AdEX - Whitepaper Review

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JasonMasterNET

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Today I’m going to be breaking down the Whitepaper for AdEx. The news its onboard with NEO and its spike caught my interest to look into the coin. I though it may be helpful to go through my process here, step by step item by item and get input from others.
Their whitepaper can be found here:
adex.network

AdEx-Whitepaper-v.7.pdf​

1231.24 KB

My Criteria is a but simpler and strays from @peters spreadsheet. Basically I’m looking at:
  1. Is it a saturated market (yes, advertising is extremely saturated)
  2. Is there a problem (we will review, ill make no asumptions, i see none other then annoyance)
  3. Is there anything Proprietary (special/patented) that they do to seperate them selves from competitiors that cant be copied
  4. Can someone do the same thing cheaper
  5. Is it profitable/what are their margins (likely unkown with an ICO)
I’ll start with their business case: 9 problems and their solutions. I’ll go through these one by one.
I spent most of this morning reading through AdEX white papers. Here are some of what stuck out to me:
Problem #1: Lack of consumer consent
While popular advertising networks like the ones of Google and Facebook allow for some
extent of consent and control over what ads users see, this functionality is very limited, and a
lot of options are simply hidden from the end user (Facebook, for example, collects data
from the so-called “data brokers” but it took us purposeful research to find information on
opting out of these) . Furthermore, it is directly bound with the targeting parameters of each
campaign, launched by an advertiser - if an advertiser makes a mistake when defining these,
the ad will be broadcast to people who may not be interested in it and may not want to see it.
Solution: The AdEx Profile
As we mentioned earlier in this paper, each and every user, to whom AdEx serves ads, will
have their own profile where they can be as precise as they want outlining their interests and
preferences. This profile will ensure that consumers only see ads that are relevant to them.
For advertisers this means more precise targeting, less opportunities for mistakes when
setting their campaigns, and higher conversion rates.
Click to expand...
They basically say consumers dont have a say in what Ads are being displayed to them… I’m not sure this is a real problem. I think mostly people DONT want ads at all, not so much that they care about the content accuracy of those ads. if i see 10 ads, and only 7 of them are things id buy, that doesnt really factor in… mostly i just want the ads to go away. Thats my asusmption, they dont really have any market data showing it one way or another.
I also dont love the solution. Having user profiles. I dont think i would really take the time to register/sign in to an ad service, because mostly i dont care, i just ignore them or install something to block them. AdChoices mostly displays things targeted to me, and if they didnt im not sure id care. i know i wouldnt care enough to sign up for an ad service tailored to me. again, opinion and cant speak for the entire market here.
My Conclusion(opinion):
  • I dont see this as a problem. When it comes to Ads i dont want them at all, im not really concerned if they are accurate or not.
-I dont think the solution is attractive. Ad accuracy is a big enough issue for me to spend time singing up and registering for an Ad service tailored to me. (this could change, depending on features and benefits - do i get rewards? Is there an option to turn ads off completely?)
-(most important) There is nothing special or proprietary about this solution. Anyone else can do the same thing… use a profile that allows user to specify the ads the want to see.
For me this fails 2 of 3 condtions. I dont view it as a (large) problem, and the solution is not something that can not easily be copied or implemented by someone else or done better/cheaper by someone else.
I will post problem 2 in my next post…
 
This is great man. Thank you for taking the time to do a detailed analysis. We need more posts like yours. Would you be so kind to do one on the coin that is due to release on NEO in September?
 
PAge 9 of the whitepaper; Problem#2:
Problem #2: Privacy concerns and data misuse
Major ad serving networks and exchanges operate with huge amounts of centralized data
that can easily be traced back to the consumers’ identities. Despite legal disclaimers,
consumer have no knowledge of the purposes, for which their data is used, which is a threat
to their online privacy - a threat the end users can do nothing about. Most advertising
networks include disclaimers about disclosing data to third parties, however despite these
disclaimers, consumer and marketing data is being sold by data brokers (unfortunately, there
is no reliable information available on the data broking market size but we have reasons to
believe it’s a multi-billion dollar industry).
Solution: Blockchain ensures anonymous use of big data
The blockchain technology, which AdEx utilizes, allows to anonymize large chunks of data
so it is only used for statistical purposes. Put simply, with the help of blockchain, advertisers
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still get to receive and process data about their target audiences and consumers in the form
of statistics only - without compromising the privacy of these consumers.
Click to expand...
Basically… they are saying that sites and advetisers are storing your information (location, browsing habits, email, etc) and selling that data, Additionally there is no user consent, other then small disclaimers or terms of service which no one reads…
This is certainly a problem… probably the biggest in this space.
Their solution is “BlockChain Technology”. It is true that the BlockChain is encrypted and identities and locations are private… they dont go to much extent on execution of this, so my atennas are going up here… are they just throwing out “BlockChain” as a buzz word or is the technology really going to execute on it?
On page 16, describing the technology/core it lists user data being stored in an AdEX user registry, which is then sent over the BlockChain. It can be assumed, but is not explicitly stated that Advertizers will only get non-private data such as browsing habits and product preferences, not location or idtentity.
Page 20 has details on reporting, but doesnt get too deep into what is stored/accessible to advetizers:
Detailed reporting data is kept off-chain in a multi-master, append-only database called
hyperlog, although any database with similar characteristics can be used instead. To ensure
consistency, the overall result will be verified through the AdEx Core ADXExchange module.
  • Dapp: An abbreviated form for “decentralized application”, or an app with a backend running on a decentralized,
    peer-to-peer network instead of on centralized servers.
    ** Gas: the fee paid for the execution of every operation made on Ethereum.
    20
    Every involved party - advertisers, publishers and users - would log events to the this
    database, ensuring that detailed reports can be extracted from it
Click to expand...
One more important note here: GAS is paid by the publisher. This is important to note for later once we get a more clear picture of the platform… but how much GAS is needed, the cost, and who is paying it has real ramifications either positive or negative depending how the math works out.
Lets run it through the filer:
  1. There is a legit problem. privacy and your data being sold.
  2. There solution is to rely on the BlockChain to maintain user Anonymity. this is a good solution (assuming the execute on the technology).
  3. there is nothing really proprietary or special about it (other then being endorsed by NEO) so it techincally can be copied and potentially done cheaper/better.
My Conclusion:
This is a big problem, and a growing one as the general public learns of how their privae information is sold and details about hem sent. (One consideration here and a case study needing review is this: Are people willing to trade off privacy for more access to social media? i dont know but that could have an effect here).
I like how BlockChain provides a solution… im not sure how adapable that solution is:
  1. it would require its own browser, otherwise im not sure how it would prevent other ads, such as adchoices from ALSO running, so your private data is stored and sold anyhow. Are people going to break from chrome or firefox? if they care enough about privacy maybe?
  2. if they DO care about privacy enough to switch browsers, what stops google/firefox from seeing that and just saying hey "why dont we just do what AdEx does, there is nothing proprietary or stopping us from doing it
For me they certainly identify a problem, im just not sure how adaptable the solution is, how far its reach is, or if it will catch on before the big browsers make the same or similar change.
problem 3 in a bit… gotta grab lunch
 
We’ll see… depends how much time this takes. I really wanted to just demonstrate exactly what a whitepaper is:
Guys it outlines the entire company! its their plan! its the problems they want to solve and how! its their underlying technology and strategy to market! Read them before investing!
Also i think this helps make it tangible that people arent just investing in some coin thats spiking or “going to the moon!” there are real projects and companies behind those 3 letter coin abbreviations.
 
is that Red Pulse, or Elastos? Let’s all share info if $RPX gets onto US exchanges, esp bittrex. Right now theyre just taking presale sign ups i think… and 9/1 or 9/10 release onto Binance.
 
Thanks for filling in the name, Yup, Red Pulse!
Looked up Elastos really. Couldn’t find much info. Do they even have a website up? Regardless, thanks again for the info. Didn’t even know about Elastos until you mentioned it!
 
Page 10, Problem 3
Problem #3: Lack of bidding transparency
Existing real-time bidding (RTB) platforms offer no information about ad bids whatsoever.
This means that an advertiser is told the maximum bid for a particular ad property is $X but
is not given the opportunity to verify this.
Solution: A decentralized exchange that can be audited
Due to the fact that AdEx is based on blockchain, advertisers can easily trace every
click/view and verify every component of a campaign (participants, ad placements,
impressions and clicks, etc.). The information is decentralized so it can’t be hogged or
manipulated by the ad exchange so advertisers are only paying for actual results.
Click to expand...
Basically, in the traditional/current market, prospective advertizers or clients would need to trust that the numbers they are being given on cost and profitability are accurate, and that the numbers are fudged or represented in a light to make them look better.
The real problem this creates is cost. The Advertisers would need to sink time/money into their own research to verify they are getting accurate pricing and profitability info to make an informed purchase.
their solution… BlockChain. unlike problem 2 i think this is where the real benefit of the blockchain helps solves this issue. Everything is decentralized and in the public ledger. no way to hide that and it should take less resources to verify. (although you can still try and spin the blockchain results, and interpret the numbers in a certain light, thats what markets do - but this really closes that loop substantially and reduces costs for advertisers).
The question is, how much does that save advertisers? whats the delta on it? how much are they saving? the more it is, the more AdEX would benefit them.
lets run it through the filer:
-there is a real problem
-the solution is viable and the technology really makes sense, its not just throwing around the word “BlockChain” as a buzz word.
-It isnt proprietary or special. nothing to stop someone else from doing it cheaper or better.
My Conclusion:
I like this application of the BlockChain and more importantly the benenfit to the people who it targets(advertisers). If you tell someone you can cut their research/vetting costs in half and ensure them a completely transparent ledger for pricing and profits, thats very attractive.
how will you save them? thats important… how well AdEx can market that is maybe equally important.
 
Page 10, Problem #4
Problem #4: Unclear and/or misleading reporting
Online campaign reporting is every advertiser and marketer’s nightmare. Each and every
existing advertising network measures different metrics - one would report on clicks, another
one - on sessions; one would give details about invalid clicks, another wouldn’t; and so on.
This prevents advertisers from being able to cross-check data and results, from using unified
KPIs across all networks, and from accurately tracking return on ad spend (ROAS).
Solution: Unified real-time reporting
Blockchain provides a universal data set that every advertiser can understand and use to
analyze campaign performance. Further to that, AdEx will allow real-time reporting (existing
networks require at least few hours to aggregate the data and show it to the advertisers).
This way, advertisers can quickly spot trends and adjust their campaigns for maximum
conversions. With real-time reporting they can also easily test if a campaign is set and
tracked properly.
Click to expand...
Basically they are saying that in the current enviornment resources are all reporting in different ways… some on clicks, some on sessions and that this data isnt unified and that makes it difficult to run calculate to get a Return on investment…
Solution: BlockChain
I’m not sure i buy this as a problem… i think that condition does exsist, but gather, consolodating, and filtering data isnt really a problem not easily overcome. I dont think you need the blockchain here…
a small example.: i wanted to track my crypto investments, but my traes are in bittrex, my usd investment in coinbase, and market cap info on several sites… in an hour i created a sheet that uses API’s to gather all these real time data so i could use excel formulas on it… i didnt need block chain and im not sure if this problem does either… doing some quick search on social media/slack/messageboards, i dont see much chatter on people this being something people are excited to work with to solve this issue. this one is kind of wait and see, but at face value to me this is more using BlockChain just to use it, and not because its neccesarily the best application of it.
lets go through the filer:
-Not sure how big a problem this is. not enough to really say 1 way or another but im speculative(opinion).
-im not sure that blockchain is the best solition for this. maybe it is, but this type of problem has exsisted in many areas and solved in many ways already
-nothing proprietary about it that cant be theoretically done cheaper/better
My Conclusions
not really much from here… im not sure its a problem and if it is its a problem thats been solved dozens of ways in dozens of industries.
 
Problem#5
Problem #5: Ad fraud
The current online advertising ecosystem is flawed. It enables fraud committed by
advertising networks, by advertisers and by malicious third parties. According to reports from
ad agency The&Partnership and the Adloox audit verification company, in 2017 brands will
suffer losses in the amount of $16.4 billion due to ad fraud (bots, exploiting backdoors in ad
serving networks, etc.).
The question of advertising fraud should also be addressed by ad publishers. The global
media supply chain also needs to change to ensure ads viewability transparency, reliable
measurement, compliance rules and common standards for advertisers.
Solution: The AdEx anti-fraud mechanisms
AdEx will equip advertisers with technical mechanisms to trace and prevent fraud and invalid
ad traffic. This technology in combination with the transparency, real-time reporting and audit
accessibility of blockchain helps deliver a platform where advertisers know exactly how
much and why they are paying for advertising inventory
Click to expand...
Basically, they are saying that i the current landscape it is easy to commit fraud, by using bots or other means to manipulate data and metrics or prices. They dont link to their report, nor do they state how big a stake 16.4M dollars is in the advertising market. is that 90%? 60%? 2%? My attenna goes up when i see things like that, is “16 billion” thrown in for shock value or were they unintentionally leaving out how much impact 16.4 billion dollars is?
Either way, the problem as i see it isnt the money, it is the compliance… if auditors need to check advertisers for regulatory compliance, i can see this potentially helping. although im not sure product wise that is eomthing that is monetized… more just a fringe benefit to auditors.
solution: BloclChain
this seems like another good, natural fit as a solution and not just used as a buzzword or forcing blockchain as a solution. public ledgers lend well to auditing, although if all parties are anonymous im not sure how easy it is to deted fraud. it may even make it easier to be malicous with less risk of being identified.
lets run it through the filer.
-this does seem to be a legit problem
-the solution of blockchain seems viable, although im not sure enough or in the right area to monetize it
-there is nothing proprietary or special. it can technically be done cheaper/better
My Conclusion
Id need to do more independant research on what if any regulator compliance is required by advertisers pertaining to specifically this service/product. if data isnt privelaged or anonymous it may not require any federal compliance in the US. not sure about foreign. cant tell
the solution seems on that fits… so thats a checkmark if this really does solve a problem. although anyone can provide the same solution… maybe cheaper/better too
 
Problem#6 (The Biggest Problem By Far)
Problem #6: Ad blockers & ad blindness
Ad blocking software rose 30% in 2016, reaching a total of 615 million devices worldwide
where ads and sponsored messages are blocked (308 million of these were mobile devices).
Users are deliberately choosing to install ad blockers, growing weary of ads that are too
intrusive and/or irrelevant.
On top of this, users are also prone to developing ad blindness - a condition of consciously
or subconsciously ignoring any piece of visual information that resembles an ad or a banner.
These two phenomena cause revenue losses to advertisers as the latter are unable to fully
reach their target consumers.
Solution: Clever, meaningful ads that people want to see
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AdEx will deliver unintrusive ads that are precisely targeted. Through this, the end users will
be seeing ads that are facilitating their consumers habits rather than annoying them.
The exchange will also offer advertisers to select for their ads visual design that resembles
native content as much as possible .
Click to expand...
The problem of “how do we get users not to use ad blockers” or “prevent them from ignoring ads subconsiously” id assume is probably the biggest problem this space faces… ads are no good if no one sees them right?
Their solution: Nothing. i say nothing because they dont really offer a solution, they offer a promise. they make a claim that their ads will be so unintrusive and tailored to the customer that customers wont block them or find them as an annoyance.
There is no proof of concept here. There is nothing historical to indicate that they are bad/ok/good/great at this. Their staff is heavy with tech people, not much marketing wise and the marketing people they do have dont seem to have a ton of a track record with cutting edge advertising.
I’m not at all saying they cant deliver on this promise, but at this point thats all it is. This is also not something that BlockChain address… and something currently every single advertisers is trying to fix.
their solution is unknown so i can say if it is proprietary or not as we have not see the implementation.
To me if they can fix this problem, its huge and could really propel them. but everyone is aware of this problem, and blockchain and smart contracts dont address the problem… so it comes down to how innovative and clever they are. to be determined
My Conclusion:
there is nothing tangible to determine if they are capapble of solving this problem. for me this is a non factor at this point until their solution is more clear

ADX, have you guys been paying attention?
 
Problem #7
Problem #7: Central regulation
Most of the existing ad exchanges rely on central regulation, in some cases from tech giants
like Facebook and Google. While this has advantages, it’s also extremely limiting, restrictive
and authoritarian. It’s not uncommon to see ad campaigns, or even advertisers/publishers
getting banned unfairly, with little to none ability to appeal, let alone quickly.
Even considering those restrictions, scam/malware ads still exist to date, even on Facebook
and AdSense.
Solution: User-powered governance
With AdEx, the consumer determines what’s right or wrong. The power of crowdsourcing has
proven itself over the recent years, and the “consumer is always right” statement has never
been more true.
Furthermore, we believe that giving users the power to essentially filter out bad
advertisements will be beneficial for overall conversions, and therefore advertisers and
publishers.
Basically they are saying that the giants (google/facebook) governing things is bad and unfair to advertisers who have little control over whats blocked or banned.
their soluton is to decentralizes it, using blockchain, and giving the users the power to decide,
lets put it through the filter:
  1. im not sure this is a problem. is central regulation a problem? in many places yes… in the space, im not so sure. to end users really care if ads are unfairly blocked? probably not. advertisers would. although im not sure putting it in the users hands instead of a centralized party is better or worse. they dont provide any real backup to this claim, and assume the problem…
it would be a strong assumption, so id lean towards its probably an issue. im really too ignorant in this particlar area to really even speculate.
  1. the blockchain here is a fit and not forced.
  2. not proprietary. someone could come in and do it cheaper/better
My Conclusion:
Not enough to go on… but solution wouldnt be unique anyhow. id need to educate myself more here.
 
Problem#8
Problem #8: Payment methods limitations
All existing ad networks require advertisers to use verified payment methods such as bank
accounts, credit cards, etc. However, for many advertisers (especially micro businesses in
developing countries), that’s an issue.
Solution: Cryptocurrency
Blockchain and the use of cryptocurrencies allows literally anyone to take advantage of
advertising possibilities to grow their business
Click to expand...
Basically, they say that there are small business in developing areas with access to banks or credit whom are missing out on opportunity.
this is absolutely a real problem
solution: accept cryptocurrency
This solves the problem. how big of an untapped market are developing countries with no access to credit? im not sure. the bigger it is the more this will help AdEx get a foot hold.
filter:
-legit problem
-legit solution
-solution no proprietary and can be copied and done cheaper/better
My Conclusion:
I’d need to check the size of that market and how much influence it woudl have. i can see this appealing to those markets, but id imagine those are extremel small and maybe irrelevant when it comes to an advertising market dominated by giants in big 1st world countries.
This could help keep AdEx relevant as niche worst case, although they could stll fall victem to someone coming in cheaper/better with the same model
 
Problem#9
Problem #9: Lack of focus
General ad networks and exchanges act as mediators between advertisers and ad inventory
providers - and usually cater to very diverse ranges of both groups. This is why there are
often issues like inappropriate ad formats, wrong audience targeting, etc.
Solution: Focus on one niche industry
The AdEx team comes from a background in VOD and video streaming - and this is why the
network will initially work with publishers who are exclusively video entertainment providers.
We know this market and we know how to best serve it so advertising there is beneficial for
all the involved parties.
This does not exclude the possibility of AdEx opening up to other types of publishers in the
future with AdEx V2 ( see Roadmap ), or developing multiple sub-divisions of AdEx, each
catering to a specific niche.
Click to expand...
Basically, they are saying that a problem in the current landscape is that offerings are too broad in scope and that leads to targetingthe wrong audience which leads to poor margins.
They dont substantiate this claim with any study or metrics. And at its face it seems a bit off. Advertising is a HUGE industry and there are many companies and projects that focus on niche/small subsets of the market.
Solution: they focus on one niche area, video on demand
This could hurt them or help them… on the positive side, doing 1 thing Great is better then doing many things poorly. so if VOD is their thing, and they do it better then anyone else, then that works… on the downside, by targeting a niche, you are cutting out tons and tons of potential clients and applciations for your product. they do say they"may" expand in the future, but give nothing beyond that.
filter…
-not sure this is a problem, id be shocked if there werent thousands of niche advertising companies, projects, platforms, and start ups,
-their solution is a good one, but only if they are the best/one of the best. that relies mostly on talent. and im not farmiliar enough with them to say they have the best VOD people in an enormous space
-it isnt proprietary but it is unique if they are the best, it coudlnt necessarily be copied and done better… it could be done cheaper potentially
My Conclusion
They would need to prove that they are at the top of the industry in VOD marketing/technology/solution/ads. they dont really have much as far as credentials just yet to make that claim… they need to show proof here first.
 
**** FINAL THOUGHTS *****
AdEx seems to be relying on a few things:
  1. that they know and can execute the VOD market better then anyone
  2. that users will adopt their browser/service because they want ads to be more targeted to them
  3. that a public ledger easily audited is big enough for compliance to get people excited
  4. That those in undeveloped areas without credit represent a big enough footprint to make an impact
  5. That user value privacy over social media/browser interaction enough to force change
To me this is a bit light:
-They have no proof on concept, or credentials to get excited about their innovations and talent in the VOD niche of their space.
-Nothing in their solutions is proprietary, unique or cant be copied and theoeritically be done cheaper or better.
-some of their solutions BlockChain seems forced, and not a natural fit.
** BUY or PASS? **
To me right now this is a PASS that im putting on my watch list for the following reasons:
-The space is super competitive (Ads). it is a saturated market
-They havent proven concept on their market differentiator (VOD)
-While they are “first” they are just first to concept, not first to execution
-They have no proprietary advantage over competitiors who may try and be cheaper
Pros: legit staff, although a bit tech heavy, early relationship with NEO, early market share (71M market cap)
Cons: No proprietary technology, reliance on VOD niche, entering a saturated market that has strong ties to the exsisting landscape.
To buy into AdEx id really need to see some strong innovation in their VOD targeted niche and some news on how they are leveraging blcok chain and smart conracts in a way that forces change.
Not saying they cant, but im not going to pay them to prove it. i need more to invest.
 
Excellent work and criticisms. I think you said it the best, People really don’t care what ad’s their getting and your right if 7 out of 10 ads are for products I want it doesn’t matter, I still saw 10 ads.
 
wow you really put a shift on this AdEX review haha, this alone deserved to be Mod status
:crazy_face:
 
That is how I see it… but keep in mind that is just one of 9 industry problems they aim to solve… and their target is more the advertisers then the end users. although is important since a major hurdle will be adoption.
How will they get users to sign up for profiles?
How will they get sites or browsers to adopt them?
those are 2 very difficult things, that will rely on the companies talent and not BlockChain technology.
They need to get a large footprint in one of the biggest global markets there is (advertising) and do it competing not only against other/future .ICOs but against giant marketing/advertising companies that have been doing this forever and already dominate the market.
If they can find a way to solve the big problem - users blocking ads/ignorning ads, they can go places… but again, this si something every marketing company in the world is trying to do every day… crypto or not.
I’m not skeptical so much as its too early to really tell

 
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