How blockchain transforms digital marketing

Blockchain can offer revolutionary changes for marketing. But, there is good news for advertisers and sites. A little futuristic article by Robert Allen, recently published on the Smart Insights blog. However, specific practical advice is also present.

Blockchain has become a hot topic in the technology world since Bitcoin has emerged from non-existence to become a fix idea for geeks around the world since about 2013. Marketers generally love to look for new technologies to get away from the daily routine and follow fashion trends, ever since one guy came up with how to use a printing press to make leaflets advertising wigs and accessories.

But until now, the blockchain has not come into vogue among marketers and has not become a trend, like Snapchat and online video.

I think there are two main reasons for this:
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1. Blockchain is the result of a very difficult to understand cryptography. Because of this, it is much more difficult for advertisers to see the benefits of technology; they are not as obvious as, for example, with online video on Facebook.
   
   
2. In people's minds, Blockchain and Bitcoin are inextricably linked. Many people think that blockchain is a bitcoin based technology. And there is nothing wrong with such misconceptions, since the topic of Bitcoin is already beaten, and the prospects for the blockchain are huge

Considering the ignorance of the advertising market about blockchain technologies, in my article I will try to solve some of these problems. Firstly, I explain the essence of the blockchain technology in simple words, and secondly, I propose interesting ideas based on blockchain, which have nothing to do with Bitcoin. Therefore, if you already have an idea about decentralized block chains, you can immediately go to the second part of the article.

What is a blockchain?

As Albert Einstein said: "Everything should be stated as simply as possible, but not simpler." Blockchain is a complex technology, but its basic principles can be simplified. The bottom line is that not a bank or a notary keeps records (for example, about transactions), but each member of the network. The records are fully synchronized, and no one can have exclusive access to them, since the architecture is such that the records must fully comply with all. If I changed my blockchain and in the “turned out” version that you paid me £ 200, the system will not accept my transaction, since my records will not match everything else. This essentially makes the blockchain an “unbreakable” technology.

The diagram below allows you to understand how this works:


But what makes the blockchain so meaningful? And the fact that we can trust the counterparty without the need to involve certification centers. It sounds a little academic, but trust is actually the basis of the entire digital economy (and the “physical” economy, for that matter) and companies that are set up as certification centers will massively lose their positions thanks to the blockchain.

Implications of blockchain for digital marketing

There are many areas of the digital economy where we must contact the certifying authority to ensure credibility. A good example is the automatic procurement model of advertising (programmatic buying). If a random site, which you have never heard of, says: “place your ad on my website, millions of people will see it,” will you trust it? Me not. You have no way of knowing if they are telling the truth about their attendance. And even if you installed an analytics system that measured the number of ad impressions, you still can’t be completely sure that these are real people, and not just bots that the site owner caught up with to increase their profits.

This need for trust has led to the success of various certification centers, companies in the digital world, which are arbitrators and work to ensure trust.

1-Destruction of ad networks business model

The most successful of these certification centers were Google and Facebook. Google earns over $ 4 billion on the Google Display Network. It is here that he acts as an intermediary between the platform, which has an audience and an advertiser who needs to go to his website.


If they trust each other - the advertiser and the marketplace - Google will not be needed as an intermediary who takes a share of the profits. But this does not happen, so Google acts as a reliable certification center. The advertiser can not trust the site when it comes to the use of dubious tactics markups to increase revenue.

With the help of blockchain, you can verify that each individual user is authentic with an accuracy of 100% and the site sells only genuine clicks, then the advertiser and the site itself do not need an intermediary, and by agreement among themselves can exclude it from the business, while maintaining your money.


So now you can see what possibilities the blockchain has for the world of digital marketing. There’s probably no greater threat to Google’s profits than blockchain. It poses no less a threat to such IT giants than Bitcoin, for large banks. We agree, however, that this is good news for advertisers and sites. They will be able to save more income for themselves and not have to pay a third party.

2-click on fraud

A distributed register of transactions, which is a blockchain, can provide not only an “unbreakable” transaction record, but also a digital signature record for people to uniquely identify them. This means that the user is able to prove that he is a real person, but not to disclose his personal data, which can be used for criminal purposes. This technology has already been developed and its wide distribution is only a matter of time. Microsoft is already working on building its own digital identification system based on the blockchain. Probably, other technological giants will also see the potential of these technologies, and integrate them into their own systems to prevent many types of click fraud.

This will allow to check with much greater accuracy who clicks on the ads and who sees them.

Click fraud fraud is an extremely common problem. It will cost advertisers more than $ 7 billion in 2017. Solving this problem would increase the aggregate effectiveness of advertisements on the Internet by $ 7 billion. Advertisers will receive higher profits and ROI after eliminating fraud and working without intermediaries like Google. This, in turn, will mean large budgets, which is good news for internet marketers. Provided that they play by the rules and do not cheat clicks with bots, of course.

3-Changing profit models for sites

Currently all online transactions must be processed by a third party, such as Paypal, Stripe or Worldpay. These businesses must offset their costs (for example, server infrastructure, employees, and marketing) and build some profit. The mediator takes a commission for each transaction. For the most part, these commissions are quite reasonable. If you buy a watch, a dress or a refrigerator on the Internet, the amount of remuneration paid to a third party for the “purity of the transaction” will be a very small part of the total value of the goods purchased.

But with the help of blockchain, you can transfer any amount of money (in digital currency), regardless of its size, completely free of charge (in popular currencies, for example Emercoin, there are miners' rewards that are known to everyone and make up not a fraction of the purchase, but a fixed negligible amount - comment perev.). There is no third party and there is no need to pay for servers, staff and marketing. All transactions are stored in the blockchain, which is distributed to all network participants.

This means the absence of fees at all, which opens up the possibility of micro-transactions that could create a completely new profit model for various sites.

How much would you pay to view a web page without ads? 1 pound? 1 penny? 0.5 penny maybe? What about 0.1 penny? Without the blockchain, these micro payments are meaningless, since third-party transaction costs will be higher than the revenues from each transaction. But with instant and free transactions offered by the blockchain, such payments become real.

You can see a small window in the corner of a popular site that says something like: “Do you want to view our content without ads? Just click here to pay 0.1 penny right on this page. ” Or the site may charge for access to its pages, but its size will be low enough so as not to scare users away, as is often the case now.

For sites, the transition to this type of revenue model will mean a decrease in the number of materials suggesting advertising space (or their number will grow more slowly than it could), however, the demand for advertising will remain, so the prices per click will increase. This will mean that support for micro-transactions is more beneficial for sites, as it will provide an opportunity to increase the cost of clicking on advertisements.

If you are interested in learning more about how blockchain will destroy existing industries and transform the global economy for the better, I can recommend a recent TED presentation on this topic (eng.) .

Translated by Nikolay Suvorov.