The roots of blockchain technology can be traced back to 1991 when Stuart Haber and W. Scott Stornetta proposed a concept called a block chain. It was a system that consisted of a chain of blocks secured by cryptography and digital timestamps that could not be altered.
In 2008, an anonymous entity (a person or persons) named Satoshi Nakamoto used this concept to introduce Bitcoin — a cryptocurrency that enabled people to carry out transactions without the need of an intermediary such as a bank.
Over the course of a decade, several cryptocurrencies entered the market such as Ethereum, Litecoin, Ripple, EOS, and so on.
In this article, we will understand how blockchain can be implemented in marketing and advertising. We’ll start by understanding the concept of blockchain in marketing, its strategies, best practices and benefits with examples.
Let’s dive in!
Table of Contents
What Is Blockchain?
The Blockchain Process Simplified in an Infographic
In simple words, a blockchain is a decentralized distributed digital ledger, that is, a database across several nodes or computing devices. Each verified transaction (data exchange) is stored into units known as blocks. Each block contains the transaction data, a timestamp, and the cryptographic hash of its preceding block.
Rather than relying on a centralized system, a blockchain uses a Peer to Peer (P2P) network to store data at multiple locations. Each location is called a node, and it stores a copy of the data right from the genesis block. Every time a new record is added in the database, it automatically gets updated across all nodes on the network.
The transactions are verified by users on the network by solving a math problem. Once the block is verified, it gets added to the chain of existing blocks. A verified block can’t be edited, and this is where the immutability aspect of the blockchain comes into the picture.
Why Blockchain in Marketing?
Representation of the 3 Reasons Why Blockchain Should Be a Part of Marketing
To understand how blockchain will change the marketing landscape, let’s look at the three fundamental reasons why blockchain is rapidly gaining widespread adoption:
In a centralized or client-server model, there’s one (or more) entity known as the server that hosts all the information, and you (the client) must communicate with the server to gain access to the information. For example, if you need to send money to someone via the internet, you need to do so by going through a middleman such as a bank.
Along with the addition of a middleman, the centralized model is susceptible to many threats such as data leaks.
On the other hand, a P2P network is decentralized. There’s no single host of the information. In fact, as seen earlier, every node in the network stores the information locally. So, if you want to send money to someone, you can do so directly without routing it through a middleman.
The second aspect is security through the immutability of records. Once a block is verified, the data stored in it can’t be altered. Even if someone tries to deceive a block in the blockchain, it will significantly change the data along with the hash of its previous blocks. Since the whole blockchain has now changed, it can’t be verified with any other node. Anyone trying to hack into the blockchain needs to alter records at every node, which is practically impossible.
Since blockchain is a distributed digital ledger, all users in the blockchain have access to the transactions that have taken place. While this aspect might raise some eyebrows, there’s no need to do so because although the transactions are available to the blockchain users, the identity of users remains concealed.
A Note on Smart Contracts
In this next section, we will frequently come across the term – smart contracts. So, before we see how blockchain will revolutionize marketing, let’s understand the concept of smart contracts.
IBM succinctly defines smart contracts (also known as cryptocontracts) as,
Smart contracts are often self-executing, trackable, and irreversible and contain the terms of the agreement between the buyer and the seller. Their self-executing trait eliminates the need for middlemen.
For example, while working with a consultant, businesses can use a smart contract that will automatically release the payment upon the successful completion of the deliverables. This way, there’s no need for additional steps such as invoicing.
8 Blockchain Strategies and Best Practices for Marketing
Representation of the 8 Blockchain Strategies and Best Practices for Marketing
Blockchain technology is all set to disrupt industries such as Banking, Financial Services and Insurance (BFSI), real estate, media, retail, healthcare, and legal. And that’s just to name a few! Big names such as IBM, Microsoft, Oracle, Intel, Apple have already recognized the potential and started to make inroads into blockchain.
With so much hype surrounding the technology, let’s look at the blockchain strategies and best practices that are transforming the marketing landscape.
1. Influencer Marketing
Brands are heavily investing in celebrity and micro-influencers to spread their message to a wider audience. But influencer marketing gets a bad rep due to problems such as difficulty in tracking the ROI, lack of transparency, and fake followers and engagement.
Blockchain can effectively solve this problem by introducing smart contracts in the ecosystem. Smart contacts will facilitate the payout upon the completion of specific actions or after delivering the desired results.
The technology can also be used to verify the performance and legitimacy of the influencer.
Example: Socialmedia.market is an Ethereum-based influencer marketing platform that enables advertisers to work with influencers and offers a dispute solution system.
2. Affiliate Marketing
According to Statista, approximately 6.4 billion USD will be spent in affiliate marketing in the U.S. alone. Despite such investment, brands, unfortunately, face problems such as dealing with dubious affiliates, wasting money on sites that bring no value and paying hefty commissions to affiliate networks.
Blockchain can curb this money wastage and bring order in affiliate marketing in the following ways:
- Use cryptocurrencies to simplify the payment process.
- Payouts are usually kept on hold by the affiliate network until the minimum payment threshold is reached, while blockchain-driven products can operate without such limits.
- Introduce smart contracts to ensure accountability and reduce ad frauds. That means the use of tracking pixels will become redundant.
3. Loyalty Programs
Customers join loyalty programs because they are either already loyal to your brand or are looking to get discounts. An average American household is part of 29 different loyalty programs but uses only 12 of them.
The problem with loyalty programs for customers arises when it comes to redeeming points. Customers need to keep a track of different loyalty programs, and redeem them before the offer expires. So, rather than being a win-win situation for brands and customers, it becomes exactly the opposite of that, because brands are also losing out by creating a liability.
Loyalty programs fueled by blockchain can solve this problem by introducing a frictionless system. As blockchain is decentralized, multiple brands can collaborate by allowing customers to redeem loyalty points with any brands within the network. Since the loyalty points are deposited in real time, customers can redeem them on the go. This way, everyone in the ecosystem wins.
4. User Data Protection
With data breaches becoming more frequent, businesses need to prioritize protecting customer data. The introduction of GDPR in 2018 brought about stringent guidelines for brands when it comes to gathering and using customer data. Therefore, brands have been looking for solutions that would enhance customer data protection.
Blockchain comes to the rescue here by enabling users to either anonymize their data or sell their information to brands they choose.
Example: Killi is a blockchain-based solution that restores the authority to users’ by allowing them to either sell their data or fill out surveys and get paid for it. Similarly, uPort enables users to register their identity on Ethereum and manage their data.
5. User Rewards
We live in the attention economy where if you’re not capturing the users’ attention, you’re losing it. Brands literally pour truckloads of money in online advertising so much so that the global digital ad expenditure is predicted to grow up to 333.25 billion USD by the end of this year.
Blockchain can help you make the most of your investment by showing your ads to the target audience that is most interested in your offerings. For example, a blockchain-based browser called Brave enables its users to decide the types of ads they get to see. Brave has introduced Basic Attention Token (BAT), an Ethereum-based utility token that gets distributed among publishers and consumers depending on the ads viewed. So, essentially, the advertiser is paying users for their attention, ensuring that the ad budget is efficiently spent.
6. Ad Fraud Prevention
Out of the 332.25 billion USD digital ad expenditure in 2019, advertisers will lose 42 billion USD due to ad frauds. Over the years, advertisers have been losing a lot of money in ad frauds such as fraudulent traffic, domain spoofing, malvertising (a portmanteau of “malicious advertising), and so on. Along with that, publishers swindle advertisers by showing ads on dubious websites that bring a lot of traffic but no results.
7. Blockchain-Based Social Platforms
Social media platforms have amassed billions of users since the last decade. Although social media has given users plenty of opportunities to connect with their family, peers, favorite brands, and celebrities, it comes at the cost of their data. Since ad sales is the primary revenue stream for social media platforms, they track every action to enhance their targeting capabilities. This knowledge coupled with recent data leaks has made users cautious when it comes to using social media.
While I agree that these solutions may not bring any benefit for brands just yet, Steem is a social blockchain that lets you build apps on the platform, monetize your content, and build communities. Applications such as Steemit (Blogging platform), DTube (Video platform), and Utopian (Enables people to fund open source projects) are built on Steem.
8. Social Commerce
Social commerce has already arrived, and the next disruptor for the e-commerce industry is going to be blockchain. Blockchain has similar applications in E-commerce when it comes to preventing frauds, enabling faster transactions, and keeping user identity anonymous.
Example: Along with these solutions, e-commerce has been bestowed with several other solutions. AT&T is collaborating with Microsoft and IBM to create a suite of blockchain products that includes a solution that ensures the authenticity of products.
Learn More: How Blockchain Can Help Solve Ad Fraud
4 Benefits of Blockchain in Marketing
Representation of the 4 Benefits of Blockchain in Marketing
We just looked at the strategies brands can use with blockchain-based products in their marketing activities. Here are four ways your marketing campaigns can benefit from blockchain technology.
1. Reduced Costs
Since blockchain is a decentralized, peer-to-peer technology, you can cut down an enormous amount of costs right off the bat. The main reason is you are essentially removing third parties from the equation. Ad networks are notorious for burning a hole in advertisers’ pockets in the name of fees or profit cuts. The inclusion of smart contracts ensures that you’re paying only if the terms of the agreement are met. This enables brands to deal directly with publishers, freelancers, external vendors or users and pay them without relying on the middlemen.
And although blockchain may incur some infrastructure costs, the transaction costs are almost nil.
2. Audience Targeting
As a marketer, it is disappointing to see the terrible results of your marketing campaigns. The ad copy, visual creative, ad format, target audience, everything was well thought out, but it just didn’t work.
By decentralizing the advertising ecosystem, brands can directly connect with the right publishers and take their message to the right audience. Additionally, since users get paid for viewing ads, brands can be assured that they’ll get the most bang for their buck.
3. Increased Efficiency
Activities that involve paperwork tend to be time-consuming and tedious. Take invoice processing, for example. Once you raise an invoice, you need to wait for the payment. Furthermore, the involvement of a middleman delays the payment release.
Blockchain tackles this problem by enabling transactions to take place in real time. Since the information is accessible to both the parties, it is not necessary to maintain separate records.
Again, the implementation of smart contracts facilitates immediate payment as soon as the terms in the agreement are met.
4. Decentralized Applications
When it comes to traditional mobile apps, the rules are dictated by the Play Store or App Store. The same goes for any platform that has a single authority that controls the entire platform.
Since no single authority governs decentralized apps, there is no my way or the highway approach. We saw how Steem enables brands to create apps and provides them with an opportunity to monetize and build a community. Similarly, Ethereum, EOS, NEO, Tron, Cardano, etc. are some platforms that enable you to build apps on their platforms. The absence of a single authority allows you to connect with your target audience directly.
Learn More: What Is Bladtech (Blockchain+AdTech)?
Over to You
Despite being in its nascency, blockchain technology has already made its way across multiple industry verticals and departments, and marketing is just one of them. We’ve covered the concept of blockchain in layman’s terms to help you get a fair understanding of the technology and how it can be used in marketing. We also saw the ways it can transform the loopholes and challenges you face as a marketer and the benefits it can provide.
To get ahead in the game, marketers need to evaluate and experiment with the various alternatives and use cases that we saw earlier.