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eCommerce and Advertising on the Blockchain

Louie Bacaj
Louie Bacaj
8 min read
eCommerce and Advertising on the Blockchain

Advertising on the internet, as we know it, is dead. Long live advertising! That may sound like hyperbole, but it is in fact where we are headed, and some, like myself, will argue that we are already there. I will lay out, what I believe, is sound reasoning for my thinking over the next few paragraphs. I would also like to talk about a few new technologies, blockchain and cryptocurrency, that will usher in a new wave of decentralization that can get brands closer to the consumer than ever before. Digital programmable money, with no middlemen, is poised to change eCommerce and online advertising forever.

As an engineer who has spent the last few years building technology to grow an eCommerce shop, I have had that “aha moment” where one realizes how deeply important online advertising is to eCommerce. It is important not just because of the most obvious reason: growth, but also because eCommerce is a vastly different animal than a traditional store. A store that has nice isles, limited inventory, is generally a well understood thing. We’ve been doing that for a few thousand years. The tale-end of eCommerce with the millions of SKUs available for sale and the discovery of those SKUs has its fate very much intertwined with advertising. Advertising aids eCommerce in discovery, helps with personalization, and obviously with growth.

There are so many other areas where eCommerce and online advertising intersect, so much so, that it’s hard to tell the difference. For example Amazon is en route to become the biggest advertising platform on the internet, which I firmly believe will surpass both Google and Facebook in this regard. Advertising is one of the main reasons Amazon had a 25% jump in their stock price recently; their advertising money is going to quintuple in the next few years. Quintuple. People advertise all manner of stuff on the internet, but eCommerce is the best kind, arguably most useful, and least divisive type of advertising. With the staggering growth over the next ten years, to trillions, eCommerce is poised to become online advertising most important patron. So in essence this is not a one way street, online advertising needs eCommerce just as badly as the other way around; in order to pay those bills.

Why is advertising dead?

Let’s take a look at the facts. There are only a few huge players doing well with powerful ad-tech on the internet. Those players are all monopolies in their respective areas; Google in search, Amazon in eCommerce, and Facebook in social. These giants have become the De facto gate keepers of all growth for any company in the modern age. That in of itself is problematic but this article isn’t just about that. It’s about the fact that consumers hate ads on the internet and rightly so. The largest growing demographic that every brand covets and wants to attract, the millennial, has the highest usage of ad blockers of any generation. This group thinks advertising is badly broken, as someone of that group I agree with that thinking.

Who can blame us? User data is brokered without the users knowledge, often consented by vague terms of use and privacy policy documents that no one reads. There is zero accountability on data hoarding and subsequently data is hacked left and right with no consequences. Literally everything is collected by these walled gardens because, why not. Zero accountability and cheap data means you can afford to hoard it all. The truth is no one needs this much data to run their business. With the recent Equifax hack, where over a hundred million users lost their personal data to criminals, and with the recent election that type of data collection, without any rules, is coming back to haunt us and it will only get worse.

If the fact that the ad-blocking arms race is only getting worse and advertisers are upsetting and alienating their biggest growing audience isn’t scary, keep on reading. Targeting models that allow for the targeting of emotional teenagers, such as the ones Facebook allowed and got in trouble for here. The liability brought on by all this data hoarding is insane, this model is broken for the tech giants too but they just refuse to accept it.

The real value-add from data that advertisers covet, which by the way, isn’t everything, is never shared by the gate keepers, Google and Facebook. They let advertisers get a taste of it on their platforms but they can never take it out, hotel California. They can use it for targeting on those platforms, but have to keep it in the garden. In essence this only enriches one group at the expense of everyone else. Users don’t benefit from this, brands don’t benefit from this, and publishers don’t benefit from this. This is a broken model and not to beat a dead horse but silicone valley is not an advertisers friend or the users friend for that matter anymore.

Advertising is broken for users, publishers, and advertisers. It’s only not broken for the walled gardens.

More reasons why Ads suck.

Outside of the giants the technology behind most advertising today is terrible and full of fraud.

Ads that hijack and crash your browser, suck out your data plan, and drain your battery are also very wrong, they download gigabytes of data to perpetuate ad fraud. Ads that are using your browser to mine computer code, large giants putting their thumb on the scale. Anti competitive ads on the front page on the internet. If all of that does not convince you that advertising on the internet is broken, I don’t know what will.

How do we fix it?

Blockchain technology, the backbone of cryptocurrencies, has properties that can transform the advertising industry. In fact, I will go as far as to say that a new ad-tech renascence will be upon us very soon. As an engineering leader, and a doer, I don’t like to make claims that can’t possibly be accomplished. So this opinion of mine is in large part from evidence of what is happening on this space and from my little experience and exposure to this technology so far.

As evidence, a few of the largest Initial Coin Offerings to date, and some of the most promising, have been focused on the ad-space and some will deliver, although plenty will also fail. For those readers who don’t know, An initial coin offering is when a company issues tokens for sale, much like a kick-starter capaign, that they then plan to use in some novel way as a core part of their product. This piece of innovation was brought to us thanks to blockchain technology, for better or worse. There will be so many unforeseen uses of this technology and that is one of the biggest reasons why I am so optimistic.

One of the most successful tokens that will have massive impact on the advertising industry is the Basic Attention Token (BATs) ICO. The BATs token is something brands, merchants, and really any advertiser can use in the BATs Brave browser in order to reward users for seeing their ads, users won’t want to block ads that pay them. The folks behind this ICO will help advertisers push ads that users do not want to block. If you use an ad-blocker with BATs you won’t be rewarded for seeing the ad. This is very different from having middlemen like Google or Facebook get paid for an Ad which gives zero of those dollars to the consumer and which ultimately has led us down to this ad-blocking arms race.

Right from the BATs homepage.

I don’t own any BATs coins, nor do I believe that this will be the only innovation to hit online advertising out of blockchain technology. In fact, I believe it’s only a matter of time before someone figures out a way to use blockchain to do this across every browser, every device, and not limit it in the ways that BATs is limited. The ad-blockers can become an advertisers best friend on a blockchain ads platform, not their enemy.

Tame the data collection beast.

The massive data collection beast can also be tamed. If data costs money and that money goes to the user and the user has the power to decide how much to share, how much to sell, and how much to sell it for, that is a transparent and fair advertising model that does not alienate anyone. It will get real expensive real fast to hoard data. Blockchain technology and cryptocurrency can help make this a reality. Again, I like to think I am a realist, one could also create this sort of thing without those technologies but there is massive frictions in place right now.

Don’t get me wrong Google, Facebook, and Amazon are useful in spite of ads and they will continue to hoard your data and not give you a dime long after this tech becomes a success. This article is not to say that blockchain will eliminate the usefulness of search on the internet, it won’t, nor will it stop these giants from collecting everything. It will, however, create new channels and refine the vast majority of the existing channels for advertisers to connect with their users. It will give power back to the open internet. Most importantly it will divert ad dollars, from these middlemen that are now more focused than ever on milking everyone on their platforms, to more useful and interesting programs that eCommerce can benefit from.

These technologies make it so programmable money means not sharing your bank account for a few ad dollars, or waiting months for a little cashback like millions of folks do with EBates. Not to mention the fees in place with the current financial system, the trust model needed to execute this and the list of friction goes on and on.

On the blockchain users can opt into sharing their data willingly and collecting cryptocurrency every time it is bought and sold. Now that is a great model that will benefit the brands and advertisers on the internet as well as users. It is a flip on the current model where it is bought and sold anyway and user does not see a dime of it. Imagine sitting back and getting paid for your browsing history and what products you looked at on Amazon rather than having that valuable info stolen and leased out by walled gardens for their own enrichment. The blockchain through smart contracts can also punish those that don’t use the data for the intended reasons. The fraud can be managed through the blockchain too and believe me as someone in this space there is a lot of fraud.

For the advertisers, brands and startups looking to grow in this new age of decentralized advertising, that promise of direct to consumer will finally be real again. With micro payments and friction-less programmable money that can reward users in real-time all kinds of marketing programs become possible. Blockchain and Cryptocurrency will do for commerce and advertising just as much as the early internet did for it. We have a long way to go for sure but this is one of our best chances to turn the tide and get there. The shear amount of excitement alone can propel this to places few other technologies have gone in the past.

In conclusion.

Online advertising is struggling right now but cryptocurrency and blockchain technology is poised to create a reshuffling of the middlemen that has not been seen for a long time. The decentralized early internet brought with it that direct to consumer promise for many small brands and startups; no more big chain retailers blocking a great brand from selling their stuff, they could put it online and bypass all of that. It brought with it the promise of the removal of the gatekeepers to growth. The old media, television and radio companies, used to control whose commercials show and whose don’t. They controlled this for nearly a hundred years and with that the fates of many companies and ideas rested in their hands. The internet ripped that apart in less than ten years.

I wrote before that the difference between this new technology and the existing is subtle but massive. Just like an ordinary dial tone from an ordinary phone is subtly different from one that can connect you to a digital interconnected network.