Retail Blockchain Deep Dive: Marketing

Blockchain in marketing is all about identity.

Marketing applications are the third most active area of blockchain use and investment. While supply chain applications are focused primarily on the B2B space, marketing has a mix of B2B solutions (like ad fraud) as well as solutions that are much more consumer-facing (like loyalty programs).

Most of the founding principles that drive interest in supply chain applications are the same as for marketing, but with a few twists. In supply chain, it’s all about visibility into who has touched a product in one way or another as it has moved from farm to fork or sheep to shelf, and how long it took and what was done to that product along the way. It’s the record itself that is important, and creating a common record per product that can still be used and updated by multiple parties with different data needs.

In marketing applications, it’s not the record so much as the identity of the participants adding to the record that is critical. This is a bit ironic, given that one of the founding objectives of cryptocurrencies was that you could transact anonymously. But it’s not so much that a transaction may or may not be untraceable back to you, it’s that you could potentially use a pseudonym to disguise your identity so that it is not so easy to trace a transaction back to you. That’s a big difference. If you take away the ability to transact anonymously – in fact, require transactions to explicitly identify who is transacting – then blockchain becomes a powerful tool for visibility into the multiple parties participating in a transaction, with a layer of accountability that can come with that.

Once you have identity, then you can start adding roles and permissions to those identities. This is the most powerful part of blockchain, especially when it comes to marketing applications. In a B2B context, that might mean only sharing the right data with the right partners, or in the case of smart contracts, giving a partner permission to engage in activities on your behalf, whether advertising or peddling influence, and also making it easy to revoke that permission if necessary.

With marketing applications, because consumers are involved, adoption can sometimes be more difficult, because startups here have to “make markets” – they have to get enough retailers or brands participating that it’s worth it for a consumer to sign up, or they have to get enough consumers to sign up that it’s worth it for a brand or retailer to participate. And usually they have to convince both sides at the same time.

This means the hyperbole around how big a market is that a startup may be tapping into, or how much value can be created around a particular loyalty scheme or influencer network can get out of control. So while I will highlight examples of companies that are putting together use cases that apply to the two different major areas of investment in blockchain in marketing, the usual caveats apply: these companies are being called out not because they are wildly successful – several businesses and/or their business models have not been established or proven in any way, and there’s no guarantee that any of them will be around tomorrow. I’m using them as examples of different ways of approaching the same problem, or as evidence that there is activity of some kind, but I in no way endorse any of these companies. Invest at your own risk!

Ad Fraud

For the uninitiated, it can seem weird that one of the first, most-active, and best applications of blockchain in marketing is ad fraud. It’s important to get specific: in digital advertising, ad fraud is a huge problem, big enough that even though brands have been moving more and more of their budget over to digital and away from traditional, the demand has not really come with a rise in prices (on average) for digital “supply”.

Ad fraud comes about because in digital programmatic advertising, it gets murky very quickly. A big, established brand may want to reach 40-something moms in the US, but it’s not like you go to “” in order to find all those moms, let alone get advertising in front of them. Behind the scenes of an ad buy like this are dozens of networks that promise to place your ad on sites that have a high percent of traffic from your target audience, and then you pay for performance.

That act of farming out advertising buys is where ad fraud sneaks in, especially because a lot of it is highly automated, happens very quickly, almost moment-by-moment, and could involve thousands and thousands of web sites that are impossible to audit. Unscrupulous people set up websites that use a lot of key words that they know advertisers look for, register those websites with ad-placement networks, and then use bots to generate the appearance of visitors who come and click on ads. Advertisers get their ads farmed out to these fake sites, and then end up paying for fake clicks from fake people.

The challenge can be the same with influencer marketing as well – a fake blogger with a fake audience who may or may not have actually promoted your product or brand anyway.

There are quite a few companies that are trying to use blockchain to solve this problem by making sure that there is total transparency and visibility into which sites supposedly promoted which ads at which points in time. Blockchain additionally helps govern the smart contract around payment, especially for influencers: when you add your influencer post to the blockchain or you meet some minimum requirement for clicks, then you get paid.

One company taking the lead here is IBM. Once again, the tech giant is at the forefront with a consortium of advertisers called AdLedger. They have two proofs of concept running, one on campaign reconciliation (making sure that everyone advertised what they said they did), and one on GDPR compliance.

Another company focused on digital advertising transparency is Lucidity, which also happens to be a startup in IBM’s blockchain incubator. This company has focused more on providing analytics and dashboards to a marketer, based on the underlying data that would be captured in a digital advertising blockchain.

On the influencer marketing side, Network GURU has created the Gagapay Network, which creates a platform for affiliate or referral marketing contracts for small-scale influencers.

And, as for payments, there is a question as to whether blockchain can truly scale. The number of transactions that go into a digital programmatic ad placement are even more substantial than are generated by payments. Lexicon is a startup that claims to have solved this.

Consumer Identity/Loyalty

If identity of an advertiser is important to solving digital ad fraud, just wait until you can get the consumer identity involved too. For consumer privacy advocates, the good news is that programmatic advertising is not trying to use blockchain in this way. But there are plenty of other schemes and business models that do. Most of those focus on consumer loyalty, like coalition marketing programs or straight up pay-for-your-data loyalty programs that could be run by a single brand or retailer.

In general, it works like this: a blockchain startup creates a loyalty “network”. The network is typically powered by tokens or coins – and thus an Initial Coin Offering is often a fundamental part of the startup’s funding process. The company sells coins, which can be used as the “currency of the realm” for the network. Retailers and brands buy the coins, use them to carry the value of whatever it is they’re offering – think loyalty points – and then consumers can collect those coins and redeem them for other things of value.

Most companies going after this space are trying to be a coalition, where they convince a bunch of retailers to buy some coins, and convince a bunch of consumers that these coins are worth having. Sometimes the companies try to seed the network by offering additional value to consumers, like wallets or data analysis on spending, etc.

Where things can potentially get interesting is when those offerings are paired with things like data revocation, where a consumer can opt in to share information about themselves, but can alternately choose to opt out. The nature of blockchain makes it easily possible for opting out to revoke permission to access data – basically, the “right to be forgotten” aspect that is foundational to GDPR.

Swych is an example of a blockchain startup that has centered on gift cards as the extra added-value that gets consumers to participate. You can use Swych as a wallet to hold gift cards, as a way to buy and send gift cards, and as a way to trade in gift card balances for balances with other companies.

Shopin is a more traditional coalition loyalty program, but has focused more than most on the idea of consumer permission and revocation of that permission. They’re trying to drive retailer and brand acceptance through access to aggregated analytics about consumers.

Nucleus Vision offers beacon-based identification of consumers, who collect “nCash” coins for sharing their location via an app, and can redeem those coins with participating retailers who add the beacons to their stores.

Boltt puts a bit of a different spin, by offering a “private” network – Boltt is a fitness tracker manufacturer based in South Korea, and it offers consumers who buy a Boltt tracker access to a blockchain-driven network where physical activity generates Boltt coins, which can be redeemed with other brands and retailers that Boltt has specifically partnered with to get them to offer those benefits. Think of it just like redeeming American Express points.

That is just a flyby of different kinds of companies offering different ways to go about the same thing: track consumers and monetize their data. There are many, many more out there, and some will probably have come and gone in their entirety in the space between when I wrote this article and when you actually read it.

Of all the applications of blockchain, this one gets into “wild west territory” the fastest. But if the right value equation can be found – the right balance between paying consumers to participate and getting retailers to pay enough to fund that participation – then it could eventually take off. Consumers could potentially place great value on the idea of seeing who has accessed data about them, and have the option to say “no”. The question is, can retailers be persuaded that this level of control is in their interests too? I’m not so sure about that.

The Bottom Line

It’s important to remember that to say that marketing applications are the next most mature in blockchain after supply chain isn’t really saying much. A lot of these examples are whitepapers and a website, without even any code to show for it, and even the activities that are backed by large companies like IBM are more focused on proving out a concept than rolling out an initiative.

Personally, I would value the opportunity to have greater control over my personal data – and make some money off of it too. And there is real potential for blockchain to enable that. But I’m also not holding my breath.