Why there will be no ad giants like Google or Meta in Web3

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Why there will be no ad giants like Google or Meta in Web3 🧵 What if there were no data walls? Can we possibly build a fully decentralized ad exchange that connects publishers, advertisers, and end-users directly? Let's find out:

As I write it, 3 companies, namely, @Google, @Meta, and @Amazon, control the majority (54%) of the digital advertising market.

They are followed by other consumer giants like Twitter, LinkedIn, Bing, TikTok, you name it, and only a tiny part of the market (<5%) is designated to independent ad networks, not associated with any consumer app. Why is it so? The answer is in data.

Consumer products aggregate first-party data they receive from their users and create walled gardens for advertisers, where the latter can only access this data for advertising purposes through the native advertising solution of the given company, only within their product.

In Web2, this leaves no space for ad networks to compete, as even with all the cookies and shady tracking, they hardly can get users’ geolocation and rough demographics, not even mentioning interests or buying intent, making targeting super inefficient.

Soon, in 2024, the situation will get even worse as Chrome and Safari will stop supporting 3P cookies, basically destroying independent ad platforms and strengthening their oligopoly.

The walled gardens of data are what protect the dominance of the centralized ad giants, and their walls are only growing over time.

In Web3, anyone can access on-chain data, because it is on a chain.

Moreover, this data on a chain presents the lump sum of user activity and interests in the context that may be relevant to web3 advertisers. Making any additional first-party data marginally useful, and leveling the playing field.

Say, now, some Web3 clone of Twitter wants to start selling ad surfaces. They can create their own product, which will be the same as others, maybe less sophisticated.

Or, they can join the existing network with an efficient and highly-optimized exchange and advanced algorithms, operating on top of the same data but across many more sellers and buyers allowing our friendly social platform to bring the highest-paying advertisers for their users

The network quality and algorithms are the cornerstones of ad giants of the future. And not an association with a particular consumer interface.

>At 8:29 @friedberg shares how the efficiency of Google’s ad exchange helped them build an actual monopoly around their ad network and lock the publishers in. youtu.be/CwQMMzoeH9s?t=509 @theallinpod

If to fantasize, one can even argue that ad exchange is just like any other exchange. You have the bidders, you have the askers, you have unique impressions enriched with the right data, that can be matched with the most relevant and highest-paying advertiser mathematically.

Meaning, it can be standardized and decentralized while all the operations being performed by smart contracts and not a single entity.

Even more, don’t forget that the data access is also permissionless, giving us two big terms of the equation, that can operate in a purely decentralized way. Allow publishers to deposit the inventory, and advertisers to create campaigns, and voilá, your AdChAiN is live.

Maybe there can be pools of unique data or analytics engines or pools of advertiser’s reward tokens, or maybe even end-users can put their 1P data in pools of particular advertisers they trust in a DataDAO manner and earn fees from ads like they earn fees from swaps on Uniswap.

In either case, the speed and cost of the transactions won't allow implementing anything like that today. Considering that each transaction has low value but needs to be fast and cheap, maybe there is a space for new more extreme roll-ups or L3’s specifically for adtech purposes

What we can be sure about, is that the future of advertising looks exciting. That’s why we build @slise_xyz. The ad platform for web3, serving better ads for a better internet of the future. Be the first to read this and new pieces on my substack: acecreamu.substack.com/p/decentralized-ads