Ledger Domain: How and Why Marketers Can Improve Their Implementations of the Blockchain

Looking At Milky Way, Image by Wall Boat

Is there any product, service or technology out there today that’s just a click away from offering people the virtual equivalent of a cure for the common cold that costs less than a dollar and tastes better than chocolate? No, of course not. But as new innovations inevitably rise and fall along the waves of the tech hype cycle, the true potential of The Next Big Tech Thing often takes years to become fully realized and optimized for a deep and wide variety of markets.

One of today’s leading candidates competing for this top-level billing is the blockchain.¹ It is enjoying massive media buzz, investment and experimentation in configuring it for a diversity of applications including, among many others, food supply chains, financial services and artists rights. This technology is providing new means to accomplish business tasks more securely and reliably, thus increasing operational efficiencies.

Yet whether the blockchain can and will fully and effectively scale in all circumstances still remains to be seen by many sectors of the business world. An inherently key question at the very heart of the blockchain’s growth and acceptance is whether marketers and advertisers can leverage many of its technological virtues and, if so, how they can best accomplish this?

Taking a deeply insightful and informative look at of the latest developments concerning this is a highly informative recent article entitled How Blockchain Can Help Marketers Build Better Relationships with Their Customers, by Campbell R. Harvey, Christine Moorman and Marc Toledo, posted on the Harvard Business Review website on October 1, 2018. I highly recommend a click-through and full read if you have an opportunity.

I will summarize and annotate this, reference in some related Subway Fold posts, and then pose some of my own ad-free questions.

The Benefits of Diminishing Transaction Costs

Economic Gardening, Image by Missy Schmidt

According to a February 2018 CMO Survey, just 8% of its participants rated the usage of the blockchain in their marketing operations as being “moderately or very important”. This technology is still “not well understood” among marketers and perceived as being over-hyped. This has resulted in a “wait and see” attitude about it. Nonetheless, there are compelling reasons to understand the blockchain and build specific marketing applications for it that will be more likely to benefit early adopters and innovators.

The blockchain’s virtues of “transparency, immutability and security” make it very suitable for a wide range of transactional and managerial functions. Likewise, it lowers the costs involved in executing all of these activities and, even more importantly, the need to rely so heavily on the web’s giant advertising intermediaries (primarily Google and Facebook), may be reduced. As well, the means now exist using this technology to permit consumers to better “own and control” their personal data.²

Currently, electronic transactions using credit and debit cards involve significant costs to online and real-world vendors. These associated costs are passed along to consumers. Sellers often set minimum purchase thresholds to maintain their profitability.

However, the transactional costs of using the blockchain are approaching zero. For example, MasterCard and Visa have implemented blockchain-based alternative systems enabling customers to “send money in any local currency”, without using a credit card. This again removes any embedded intermediaries and “connects directly to the banks” involved. Consequently, cross-border fees can be dispensed.

There are other advantages emerging for marketers and advertisers involving exchanges of real monetary value with consumers. Rather than these professionals all relying on third-parties such as Facebook for acquiring troves of customer data, they could instead use a system of micropayments³ to directly reward consumers for their personal data. For instance, under this alternative model, a supermarket chain could provide shoppers with a mobile app that pays them to install it, tracks their location, and use it for special deals on merchandise at personalized prices4.

Similarly, marketers could employ the use of smart contracts that vitiate the “need for validation, review, or authentication by intermediaries”. These can be engaged when participants subscribe to an email newsletter or customer rewards program. (More on this below.) The micropayments here are dispensed to consumers whenever they respond to a vendor’s emails or advertisements.

Like Flamingo Synapses, Image by Donal Mountain

Alleviating Google’s and Facebook’s Dominance in Online Advertising

This direct-reward-to-consumers architecture could similarly be deployed for the engagement of website ads. Presently, most users are put off by the current system of intrusive pop-ups and other forms of unavoidable online advertising. A growing Web-wide push back to this has been the use of ad-blocking browser add-ons.5

New alternatives based upon the blockchain can “recapture” some this lost ad revenue by directly compensating online consumers “for their attention”6. This could potentially diminish Google’s and Facebook’s lock on the majority of online ad and data revenues.7 Blockchain options will also enable individuals to “control their own online profiles and social graphs”.8

Taken together, these possibilities might permit companies to:

  • interact directly with their consumers
  • bypass patronizing the social media and search giants, and
  • avoid relentless email solicitations and “follow-me ads”

Furthermore, meaningful cost savings can be directly passed along to consumers by virtue of this voluntarily consumed advertising via these types of blockchain-supported conduits.

Image from Pixabay.com

Shutting Down Online Frauds and Spam

By 2016, $7.6 billion was appropriated by “fraudulent or deceptive activity” and is expected to increase soon to nearly $11 billion. Nonetheless, marketing teams who deploy the blockchain to “track their ads” can:

  • maintain control over their online activities
  • be more confident that expenditures are going to “ROI-generating activities”, and
  • measure the effects of their efforts on a per-user and per-mail scale

Thus, to the benefit of marketers and vendors and to the detriment of bad actors online are the following technological advantages:

Verification: The blockchain can be used to provide verification of “the origin and methodology of marketers”. It can likewise reduce or eliminate large-scale phishing spam through the use of micropayments to the recipients of marketing emails. This will enable “companies to identify consumers” who are genuinely interested in their offerings. Micropayments could then be dispensed in exchange for access to various forms of onscreen content.

Security: Such implementations could also potentially defeat malicious hacks using denial of service attacks (DoS) and could make social media sites more resistant to automated bot accounts. The former are attempts to overwhelm web servers with a flood of traffic and latter are widely used for massive distributions of deceptive information, as well as to illegally appropriate “online advertising from big brands”.

Authenticity: A user’s bonafides is one of the main cornerstones of the blockchain. Turning this into a service, Keybase.io is a company currently working on reducing social media fraud. Their blockchain-enabled app permits individual users to prove they are the “rightful owners” of various social media account. This makes marketing easier to monitor and advertising expenses more supportable.

“Origami Fish – Made by June”, image by Penny

Increasing Revenues from Media Viewership

Original and editorial web content built upon blockchain technology can potentially permit media companies to increase their “quality control and copyright protection”.9 For example, Kodak has developed a new product called KODAKOne, an image rights and distribution platform. It uses the blockchain to record the ownership rights to individual images. Photographers will be awarded greater control over their work than they currently have with how their pictures distribution online. In the future, photographers will automatically be sent payments whenever their content is used. This could probably also be used for video content creators whose work has gone viral.

A company called Coupit also uses blockchain tech to enable marketers to join loyalty and affiliate programs whereby consumers can opt-in and “trade rewards with each other”. As a result, marketers can increase their “visibility and transparency” in order to distinguish inactive from loyal consumers. They can next sharpen their marketing strategies to distribute “targeted offers” to each of these categories.

In those cases where marketers employ a data aggregator or analytics processor, using micropayments will permit companies to circumvent ad-blocking apps10. For consumers, this gives then more fine-point control over their personal data and privacy, and rewards them for their willingness to view advertising that they have chosen.

Taking an alternative approach to content monetization is a new web browser called Brave. In addition to providing many built-in privacy and security features, it contains a blockchain-based feature called Basic Attention Tokens (BATs). These enable “publishers to monetize value added services” whereby users can dispense these tokens to sites they choose for content they select.

“The Crystal Ball”, Image by Gyorgy Soponyai

Companies and Consumers are Both Beneficiaries

Along with the progression of the blockchain’s reach and capabilities, business “intermediaries will need to adapt” accordingly. As discussed above, consumers will be exercising increased control and discretion over how they decide to engage with advertisers and Web threats such as spam and phishing will become self-limiting as their current tactics will be economically undermined.

Balancing this power and attention shift, companies might be able to exert greater control over the “quality of inbound traffic” to their marketing programs and achieve greater understanding of their customers’ needs and motivations.  When pursuing such “high value customers”, these economic incentives will perhaps result in a correspondingly increase in value.

Given all of these advantages that marketers and advertisers have to gain from further embracing blockchain technology, “finding ways to design and implement” them should be a joint effort among corporate decision-makers not just in marketing but also from the strategy, finance and technology departments. Moreover, innovative applications of the blockchain may ultimately be more beneficially in connecting marketers and advertisers with their intended audiences in ways that may have not been otherwise previously possible.

My Questions

  • Given that Google and Facebook currently have an overwhelming lock on online advertising’s multi-$billion revenue streams, will they meet any potential challenges to this with their own blockchain-founded variants? If so, how might they be different in their approach to benefit both advertisers and consumers? At the very least, do they even perceive this as a legitimate threat to their business models?
  • In addition to rewarding consumers with micropayments for ad clicks and content views, what, if anything, could companies do to correspondingly build incentives into their pricing structures for consumers’ purchasers? How should pricing be affected for repeat or bulk purchases by consumers? What if consumers make referrals of additional interested consumers to these blockchain-based vendors?
  • Would using mixed media such as augmented reality and virtual reality lend themselves to blockchain-based marketing implementations to further attract new potential consumers? That is, in return for micropayments disbursed to capture users’ attention, might enhanced advertising or content consumption experiences benefit both advertisers and consumers who would both end up feeling as though they are receiving added value for their participation?
  • What new entrepreneurial opportunities for goods, services and technologies might arise from these new and extensible blockchain-based marketing capabilities?

 


1.  Some examples of earlier implementations of blockchain technology were covered in these Subway Fold posts.

2.  X-ref to the concluding paragraph of the June 7, 2018 Subway Fold post entitled Single File, Everyone: The Advent of the Universal Digital Profile, concerning another innovative effort to return full control of personal data to consumers called the Hub of All Things. Two other similar startups that have emerged during the past few weeks are Inrupt and Helm. This is starting to become a very interesting and innovative space. Furthermore, there was a fascinating and far-ranging article in The New York Times on October 19, 2018, entitled How the Blockchain Could Break Big Tech’s Hold on A.I., by Nathaniel Popper, exploring the possibility of using the blockchain as a means for individuals to control and distribute some of their personal information to be used in AI databases.

3.  Virtual reality pioneer, Microsoft scientist and author Jaron Lanier presented a persuasive case for this, among many other thought-provoking insights about the digital world, in his book entitled Who Owns the Future? (Simon & Schuster, 2013). Highly recommended reading if you have an opportunity.

4Amazon constantly and widely varies it prices based on all of the personal and market data they have accumulated as reported in an article posted on BusinessInsider.com on August 10, 2018, entitled Amazon Changes Prices on Its Products About Every 10 minutes — Here’s How and Why They Do It, by Neel Mehta, Parth Detroja, and Aditya Agashe.

5.  For example, AdBlock and Ghostery, among others, are browser add-ons that can effectively remove nearly all online ads. These apps are continually updated by their developers.

6.  Columbia University Law School professor and New York Times contributing opinion writer Tim Wu wrote a highly engaging book on the past, present and future of how advertising and mass media compete for our attention entitled The Attention Merchants The Attention Merchants: The Epic Scramble to Get Inside Our Heads, (Alfred A. Knopf, 2016). It is very worthwhile reading for its originality and insights.

7.  See the July 25, 2018 Subway Fold post entitled Book Review of “Frenemies: The Epic Disruption of the Ad Business (and Everything Else)” for more detailed coverage on the current state of the online advertising market.

8.  See again the June 7, 2018 Subway Fold post entitled Single File, Everyone: The Advent of the Universal Digital Profile for some of the emerging innovative alternatives in this space.

9.  See also these Subway Fold posts in the category of Intellectual Property.

10.  See the August 13, 2015 Subway Fold post entitled New Report Finds Ad Blockers are Quickly Spreading and Costing $Billions in Lost Revenue.

Two Startups’ Note-Worthy Efforts to Adapt Blockchain Technology for the Music Industry

"Coachella Day 1 [2nd week] - Sahara Tent", Image by The Bull Pen, This work is licensed under a Creative Commons Attribution 4.0 International License.

“Coachella Day 1 [2nd week] – Sahara Tent”, Image by The Bull Pen

With the advent and then propulsive web-wide spread of MP3 file technology during the last twenty years*,  all of the music industry’s consumers, artists, recording companies, talent agents, business models,  distribution channels and intellectual property rights have been radically transformed. Today, the big money in the industry today is most often made by artists with established names who are able to draw audiences during their tours, sell merchandise, and continue to sell and stream music from their catalogs.

Of course, nowadays every well-known, moderately known and unknown act has an online presence to engage and inform their fan bases through an array of social media platforms and dedicated websites. Still, the music biz today is an even tougher business to earn a dollar than it ever was before. (See also the December 10, 2014 Subway Fold post entitled Is Big Data Calling and Calculating the Tune in Today’s Global Music Market?.)

In an effort to adapt dramatically new technology to energize, innovate and democratize the music industry, two recent startups, both still in their development stages, are using blockchain technology in previously unseen and imaginative ways. The blockchain is, in its simplest terms, a distributed, decentralized, transparent and encrypted database that acts as an online ledger to record transactions, documents and other information. It is most often used to memorialize transactions involving bitcoin. (See the May 8, 2015 Subway Fold post entitled Book Review of “The Age of Cryptocurrency” concerning a comprehensive new book on this subject.)

These early stage startups were the subject of a truly fascinating article posted on Billboard.com on August 5, 2015 entitled How ‘the Blockchain’ Could Actually Change the Music Industry by Gideon Gottfried. I will summarize, annotate and ask some unencrypted questions of my own.

I.  PeerTracks

The first startup is called PeerTracks. Their plan is to establish a music streaming and retail platform that includes “fan engagement and peer-to-peer talent discovery”, according to its president, Cedric Cobban.  They will use the blockchain for its transactions and paying artists directly for any revenue generated when their music is streamed “on a per-user-share basis”. Their launch is currently planned in about two months.

The core of their approach is to generate marketing revenue through the use of “artist tokens”. This is a system whereby each musical artist can create their own tokens with their name and image, and then set the permanently fixed amount of them to be made available. These tokens are intended to take on the characteristics of a “sub-cryptocurrency” (similar to some of Bitcoin’s characteristics), whereby the value that emerges for them is a direct indicator, based upon supply and demand, of the artist’s appeal. Site users can also speculate on the future value of the music and merchandise of currently unknown musicians.

The artists on PeerTracks will have the capabilities to affect the relative value of their own tokens. They will be enabled to buy back their tokens with any income they generate from “streams, sales, merch, tickets”. They can also permanently eliminate some tokens to decrease their supply and, in turn, increase their value.

Conversely, artists can affect demand by the types of items they offer to their token holders. Among other things, they can offer “discounts, free tickets, giveaways”. By providing incentives for fans to acquire their token, artists can raise the tokens’ relative values. As well, there are potential benefits to advertisers on PeerTracks interested in implementing paid sponsorships for more recognized music acts with product giveaways.

All songs uploaded on the site will be accompanied by a “smart contract“. According to the immediately preceding link to Wikipedia, smart contracts are “computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract, or that obviate the need for a contractual clause”.  The smart contracts on PeerTracks divide up the funds generated accordingly among the parties involved in the song’s composition and performance. This is considered to be an important advance in using the blockchain and, it is hoped by developers currently working on this, will become a platform upon which new business models will emerge.

II.  Ujo

The second startup in this space is called Ujo. Their plan to use the blockchain to improve both the distribution of royalties to artists and music licensing. They intend to accomplish this by establishing a “rights and payment infrastructure”. It will be free to use and open for third parties to create their own apps for new services including, among others, curation, streaming and negotiation.  Similar to PeerTracks, they are working on an alternative means to distributing revenues to “artists and rights holders”. Furthermore, they are trying to build a blockchain-based means to determine ownership of creative works.

The prospective adoption of this by the music industry of this entirely new system is expected to take time because of its tendencies to keep data private as well its outdated and often incompatible systems. Phil Barry, who is involved Ujo along with about 20 other developers, hopes their new system will unify and replace the legacy systems. He believes the platform will provide economic advantages to artists and recording companies receiving their royalties through it. As well, this will provide “new revenue and business models”, new ways for consumers to enjoy music, and simplification to the manner in which “music is managed and licensed”.

When an artist creates a new song in the future, using Ujo it will be permanently stored on the blockchain and assigned a unique ID. If another artists or performers changes anything about the song, their subsequent versions will receive a new ID and be “instantly recognizable”. Any resulting revenue from the song will then be distributed immediately and “proportionately to each rights holder”.

My own questions are as follows:

  • What other marketplaces, technologies and professions would benefit from using comparable types of blockchain adaptations?
  • Could traditional legal documents such as contracts, leases and wills, among many others, be written to the blockchain to make certain that all parties to them met their obligations?
  • Could artists’ tokens likewise be created for actors, writers, painters, graphics artists and other creative types?
  • What would be the results of a book or any other publication being written to the blockchain in terms of royalties, rights, subscriptions and recognition?

March 4. 2016 Update: For a related follow-up on this post please see the new Subway Fold post entitled The Mediachain Project: Developing a Global Creative Rights Database Using Blockchain Technology

June 5, 2017 Update:  An new article posted today, June 5, 2017, on the Harvard Business Review blog entitled Blockchain Could Help Musicians Make Money Again, by Imogen Heap, looks at the potential of blockchain technology from a musician’s point of view. A highly recommended read if you have an opportunity to click through. 


*  For an outstandingly written and highly engaging account of the total transformation of the music industry, I very highly recommend a recently published book entitled How Music Got Free: The End of an Industry, the Turn of the Century, and the Patient Zero of Piracy, by Stephen Witt (Viking, 2015). I just finished reading this and to say the least, it rocked.