Just three months into 2018 blockchain has emerged as one of the most over-used buzzwords in the digital industry and beyond. Terminology around the tech has reached saturation point and with SXSW, Advertising Week Europe and Cannes Lions on the horizon the hype isn’t going anywhere – here The Drum finds out how to separate the buzz from the BS.
By January 24, 2018, the Date AppNexus Began Enforcing the Policy, over 80% of the Top 1000 Domains Available Within …
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Leading Advertising Technology Company Reports Increase in Video Activity Across the Platform, Adding Innovative Formats, Data Offerings, and Premium Inventory …
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Since at least 2013, folks in the ad tech business have been expecting the AppNexus IPO.
The online ad company filed confidentially to begin the IPO process in 2016, but two calendar years later there is still no sign of a public stock listing for New York’s biggest "unicorn," last valued at about $2 billion.
The IPO was first expected in spring 2017. Then the expected date got pushed back to the second half of 2017. Now it’s 2018 and, a source tells us, don't hold your breath.
A mixture of negative variables, many beyond the company's control, have conspired to keep AppNexus off the market, a source close to management told us. A company spokesperson declined to comment when reached by Business Insider.
Partly, it's Snapchat’s fault.
The SNAP IPO performed "abysmally" upon its launch, our source notes, with its stock falling below the opening offer price of $17 per share and staying there for another 6 months before finally rising above the IPO price in the last few days. "It broke the issue price," our source says. "It was bad."
SNAP poisoned the market for tech IPOs generally. Banks advising AppNexus said, "Don’t be the second one" out of the gate after SNAP. "Everybody was reticent."
That led to a situation that compounded AppNexus’s problem: Healthy companies — like AppNexus — didn’t want to go public into a stock market that hated tech IPOs. But more desperate tech companies simply needed the money, and were forced to launch anyway. Thus, "the only companies going out were the ones needing the cash."
Their stocks got hammered, making tech IPOs look even worse. For instance, Blue Apron's IPO offer price was $10; it was last seen at $3.26, a nearly 70% loss.
Established ad tech players like Rubicon and Criteo also fared poorly in the last couple of years. Criteo has lost a third of its value, Rubicon has lost 90% and is close to becoming a penny stock.
"We had the better house in a bad neighborhood," our source says.
There has been one bright spot in ad tech IPO land: The Trade Desk, whose stock has held up as its revenues have grown larger. But the rate of its growth is slowing.
"That's the best story — and it's not the 'best' story," the source says.
AppNexus has similar high-class problems: Business Insider estimates its revenues might currently be around $350 million per year, but with those big numbers come the problem of declining growth percentages. The "big numbers problem" is common to a lot of companies that mature into large, solid businesses — it gets harder to move the revenue needle over time because you need new businesses that pay in the millions or more to get there.
AppNexus has also done a substantial amount of rebuilding among its clients. Its "IQ" program weeded out invalid traffic or abusive clicks, reducing the available impressions it was selling by 35%. That reduced total spend on the platform by about 3% that year (because most spending occurs on household name websites that don’t practice click fraud). Nonetheless, the optics weren’t helpful.
Now the company has more direct relationships with publishers, agencies, and brands, and isn't so reliant on networks. Apple's addition of an ad-blocker to its Safari mobile web browser didn't help the scene either. Retargeting — those shopping ads that seem to follow you around the web — isn't a big part of AppNexus’s business but the removal of tracking cookies from the iPhone added to the negative chatter about ad tech in general. "Apple has made it pretty much impossible to drop a cookie that tracks you," the source said.
That's the inside story, but the company's management is aware that promising an IPO and then failing to deliver looks weird from the outside.
AppNexus has taken about $281 million in funding. Its backers include WPP, Yahoo Japan, and News Corp. Those investors and board members aren't like Silicon Valley VCs, who need a scheduled "liquidity event" to justify their investment. "We don't need the capital." AppNexus is "not getting the pressure from VCs … just to have liquidity," our source says.
In the meantime, AppNexus is looking at small to medium-sized acquisitions, particularly in the video space, where it could use all the engineers it can get. The company serves about 57 billion ad requests per month through its video supply-side platform (on which publishers can offer ad space in online videos).
There is even talk of developing some kind of programmatic buying capability for local spot TV commercials — an area ripe for digital disruption that has seen repeated failures in the past (Walmart and WPP have both backed companies that failed). Our source said the company was aware that digitizing analog spot TV was something of a Bermuda Triangle for ad tech companies.
But back to the IPO. The company continues to file quarterly statements with the SEC, confidentially. It's ready to IPO. It just doesn't want to.
"We'd like to go out," our source says. But "it's an unforgiving environment."
Perhaps, later this year?
Blockchain has been positioned as the ultimate solution to the many faces of fraud in MarTech and AdTech. Within the industry, a bright promise of a decentralized future has led to a spurt of blockchain initiatives.
For many years marketers have been left to deal with the pressing issues of bot-traffic mixed with spoofed domains… This has resulted in a huge headache for everyone involved.
- Marketers lost $7.2 billion to digital ad fraud in 2016 – WhiteOps
- Click fraud is currently growing at 50% per year – The Australian
Bot- vs. Human-Traffic Fraud:
The two major groups of fraud in the industry.
- Bot-Traffic Fraud: Includes all non-human traffic types, designed to create fake impressions and fake leads.
- Human-Traffic Fraud: More complicated issue dealing with real users who generate fraudulent impressions.
This is where blockchain can step in, as it’s intended to deal with both types of fraudulent activity. The main principle behind this decentralized system and blockchain is to minimize and eliminate the core problem. Through an open access ledger, there are no intermediaries, i.e., no leeway for fraudsters. The ledger is intended to track the journey of an ad impression. Blockchain implies complete transparency, providing a way to share data.
So, is the fraud dilemma is solved?
In short, not quite. The buzz around blockchain has created a completely new issue – educational gap fraud.
Educational Gap Fraud?
The hype around blockchain, along with a general lack of knowledge, has raised education gap fraud. PR teams tend to use the term “blockchain” without a second thought; as result this has led to industry-wide confusion. Marketers are interested in blockchain, yet they don’t see the scope of possible applications, or the potential return. The overarching conclusion is that the industry doesn’t know how blockchain works.
The IAB Tech Lab presents an Ethereum blockchain-powered initiative in the form of an ads.txt utility – a major step forward. There’s no doubt that blockchain will play a role in bringing AdTech to a new level of transparency. Yet, questions persist:
- Why does the industry need to make the ecosystem even more sophisticated with blockchain?
- Who is going to pay for these new transactions? There are already approaches where no one needs to pay for transactions.
While blockchain is positioned to solve for bot-traffic and human-traffic fraud, educational gap fraud will be conquered only with increased education in the industry.
There are already solutions being implemented to combat these issues. There have been a rise in ICO startups and companies offering ready to use blockchain solutions. Companies should strive to grow business with experiments that should be inexpensive — no struggle with endless code lines.
The IAB has already created a Working Group: Blockchain for Advertising to develop educational guidelines for the potential uses of blockchain. Currently, the group is working on setting priorities, establishing best practices and core standards.
The Bottom Line
Question everything “blockchain.” SmartyAds starts by asking our clients who believe they need a blockchain solution: Why do they think they need blockchain? In the end, it’s less about the tech and more about a problem that needs to be solved. Although decentralization is a great idea, there are few cases when it’s truly needed where it can be applied correctly and for the good of the task — not for the good of early dream-sellers’ successes.
When it comes to dealing with fraud — blockchain is the best tech. However, unless there is industry-wide education in which all parties get involved within a working blockchain system, the full benefits of the tech will not be achieved. Nevertheless, the perks of implementing blockchain in a diverse digital advertising age are visible and beneficial.
Ivan Guzenko is the CEO and founder of SmartyAds, which joined the AdTech revolution 12 years ago. Being half-tech and half-business minded — Guzenko is passionate about looking for the next big thing in the industry. Guzenko is a strong believer in AI, cognitive learning, and 360 automation approach that will connect the dots between the buyer and the seller — with no middlemen. Guzenko entered the blockchain industry at 2013 and is an active member in the blockchain community. Guzenko introduced and launched the first blockchain-based future trending exchange prototype, 2 years ago at AdTech Israel and beta-launched the product in 2017 for the APAC.
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