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Setting Up a Blockchain for Large Scale Advertising Buys

blockchain for advertising

Five years ago, if marketing apps had offered the degree of granularity that agencies and brands had wanted in order to promote the apps after they were built, there would have never been the need for what Kochava brings to the market today. Those apps didn’t, however, and the companies using them couldn’t measure the full effectiveness of the apps through the number of downloads, installs, and other metrics that would have offered the necessary concision.

The products Kochava brings to the market allow companies to get those details.

Kochava’s History

Kochava was born in 2011 when PLAYXPERT, the in-game community messaging tool for PC gamers, was sold to Razer, and some of the PLAYXPERT team wanted to continue to work together. Part of the viability of the company today can be found in its evolution. Kochava didn’t exactly set out to create the software needed for today’s market; it listened to the call of those companies who needed that granularity. It was at that point that the Charles Manning-led company began to build the first generation of Kochava.

About six months along its new path, the new measurement and attribution arm eclipsed that of the consulting services, which they then closed off to put all focus and energy toward Kochava.

The company funded itself with Manning saying that, it being such an early stage venture, he wanted to get to the next milestone without raising money, a trend that has now continued for six years.

How the Service Works

An SAAS subscription-central network, the Kochava instrumentation is embedded into the advertisers’ app. Customers can design their own campaigns and tracking links for them, and the Kochava platform can assign credit allocation to the data by attributing which traffic comes from which marketing effort. Kochava’s system also creates a nexus of the advertiser’s data with regards to audiences and marketing data to promote the app.

Manning says the service effectively arms the advertiser with access to the best tools on the market despite company size or spending budget. Kochava has no loss-leader accounts, and as its customers grow their media spend, the company grows and reinvests in the technology.

During its evolution, having discovered the focus should be on actual reach versus frequency, the Kochava team developed fraud mitigation technologies, which afford the opportunity to see fraud at scale. This development brought about a change in how the company charges for its services, from charging a percentage of the media spend to a structure based on transactional activity with smaller companies having access to the same technology as the bigger ones, but at a lower price, and larger companies leveraging volume pricing. Part of the pricing increase for the enterprise offerings is because the proprietary nature of the larger companies’ data; it’s theirs, and they want to protect it. Smaller companies don’t care as much about that.

Pricing for these smaller customers goes as low as $100/month, and Kochava has even invented a way for companies who don’t care to pay that much to be able to utilize the service. For these customers, the company has created freeappanalyics.com. In this scenario, Kochava is compensated by selling the customers’ data to enterprise customers, giving a visual data marketplace where they can find users that are similar to the other users the company has acquired.

Incorporation of the Blockchain and Advent of XCHNG and OnXCHNG

In 2015, Manning saw the potential to apply blockchain tech to the company’s offerings. Research into Ethereum showed that it had blockchain limitations that would stop what Kochava sought to do, so the company decided to build its own consensus engine, XCHNG, a P2P engine and smart contract engine as a package. The idea was that, when a customer clicks on an ad off the chain, the Kochava solution measures the off-chain activity and writes to the chain what is seen off chain.

After two years investing in blockchain, they began to talk about using the blockchain for advertising. The blockchain they have created, XCHNG, reimagines protocols of inventory discovery, tracking discovery, incorporated ratings, and measurement as first-class behavior of the blockchain itself.

Now they have created a partner program, OnXCHNG, designed to expose the code and the road map, which will be open source. Manning says, “There is a nascent period in an open source project; if it has a lot of attention, there is a great temptation for it to be heavily forked. It’s easier to fork before it is adopted than after it has critical mass.” In order to unify and not splinter the chain on the open code, partners sign a non-disclosure agreement and receive access to all of the code, data, etc.

Kochava’s consensus engine is a Byzantine Fault Tolerance (BFT) proof-of-stake model. With an added twist to handle the scalability that the ad world requires, Kochava’s engine is designed to handle millions of transactions per second, using a multi-dimensional side-chain approach. The digital IO is a PDF, and tracking it is another piece of tech across many vendors. The Kochava blockchain architecture puts an insertion order into the chain, with each line item being a second dimension off of that world chain. Hanging off each line item is a roll-up chain, which is a calculated roll-up of children chain that applies consensus in a sharded fashion.

The company has also built the concept of a distributed file system (DFS). Manning says there are a handful of these, with Protocol Labs having the best known to date, and Filecoin recently launching an ICO for their DFS. This holds great promise for a lot of use cases. One challenge of digital ad space is that the data needs to be stored, but it is not document-based. A DFS is document-based, which means it can’t issue a protocol demand across a series of decentralized nodes and ask for data inside the files. The Kochava solution is to provide a sequel-like protocol on top of the document-based framework.

To this point, Kochava has lined up 15 partners with the OnXCHNG program. These partners represent leading and material independent ad inventory sources.

On February 22, the company staged a live benchmark and demonstrated for a single IO a sustained volume of 180,000 transactions per second in the consensus engine. That’s real nodes across the open Internet, with a clearing time of 40 milliseconds. Manning says that if you multiplex that across myriad buyers and sellers of media, you bring the upper limit down to IO size. The company having spent $6.5M on its media buy, and projecting that the consensus engine can support the volume of the live traffic, the key performance indicators are compelling.

Manning points out that there are a lot of companies merging digital advertising with the blockchain, but what is different about the OnXCHNG platform is how it attacks the problem. “You can’t just layer blockchain pixie dust on the system and say its better. That doesn’t solve the problem.” The solution that Kochava has found is that every transaction must begin and end with an insertion order, the agreement of which defines what is being bought and sold. He points out that a number of companies are applying periphery in similar fashion, MetaX and Brave Browser among them, but doing so to attack different problems.

Customers and Target Market

Kochava’s customer list reads like a who’s who of major brands: ABC, CBS, NBC, Netflix, Turner, Dunkin’ Donuts, Chik-fil-A, and McDonald’s are among them. All of these can use the platform to measure ad effectiveness and create efficiencies in the buying and selling process, as the company covers a number of different verticals. Being larger scale media buyers, they are looking for a solution that will guarantee anti-fraud as well as efficiency.

Companies that have signed on to participate in OnXCHNG include Aerserv, Applift, Chartboos, DataStream, Datawallet, Feedmob, Instal, Kiip, Parrable, Snap Interactive, Sulvo, and many more.

Expanding Offerings and Going Forward

Manning says that he can see how buying and selling can be protocol-based versus intermediary-based. He notes the importance of relationships in the media industry, but points out that buying at scale guarantees there are audiences you’re just not going to have the time to reach. With a protocol-based market, he sees the ability to win these agencies will scale and leverage the technology.

He sees Kochava continuing to lead in the measurement space in terms of its core feature set. The company acquired a push notifications industry company last summer, a customer data platform that they have been incorporating into Kochava over the last six months. He sees this as a “core missing piece,” which the company now has.

The company’s gravitational pull is toward engineering, he tells us, and that they have “outflanked many competitors” with that focus. “We continue to serve tier one customers without flash or pizzazz, but we deliver ROI. The advertising industry is becoming wise to how important that is.”

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Written by Paul Keenan.

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Allen Taylor

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