How the European GDPR Affects In-App Advertising

While the digital ad industry works to recover from GDPR, emerging technologies could offer innovative solutions

The European General Data Protection Regulation (GDPR) came into force during May of this year, introducing sweeping changes to the way that companies and websites interact with their customers and users.

Among other requirements, the regulation puts the onus on website owners to ensure they have the explicit consent of a user for the use of 3rd party tracking cookies. These cookies are the kind used by advertising platforms, placed on users’ hard disks to follow their online movements. In this way, adverts served can be personalized to the users’ individual preferences.

Even websites outside of the EU are required to comply if they are processing data belonging to EU citizens. To a global digital ad industry worth $192 billion, the ramifications of the consent model spelled disaster.

One CIO went on record to Forbes, stating that the EU market would suffer from restricted access to smartphone apps which are reliant on advertising. He believed that so many small developers on which the industry depends would not have the resources to ensure GDPR compliance.

Another predicted that EU citizens would be blocked from browsing US websites, which were underprepared for compliance.

Quantifying the Impact

Smaato, a real-time mobile advertising platform, has now released a report detailing some hard numbers which show the impact of the GDPR during the first half of 2018. While GDPR consent requirements have not killed online advertising in the EU, their effects have been felt across the global advertising industry.

Smaato reports that mobile ad request growth slowed to just 23% in EMEA countries, compared to 181% growth in the Americas and 101% in Asian countries. The company attributes this slowdown in Europe to the effects of the GDPR.

These numbers were driven by a decreased supply of advertising slots, as platforms grappled to ensure they could remain compliant with the new requirements. The decrease in supply quickly pushed up demand, causing a global 17% price increase of non-targeted advertising slots.

Smaato predicts that the effects of the GDPR will continue to ripple across the worldwide advertising industry for the remainder of 2018 and beyond.

Blockchain — An Alternative Consent Model

While the digital ad industry works to recover from the effects of the GDPR, emerging technologies could offer an innovative solution to the consent problem. Blockchain is now gaining prominence in many sectors, in part due to how it puts users in control of their own identity and data.

This control over data can also apply to a consent-based model in digital advertising, as in the case of Zinc. Zinc is a new blockchain-based digital advertising platform, which uses its own native digital token to reward users for their time and attention spent on viewing advertisements.

Users download the Zinc app which also serves as a wallet for the tokens, and they can then spend their rewards on in-app purchases and mobile gaming features or use them to purchase ad-free experiences.

With such a reward-based model, advertisers, publishers, and app developers are assured of explicit user consent that is fully compliant with the requirements of the GDPR. If other countries start to introduce similar legislation, then a blockchain-based platform like Zinc means that publishers don’t need to undergo further changes to cookie banners and opt-ins implemented as a result of the GDPR.

User consent is provided automatically by downloading the Zinc app, agreeing to its terms and receiving the rewards on offer.

Broader Benefits

Besides GDPR compliance, a blockchain ad platform offers other advantages to advertisers, site publishers, and app developers. The digital advertising industry suffers from a fraud problem, which currently costs the sector $19 billion per year. This is expected to rise to a mind-blowing $44 billion within the next four years.

Digital ad fraud can happen programmatically, with bots or malware generating false clicks or views on advertisements. It also occurs in “click farms,” where humans are employed to click on ads again and again, generating fraudulently enhanced revenues to publishers and ad serving platforms.

Two core features of blockchain are its ability to serve as a permanent, unalterable store of data, and to verify the truth of an event having occurred using the consensus of a decentralized network. A blockchain-based ad platform takes advantage of these features, providing advertisers with an assurance that clicks on their adverts are genuine.

All clicks are permanently recorded on the blockchain, which also provides advertisers and publishers with a high-quality source of data about the advertising preferences and habits of their audience. This marks a further change from the current environment, where convoluted advertising supply chains mean that clean, high-quality data is unavailable to advertisers.

Data transparency also offers enormous advantages to publishers and developers, as it can demonstrate the competitiveness of their websites or apps.

Enhancing Quality in the Digital Advertising Industry

The advent of blockchain appears to represent the start of a seismic shift in the world of digital advertising. Today, digital advertising is heavily dependent on quantity. Advertisers have harvested as much user data as possible, to serve as many ads as possible. This approach has led to user fatigue, and eventually the introduction of legislation like the GDPR, which aims to bring the industry back under control.

Now, blockchain-based ad platforms like Zinc are able to market themselves on a business model driven by quality. Quality in data collection, in advertiser return on investment, and on the ad viewing experience of individual users.

Disclaimer: This is a contributed article and should not be taken as investment advice

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