Marketing in the blockchain era

31 · 05 · 2018



Mired in scandals and concerns about viability or sustainability, cryptocurrencies are fighting to gain their place in the business world. But no one can deny that the technology behind it – blockchain – is here to stay and promises to revolutionise the way data is stored, in a secure and distributed way, enabling trust in transactions without intermediaries by building consensus through sophisticated math algorithms. While many companies have not yet developed the data-driven culture that the Internet age demands, recent milestones like the implementation of GDPR, the open banking regulation, technologies like IoT, AI or blockchain and ventures like Solid or Dock.io push the agenda further and faster, making it harder for organisations to keep up with recent developments.

Now that accessing consumer data is considered paramount to improving customer experiences, adapting messages or increasing customer lifetime value, marketers will face multiple challenges in the coming years. Starting with the long-term question of who’s going to own or control consumer data. Companies will need to address growing concerns from consumers about how their data is managed when scandals like Cambridge Analytica are putting Facebook (and other tech giants) in the limelight and in the minds of Government regulators. Will blockchain play a role here? We think it definitely will.

I opened a recent conference about marketing in the blockchain era by telling the story of my most beloved playlist on Spotify. My wife and I have different biorhythms and the music we play at home at the start of the day must be slow and melodic. Being one of those nerds who spent hours recording and giving mixed tapes away as presents, I strove to create a playlist of the most amazing slow-paced but powerful music ever. I called it Smooth Breakfast, a playlist which contains 550 songs and counting. I reckon I’ve spent more than 20 hours working on it, along with hundreds of other playlists. But what would happen if I decided to switch from Spotify to Apple Music? I cannot take my playlists with me, without paying for a smart service like Sidify. Why? I understand that I pay for the right to stream music, not possess it, but though the songs are not mine, the metadata (aka the playlists) are.

And the same remains true with my social graph on Instagram, or even more interestingly, with my online transactions on Amazon or any other e-commerce store. All this transactional data that has made Amazon so powerful belongs to me as much as to them. And if, tomorrow, to move over to Alibaba and let them manipulate me instead, I should have the right to move the data from one to another at no extra cost.

I guess this is what Tim Berners-Lee was trying to do with Solid, a venture intended to reimagine and rebuild the Internet. A serious attempt to separate applications from data, Solid sought to put data back in the hands of its original owners, the users, by storing that data in a blockchain. There are no recent updates on Solid, but there are many similar projects in the works. Dock.io, for instance, a kind of LinkedIn where users control their profile, managed to raise 20 millions dollars through an ICO last February.  

Clearly this is going to have an effect on the marketing sector. The desire to control our data has popularised services like People.io, where users are in charge of their data (no blockchain involved here) and are paid to view adverts.

I strongly believe that users will be in full control of their data by the end of the next decade. It might well be wishful thinking…but maybe not. Take for example the 2nd Payment Service Directive (PSD2), an EU directive promoting Open Banking, which is the idea that banks have to share user financial data with third parties to foster innovative services. Whether users are in full ownership of their data and able to dictate where brands can access that data, or companies are forced by regulators to open up access to data sets so that startups and new players can make use of it, blockchain will play an important role. With this data-is-the-new-oil mindset, governments are looking for ways to limit how much power tech giants have, which in turn will change the way marketers currently negotiate access to consumer data.

 

Building trust (or avoiding fraud)

 

In a study Good Rebels published last year, we stated that blockchain will help build trust in a number of different sectors, and if there is one industry that desperately needs to rebuild trust, then it has to be the advertising industry. 2017 has been a bad year in terms of market value for big agency conglomerates. The recent departure of Martin Sorrell from WPP, amidst covered allegations of “personal misconduct” is just the icing on the cake. Prominent advertisers have been warning the industry for a long time about digital fraud.

Some have estimated that digital fraud is costing the industry $1 for every $3 invested in purchasing digital ads. About $8.2 billion annually is lost worldwide due to fraudulent activities such as bots traffic, domain spoofing, pixel filling and ad stacking. We wrote a piece some months ago on blockchain and how it could help combat fraud in online advertising:

Through Blockchain you can record how many times the ad is viewed, where it was published, and the nature of the traffic that consumes it. This improves confidence and transparency in the advertising purchase. This data cannot be altered and is unique, thereby avoiding any fraud of the results when it is transferred between intermediary nodes. MetaX has developed the first protocol, called AdChain, to use blockchain technology to record and store ad impressions in real time in order to guarantee that advertisers are only paying for the ads they actually consume. AdEx (for video), RebelAI (for programming), NYIAX (for digital futures) and MadHive (for OTT and Data Management) are other companies that will be the subject of much discussion this year.

Though advertising remains a valid way of impacting the consumer, online reviews are one of the most trusted sources of product information, really influential when it comes to purchasing decisions. But once again, fraud is still a concern. Startups like Lina.review have been created to solve the problem of false online reviews:  Lina aims to become the world’s first community-driven “tokenized” user review system with practical applications that range from household goods to digital media such as video-games. Their system’s objective is to resolve the discrepancies that plague online reviews including unreliable write-ups from paid reviewers or the company’s own staff; greater demand for customer reviews than there is supply, and the prioritization of quantity and aggregate scores over quality assessments from prolific reviewers.”

Revain is trying to create a similar ecosystem, where reviews are filtered by Watson, IBM’s AI platform. The reviews are stamped on Ethereum, the RVN token (a cryptocurrency) incentivises users and brands to generate useful reviews, and RSS contracts ensure that the feedback is not censored.

 

Loyalty crypto points

 

Another field currently being explored by blockchain entrepreneurs are loyalty programs. This list of projects currently in the works gives you an indication of how compelling the idea of converting reward points to cryptocurrency is. But there’s growing scepticism concerning the validity of these systems. It might be that businesses don’t want to make their point system more fluid or that multi-brand programmes are against brand interests if they don’t promote exclusivity.

American Express announced recently that they are integrating blockchain into their rewards programme, in partnership with digital retailer Boxed. They say they are leveraging Hyperledger to let merchants create custom Membership Rewards programmes for American Express cardholders, through smart contracts which automatically fulfil rewards programs offers.

 

A lighter Blockchain?

 

Many of the uses we’ve highlighted so far will need a “different kind of blockchain”. The major breakthrough to come from Bitcoin was the ability to create a “distributed trustless consensus”, a way of making clear to participants in a marketplace that a transaction had really happened, that there had been a real exchange of assets from subject A to subject B, that subject A was the legitimate owner of the assets and that this transaction will remain unchanged (uncorrupted) forever, thus ensuring assets ownership legitimately transferred from sellers to buyers over time. This “distributed trustless consensus” is enabled through blockchain using what is called “Proof of Work”, a complex and CPU intensive mechanism. The POW needs a lot of computational power; it has been calculated that 1 bitcoin transaction requires 5x the power than 100,000 Visa transactions.

These astronomic power needs make it nearly impossible to use the current blockchain technology for many of the use cases we’ve been talking about. That’s why other lighter blockchains are gaining momentum, simpler mechanisms like IOTA or Hashgraph, a technology fulfilling the “distributed trustless consensus” of blockchain but with much less computing power required. As they explain in their FAQs: “Instead of some small subset of participants being responsible for validating transactions and adding to the ledger (like miners in blockchain), all nodes contribute. Consequently, there is less need to incentivize through fees. Transaction fees are therefore expected to be very small, thereby making Hashgraph viable for micropayments.”

 

Radical Transparency and the need for Human-Centred Organisations

 

We don’t know if our WordPress plugin based on blockchain will really be able to help combat fake news, but stamping content using bitcoin or ethereum blockchains is just one example of how this technology is being used to ensure traceability throughout the supply chain. As stated in our recent whitepaper, Human-Centred Organisations are obsessed with 3 journeys: that of the customer, the co-worker and the citizen. These three journeys are intertwined: we are part-time consumers, citizens, workers, parents, in short, stakeholders affected by the actions of corporations. More and more often, we’ll make decisions based on how companies tackle these three journeys.

My eldest daughter recently warned the whole family not to buy from a big sports retailer based in the UK: “it’s well known that they don’t treat their employees well, and it’s not fair”. In a not so distant future, our daughter will be able to launch a purchase order through an AI agent and tap into a huge deluge of transactions in marketplaces using blockchain to check that one product is fully compliant with sustainability rules.

Companies like Skuchain are using Blockchain and Internet of Things to make the supply chain more efficient. The promise of greater transparency has prompted Coca-Cola to start experimenting with blockchain in order to combat forced labour, Unilever and Sainsbury’s are participating in a pilot to build a database of small tea producers in Malawi to improve supply chain transparency, and Ben & Jerry has just announced a pilot with the Poseidon Foundation to “use the Stellar blockchain to break carbon credits into microtransactions that can be attached to every scoop of ice cream”.

You can never start too soon. Companies must start learning how to take advantage of a new technology comparable in impact to the TCP/IP protocol which triggered the development of the Internet as we know it. More than ever, the world is powered by people, and blockchain will allow individuals to make even more informed decisions. Companies must get ready for this power shift.

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