Mobile attribution and marketing analytics platform Kochava recently announced XCHNG, an open and unified blockchain framework for the digital advertising ecosystem. The blockchain-based XCHNG system of record enables the tokenization of an insertion order – an IO, or a contract to buy advertisements – with the multitude of benefits that a blockchain-based system brings in order to facilitate transactions between buyers and sellers of advertisements. The XCHNG framework will be powered by the XCHNG Token, which will be released in a Token Generation Event in early 2018.
Kochava CEO, Charles Manning remarked: “Currently, marketers are stuck with a complex and inefficient centralized technology path to customers that is unsecured and lacks standardization and transparency. Advertisers are demanding greater efficiency, security and transparency in the industry. By leveraging a blockchain standard, XCHNG offers an open, decentralized model for digital advertising that simplifies the process through peer-to-peer buying and selling.”
The company aims to solve issues that marketers face in capturing and analysing an increasing number of digital touchpoints. Another problem that Kochava has identified is the supply chain, which does not operate on a common system of insertion orders that are traceable from contract to delivery to measurement and ratings. With its solution, Kochava hopes to enable the targeting audiences on large scales, whilst also protecting consumers’ personal data and identities. As a blockchain-based solution, issues of fraud and illicit activity will also be mitigated in this market, estimated to be worth more than $220 billion in 2017.
XCHNG will tackle these issues using an open, global distributed ledger to facilitate end-to-end workflow. Through the use of a crypto-verified distributed ledger, all parties will be able to participate in the workflow of the IO together—from discovery and negotiation to execution, verification, and payment.
The framework addresses critical concerns in the digital advertising landscape in a number of ways, including facilitating the buying and selling of ads using smart contract IOs, and enabling the related targeting and activation of audiences. In addition, it will bolster ad-spend efficiency and security, whilst also adopting a next-generation advertising system-of-record for all participants and tokenizing the framework to treat digital ads as a true asset class.
Manning added: “Blockchain, in its peer-to-peer nature, is a very egalitarian, very open playing field. Building the XCHNG framework on blockchain only improves and enhances the experience for all players in the digital advertising ecosystem—greater access to inventory for buyers and greater yield to publishers, both large and small. We have designed and developed XCHNG to be open for third-party verification, but Kochava also provides industry-leading measurement right out of the box. Finally, XCHNG is able to leverage the Kochava Collective, the largest independent data marketplace, comparable in scale to the biggest players in the field.”
Manning kindly agreed to answer some questions for Chain-Finance.
C-F: Can you explain what XCHNG aims to achieve in the digital advertising space?
Manning: XCHNG proposes a better way of doing business for the digital advertising industry by employing blockchain technology to address fundamental challenges. The blockchain-based, open-source framework from XCHNG provides an efficient, secure, transparent method for buying and selling digital ads.
C-F: What are the biggest issues and challenges in the industry today?
Manning: Today, digital ads are bought and sold using an antiquated Insertion Order process that is not secure, standardized, or consistent. The terms of an order are not verifiable and frequently not adhered to. In addition, advertisers lose money to fraudsters and middle men, and publishers can’t follow their inventory to understand its value. Many intermediaries have emerged to attempt to solve specific issues within the process, and this has resulted in a very complicated transaction path that is inefficient and complicated for buyers and sellers.
C-F: What makes the digital advertising industry ripe for disruption?
Manning: It is estimated that 50% of every dollar in digital advertising is lost to intermediaries or stolen by fraudsters. This alone is a compelling reason for industry participants to seek change. It’s a $224B global industry, $83B in the U.S. alone, and of that, $53B is in mobile. It’s a market that has grown very rapidly from its inception, and continues to have huge opportunity to scale, which means it will continue to be targeted by fraudsters. It also is an industry marked by technical innovation; participants have a low tolerance for inefficiencies when there are viable technical solutions available, this makes a high percentage of industry participants very interested in seeing blockchain solutions. Finally, digital advertising has reached a boiling point; advertisers are ready to see significant changes to address the wasted time, wasted money, and lack of transparency they are currently experiencing.
C-F: What makes blockchain the best route for this?
Manning: Digital ads are currently bought and sold through a centralized framework. This means that a central authority makes the rules, processes transactions, and that intermediaries insert themselves in the process around that central authority. The centralized framework works if the central authority is a trusted entity, but it falls apart when trust is lost. The industry currently operates in a state of low trust of those central authorities. The real value of blockchain is its decentralized nature, which enables peer-to-peer transactions, and renders intermediaries obsolete. When blockchain technology is applied to the problems of the digital advertising industry, we see a whole list of issues dissolve.
C-F: What savings and efficiencies do you believe a blockchain-based system can offer?
Manning: Depends on the blockchain-based system. The system we’ve designed provides a way for a buyer and seller to work together directly with supportive actors related to measurement, ratings, and payment, that supplement the framework to buy and sell at scale.
C-F: How will the platform combat the issue of fraud?
Manning: Blockchain is designed to be secure on a number of levels. Not only is each block on the chain encrypted, it’s also hashed to the previous and subsequent block. Neither the block, nor the chain, nor the connections between blocks on the chain, can be tampered with without the participants on the chain knowing it. While the framework is resilient to fraud, the architecture supports an immutable ledger that publishes all participants who are supporting an ad buy. Because of this, fraud is mitigated and exposed when it exists.
C-F: Will using the blockchain open up digital advertising to a wider market?
Manning: Yes. Currently, the lack of standardization across the industry means that only the larger networks who create their own internal standards can attract the broadest range of advertisers. An open, standardized framework built on blockchain establishes common standards that ALL industry participants can enjoy, not just the larger players. Peer-to-peer transacting means intermediaries are rendered obsolete, and the market is wide open for buyers and sellers to transact securely. It truly provides an opportunity for the industry to scale.
C-F: Do you think the solution will be readily adopted or will it take time for people to understand the blockchain side of it?
Manning: This is a great question. General purpose solutions will invariably take time to adopt. The XCHNG framework is exactly the solution that connects the IO with the delivery of that IO, which is the first step to addressing the issues in digital advertising. As we demonstrate the system and advertisers and publishers see the results, we believe adoption will increase. Doing business on XCHNG doesn’t require a deep understanding of blockchain or a lot of technical knowledge on the part of the advertiser or publisher. Once advertisers and publishers are reassured that the process is not technically challenging, adoption will continue to increase.
C-F: Will some of the benefits of a global blockchain platform be mitigated if the rate of adoption is slow?
Manning: The role of blockchain is transparent to the efficiencies it represents. Innovative companies (like Kochava) will implement new technologies and share the benefits with their customers. If the services are faster, more efficient, more secure, and less expensive (as is apt to be the result of innovative technology) it will be good for business and customers will respond accordingly because they are experiencing the improvements. Industry participants who continue to operate on traditional frameworks will continue to experience the challenges of today. Blockchain facilitates efficiency for all who choose to use it. While the most successful implementation is one that is widely and rapidly adopted, blockchain will benefit the industry even on a small scale.
C-F: How important is it for the project to be open-source?
Manning: An open, decentralized framework provides a consensus model for trust and is an important aspect of the project.
C-F: What are the next stages of development for XCHNG?
Manning: We are actively communicating with and signing up early partners for the OnXCHNG program on both the buy and sell side. The XCHNG team expects to have a demo available in Q1 of 2018, and will continue to craft the roadmap of the project, with input from partners. We expect to begin accepting inventory in Q3 of 2018. Interested potential partners should visit xchng.io and request to join the OnXCHNG program.
C-F: When is the platform expected to be released?
Manning: No later than Q4 of 2018