Blockchain technology, the basis of cryptocurrencies such as Bitcoin, took off in 2017 across a wide array of industries, and is poised to make significant strides in digital advertising in 2018. The inherent benefits of blockchain – security, transparency and accountability – hold great potential for the digital advertising industry, where marketers and publishers have been struggling to combat bot fraud and transparency issues. However, the same benefits also pose a variety of technical, practical and legal barriers.

Blockchain is a decentralized and mutually-verifiable digital ledger – like a digital spreadsheet where entries are verified by consensus. The transactions are encrypted and cannot be erased or altered once they are entered, and because they are confirmed via consensus, the need for an independent middleman is removed. Theoretically, this creates an environment of greater transparency, security and trust between all parties involved in the digital advertising ecosystem, and many in the digital ad world are jumping on its potential to solve their woes.

In September 2017, the Interactive Advertising Bureau (IAB) announced a working group would begin "exploring ways to leverage blockchain to improve efficiency and value realization in digital advertising," but the purported benefits, like diminishing bot traffic, promoting viewability and protecting brands from unsavory content, were enough for some, particularly start-ups, to begin utilizing blockchain in digital advertising right away. Among those were a company that uses blockchain technology to crowdsource a verified whitelist of non-fraudulent publishers, and another that acts as a decentralized ad exchange with a focus on fraud, privacy and consent.

While many are bullish about the prospects of blockchain in the digital advertising industry, there remain a number of potential roadblocks. Among the technological concerns, for example, is that the benefits of transparency and mutual verification come at the cost of transaction speed, which will pose a problem for real-time bidding. From a practical standpoint, requiring mutual verification from all "nodes" involved in a particular transaction may be unworkable.

There are also a number of significant legal issues associated with the rise of blockchain. First, while having all relevant transaction data available as part of the blockchain may increase transparency, certain information may be subject to data privacy laws, applicable privacy policies or the data security obligations of a particular party. The fact that the data cannot be altered raises concerns as well – because once private or personally identifiable data is disclosed, it cannot be easily retracted, even if erroneous. Another potential concern for parties to consider is who actually owns the information in the blockchain. If all relevant parties have access to view and independently verify the blockchain data, the next step is to define and police each party's respective rights to use, repurpose and distribute such data.

Key Takeaways:

  • Blockchain technology can potentially increase transparency and trust among stakeholders in the digital advertising industry.
  • Legal considerations related to data privacy and intellectual property should be addressed before participating in blockchain-based ad platforms.
  • Media contracts will need to allocate liability differently on issues such as ownership, infringement and data to address the use of blockchain in the media ecosystem.

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