How will blockchain and cryptocurrency impact the advertising industry? Rather than waiting several years to learn the answer, some entrepreneurs have already begun writing the next chapter in the history of advertising – an industry they hope will continue to be as receptive to technological innovation as it has been in the past.
Among these entrepreneurs is Vladimir Dyakov, 37-year old former programmer, who ran several advertising and consumer loyalty projects for big Russian companies in previous years. The idea of introducing cryptocurrency in ad networks came to him less than a year ago. His company AB-Chain is now completing an ICO, in the course of which it has already raised the equivalement of $1.8 million. [Update April 2: AB-Chain claims to have raised some $2.5 million in total during the ICO which ended on March 31.]
AB-Chain’s primary aim is to leverage the huge marketing budgets generated by ICOs. “Companies raising amounts in cryptocurrencies – some $5 billion in 2017 – need to advertise their products. According to their investor documentation, marketing would account for up to 40% or even 50% of their planned expenses post-ICO,” Dyakov noted.
AB-Chain itself uses the blockchain technology, but sparingly. “We only apply what is most profitable in this technology and relevant to our case,” Dyakov says.
Answering the objection that well-funded blockchain companies might still, after their ICOs, prefer to run campaigns using classic ad networks and classic payment means, Dyakov says that if they did so, these companies would hit a bump.
“As long as your advertising budget is $10,000 a month, you can exchange your bitcoins into dollars with a small conversion commission,” he explains. “But if you need to convert, say, $1 million, the commission could go as high as 40% or more because the liquidity of the cryptocurrency market is low.”
When asked about cryptocurrency ad budgets putting aside the specific case of ICOs, AB-Chain’s founder Vladimir Dyakov told me that cryptocurrencies are in the process of becoming “a rather common payment means” to remunerate freelancers and small businesses.”
Planned expenditures of companies having conducted an ICO in 2017
Estimated total digital advertising market in cryptocurrency, 2018-2022 
Source: AB-Chain. The calculations are based on the amounts already or expectedly raised by startups through ICOs as of late 2017, and on the budgets allocated to marketing in the post-ICO plans of an international sample of 30 companies. The estimate does not take into account the ad budgets in cryptocurrency that may come from other types of advertisers.
From immediate opportunity to long term strategy
In the immediate term, demand has emerged for ad campaigns at an earlier stage – to promote ICOs, with budgets in the hundreds of thousand dollars minimum per campaign.
AB-Chain aims to be among the first players this year with the capacity to run ICO support campaigns – assuming the current ICO wave doesn’t end abruptly – whenever these companies have cryptocurrencies to spend.
In the long term, Dyakov hopes to see the emergence of a full-fledged advertising market in cryptocurrencies. “In a slow but irrepressible trend, cryptocurrencies will penetrate the entire economy,” he explains, citing Ethereum founder Vitalik Buterin. “And this will inevitably translate into ad budgets and ad offers in cryptocurrencies.”
In March 2018, confirming Dyakov’s prediction, Mail.Ru Group began accepting payments in cryptocurrency for running ads on the group’s properties – which attract more than 5o million users in Russia every month. Dyakov concedes, though, that that not all traditional ad networks will adopt cryptocurrency as a means of payment in the nearest future. As giants like Google and Facebook, they may not embrace crypto-currencies for years, until all the legal and regulatory details are fully settled.
Startup development amid fraud and scams
To bring his idea to life, Dyakov invited Russian industry professionals he had long known to join the startup. He has also attracted advertising and blockchain experts from as far away as the USA, France and Hong Kong to help fine tune the AB-Chain concept and develop the project.
Meanwhile, as AB-Chain moved from concept to execution, challenges began to arise.
“There’s a lot of fraud among ad platforms,” says Dyakov. “It’s impossible to completely avoid scams when operating in this market, but it is possible is to minimize damages.”
To weed out dubious ad channels, AB-Chain goes beyond expert analysis and evaluation and invests small amounts of money in various ad platforms to test their efficiency. “The vast majority of ad channels generate a very low response, and we quit them. But when we see an effective channel, we continue investing in it.”
Even though AB-Chain raised more than its soft cap target of $1.5 million in the course of its ICO, Dyakov remains open to classic investors, including venture funds “as well as certain types of players from the advertising industry.”
After the fundraising, AB-Chain intends develop its project at the global level. The startup’s primary target markets are the United States and China. “More and more and campaigns are being rolled out in various countries, and this is particularly true in the field of high tech,” Dyakov notes. “Many of our advertisers will need a global answer to their global needs.”
Moreover, blockchain and cryptocurrencies might become the means to overcome traditional obstacles to entering certain markets.
“The Chinese market is promising, but the country’s market regulator doesn’t let Western advertisers fully operate on it. AB-Chain might become a game changer there,” Dyakov observes hopefully.
Several Russian startups in the running
AB-Chain is not the only Russian startup operating at the intersection of blockchain, cryptocurrency and advertising.
Bitclave, which claims to have raised the equivalent of $25 million in an ICO in November last year (see EWDN’s regional ICO report), is building what it calls “an anti-Google search engine where all money goes directly to users.” The BitClave Active Search Ecosystem is intended for customers to “control their identity, decide who has access to their data, and get remunerated in tokens each time their data will be used for marketing purposes.”
BitClave told us they’re actively developing their platform, but could not specify any launch date.
Another Russian startup in this field is mytime (see EWDN’s story), a platform designed to reward online buyers of services for their time. For example, a video game aficionado may receive tokens for every minute of online fun, while a taxi passenger may get these tokens from the taxi company based on the time he spent on the road. Meanwhile, service partners will be able to earn tokens by attracting loyal users to the platform, says mytime.
mytime’s concept is very close to that of Basic Attention Token (BAT), a US startup which raised the equivalent of $36 million in less than a minute in May last year. As a more modest start, mytime has just raised $3.5 million from private investor as part of its ICO.
Disclaimer — EWDN co-founder Adrien Henni is a strategy advisor at AB-Chain. This story, however, has been written in an independent spirit.
