Chain, Chain, Chain… (No) Chain of Fools.
Jason Cohen, CEO
Blockchain Will Have the Marketing Economy Singin’ a New Tune
Every chain, has got a weak link
I might be weak child, but I’ll give you strength
– From Aretha Franklin’s Chain of Fools
Smart marketers are always looking for the next great thing to power their quest to find, keep and build customer relationships. Decades ago it was internet marketing and email marketing campaigns. Now, the technology provided by Google, Facebook, Twitter and Instagram are the most recent dominators of that quest. All of these platforms have their own strengths and weaknesses, but no technology has the potential to disrupt digital marketing and current financial/economic norms more than blockchain. That’s because blockchain’s architecture may have no weak links (as Aretha fretted!) that may make the link between marketers, their brands and their customers stronger than ever before. So if you’re a career marketer who isn’t planning on retiring in the next 12 months, it would be foolish to avoid becoming familiar with this new marketing tune.
What the Heck Is Blockchain, Anyway?
Like the amorphous entity that the internet is, blockchain is best defined by what it does. But let’s take a crack at it, anyway. At it’s most basic. Blockchain is a data-driven algorithm that allows data to be authenticated, encrypted, stored and displayed like a public ledger. From an economic perspective, the data represents transaction histories stored in ‘blocks’ that can only be built upon, not changed. The blockchain algorithm was designed to run on a decentralized network of many, many computers (or “nodes”), rather than a supercomputer. Without a leader or central administrator, it’s virtually impossible to hack. Finally, blockchain is an open programming language, which enterprising and innovative businesses are beginning to use or, at least, explore the opportunity, this technology’s potential applications.
From Chain, Chain, Chain to Ching, Ching, Ching: Blockchain and Bitcoin
By it’s very nature, blockchain is both a revelation/revolution and threat to how business transactions occur. The first company to really make Blockchain a reality was cryptocurrency, Bitcoin. Motivated by a total rejection of government-guaranteed money and bank-controlled payments, a developer using the pseudo name Satoshi Nakamoto, wanted to make it possible for people who don’t know each other to conduct financial transactions without the need for a middleman, government regulation or financial institutions.
Blockchain monitors and verifies Bitcoin transactions by using the network’s algorithm and its many nodes to ensure that each transaction is unique. Once a majority of nodes reach a consensus (51%) that all transactions in the recent past are unique, they are cryptographically sealed into a block. Each new block is linked to previously sealed blocks to create a chain of accepted history, thereby preserving a verified record of each transaction.
Blockchain, Intermediaries and the Future of Marketing
Marketers have long sought to realize the true value of one-to-one marketing, where the brand and the customer have the closest possible relationship. This type of relationship is developed only when the customer trusts the brand. In many cases, the relationship between the customer and the brand (product or service) is undercut by the many intermediaries along the supply chain (retailers, advertising agencies, media companies, etc.). When everyone along the supply chain takes a piece of a piece, transparency is questioned, profitability impacted and relationships fail. Just think of the travel industry, where travel agents are becoming obsolete and media companies being replaced by programmatic ad buying systems.
The marketing industry, including interactive and brand agencies like ours, must be primed and ready for the potential disruption – and opportunity – that blockchain affords. As an industry, we will need to adapt our business model. While that may be a few years away, what we’ll see over the next 12-18 months are early stage changes in consumer and marketer behavior, including the following:
- The access switch flips in the other direction. The power, which individuals are already beginning to feel, will continue to increase. Blockchain will help individuals’ better control access to their own identity and personal information.
- Marketers pay for customers’ attention. Not only will consumers, who are already in possession of ad-blocking software for their mobile devices, will have increased controls over their own access. This will make it challenging for brands and marketers to know if an ad or offer reached their target audience. This may require brands to pay an individual for every contact. Transactions may cost a few cents or fractions of a cent, but will require a technology like blockchain that can handle micropayments at large scale. Credit card companies are not setup to do this. While advertisers may balk at the whole concept of paying consumers, they will benefit from a new level of access and trust with its target audience.
- Marketers achieve new economies of scale. Recall Facebook’s announcement in 2016 that it discovered ad click fraud on its network? We are seeing more proof-of-concept advertising products using Blockchain that provide accurate and faster reporting, reduced fraud, and claim to reduce advertising costs.
- Transparency, credibility and the truth reign supreme. Blockchain’s ability to authenticate a brand’s claim about the quality of its product or service will provide consumers with a new sense of trust. Because data and transactions are built into a public ledger that is sequential and unchangeable, the supply chain becomes a key part of the value proposition. When a brand claims their product is organic or has certain natural ingredients, blockchain can serve as a fact checker that authenticates brand claims for public consumption. It will force brands to make good on their promise.
- Formal loyalty programs become more available to all. Just think about what happens, when “loyalty no longer has its privileges,” and loyalty points and coupons may become another coin of the realm.
- Interactive agencies will need to develop blockchain apps. Rather than getting cut out of the action, agencies will help companies identify what blockchain platforms to integrate or develop their own business applications. Buyer journeys will be become more personalized increasing the importance of one-to-one messaging at scale.
How Early Adopters Are Leveraging Blockchain Right Now
OK, we’ve already mentioned how Bitcoin is already out in front of the curve in terms of blockchain implementation. Some other companies are in full implementation mode, while others are still poking, prodding and nibbling around the edges of this paradigm-shifting technology. Here are some initial reports:
- Starbucks has indicated that they “talking up” blockchain, as it applies to their mobile customer orders, which now represent 11% of their business. According to Executive Chairman, Howard Schultz, the use of digital currency must be “legitimatized by a brand and a brick-and-mortar environment, where the consumer has trust and confidence in the company that is providing the transaction.”
- Steem.io bills itself as “a blockchain-based rewards platform for publishers to monetize content and grow community.” The concept here is the use of smart media tokens (SMTs) in a decentralized social network to encourage the development of digital content. Steem claims to be responsible for over $22M in payments since June 2016.
- According to Forbes Magazine, Wal-Mart and nine major food giants are collaborating with IBM to explore applications of blockchain applications. Specifically, this is aimed at fine-tuning the whole food supply chain process to ensure the quality and freshness of its meats and vegetables.
- Edge, a cyber security startup, is using the inherent security in blockchain to develop applications for developers who want to secure their development efforts. With nodes on the “edge” of the network, the concept is that security breaches can be eliminated.
Stay Tuned For More
The fact that many leadership companies and developers are acknowledging the value of blockchain applications is enough to inspire all marketers to pay close attention
Just as few predicted what would happen with Spotify, Uber or Seamless in the ‘90s, we can’t predict how this technology will evolve or impact us. We feel, however, that the data will start to prove over the next 12-18 months that blockchain is for real. Its unique strength derives not only from a powerful algorithm but also from empowering consumers. No fooling! Stay tuned…more to come on Blockchain. Subscribed to Simply180 Insights to get the latest.