August 16, 2017
How Blockchain Technology & AdLedger are Transforming the Ad Industry – with Stacy Huggins
On this episode of The Innovation Engine, we'll be looking at blockchain in the advertising space. Among the topics we cover are why there is currently a staggering amount of waste in the ad tech supply chain, how a new consortium called AdLedger and a company called MadHive are working to combat that waste, and why we may be entering the golden age of personalized advertising.
Our guest for this episode is Stacy Huggins, co-founder and CMO of MadHive. Stacy is an entrepreneur, seasoned marketing executive, and thought leader in applying blockchain technology to media and ad tech. MadHive is a blockchain-based advertising platform and a founding member of AdLedger, a consortium of advertising and publishing executives with the purpose of bringing transparency and data security to the ad tech supply chain by harnessing a blockchain backed peer-to-peer network.
LISTEN TO THE EPISODE
Interested in hearing more? Tune in to the full episode via the embed below.
What is AdLedger?
- AdLedger is a consortium made up primarily of publishers, advertisers, and other industry stakeholders with the primary purpose of developing a new protocol based on working with distributed ledger technology.
- Right now the supply chain is really designed for the middle men and their own profitability, and it's at the expense of either end of the supply chain. For example, the advertisers and the publishers.
- AdLedger aims to develop API specifications so that people can connect to a distributed ledger and hash information.
◦ A hash is really just a digital signature that says this happened at this moment in time, and it's an immutable ledger so it cannot be changed or altered. It will shine a light on to some of the issues that the supply chain is experiencing: arbitrage, a lack of transparency, and fraud.
Why does the ad industry need a consortium like AdLedger?
- Google and Facebook have a duopoly in the advertising world because they have unparalleled data stores and and an unparalleled ability to target users on desktop, phone, tablet, and OTT devices.
- The advertising industry bleeds billions of dollars every year due to fraud and flaws in the internet supply chain – a whopping $8.2 billion a year, according to research from the IAB.
- AdLedger will help other players compete for ad dollars and reduce waste in the supply chain by facilitating a programmatic ad market. AdLedger will be able to harness data from disparate sources and provide transparency, brand safety, and data security by locking up data with cryptographic keys.
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READ THE TRANSCRIPT
You can read a full transcript of the interview with Stacy Huggins below.
Will: [00:00:00] On this episode of the innovation engine we'll be looking at Blockchain in the advertising space, why there is currently a staggering amount of waste in the ad tech supply chain, how a new consortium called AdLedger and a company called MadHive are working to combat that, and why we just may be entering the golden age of personalized advertising. Here with us today to talk about all that, and more, is Stacy Huggins, co-founder and CMO of MadHive. Stacy's an entrepreneur and seasoned marketing executive who's a thought leader in Blockchain technology and its applications to media and ad tech. Having held leadership roles in the agency, ad tech, and client sides of the business, Stacy has a deep understanding of the challenges within the Ad tech supply chain. MadHive is a Blockchain-based advertising platform that is a founding member of AdLedger, a consortium of advertising and publishing executives with the purpose of bringing transparency and data security to the ad tech supply chain by harnessing a Blockchain-backed peer-to-peer network. Welcome to the podcast, Stacy.
Stacy: [00:01:13] Thank you very much. Well it's great to great to be with you today.
Will: [00:01:16] Absolutely we're thrilled to have you. So let's start off this episode talking a little bit about AdLedger. What is AdLedger and how does MadHive fit in?
Stacy: [00:01:26] Sure. So AdLedger is a consortium made up primarily of publishers and advertisers and some of the middlemen, the data companies, primarily made up of those industry stakeholders, which is a little bit different from a lot of the consortiums out there. But our our primary purpose is to develop a new protocol based on working with distributed ledger technology. So we plan on using a lot of the industry standards that are already established by the IAB and the MRC and other advertising technology industry standards organizations. But you know we will apply all of those standards for interacting with Blockchain technology. And really what that means is we will figure out things like you know using blockchain tools, like smart contracts for instance, which are all of the details of a deal or an insertion order can be governed in code. And so if we were, as a group, as an industry, to transact together using smart contracts, how would that look? And what was the universal language of a smart contract? So we're really getting together to tackle an issue in the supply chain. One is the lack of transparency, which is a really big problem. Right now the supply chain is really designed for the middle men and their own profitability, and it's at the expense of either end of the supply chain. For example, the advertisers and the publishers. So the one major thing that that MadHive has done is we did launch AdLedger as a consortium. However we are simply a member and it's governed by by the members. So we are participants, although we did start it, and we had support of IBM in starting this Adledger. It's a foundation, and what we aim to do is really to develop API specifications so that people can connect to a distributed ledger and hash information. So a hash is really just a digital signature that says this happened in this moment in time, and it's an immutable ledger so it cannot be changed or altered, and it will really shine a light on to some of the issues that the supply chain is experiencing: arbitrage, and of course lack of transparency and fraud. The main purpose is, though, for us to figure out... get competitors, even, to sit at the table and talk about you know what we can do to work together in using this common protocol.
Will: [00:04:15] And you mentioned IBM. Who are some of the other players that are part of the larger consortium?
Stacy: [00:04:21] So right now we can't actually announce all of the participants. We're working on getting all of the permissions, but it's based a lot of the major broadcasters and some of the major digital advertising platforms.
Will: [00:04:39] Okay, got it. And so the idea for AdLedger is that it will harness what's called a Blockchain-backed peer-to-peer network, if I got it right from the site or from the press release. So I'm of a certain age... So when I hear peer to peer I immediately think of Napster. Can you paint a picture for me and for listeners of what a blockchain backed peer to peer network actually is?
Stacy: [00:05:03] Sure. So it's a little... it's not as utopian as as as the idea of Napster. What we're aiming to do really is.. what MadHive believe in as a as an organization, what we're trying to influence AdLedger to be, is to participate in what's called progressive decentralization. Right? So if you were to completely decentralize and have no middleman whatsoever and use 100 percent blockchain protocol, it's very hard. There's many security risks to launching a decentralized network. So we're really having a roadmap to analyze piece by piece in terms of what should be decentralized and what shouldn't, and so what we're really aiming to do right now is to tackle specific areas. So one area is a data sharing platform, and that might mean that users on this ledger (for example a publishing company with decent amounts of data, and a lot of it is secure and personally identifiable information). MadHive is an application layer that sits on top of a Blockchain. So you know, as a company, MadHive is working on ways to lock up very sensitive information, like using cryptographic keys for instance. So if we were to lock up the sensitive information and encrypt it, and have it be a permission-based ledger, is there a way that the users on the ledger could actually trade data and use data in a way that keeps the users information very secure, but also helps to extend the overall targeting capability of the entire ledger? And that's really in a lot of direct response to the duopoly of Google and Facebook. So their data stores are unparalleled and their ability to target users across you know mobile, tablet, and even desktop. And now even OTT devices, like you know Apple TV and Amazon Fire and of course YouTube. We can't compete with them. And what we're trying to avoid is a day where you know Facebook is really a rep firm for all the major publishers, selling all of their inventory for them and doing away with those direct sales teams and those direct deals, and thereby handing over 30 percent of their margin to Facebook, for instance. So the only way you can compete is to really have the same type of technology that they do, which is really end to end technology, and have access to a ton of data. And the only way to do that is for even competing folks to get together and share data sources. Those sources would be would be paid for, of course, and you could transact and interact with a transparent record, on a ledger. So that's an example of a peer to peer network where there could be potentially, in the future state, data trading. The other aspect I should also mention of peer to peer means that there is a consensus, and that means that-- So on a blockchain anyone who's transacting to a blockchain would have a node. And so it's really a server. So there would be a consensus that everyone agrees that this ad was served, and this ad was served on this Web site at this moment in time, and whatever the publisher decided at that point to hash to the blockchain everybody else would agree that we we all saw that and we all say that it's true. So it's an audit trail, really.
Will: [00:08:54] And when you say publisher or publishing company, we're talking about newspapers, networks, music publishing, and all all of the above?
Stacy: [00:09:03] Not necessarily music. So we're not getting into digital rights management of music, at this point. So when I say publisher I mean a Meridith Corporation, a news corporation, or you know Condé Nast, and that's digital. And then on the OTT side it could mean Hulu for instance.
Will: [00:09:22] Okay, got it. And let me ask a little bit more about the Google and Facebook duopoly.
Stacy: [00:09:28] Sure.
Will: [00:09:28] So for now major media companies are running ads through Google ad words or Facebook's ad platform. With AdLedger I guess. How would they be placing their ads where where would they be placing their ads?
Stacy: [00:09:44] So they would still be placing their ads on Google and Facebook just as they do. However, more and more over the last few years especially, the piece of the overall pie that Facebook and Google gets, in terms of the ad dollars that are spent digitally, they're getting more and more and more and more. They're growing, which makes it very difficult for like I said the rest the rest of these sales teams and organizations to compete. Their margins are being squeezed by tech intermediaries. So what it means is that there will be other options that are just as attractive for advertisers and their agencies to buy media on. So instead of Google and Facebook getting 70 percent of the pie, perhaps they can you know publishers of the whole, and programmers, can chip away at some of that and reclaim some of the dollars that they've lost over time to Google and Facebook. So it doesn't mean that they go away, and also someday it could mean that Google and Facebook would be transacting also and hashing to a ledger, although I think that's a long time coming. But it just means that perhaps they don't get as big of a pie as they do now.
Will: [00:11:02] Okay, got it. So MadHive and AdLEedger are both responses to a very real problem: The advertising industry bleeds billions of dollars a year -- according to research from IAB, $8.2 billion to be exact. How is that possible?
Stacy: [00:11:19] Well it's all due to a lack of trust. So that $8.2 billion is really the cost of trust in the advertising industry. And so any time that you've got many disparate parties transacting with sensitive data sources and with a lot of money on the line, nobody trusts each other. So you know the way that Adtech has formed and evolved over the years is into these disparate verticals in the supply chain. They're referred to as you know SSP, which is sell sell side platform; DSP, which is demand side platform; and DNP, which is the data management platform. So trust is typically maintained by centralized third parties delivering reporting to keep all of the others in check. So the cost and thereby the profits are driven inwardly toward these centralized intermediaries for maintaining all this trust. And of course all of this verification is really very expensive. On top of all of the technology services and the application layers that you know publishers and advertisers have to pay for. So these intermediaries charge about 60 cents on every dollar leaving a publisher with 40 cents. And there is a huge lack of transparency for buyers and sellers and no one really knows what the other is bidding on in an auction or programmatic environment, or where the ad will end up. So fraud plays a big part in all of this. So a programmatic marketplace, which really means that you know the deals are done and everything runs automatically through machine to machine and there's a bidding and in an auction that takes place. So this marketplace is overtaken by all of these intermediaries creating these walled gardens around data using their independent position to arbitrage inventory from publisher to advertisers. Sometimes at like 100X mark up. So also the opacity of these walled gardens forces publishers and advertisers to pay for the same connectivity to the same user many times over.
Will: [00:13:31] Okay. And let me ask a little bit about about MadHive, specifically. You provide solutions for advertisers and solutions for publishers. What are the different solutions sets and what are some of the things that they enable?
Stacy: [00:13:45] So MadHive is like I said it's an application layer that sits on top of the blockchain and facilitates a lot of this data transacting that happens. But really we're in a class of emerging platforms. Another three letter acronym is called an SPO platform, which is really supply path optimization and it allows really buyers and publishers to build a closer relationship, and we're attempting to move a lot of that value of that media buy to the buyers and sellers directly. So MadHive is an SSP, which is the sell side platform, combined with a DNP, which is a data management platform, and we have a front end buying platform. So that means that both sides, publishers and buyers, can transact on our platform. The big difference is that our platform is 100 percent transparent on both fees and auction dynamics. So this optimizes the delivery of the inventory to the best performing demand among the premium publishers. Everyone that is in our supply side, so that would be the publishers and any of the OTT stations, for instance, that that we work with. They're all agreeing to be transparent and they're consistently the best of inventory. Very premium. With our business model, we're allowing demand and supply partners to manage through these increasing costs, and they're able to navigate around bad actors. So they protect their brand with premium transparent inventory sources from our private marketplace. So really what we're able to do is create a private programmatic marketplace where we can harness data from disparate sources, provide transparency, brand safety, data security by locking up data with cryptographic keys and make making that data somehow portable because it's locked up, and we hash all of the impression level data within our marketplace to a blockchain. So really what you end up with at the end of the day is increased revenue, lower cost, unduplicated reach, and you actually get this amazing true omni channel reporting tool.
Will: [00:16:02] And show doesn't want all of those things?
Stacy: [00:16:05] Right! Hahaha. Right. So in some instances a lot of this transparency is available, but typically it's at the expense of the advertising agency. And like countless man hours just trying to track down all these disparate sources of data, collate them, and then figure out the mystery of all the discrepancies. Because all these third parties are delivering information that conflicts with other verification sources. So when there is an actual independent ledger that all parties are transacting to that's immutable and cannot be changed or altered, it makes things a lot easier.
Will: [00:16:47] And who are some of the ideal customers for MadHive? Who are you targeting?
Stacy: [00:16:52] So right now we're targeting obviously any of premium publishers. Publishers that could be in digital, focusing primarily in video marketplace. The digital display advertising industry is very very established right now and there's a lot of whitespace and a little bit of room for evaluating technology stacks and looking at new ways of delivering ads in the premium video and OTT space. So we're looking at those supply side platforms, but also on the demand side now we're looking for you know large CPG companies and their agencies, large e-commerce platforms. You know mostly those that are looking to really understand and are digitally savvy and are really tired of the murky supply chain. Those that have really had it and aren't willing to keep paying for an inefficient supply chain anymore. And also those that are looking for a very streamlined buying experience.
Will: [00:17:57] Okay, and let me ask... you mentioned OTT in the last answer. For those like me who were under the impression that OTT is basically ad free, are we wrong?
Stacy: [00:18:07] As of right now, it is considered to be... I mean at least the ones that most people watch, in terms of Netflix, is ad free. However, if you watch others, like Hulu for instance, is not ad free unless you unless you pay for premium services. But it's not ad free on a lot of those network OTT apps.
Will: [00:18:31] OK, gotcha.
Stacy: [00:18:31] But the difference is that right now the way OTT purchased is it might be like a digital extension or an add on to a big broadcasting buy, where they are mostly transacting on linear broadcast television. But with chord cutting growing at a massive rate, we're going to see more and more that users are watching on demand any time they want through streaming devices. And as that happens, the ability to make you know all of television programmatic... there's not a big incentive for that to happen right now in the industry because the way linear broadcast is sold it's you know everything's protected and it's it's very seamless. It's typically the agency and the publisher. They do direct deals together. But the targeting capabilities are not as great and you rely pretty much 100 percent on Nielsen. So the benefit to the industry with all this streaming is that it's delivered over IP, and there's more you can do from it from a targeting standpoint. So you can really help to deliver the exact right ad to the exact right person, much in the same way that Facebook does. So we'll find that the commercials are a lot more interesting for folks over time.
Will: [00:19:47] Okay got it. And it is that, forgive my ignorance, is that kind of the definition of programmatic?
Stacy: [00:19:54] So the definition of programmatic, and it's different for depending on who you speak to, but programmatic is a way of buying and selling and serving ads that is done primarily-- it's automatic. So there are intermediaries that make it happen, but you know you really serve up your inventory, if you're a publisher, to be auctioned on and bid on. And then buyers can come in and just grab it, instead of having there be a sales cycle where everything is bought upfront. Typically you've heard of something called the upfront and that's when you you know you buy media, upfront ahead of time, and it runs and you know when it's going to run. When it's served digitally, it's definitely a different experience. And you know in some cases programmatic transacting can be very efficient and easier on an organization and it, but it's not it's not better if it's at the cost of you know of 40 percent margin.
Will: [00:20:54] Sure. So let me let me get back to AdLedger for a second. The plan is to open source AdLedger. How did MadHive and the other members of AdLedger arrive at that decision?
Stacy: [00:21:05] In terms of what will be open source, that's the API specifications will be open source. And we're also working on a way to lock up data in something called the blind trust, which you know the specs for that will will be peer reviewed. So you can test that it is actually blind in order to keep data safe. So much like the... there's something called the open RTD spec, which it was very similarly launched by some ad tech intermediaries to come up with a way to transact more efficiently. And that was open to the industry and those specifications became open, and then was eventually rolled into the IAB. That's really the trajectory we'd like to see AdLedger move into, in terms of offering API specifications for all members to transact, and also make some of the products that we produce able to be peer reviewed. That doesn't mean that there's not going to be a layer of innovation and competitiveness because it's what you do with the ledger where the innovation really really comes out. So although there'll be ways to transact and access that ledger and those API specifications will be open, but the application layer that you build on top of the ledger. That's where all the innovation and competitive advantage will will be seen.
Will: [00:22:30] Okay. Nice. And if anyone listening is interested in getting involved, how can they do so? Or maybe when can they do so? I know that AdLedger was just announced in July.
Stacy: [00:22:41] Right. So they can certainly reach out there's a contact us form on AdLedger.org and ask about membership, and we're going to announce the founding members in September and we'll meet again in September. And shortly they'll be a FAQ section that can answer a lot of questions for folks interested in joining, and whether or not they should join in. But yeah there is a Contact Us form. They can reach out and ask questions.
Will: [00:23:11] OK. Very nice. And I asked the same question for MadHive. I assume it's go to the MadHive site, which is MadHive.com I believe?
Stacy: [00:23:19] It is. Yep. And you can also reach out to me directly. Stacy@madhive.com.
Will: [00:23:27] OK. Very nice. Well Stacy thank you so much for your time today. Thanks for talking with us about AdLedger and MadHive. I'm curious to see where it all leads.
Stacy: [00:23:37] Great. Thank you.
Will: [00:23:39] Absolutely. My pleasure.