Case Study: Applications of Blockchain in the Marketing Data Industry
Hey everyone, today we would like to share a case study that was written by our very own advisor, Jeff Wilkins. Enjoy!
According to eMarketer(1), media spending is forecast to hit $643 billion worldwide in 2018, an increase of 8.8% from the prior year. Broadly speaking, the advertising industry can be broken down into three categories: digital, TV and other/offline. Digital has exhibited the strongest growth, with TV ad revenues growing modestly and other/offline in decline.
Fig. 1: Growth in the Global Advertising Industry
Increasingly, the success of advertising and marketing relies on data to help profile and select audiences. While the use of marketing data has boosted the efficacy of advertising campaigns, it has spawned problems for marketers, publishers, and consumers alike.
At its foundation, the marketing data industry relies on trust to function. Since buyers and sellers of data often do not know each other, or may have limited transaction histories, it has been difficult to establish a high degree of trust. In addition, the process of verifying the providence of data, the quality of sources, and the accurate reporting of usage and tracking of royalties have been problematic.
As a result, an ecosystem of third party trusted providers have emerged. For example, in display advertising, Google fills the void as a trusted third party vouching for the publisher sites on which it serves ads. For offline data, such as postal mailing lists or consumer demographics/psychographics, compilers can serve a valuable role in assessing sources and cleansing and integrating their data. Industry experts such as brokers and managers are also sometimes used.
More recently, various technical solutions and algorithmic approaches have been proposed to detect fraud and unauthorized use. These methods have been applied in diverse settings such as display advertising, social media and lead generation. Offline methods have largely focused on unauthorized use.
Our focus is on the marketing data industry. With the rise of Blockchain, new paradigms and business models are being developed to address these shortcomings. The Blockchain and its underlying technologies promise to disrupt the traditional model by allowing buyers and sellers to interface directly via self-executing contracts with full transparency on sourcing.
Issues Facing Publishers/Data Owners
Publishers face a number of problems that can be ameliorated with a blockchain-centric solution. The traditional publisher business model has been radically impacted by digitization. The business models of publishers have come under enormous pressure. They are faced with replacing lost offline space ad revenues with new revenue streams. Publishers are looking for new revenue streams, including monetizing their data assets, to offset these declines.
Royalty Reporting and Payment. The challenge comes in ensuring that partners are accurately and fully reporting usage and royalties. The current approach is often based on a trusted agent intermediary selling the data and vetting the buyers. The Blockchain eliminates the needs for trusted intermediaries and royalty reporting. It allows data owners to monetize their data directly through the Blockchain and its self-executing contracts. The Blockchain can hold the buyers’ funds in escrow until the contract is fully executed and verified.
Complexities of Data Integration and Royalty Reporting. In a multi-sourced data environment, it can often be difficult to establish the source of data and apply the appropriate royalty rules. For example, a consumer profile might contain contact information (name/e-mail/phone), demographic data (age, income), psychographic or transactional data. How are royalties computed for each contributor, based on what is charged to the client? And in cases where more than one source has provided a particular data element, how is credit ascribed and royalties calculated? Once again, the Blockchain provides an answer for objectively codifying the computations in a way that is both transparent and auditable.
Real-time Audits. Royalty report auditing is so painful and strenuous that most data contracts provide for only infrequent audits with advance notice and on-site with the reseller. Blockchain allows an audit to be conducted at any time, remotely and without advance notice.
Detection and Prevention of Unauthorized Use. Even if purchased through a Blockchain-controlled process, leakage from delivered data assets can still occur. Traditional approaches, such as seeding mailing lists with records, appear woefully inadequate to address the wide variety of channels and approaches in which data may now be monetized. Blockchain offers novel ways through federation to eliminate the need for any intermediary to take possession of the data.
Acceptable Use. The ability to track data usage will ensure not only accurate royalty reporting, but also verify that the publisher’s restrictions on acceptable use are followed.
Consolidation of Industry Ad Spending. While online advertising revenues are growing rapidly, much of the growth in ad expenditures is going to a handful of powerful companies. As platforms, Google and FaceBook are able to create detailed profiles of users. This data, and the targeting it allows, places independent publishers and data owners at a competitive disadvantage. According to eMarketer(2), Google and FaceBook’s share of US digital advertising spend increased to 63.1%.
The Blockchain offers loosely-affiliated publishers and data owners the ability to pool their collective data assets to better compete.
Issues Facing Consumers.
It is often remarked that consumers are now the product being sold by publishers. They have no easy way of seeing what data has been compiled on them, or a way to correct it. They have little to no say in how their data is used and what advertising they see. Other than access to free or subsidized services, consumers are not paid in accordance with the value they create for publishers. The Blockchain will seek to dramatically upend the old order of business, thus empowering consumers to take charge.
Access to/Verification to their Personal Data. Many consumers have been frustrated by the opacity of the marketing data industry and their inability to rectify errors. A Blockchain-based solution will allow consumers to explicitly access their data and ensure it is correct.
Compensation for Use of their Data. At present, consumers are unable to control the use of their personal data or receive compensation for their data or attention. A Blockchain solution combined with smart contracts would allow consumers to contribute their own data and set the royalty rates for its usage. Digital wallets can be used to manage the payments.
Transparency on Data Compilation/Usage. It is difficult for consumers to determine what information has been compiled about them by publishers or marketers, or to expunge erroneous information. It is also difficult to discover which marketers have made use of the data, and also how and in which specific marketing campaigns it was deployed. One recent example is Cambridge Analytica’s unauthorized use of 50 million FaceBook users’ data to target political advertisements in the 2016 US Presidential campaign(3).
A Blockchain-driven approach can be used to address all aspects of the providence and usage of consumers’ personal data.
Notification of Data Breaches. In recent years, data breaches have become common. All too often, consumers are only notified months after the fact and without any details or context of the breach. For example, between May and July 2017, a data breach involving 143 million American consumers occurred at credit reporting agency Equifax(4). Blockchain may formulate a component of the solution for fighting the resale or use of stolen data.
Acceptable Use. With Blockchain, consumers will soon be empowered to explicitly dictate their ad preferences in a transparent and auditable way. Gone will be the days of bogus opt-ins where permission was either extrapolated from loosely related actions or fraudulently concocted. A Blockchain-implemented contract could encode and enforce these policies.
New Business Models. Blockchain was enable new rewards programs for consumers, bringing loyalty programs into the 21st century. Not only can consumers be paid for the use of their personal data, but compensated for desired responses (such as completing a survey) or contributing new content to the advertiser’s campaign.
Issues Facing Marketers/Data Buyers.
Marketers are confronted with a variety of problems in using marketing data. First, the providence and quality of data are often suspect. And attempts to validate it are often post hoc or test campaign-driven. In addition, the campaign execution which utilizes the data can be difficult to track and fraud-ridden. And it is practically impossible to determine the file build decisions made to produce the final data product.
Source and Data Validation. One of the biggest issues facing marketers is ensuring that the profiles used to assemble an audience for their messages are legitimate. Confirming the origin of data, and the providence of demographic/psychographic/transactional can greatly increase the confidence in the data. In addition, analyzing multi-sourced data set can ascribe confidence levels to individual elements. If Blockchain has a record of multiple quality sources confirming age, income or interest, those elements should be accorded higher confidence than that afforded a data element only recorded from a single lesser quality source.
Validation of Customer Experience. One of the biggest potential benefits of Blockchain is validating that campaigns have been successfully completed. That might include validation of message delivery, and validation of consumer actions such as opens, clicks, lead form completions or conversions.
Streamlined Workflow. Blockchain-enabled smart contracts could be used to define and implement the terms and conditions of a transaction, eliminating the need for paper-based insertion orders (IOs). The potential savings from streamlining the order and billing workflow can significantly reduce the marketer’s costs.
Reduced Fraud. Display ad fraud is a real problem facing digital marketers. Two common causes of fraud are bots and spoofing. Bots mimic human behavior to generate phony traffic and behaviors. As reported in the Wall Street Journal(5), a 2018 study by Adobe of its clients’ sites found 28% of traffic displayed ‘non-human signals’ suggesting it was generated by bots or click farms.
Spoofing involves marketing unauthorized ad inventory. Google-conducted tests found fraudulent companies selling ad space on premium websites they did not have access to or on fake versions of those sites. One industry initiative to fight fraud is the Interactive Advertising Bureau’s Ads.txt initiative. Publishers place a file on their sites that identify who is authorized to sell their ad space. The advertising industry is working on applying the Blockchain to enhance the reliability of Ads.txt.
Fraud in other digital marketing arenas, such as Internet lead generation and the opt-in e-mail space, is also widespread and difficult to detect. Various analytic methods such as IP geolocation, time of day analysis and NCOA detection can surface characteristics symbols of fraud. Blockchain could be used to proactively log the consumer’s activity rather than rely completely on reactive approaches attempting to validate the data after it is collected. For example, adding opt-in e-mail records to the Blockchain would provide an independently verifiable time/date stamp.
Though still in its infancy, Blockchain and its distributed ledger and self-executing contracts promise to dramatically impact the marketing data industry. Used appropriately, it offers benefits to marketers, publishers/data owners and consumers alike.
1. Worldwide Ad Spending: EMarketer’s Updated Estimates and Forecast for 2015–2020. eMarketer, October, 2016.
2. Google and FaceBook Tighten Grip on US Digital Ad Market — Duopoly to grab more than 60% of 2017 digital ad spend, eMarketer, September 21, 2017.
3. Facebook and Cambridge Analytica: What you Need to know as Fallout Widens. Kevin Granville, NY Times Online, March 19, 2018.
4. Equifax’s massive 2017 data breach keeps getting worse. Brian Fung, Washington Post Online, March 1, 2018.
5. Fraudulent Web Traffic Continues to Plague Advertisers, Other Businesses, Alexandra Bruell, Wall Street Journal Online, March 28, 2018.
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