Bring on the ads!

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So last week, I set the stage for the discussion on a forward-looking glimpse of the future promised by blockchain technology and how it could start changing the way we use the internet. Well, folks, the time is here. This week, we tackle the largest game in the e-commerce industry—adverts.

Ads, Ads, Ads. Quite literally, this is the way the internet is monetized. This is how marketers turn your eyeballs looking at computer screens into profits. In a way, it wasn’t the internet that invented ads. Ads have always been how television (hey, remember that thing, kids?) monetized its programming. 

In contrast to movies, theatre, or HBO (cable subscription), which monetize via ticket sales or paid subscriptions, broadcast TV just gives you free content. Your only cost for entry is buying a big piece of hardware as a receiver. The only problem is that your money goes to the manufacturer of the device and not the content providers of the programming that you watch. So someone (probably early in the 1950s) thought it would be a good idea to sell advertising space in between programming or even part of sponsored programming so that they could monetize through the proxy of the popularity of their programming. The commercial format was born.

Fast forward to the internet age, and though it had taken a decade or so before the critical mass of users reached a point¹ to garner the interest of advertisers, this model has translated directly into the world’s new media consumption channel of choice…

So what is wrong with this?

Nothing much, I suppose. Besides, it is not all that different from what we normally think of as the advert model. Or is it?

With the power of the internet and the power for you to individually choose your ‘programming,’ came the sinister flip side of that coin. Advertisers and middlemen now have granular level detail about your private lives, buying habits, food preferences, everything. Whereas before when you were just consuming broadcast media, you were not an individual. Now, you all may as well be paid subscribers to an individual cable package, and all the programs you watched, all the things you buy, and all the websites you visited are tasty morsels of data that advertisers are more than willing to pay for.

Enter the age of directed marketing. Advertisers can now buy pinpoint accurate data for demographics to which they want to show their ads. But there is an asymmetry here. While advertisers and markets GAINED something that they didn’t have before, you, the consumer, did NOT. The extra profits that this gold mine of data mined from your collective brains did not go to you, but it went to the middlemen, the gatekeepers, Google, YouTube, Facebook, Twitter, Amazon, those that hosted the ads. That seems a bit unfair.

So what are the alternatives?

Is it time the whole ‘eyeballs on page’ model be retired?

Simply put, the alternative is to remove the middlemen and allow advertisers direct access to the data they want while paying for the people who supply the data directly, and in the process of doing so, allow people to control what data they want to share. And yes, this is a—wait for it—micropayment² use case! 

We take for granted that our browsers are basically the portal to our interactions on the internet. How much do you trust your browsers? Of course, what keeps them honest are three-fold:

1. There is competition in the browser market. There are always alternatives.
2. They are either open source or made by companies that stand to lose a lot of money if their reputation is damaged. This disincentive to act maliciously is what maintains the trust we put on browsers. But the third reason is something that most people do not consider.
3. Which is that the data on your browser is not that valuable and not monetizable in isolation. There simply isn’t enough reason for a developer to leak your data, so that cost/benefit calculus generally results in browsers being secure enough. This is key, for if we are to start to trust our browsers to act on our behalf, we have to be sure that they don’t end up selling out our eyeball time as a search engine or Twitter might.

So how exactly is can our data be monetized? Well, we would need our browsers to be a ‘data broker’ for us. 

It would not only be the place where all of our data is organized and administered but also manage all payments and transactions for access to that data. A large part of this technology already exists. What would be required is simply a plugin digital asset wallet with some smart contracting ability on a blockchain to advertise the data and ensure that access to it can be managed in a secure and atomic fashion. This can be achieved by simply putting the data on-chain and encrypted, using a one-time-use key so that it can be traded via key reveal³. The blockchain removes the data hosting requirement instead of embedding data into unspent coins on the Bitcoin blockchain to represent data drops. 

Given that this data is meant to be passive income to those that generate it, plain encryption is likely good enough, and it can even be done without paying any mining fees as these will likely be low priority transactions which don’t need to be mined in the next block and therefore will carry low or zero mining fees.

Small digression: Where do you find internet ads and where are they appropriate?

Where ads work: (e-commerce)
Amazon, eBay, or Craigslist, etc., where you are already shopping for something to buy, and are receptive to being given alternatives

Where ads annoy: (websites, social media)
YouTube, Facebook, Twitter, New York Times, The Telegraph—they just get in the way.

Where ads could be annoying or helpful: (search engines)
Google, Yahoo, Bing—depending on whether or not you are searching for something to buy or just searching for information.

Imagine then a market for browsing data, demographically characterized, facilitated by blockchain-aware browsers, allowing users to organize, categorize, and put a price on their data and even allow for whitelists or blacklists for potential buyers. All of these sorts of business rules are exactly the sort of thing that Bitcoin smart contracts are good at, locking up the spendability of coins or data depending on pre-set conditions. Such conditions may be whether or not the requisite asking price was fulfilled, whether the company is on the whitelist of accepted buyers, etc. On the opposite side of the trade, accurately categorized data is of great importance to advertisers, and ensuring that data purchased fits a specific demographical target for an advertiser makes this much more valuable to the data purchasers. It is a win-win for both the data producers and the data consumers. 

This form of marketing research data collection largely replaces the simple model where marketers pay to put ads on-screen real estate on websites that just track their visitors, as the website is just the middleman in this transaction. Suppose your browser can post directed ads (that pay the viewer for viewing). In that case, this eliminates the perverse incentive structure of the web and the temptation for websites to ‘sell out’ their real estate and focus solely on providing information which the users want to read (and pay for downloading). This means returning to a more consumer-driven market from an advertiser-based one. 

Today, the middleman advertisers spend unreasonably high amounts of money to get their ads into places where users will see them the most. While at the same time spending excessive amounts of money on marketing to convince users that they should WANT to buy their products. They literally create the market and are the market. 

They are the peddler of products and influencers to make you want to buy their product. This is a perverse incentive structure, as the winners are the influencers, advertisers, and marketers who can convince most people to do something. The consumers do not pay them, so they do not have the best interests of the consumers in mind.

If all this sounds a bit too crazy to even fathom, keep in mind that paying for website viewing isn’t a new concept. In fact, it was something that the original designers of the web had considered⁴, but it just wasn’t practical at the beginning of the web. Thanks to the reliance on credit card processors and third-party payment processors. Now with Bitcoin, we have eliminated the last remaining obstacle to on-web (sub $0.01) micropayments, and with it, the ability for the web to be finally, at long last, be efficiently monetizable. By allowing for the direct trading of information, through the magic of a simple standard called HTTP and Bitcoin SV, we can finally have a consumer-focused internet economy without the middlemen trafficking our information. And this is a world we are bound to see with our own eyes, without some third-party making money from it.

/Jerry Chan

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NOTES:

[1] Also, it required the development of the tools and platforms to allow for mass decentralized content creation. (Hello YouTube!)

[2] The hoopla is because the micropayments market is something that has been talked about for years since the invention of Bitcoin has yet to be developed successfully since.

[3] I realize I’m being vague here, but you can likely think of ways to make this happen if you are in digital currency. I’m not going to reveal all my secrets for free.

[4] The famous HTTP error “402 Payment Required” message is evidence of this.