Blockchain protocols aim to break up digital advertising cartel

For decades, product developers have needed to go through tech giants like Facebook, Google, Instagram and TikTok to market their products.

If they didn’t pay up, they wouldn’t be able to reach their audience.

This traditional, centralized advertising industry is expected to generate over $1 trillion in revenue in 2025, according to a report from Axios.

At the same time, advertisements on these platforms often don’t match up with the user’s interests and are viewed as spam.

However, some Web3 protocols are attempting to disrupt this industry and provide a better system for matching up products to users. These protocols dispense with the usual model of spamming people with interruptions. Instead, they use tokenized rewards and a data ownership model to entice users into trying out new products.

Providing value to users

According to Brandon Kumar, co-founder of Web3 aggregator Layer3, the fundamental problem with traditional advertising is that it returns very little value to users in exchange for a lot of time and effort.

“If I am being advertised to on Facebook, the only utility I get is maybe personalized ads,” he told Cointelegraph. “I don’t get any value from that, despite spending a lot of time contributing a lot of value.”

Because of this lack of value provided by traditional social media, many Web3 users look for play-to-earn games and other apps that give more value in exchange for their time. Some users also have assets to invest and want to grow their capital base through speculating and trading. Either way, finding profitable apps can be difficult.

In the early days of crypto, users relied on Twitter (now X) to find new protocols. But this was “ineffective,” Kumar stated, because it only relied on “what looks good on Twitter,” which may not have always reflected reality.

Related: Crypto Twitter: A dangerous source for financial advice?

Protocols have tried to reach users by issuing airdrops or through “liquidity mining,” offering tokens as rewards for providing liquidity. But this only caused the token price to fall. “You’re lighting money on fire by doing that,” Kumar stated.

Layer3 user interface. Source: Layer3

In Kumar’s view, the solution to the problem is to target rewards to users who have the greatest chance of providing value to the protocol’s ecosystem.

“If you have a token, you can use your token to incentivize users in a targeted way. If you don’t, you can spend fiat. And what we do is we take that, and we route that to users who are going to have high retention likelihood probabilistically in your protocol, will spend, will retain, have high wallet balances and meet your kind of target demographic,” he stated.

According to him, this can be done by considering a user’s onchain data, which is not taken into account by traditional social media platforms. 

Kumar claimed that Layer3 doesn’t merely help users make money from token rewards, it also curates content based on users’ behavior, which provides an added non-financial benefit to users.

In addition, he claimed that some crypto beginners come to the platform to learn more about digital assets, so it serves an educational function as well.

Apurv Kaushal, co-founder of Web3 aggregator Intract, agreed that this value proposition offered by Web3 airdrops presents a challenge to traditional advertisers. He stated:

“You have a big intermediary in the middle, like a Facebook, that ends up controlling a lot of the budget flow that happens in Web2 in terms of advertising [...]. Neither the company nor the users get the best deal because their data is being controlled by Facebook and all these other organizations. [But with airdrops,] the users actually get a cut in the company’s shares or tokens for contributing early to them.”

However, the industry has come to realize that airdrops can be very inefficient as well. “In the recent six or seven months,” Kaushal said, “there’s been a lot of criticism around airdrops not being the best tool for a company to get good quality users.”

Related: EigenLayer users fume over restrictive airdrop, others say it’s ‘generous’

To prevent protocols from paying out tokens to low-quality users, Intract engages in “targeted incentive distribution,” Kaushal claimed. The platform considers a user’s past reputation onchain, as well as offchain social data, when determining whether they are eligible for a reward.

One example Kaushal cited is Intract’s “proof of humanity” feature. Protocols that are worried about bots infecting their platform can verify a user’s humanity through a variety of methods.

However, the platform doesn’t dictate how to define humanity. Some protocols may have a loose standard, such as requiring the user to have a Google account, whereas others may be more strict, requiring something like a verified account at a crypto exchange or even a Worldcoin identity.

Intract’s proof of humanity protocol. Source: Intract

Either way, proof of humanity can allow protocols to provide rewards to users while simultaneously limiting the number of low-quality leads, Kaushal argued.

Video games as an ad platform

Jonathan Bozanquet, co-founder of Playa3ull Games, claimed that video games will be a major disrupter of traditional advertising in the future. 

Bozanquet said that early in his life, he attempted to sell Sony and Atari on the idea of video game advertising:

“I had Sony and Atari. We were talking to them about a company we wanted to start called Video Game Advertising, because all the games, even today, no games have actual advertising in them. So, our thought was, you’re playing a game, and you pick up a pair of shoes that make you jump higher. Why aren’t those shoes Nike or Adidas? Or, you know, some other brand that wants to move up the ranks? You drink a drink that gives you more power. Why isn’t that Coca-Cola or Red Bull or whatever?”

The two companies didn’t implement the idea, but Bozanquet still says video games can be a counterweight to the immense power of social media companies and search engines. “Video game advertising is actually a chance to sidestep the traditional media,” he stated.

Playa3ull is currently working on 30 different Web3 video games, he stated. Each game uses the same 3ULL token in its in-game economy, allowing the token’s utility to grow as each game is released and gains more players.

Bozanquet stated that the project hasn’t yet signed on any advertisers but plans to pursue them in late 2025. Once advertising revenue is obtained, the company will spend a portion of the funds to market the games, potentially bringing in more players and increasing the token’s utility further.