How to split the pie: How Web3 Is Building a Fairer, More Competitive Advertising Market
The Paradigm Shift – From Walled Gardens to Open Ecosystems
For decades, the digital advertising landscape has been dominated by a few colossal "walled gardens." Google and Meta perfected a model built on a fundamental asymmetry: they aggregated unprecedented volumes of user data within their closed ecosystems, creating an insurmountable competitive moat. Advertisers and publishers had no choice but to play by their rules, paying a premium for access to audiences they could not reach elsewhere.
In our previous analysis, we argued that this era of centralized dominance is fundamentally incompatible with the core tenets of Web3. The primary reason is the wide accessibility of rich on-chain data and the deliberate lack of control granted to any single entity. Blockchain's inherent transparency means that the most valuable behavioral and financial data—what a wallet owns, where it transacts, what protocols it uses—is a public good, not a proprietary asset.
This dismantles the very foundation of Web2 ad monopolies. But it raises a critical question: if not a monopoly, then what? What does a healthy, dynamic, and fair advertising market look like when data is free-flowing and no single player can hoard it?
This article argues that the Web3 advertising market of 2025 will not be a winner-take-all arena but a highly competitive ecosystem of specialized networks. Success will be determined not by data ownership, but by superior technology, strategic partnerships, and the ability to create and capture value in novel ways. We will explore the two core pillars of competition in this new landscape—network effects and algorithmic intelligence—and analyze the emerging framework for value distribution.
The Publisher's Dilemma: Price is King, But What Drives Price?
The desire of a publisher to work with an ad provider is ultimately defined by one simple metric: the price the provider can pay for their inventory. In Web2, this price was largely a function of data. A platform with richer, more exclusive data could command higher CPMs from advertisers and, in turn, share more revenue with publishers.
In Web3, with data democratized, this traditional lever is neutralized. If every network has access to the same on-chain data, what becomes the new basis for competition? The answer lies in two interconnected areas: the efficiency of the network and the intelligence of the algorithms that power it.
The New Pillars of Competitive Advantage in Web3 Advertising
1. The Network Effect: Scale, Liquidity, and Multi-Homing
A fundamental truth of ad tech remains: a wider network of users and advertisers leads to more efficient matching. A larger network can find more tailored offers for each individual user, maximizing the value of every impression. A large network will inherently be more effective and able to pay more than a small one or a simple 1:1 partnership.
However, the nature of "winning" the network is different in Web3. The traditional ad tech landscape is not a series of isolated silos; publishers almost always integrate multiple ad networks and even expose their inventory to larger cross-network auctions through Supply-Side Platforms (SSPs). This practice, known as multi-homing, is rational and beneficial for publishers.
Why Multi-Homing is Rational for Publishers:
Price Competition: Multiple bidders create a competitive auction, driving up the price for premium inventory.
Demand Redundancy: It provides a backup source of demand, ensuring fill rates remain high even if one network's demand dips.
User Yield Optimization: As a user is exposed to more ads, they exhaust the immediate demand within a single network, causing effective CPMs to drop. It becomes a sound financial decision for a publisher to effectively "refresh" that user by exposing them to a different network's demand pool, even if the ads are similar.
It is therefore naive to think publishers will become monogamous in Web3. They will route traffic to the providers that pay the most. This creates a fascinating challenge: in a world where data is equalized, how can any one provider consistently pay more? The answer pushes competition to the next level.
2. The Algorithmic Edge: Intelligence as the New Moat
When everyone has access to the same raw data and a similarly sized network, the winner is the one who can process that data more efficiently and interpret user intent more accurately. Competitive advantage shifts from data hoarding to data intelligence.
This algorithmic superiority operates on multiple layers:
Predictive Wallet Profiling: Moving beyond past transactions to predict future behavior and purchase intent.
Campaign Optimization: Using AI to dynamically adjust bids, creatives, and targeting parameters in real-time to maximize advertiser ROI.
User Ranking & Audience Optimization: Intelligently segmenting audiences not just by what they hold, but by their potential value to specific advertiser verticals.
Fraud Prevention: Deploying advanced machine learning models to identify and eliminate sophisticated bot traffic and sybil attacks, ensuring advertisers pay for real human attention.
The ultimate output of superior algorithms is a consistently higher Click-Through Rate (CTR). A higher CTR creates more value from the same raw traffic, allowing the network to command higher prices from advertisers and share more revenue with publishers. This creates a virtuous cycle: more revenue attracts more publishers, which increases inventory supply and data signals, which further improves the algorithms.
The 2025 Perspective: The original article noted a scarcity of AI/ML talent in Web3 marketing. This has changed dramatically. The acquisition of Slise by W3M Ventures in 2024 was a testament to the value of this expertise, bringing sophisticated AI capabilities from the traditional tech world into the Web3 ad stack. Today, algorithmic intelligence is the primary battleground.
Analyzing the Web3 Advertising Landscape Through Porter's Five Forces
The intensity of competition in Web3 advertising can be powerfully analyzed using Michael Porter's Five Forces framework, which reveals a market that is inherently more competitive and less monopolizable than its Web2 predecessor.
Porter's Five Forces Analysis of Web3 Advertising:
As the table illustrates, competition is intensified across all five forces in Web3. The open nature of the technology lowers barriers to entry, empowers publishers and advertisers, and makes it easy for substitutes to emerge. This makes the formation of a stable mono- or duopoly nearly impossible.
The Path to Value Capture: Embeddedness and Community Cohesion
In this hyper-competitive environment, how can a Web3 ad network build a defensible advantage? The a16z analysis points to two key concepts:
Embeddedness: A protocol can become a standard "Lego block" embedded in many other systems. The more a network's infrastructure is composable and integrated into the core workflows of dApps, wallets, and analytics platforms, the higher the switching cost and the more defensible its position becomes.
Community Cohesion: Networks that foster a strong sense of community among publishers and advertisers—potentially through token-based incentives, governance participation, or shared growth—can create loyalty that transcends pure price competition. When users are emotionally and financially invested in a platform's success, they are less likely to churn.
"Splitting the Pie" – A Fair Framework for Value Distribution
The term "splitting the pie" is a powerful metaphor for value distribution, famously applied to negotiation and startup equity. In Web3 advertising, the "pie" is the total value created by a successful ad transaction: the advertiser's gain from a conversion minus their costs, which includes the revenue paid to the publisher and the ad network's margin.
The Web2 model often saw the platform take a disproportionately large slice of this pie, justified by its ownership of the data and the audience.
The Web3 model, by contrast, necessitates a fairer split. The publisher's traffic and the advertiser's budget are the essential ingredients. The ad network's role is that of a chef who efficiently combines them. Its fair value is not based on owning the kitchen (the platform) but on the skill and efficiency (the algorithm) with which it prepares the meal.
A fair and sustainable model, therefore, aligns incentives:
Publishers are compensated transparently for their valuable user attention.
Advertisers pay only for performance and high-intent users, maximizing their ROI.
Ad Networks earn their margin based on their ability to optimize the value creation process for both sides, not through rent-seeking on data.
This fair distribution is not just ethical; it's a competitive necessity. In an environment where publishers and advertisers have high bargaining power, networks that attempt to capture an unfair share of the pie will simply be bypassed.
Conclusion: A Collaborative, Positive-Sum Future
The Web3 advertising market of 2025 is not a zero-sum game where one platform's gain is another's loss. The ethos of Web3, even amidst robust competition, is a common effort to grow the size of the pie for all.
The path to value creation is collaborative. It's about building superior algorithms that make the entire ecosystem more efficient. It's about creating standards and infrastructure that become embedded in the fabric of Web3. It's about fostering communities that are invested in mutual success.
We will not see a new Google or Meta in Web3. Instead, we will see a fair distribution of traffic and revenue between multiple strong players, with their market shares weighted not by data monopolies, but by their algorithmic advancement, strategic embeddedness, and ability to foster trust and collaboration.
The future of advertising is not a walled garden presided over by a single giant. It is a thriving, open, and competitive marketplace where value is earned through innovation and fairness, not controlled through ownership. The pie will be bigger, and the slices, while more numerous, will be more justly distributed.
FAQ
Won't the biggest Web3 ad network just become the new Google?
No. The fundamental economics prevent it. In Web2, Google's moat was its exclusive ownership of user data and search intent. In Web3, on-chain data is public and accessible to all. A network might achieve temporary leadership through better technology, but the low barriers to entry and the ease with which publishers multi-home mean that any attempt to abuse dominance by raising fees or lowering publisher payouts will be quickly punished by the market as traffic moves to more efficient competitors.
How can a small ad network compete without exclusive data?
Its competitive advantage must be built on specialization and algorithmic excellence. A small network could focus on a specific vertical (e.g., DeFi power users, NFT collectors, gamers), developing deeper expertise and better targeting algorithms for that niche than a general-purpose network. It can also compete on service, fee structure, and integration ease, leveraging the composability of Web3 to embed itself in specific ecosystems.
What role do tokens play in this competitive landscape?
Tokens can be a powerful tool for creating community cohesion and embeddedness. A network could use a token to:
Reward publishers and advertisers for participation.
Offer discounts on fees for token holders.
Govern key protocol parameters.
This creates a loyal ecosystem where participants are financially and governance-wise invested in the network's success, adding a layer of defensibility beyond pure technology.
How does this fairer model benefit advertisers?
Advertisers win through transparency and performance. They can clearly see what they are paying for and can track on-chain conversions directly to specific campaigns and networks. The intense competition between networks forces continuous innovation in targeting and optimization, driving down customer acquisition costs and improving ROI. They are no longer locked into a single platform's black-box algorithm.
Is this model sustainable for ad networks themselves?
Yes, but it requires a shift in mindset. The profit model moves from rent-seeking to value-creation. Networks will earn sustainable margins by taking a fair cut for the tangible value they provide: connecting advertisers to the right audiences with unparalleled efficiency. Their profit is a function of their ability to grow the overall pie for their clients, ensuring long-term alignment and sustainability.