. The beauty of this concept is: rules, conditions and requirements are described in exact terms. If these are met the contract gets executed. This not only reduces ad fraud, but can contribute to better efficiency.

3. Targeting Owned by the Actual Consumer

Some startups have already created a blockchain-as-a-service platform that gives consumers the ultimate controls on their data, what type of companies can use it, and what type of ads they see. Imagine selecting the industries you want to see ads from—retail, lifestyle brands, or region-specific ads. Consumers could sell their data to select advertisers that they approve in advance. This also works in favor of advertisers. With the help of blockchain, ad platforms can automate campaigns based on specified demographics, psychographics, etc. If the audience falls into that specific criteria, only then will the ad be visible to them. Advertisers can maximize budget by only showing ads to consumers who have opted in, and are already interested in their brand.

4. Reduce Fraud and Fight Discrepancies 

Fraud remains the biggest challenge in digital advertising. It goes without saying, that ad tech loses billions of dollars in fraud every year. It’s very difficult to identify the fraudulent clicks and impressions—and very frustrating for brands to pay for it. Blockchain technology can help to improve upon the existing practices of third-party providers when flagging domains with click discrepancies and bot infiltration. This will be a huge disruptor in today’s verification market, where many third-party companies are needed to track, verify and certify all digital transactions across the disparate ecosystem.

5. Guarantees Transparency & Privacy by Cryptography

The differentiator that blockchain technology brings to the table is the trust that comes from a public ledger which is immutable but still guarantees privacy by cryptography. Publishers and advertisers can’t see how their money is being used in the current architecture. Blockchain records every transaction, and therefore shows complete transparency to both sides of the media buying transaction– this is especially impactful in dealing with DMPs, SSPs and exchanges. Publishers still stand to lose a lot from the inevitable claw backs that emerge after validation. Moving forward, everyone involved will see exactly what goes where, why and in what quantity so we can accurately allocate budget with genuine clicks.

Consumer privacy also remains a massive concern in digital ads. Many countries are taking initiative to prevent illegal practices, such as security compliances like GDPR, CCPA, and COPPA to maintain a higher level of consumer privacy. Blockchain is able to maintain consumer anonymity while assuring safe, verifiable transactions.

Is insufficient scalability a problem?

The potential for blockchain is evident, but currently the technology can’t process real-time advertising transactions fast enough (for now). Confirmation times for a transaction to be validated and added to the public ledger range between 5-10 seconds each. Compare that to most DSPs that can process up to 2.000.000 bids per second.[2]  That’s a huge operational gap. But over time, with the correct architecture, the gap will close. It’s currently being used as a post-campaign layer to help validate transactions after the ad is served and reconcile money for publishers faster than the industry standard.

What’s the verdict?

Blockchain is still relatively nascent, but it’s moving us in the right direction to have key conversations around trust and transparency, industry clean-up, and building new infrastructure. Scalability issues need to be addressed before widespread adoption can occur. Rather than a standalone application, blockchain should be considered a feature of a larger tech stack.

Blockchain is poised to evolve and will become an underlying technology for how we buy and sell ads in the future. According to Gartner’s Hype Cycle for Blockchain Business, blockchain will be the most transformational within the next 5-10 years. It’s a pivotal technology that will mitigate fraud, maximize ad spend and put privacy controls in the hands of consumers.

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