Imagine a system where everyone wins by getting a fair reward: publishers and advertisers in the ad ecosystem are transparently and fairly compensated for their products and services.
That’s what the two-year-old London startup Alkimi Exchange proposes: a decentralized version of the current ad exchange system. CEO Ben Putley, which raised about $2.3 million, believes decentralization can improve transparency, reduce transaction costs, and reduce fraud and waste across the system. The company is in beta testing with publishers in the UK, and although Putley did not disclose specific numbers or volumes, it will launch in the US and UK in October, with a global rollout planned later internal expansion.
These infrastructure issues are key issues that Alkimi wants to solve, and if successful, could theoretically reduce costs and help publishers lower profits. By building its applications on a decentralized network called Hypergraph, which charges no fees, Alkimi can reduce typical transaction fees on traditional exchanges from 10% to 30% to 1.5%. By earning 1.5% on both the buyer and seller side, each transaction takes a 3% cut. “I’ve been working on selling software to publishers, and they always eat last,” Putley said. “They create content, manage users, and if the title or anything goes wrong, they’re in trouble. And there’s a lot of people who are taking some cash at the hands of value creators.” These so-called ad tech fees lead to The system is out of balance because some of the costs cannot be tracked, and most of it goes to social media ads for automated campaigns, not publishers like CNN or The New York Times. eMarketer estimates that half of the $57.3 billion in programmatic dollars spent annually in the U.S. goes to social networks dominated by Google, Facebook and Amazon. Avi Edery, senior vice president and general manager of marketing at Verve Group, an ad platform, said: “I think a decentralized ad exchange is probably best for publishers because they can actually see all the bids going on, not just It’s just the final bid submitted, and who’s buying what.” But Edery warns that buyers, advertisers and bid prices must be disclosed on the advertiser side in a decentralized ad exchange model — and brands may not want any People can see how much they spend. “I don’t see brands doing that, and I don’t see them charging for a bid, let alone a win,” Edri added. From an institutional perspective, Jordan Buning, president of marketing and communications at DDM, said that blockchain technology is likely to become more prevalent as issues such as user privacy and control over their data are raised. As part of its increased trust and transparency, DDM said it uses multiple demand-side platforms to monitor ads and dashboards so customers can view metrics. “We’ve seen an era of open markets, exchanges, programmatic targets — and blockchain applications to follow,” Bunin said. “Each era leverages the previous era. Exchanges use data and algorithms to find user profiles. Individuals and browsers then work to filter or block ads, and now we imagine a day when every user can control their digital presence. ” In fact, many have pointed to transparency as an issue in the media buying space. On the one hand, the CMOs of many leading companies don’t understand where their investments are going, not even the format or hosting site. ANA says this can be difficult given the growing ecosystem — from 2011 to 2020, marketing technology vendors have grown from 150 to about 8,000. Not only are many stakeholders paying more than they need, likely due to overlapping providers and services, but the programmatic ad buying process lacks overall transparency.
The challenges facing exchanges today are also due to a lack of data transparency and what some experts say is asymmetric information. Sellers (publishers) have inventory and only they themselves know the quality of the inventory they are selling. In an auction, buyers must bid without being able to assess the quality of the product, explained Tom Triscari, a programming specialist at consultancy Lemonade Projects. “Price is nothing but information about what you’re buying,” Triscari said. “If you have a little bit of information and you need to choose a price, you have a huge range because you don’t know … so they tend to overbid.” Ad inventory quality is also subject to fraud, The impact of content or context that may be harmful to the brand and issues with access to display data in ad exchanges. For example, Putley said there are common problems with URL spoofing, where sites are incorrectly represented to attract more bids or bot farms that keep reloading pages. In theory, a decentralized model could target some of these bad actors and filter out problematic transactions. “It’s hard to really audit what’s going on under the hood and see what’s going on,” Putley said. “The way our system works is by validating transactions. You have to come to a consensus with the network, so you have to complete transactions in a way that everyone else is validating transactions.” In this way, decentralized ad exchanges are in technology can work, Triscari said: “Should it work? Yes… let’s go back to the beginning of programmatic in 2008: we asked the same question – what is programmatic? And now we are here today. So, If this can happen, then this will happen.”