Better Privacy For Onchain Ads Can Revolutionize Digital Marketing

The future of advertising could be built natively in Web3 with proper privacy protections.

The modern Internet is saturated with advertisements.

In an era of highly commercialized online communities, it’s nearly impossible to be active online without consuming some form of marketing material. Web3 will also eventually experience this reality natively. But, today, most Web3 marketing still occurs on Web2 platforms.

Onchain advertising is a nascent reality that could change the dynamics of Web3 marketing. Coinbase CEO Brian Armstrong named onchain advertising as one of the top 10 ideas he hopes to see crypto builders focus on. “The best business model in Web2 has been ads. It's a reasonable bet that some form of advertising will be big in Web3,” Armstrong wrote.

Shaping the future norms and best practices for onchain advertising must happen now. Better privacy for advertising agencies, their clients and their consumers is essential.

Web2 Advertising Is Broken

Does targeted advertising violate personal privacy? The answer depends who is asked.

But, one fact that is indisputable is the inherent security vulnerabilities that accompany gathering massive amounts of behavioral data from Internet users to predict the marketing content that might be relevant to any given individual.

A second glaring problem with Web2 digital marketing is the financial exclusion of the very individuals whose data is harvested to fuel the endless stream of advertisements fed to Internet users. In 2021, the global marketing data market was worth an estimated $17.7 billion. Users (i.e. advertisement consumers) have zero participation in sharing the value of that industry even though it is built entirely on their personal data.

Readers should be familiar with a few high-profile instances of Web2 giants facing legal action for their handling of user data related to targeted marketing strategies. Twitter was sued over deceptive data collection for targeted ads. Meta was also fined over its targeted advertising practices. Major players in digital advertising were also sued over a massive data breach.

Web2 ads are clearly broken.

The Electronic Frontier Foundation even called for a ban on behavioral advertising.

Web3 advertising can easily do better. But, how?

Technical Solutions for Onchain Advertising

Web3 advertising would be no better — or even worse — than Web2 ads without proper privacy. Public blockchains are designed to be transparent by default, which means “data leaks” are impossible because everything is already publicly available onchain to anyone who looks for it. Selective privacy controlled by individual users comes from the customizable confidentiality infrastructure built by core contributors of the Oasis Network.

The Sapphire runtime, for example, supports contracts with encrypted key storage that can have their own secrets. Users can be confident that any information passing through these contracts will remain tamper-free and secure from third parties unless otherwise predetermined by the user. In a world of user-centric targeted advertising, this sensitive information is secured on Web3 and only exposed by users who want to be reached by brands who are interested in marketing to them. In short, the status quo advertising paradigm is completely inverted.

Learn more about Sapphire here.

Not only does Oasis bring selective privacy features to managing personal data in Web3, but users are empowered with hands-on control of their data. Instead of a binary option to opt in or out of targeted ads, confidentiality frameworks built into the Oasis Network are critical to a responsible, multi-faceted data economy. Tokenizing personal data is an important step toward this future. Oasis lays the groundwork for infrastructure that allows users to tokenize and secure their onchain data with control over who, when and how much data is viewed by third parties.

Read more about building a responsible data economy here.

With greater control over their own data, Web3 users are able to move beyond simply protecting personal information to actually start benefiting from it; the monetization of individual data becomes easy and attractive. Instead of large marketing conglomerates harvesting data and profiting from it, users own their data and control the cash flowing from advertisers who want to reach them with new products or services.

Controlling personal data means opportunities for profit, not just better privacy. Programmable confidentiality and tokenized data tools on Oasis support this reality. And, in many cases, Web3 user data is much more granular, specific and targeted than general Web2 browsing history patterns or cookies data, which could make this data more valuable to advertisers — but users have control over it.

Digging deeper into the mechanics of ad monetization, a key pricing concept that could drastically improve onchian advertising is the Vickrey-Clarke-Groves (VCG) auction mechanism. Many large social media companies, for example, make use of this mechanism to optimize ad space allocation beyond just awarding it to the highest bidder. A VCG auction balances an advertiser’s bid with their ad’s relevance to users, which produces a weighted average that encompasses both key data points — value and relevance. Essentially, this mechanism calculates the opportunity cost of an advertising bidder obstructing revenue to other marketers using user data to improve relevance. The specific mechanics of implementing this mechanism in Web3 advertising deserves more explanation – perhaps a blended on-chain and off-chain solution is ideal for speed and security, or perhaps a fully native on-chain solution is feasible. In either situation, advertisers will be forced to play fairer with onchain data because users are in control.

The Future of Crypto-Native Marketing

Exploring the potential of onchain advertising presents many challenges and opportunities.

Based on the track record of Web2 advertisers, the threshold of “better” is low for Web3. But, only through diligent development of customizable privacy frameworks and data sovereignty tools can Web3 transform the digital marketing landscape. Empowering individuals to protect, control and monetize their data is a central tenet of the Web3 ethos, and onchain ads sit at the center of this principle. Confidentiality technologies built by Oasis are key to capitalizing on this opportunity.

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