Mad Finance | decentralization and the future of ad tech

Although the mediums of advertising have changed with furious pace in the past century, the core concepts and inherent goals have barely budged. The overarching goal is to get the message in front of potentially interested consumers, lead them into some sort of sales funnel, and then convert them. There wasn’t too much attention placed on the industry when it relied primarily on print ads and phone calls. These days however, advertising and controversy are joined at the hip.

The internet made the sharing of information exponentially more efficient; it also provided the means for the infinite storage of information. Couple that with the profit-hungry nature of the advertising industry, and it won’t be too difficult to conjure up an image of how advertising has profoundly changed in the past few decades.

It’s a familiar tale today. The world’s largest media companies sell user data with alarming frequency, leading to precise user targeting that has become so granular that selling online is a known formula for marketers. Only since major scandals rocked Facebook and Tik Tok, has the general public realized the true ramifications of compromising user data.

This has led a pair of the world’s largest companies to lead the charge into a more private future for the public, but a drastically more difficult future for advertisers. Apple, since its iOS 14 update, has left it up the users whether or not they’d like to be tracked by sites and apps through something it calls ‘App Tracking Transparency’ . This has completely altered Facebook’s massive advertising platform and severely limited the granular tracking methods. Similarly, Google will follow suit by deprecating third-party cookies - which will have a similar effect as the iOS 14 update. Users will no longer be tracked across the internet. This means, for example, what a person buys from an online clothing store will no longer be apparent to Instagram (unless that user consents to it).

In order to dive deeper into the ad tech landscape and the role web3 will play, it is beneficial to explore the different parts of digital advertising in some detail. Understanding the mechanisms and how they impact marketers and users is crucial in order to surmise what decentralization will do to this industry.

The two main parties of the advertising business are:

  • Advertisers (Buy-Side) - The party (a brand or marketer) interested in purchasing ad space on the internet.

  • Publishers (Sell-Side) - Owners of sites or apps (digital real estate) that would like to profit off of ad placement.

In between the two there is a web of intermediaries with different interests and purposes. The enormous scale and ceaseless nature of digital advertising has spawned many companies looking for a slice of the pie. The most important ones to note are:

  • Ad Networks - Represent a large group of publishers and connect advertisers to their entire network through a single interface. Marketers can set up a single campaign and run it across thousands of sites.

  • Demand-Side Platforms (DSP) - Platforms that allows media buyers (advertisers and agencies) to run advertising campaigns and buy inventory from various ad exchanges and SSPs through one user interface. This represents the majority of where advertising dollars are spent. Google Ads and Facebook ads are both DSPs.

  • Supply-Side Platforms (SSP) - The natural counterpart of DSPs. These platforms allow publishers to sell inventory through a single interface.

  • Data Brokers - The parties that buys data from different publishers and other data holders (credit-card companies, telecoms and ISPs, retailers etc.) and combine it into aggregated audiences (aka segments).

For almost the entirety of the internet age, people were seen only as potential customers in this current system

For decades, users simply had no options to ‘opt-out’ of being within this complex web of digital marketing. The DSPs operated unabated for years before any large-scale change was attempted.

However, the tides are certainly changing and it is clear that the future of ad tech is about consent, not cookies. Through a mix of legislative protections and the supposed moral righteousness of tech giants, users can now choose whether or not they’d like to expose their data to the various platforms discussed above.

One can reasonably assume that the protection of user privacy will only become more stringent in this new digital era. Time will tell how much of an impact new transparency systems or user protection laws will have on marketers, but they will certainly be looking for new solutions to this suddenly compounding problem.

web3 has proven to be a capable adversary to traditional intermediaries; it seems likely that advertising is the next seismic shift

The advertising ecosystem discussed above can be condensed to remove the intermediaries that only exist to extract value. Parties will work directly to publish and distribute ad content, and any data enrichment or attribution systems will be modular components at the protocol level.

It’s also possible that incentivizing users to opt-in to sponsored content will be the next frontier for advertisers. In that sense, users who formerly got nothing for their ad engagements will now see some value in return for sharing their data with a specific entity.

At Mad Finance, we are building a decentralized ad protocol that brings transparency to the ad tech industry while compensating creators for their true value

Our system has many distinct features that make it an attractive alternative to traditional ad networks. To name a few:

  • Impression data stored in user-controlled data stores

  • Receiving promotional content is opt-in via trust tokens issued on web3 social

  • Payments are transparent and utilize real-time money streams

  • Anonymized impressions are combined with on-chain data for pure CPA

If we consider NFTs as a potential replacement for third-party browser cookies, we can ensure data privacy and automated incentives for token holders. Creators and brands will issue ‘trust tokens’ for users that opt-in to sponsored content. Brands can then incentivize holding the NFT in your wallet; and therefore, are exchanging something of value for a person’s online engagement data.

Users of course, are able to burn the NFT at anytime to effectively opt-out of the system. Moreover, with user-controlled data stores, consumers can directly delete the impression and profiling data they generate; this is done via client-side encryption keys. Being in control of your own data is fairly new in the advertising space, but it is something inherent in web3.

Mad Finance will change the advertising industry to make it more direct and privacy focused. Utilizing open social graphs and programmable tokens, we can democratize access to ad revenue. DSPs and SSPs will be removed in favor of a trustless ad network; where individual creators and large advertisers alike can participate in the decentralized ad protocol for web3.

Follow us on Twitter for updates, and Lens for alpha.

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