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Blockchain for Marketers

By Andrew Frank | May 31, 2016 | 0 Comments


Who would have thought the world could go nuts about a global distributed ledger protocol called blockchain?

Sure, by eliminating the evils of sovereign fiat currency and exploitative transaction fees, we might create a secure and efficient unified global economy that levels the playing field and greases the wheels of commerce for everyone, with an ideal balance of cryptographic anonymity and law-enforcement-friendly public tracking of each transaction. But the path along the way is littered with arcana and technocratic infighting. In the meantime, marketers ask, how is this relevant?

Forget about post-bitcoin cryptocurrency for the moment: one thing to watch is whether blockchain, apart from its currency, can accelerate the development of decentralized virtual marketplaces – call them “Commerce Clouds” – where digital agents such as virtual personal assistants (VPAs) and vendor bots (VBs) can do business, securely and privately. Ethereum proposes to solve the problem of how incompatible systems negotiate and transact with each other by enhancing the blockchain ledger concept with a common programming language and virtual machine that supports “smart contracts.” These would be specified and executed in a distributed environment that maintains a single, avowed state for every contract, doing away with concentrated marketplace control points and allowing machines to negotiate in their native tongues. I’ve been calling this agent-based marketplace the “proxy web” and it has deep consequences for how business is done in the future, when marketers must consider how to pitch bots. How far in the future is worth debating.

Some elements of the proxy web are already active. Marketers might recognize real-time machine-to-machine negotiation in the RTB advertising exchanges where real-time auctions are triggered practically every time anyone visits a web site or an ad-supported app. The contracts that comprise these marketplaces are not exactly standardized (although the IAB maintains a flexible and rapidly evolving OpenRTB standard, it’s not universally adopted and mappings are necessary, for example, between OpenRTB and Google’s DoubleClick Ad Exchange native protocol). Most importantly, there’s no blockchain yet to decentralize these advertising marketplaces: each exchange operates in its own restricted cloud. Adding a blockchain to RTB might do a lot to improve its security and efficiency, but it’s hard to make out the incentives that would persuade the largest marketplace operators and agencies to embrace it. While RTB has streamlined the media market’s front-end, its back-end – settlement and verification – remain notoriously inefficient and unreliable, with exchanges, networks and agencies taking on still-lucrative roles of clearinghouse, guarantor, float manager, and, at times, arbitrageur. Efficiency often doesn’t favor incumbents. There are experiments underway to apply blockchain to private ad exchanges where they may take hold, but a lot of buyers and sellers would have to get aligned.

Perhaps the greatest area of interest for marketers is reward currency. Many loyalty program operators struggle to expand the scope of their currencies: credit card companies work with publishers, brands with retailers, airlines with hotels, and so forth, but the back-office costs can be prohibitively high, especially when it comes to extending these relationships into areas like mobile gaming where they might really take off. Start-ups such as Chain are reportedly investigating some of these applications. By dramatically reducing settlement costs, blockchain could pave the way for much more-scalable multi-brand loyalty systems based on private currency.

Meanwhile, there’s a connection to be made with the rising tide of data co-ops where offerings from Adobe, Oracle, IBM, and Acxiom reflect a growing interest in proprietary data relationships among complementary marketers. Adding blockchain-based currency elements where customers can both redeem rewards points among cooperating vendors and more explicitly opt in and out of data sharing, with the potential to earn reward points with data, holds real promise. Maybe a blockchain innovation could replace the beleaguered cookie as the token of online identity.

The list of possibilities goes on. I continue to caution myself and others not to confuse a clear view with a short distance. It’s a great time to experiment with blockchain, alongside many other emerging technologies and trends, but it may be some time before a blockchain-enabled proxy web hits mainstream marketing. Still, blockchain has clearly established a role for itself in many forward-looking marketing scenarios, which will be the main focus of my research for the second half of 2016.

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