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A New Exchange, a Different Asset Class and a Hearty Dose of Blockchain

Madison Ave gets a new solution for buying and selling digital advertising

(Editor’s note: For background on NYIAX and the state of the advertising business, see JLN’s You Look Mahvelous Dahling: “Mad Men” Ready To Walk The Exchange Red Carpet With Nasdaq.)

Want to see a proper use case for the ever-buzzworthy blockchain?

Look no further than NYIAX, an exchange for guaranteed advertising contracts that runs on Nasdaq’s technology and deploys the blockchain to track trades, positions and, in the end, streamline reconciliation. On October 10, NYIAX’s product went live and the exchange continues to line up publishers and advertisers to use the platform. Then on October 19, NYIAX announced it had raised $5.6 million in seed capital to support its growth.

“One of the things that excites us the most is that we have intellectual property with Nasdaq that is a long term relationship. It’s not just intellectual property for the advertising industry,” Carolina Abenante, NYIAX’s president and co-founder said. “There are certainly markets that we’re interested in potentially expanding our technology to help with those industries.”

The trading world has been involved from the get go. Abenante met Mark Grinbaum, one of the original architects of the International Securities Exchange (ISE), in 2011 and they started looking at technology applications for a true two-sided advertising exchange. (Currently, the “ad exchanges” are closer to inventory warehouses than exchanges.) ​In​ ​2011,​ ​given​ ​the​ ​nascent​ ​nature​ ​of​ ​the​ ​crypto space, smart​ ​contracts​ ​and​ ​the​ ​blockchain​ ​weren’t​ ​even​ ​in​ ​the​ ​picture.

The project gained further traction and guidance when industry veteran Tom O’Neill became involved, bringing with him a connection to Nasdaq, as he was then an independent director for the exchange group. NYIAX’s plans were also aided by the accession of (now) Nasdaq CEO Adena Friedman, who put renewed vigor behind the venture.

But why an exchange?  Advertising is a highly unregulated industry and it suffers from a chronic lack of trust and understanding of counterparties, specifically when you move away from “high value” advertising with the top costs per thousand impressions. With smart contracts – in this case considered predefined forward agreements – traded on the blockchain, publishers and advertisers no longer have the need to renegotiate contracts partway through, and the process eliminates counterparty risk. Moreover, by eliminating indirect sellers (think a sort of advertising middleman), publishers keep more of their revenues, as they only have to pay a NYIAX transaction fee. Typically when using an existing ad selling network, publishers would lose up to 50 percent of their revenues in fees.

“There were hundreds and hundreds of touch points involved between the agency sending over the RFP – there’s responses, booking inventory –  all these different stages of the proposal process we’ve essentially eliminated and collapsed into one system,” Jamie Miller, NYIAX’s vice president of operations, said.

It’s not the only new asset class development. In the last month, capital markets saw the creation of trucking futures (a collaboration between TransRisk, DAT and Nodal Exchange) as well as the approval of bitcoin futures at Cboe and CME Group.

Given that the current trading environment has been dominated by the “search for yield,” once commercial participants are fully integrated, then professional traders will likely step in as well.

“It’s the largest industry without a secondary market, so absolutely speculators want in,” Abenante said. 

Edited by Sarah Rudolph

 

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Graduate of University of Minnesota School of Journalism and Mass Communication