Digging up the walled gardens, aka paywalls, is key for the future of online advertising.
In a major strategic shift, media giant CNN introduced a digital paywall this month asking users to pay $3.99 per month to access premium content. This is nothing new in the online media landscape, 75% of American news outlets now use them as they scramble to identify revenue generating opportunities outside of the normal adtech business models.
Surely, clicking into a website only to be greeted by an unwelcome paywall has to be one of the worst user experiences online today? How many times have you stumbled on an interesting report, headline, or feature that you are keen to explore only to be greeted by a pop-up asking you to subscribe?
Many of us will just wander onto another platform leaving behind the long-form features and maybe landing upon unreliable sources instead leading to the spread of misinformation. This was highlighted in a recent article by The Atlantic Magazine that suggests all news outlets drop their paywalls for election-related coverage, giving readers the chance to read all of the details and digest the right information.
In a super active attention economy, this is one surefire way not to keep the attention of your audience. However, it is now common practice for some of our most loved online publications, and who wouldn’t blame them? How else are they supposed to generate revenue to keep the publication alive?
As someone who has navigated the world of ad tech since the early days, Alkimi CEO and Co-Founder Ben Putley sees how the fragmented internet of today is having a negative impact on creativity and innovation. We sat down with Putley to explore how decentralized ad tech may allow us to tear down those walls that cause so much frustration.
The Problem with Walled Gardens
As internet advertising revenues hit a staggering $225 billion in 2023, a 7.3% increase from the previous year, it’s clear that the digital advertising landscape is evolving rapidly. Amidst this growth, the ad tech industry faces significant hurdles. The walled gardens are often limiting transparency and fairness, and as a potential solution, adtech start-up Alkimi is proposing a long-term vision focused on decentralization. Alkimi has built a Layer 2 ad exchange that ensures 100% transparent media spending, dramatic reductions in costs to buy and sell media which reduces inefficiencies and enables advertisers and publishers to regain control over their transactions.
Putley explains how adtech has evolved dramatically since the early days of the internet, when print media was the primary platform for advertising. As the digital world expanded, companies like Google and Meta leveraged the absence of costly physical infrastructure to quickly dominate the online advertising market. The cookie, introduced in 1994 was used to track user activity, became the backbone of adtech, despite being outdated today.
“This has led to a landscape where platforms take a significant share of advertising revenue, forcing publications to turn to paywalls or clutter their pages with ads in order to survive. In this walled-garden ecosystem, creators, brands, and users are left vying for value, with middlemen often capturing 43% of the advertisers dollars.” says Putley.
Walled gardens, like those created by Google and Facebook, may seem beneficial at first glance. They offer users a curated experience, presenting content and ads tailored to individual preferences. However, this comes at a steep cost. Users are often bombarded with irrelevant ads and faced with inaccessible content due to paywalls. This not only frustrates users but also dilutes the very value of the content creators who work tirelessly to provide quality information.
The experience becomes a maze of confusion and disappointment, where you might click on an enticing headline only to be met with a paywall, leaving you feeling cheated. This user experience is symptomatic of a larger issue: a lack of transparency in online advertising. For Putley it is all about “meeting the market where it is and then showing them how using a new infrastructure provides benefits to their business goals.”
Reducing Costs and Reclaiming Budgets
In traditional ad exchanges, an alarming 43% of advertising spend is lost to intermediaries, leading to inflated costs for brands and diminished revenue for publishers. Alkimi’s Layer 2 ad exchange aims to combat this inefficiency by providing transparency in transactions. Their system records every auction on a distributed ledger, the Ads Explorer, allowing brands and publishers to track financial flows—something that traditional models fail to do adequately.
After years in ad tech, Putley found himself drawn to the potential of blockchain technology as a solution to the many challenges facing ad buyers. “The difference between a Web2 exchange and a Web3 exchange is that a Web2 exchange is built on centralized servers, so they will have large cloud infrastructure costs, or they may have their own bare metal servers that effectively host the auction, store the data of the auction and incur quite high fees, it can be anywhere from 15 to 30% of gross ad spend can be spent on the infrastructure supports.”
This is what eats away at advertising budgets.
By contrast, blockchain allows for a decentralized network where validation and transactions are distributed among multiple nodes, significantly reducing costs and improving efficiency. By utilizing a decentralized network of validators—over 1,200 of them—Alkimi significantly reduces these overhead costs. This not only allows for lower costs per thousand impressions (CPM) but also translates into more revenue for publishers while offering brands better value for their advertising budgets.
The Future of Advertising
Surely, it is the low-quality ads and content that should be closed off to mass public consumption? A blockchain-enabled advertising ecosystem has the potential to create an internet where ads are less frequent but more relevant and publishers can afford to provide full access to all of the high quality content it creates.
As platforms like Alkimi develop blockchain-based ad tech solutions, the potential for more equitable advertising models starts to shine through. The call to action is clear: let’s distribute the dollars generated by online advertising to the parties creating value to guarantee the future of the ad funded internet. An internet where all content is free and accessible to everyone at any time.
How did the internet experience become so closed off to the everyday user? Interacting with some of the most popular sites today is far from seamless. It appears as though the lack of revenue generating opportunities for content creators of all forms is stifling creativity and ruining some of the most entertaining parts of the internet as we know it. Although the internet has become an essential part of our everyday lives, with 73% of millennials reporting increased online shopping, what about the other reasons why people use the internet, including researching, education and entertainment?
The future of ad tech lies in dismantling the walled gardens that have dominated the landscape for too long. By embracing blockchain technology, companies like Alkimi are paving the way for a more transparent, efficient, and user-friendly adtech ecosystem. To preserve a positive experience of the internet organizations should prioritize access to credible information.
