Making Digital Advertising Contracts Smart

“The Sell Sider” is a column written by the sell side of the digital media community.

Today’s column is written by Rob Beeler, managing editor, research, at The 614 Group, chairman of AdMonsters and founder of Beeler.Tech.

When shopping online, transactions are practically automatic and mistakes are by far the exception. When we buy something online we trust that we get what we pay for.

So why is it when we buy digital media “online,” we don’t have that same amount of trust?

The trust I’m referring to is not whether or not an impression is seen by a person. There is an overall lack of trust between buyers, sellers and everyone in between, but the emergence of the smart contract could one day add a dose of transparency to the relationship between publishers and the marketers and vendors they work with.

Imagine this scenario: During an RFP or discussion about a campaign, KPIs may be revealed, but just as often they are not. Rarely is there an agreement that if a publisher delivers on those KPIs that additional ad spend or a renewal will result. In fact, there is no assurance that a well-delivered campaign won’t be canceled without much indication as to why. The publisher, now negotiating from a disadvantage, must decide how to price and deliver to protect itself.

Note that most contracts based on my discussions with publishers aren’t canceled before they run. Instead, the terms are negotiated after the fact. Viewability may be measured but is not specifically a requirement until after the campaign has started. At that point, the publisher must optimize to something not specifically agreed upon in the contract.

If the terms of a contract can be so easily changed after the fact, is it really a contract?

Programmatic removes much of this contractual wishy-washiness, but certainly hasn’t improved the trust factor. Think of the percentage of advertising dollars spent throughout the advertising spectrum on ad verification, just to validate that buyers are getting what they think they bought.

To help solve this, we need to look to the IAB for the next version of standard terms and conditions. That’ll help, though adoption will take time and could still be subject to the same renegotiation after the fact.

The solution may rest in smart contracts. Built on blockchain, smart contracts essentially lock down terms in the code and automate some of the contract’s conditions. The example often given is the vending machine: You put money in and a product comes out. Dressed up in legalese, you agreed to pay a particular price and, once that amount was paid, your product was delivered with no need to sign anything.

Smart contracts are written as code and need a level of specificity to make them work. Once constructed, the smart contract can’t be changed and some aspects can be automated, such as when 1 million human-viewable impressions are served based on an agreed-upon vendor, the publisher is paid a certain amount of money.

Smart contracts are being tested in several sectors, including government and finance. The biggest challenges are education, a lack of awareness, client-side development and adoption, and the code must be written properly, just like any other piece of software. I would expect the emergence of third-party companies that focus on smart contract law.

But as the world looks at ways of speeding up transactions of all sorts, including currency and data, the ad tech industry might need to move in this direction. The result would be better definitions around what is bought and sold, the terms and specifications required to deliver and an automated immutable contract.

Think about it: Contracts that hold up for all parties involved. That would be the perfect gift for Q4.

Follow 614 Group (@614group), AdMonsters (@AdMonsters), Beeler.Tech (@Beeler_Tech) and AdExchanger (@adexchanger) on Twitter.

This post was syndicated from Ad Exchanger.