There is some confusion amongst marketers – as to the difference between blockchains and Bitcoins. They feel that they are one and the same, and that they have little to do with marketing anyway. And NFTs are alien to many.
At a high level, blockchain is a unique technology. Bitcoin is one type of cryptocurrency. Blockchain technology enables the creation, tracking and management of Bitcoins and other types of cryptocurrencies. Blockchain can also be deployed for many other applications beyond cryptocurrencies, and has the ability to significantly impact marketing in many ways.
In simple terms, here’s what marketers need to know about blockchain.
So, what is a blockchain really?
Blockchain is a virtual/digital ledger (like an accounting book) of records or transactions. Instead of one entity keeping track of the ledger and the transactions within it, the blockchain is distributed across a community or members, to validate and time stamp the transactions. This is called a distributed ledger. There is no central authority or a single source that keeps the records.
Every time a transaction takes place, it is recorded as one “block” in the “chain.” Once a block has been created, it can’t be tampered with, as it is witnessed by all the participants in the blockchain. Due to this, you can trust the transaction and there is complete transparency around it. You don’t need intermediaries to validate the information about the transactions.
WHAT THAT MEANS FOR MARKETERS
Blockchain is going to transform advertising value chains.
Studies have shown that only between 40% to 60% of advertising dollars that marketers spend actually goes to the publishers. The rest goes to the intermediaries, whose job it is to count, verify, validate and reconcile the numbers. Clearly, this is an extraordinary level of inefficiency in action. Further, the advertising ecosystem is rather opaque and is filled with trust issues, allegations of kickbacks, fudging of data etc.
Blockchains can solve a significant portion of this problem. With smart contracts between marketers and publishers, a number of intermediaries can be eliminated. Companies like IBM, Unilever and MediaOcean have done some pilots, where the early results showed them that reclaiming fifteen to twenty cents on the dollar is an achievable goal.
For blockchain to really take root, scale will be critical. Significant participation from advertisers and publishers will get the industry there. It is a matter of time. Blockchain can and will step in and help fix the trust and efficiency issues that currently prevail in the advertising ecosystem.
Beyond advertising, blockchain can also help across the other value chains in the marketing ecosystem – be it post-production value chain, promotional value chain, influencer value chain etc. Where there are processes with multiple intermediaries, concerns of transparency, deficit in trust, prevalence of fraud, need for validation or proof of transaction, and reconciliation of numbers, blockchain can help in a big way.
Another area where blockchains come in is in establishing the origin of a product and tracking down its journey. In areas like luxury goods, pharmaceuticals and spare parts – where there is a heightened risk of spurious products being brought into the market, blockchain can help establish the authenticity of the real product. This is called Provenance. It is accomplished through a combination of digital IDs and the leverage of blockchain. In this day and age, a seal of authenticity could be a huge brand differentiator.
LONG STORY SHORT
We are just beginning to scratch the surface of blockchain’s possible applications. As marketers begin to understand its potential more deeply, they will come up with more valuable ways to deploy it across industries.
What we know is that blockchains provide substantial value in terms of trust and transparency to transactions in any ecosystem. They have been proven to create efficiencies in the advertising value chain.
Most importantly, they can help bring in the much needed credibility and trust back into the marketing ecosystem.
If you wish to dive deeper into this topic, I covered it in my book “Quantum Marketing”.
I will cover NFTs in the next installment of this article.