Blockchain is best known for forming the basis of cryptocurrencies such as Bitcoin. But this technology is a revolutionary tool for a number of use cases outside of the cryptocurrency market. At its core, blockchain is what is known as a distributed ledger technology. This is a fancy way of saying that it enables record-keeping across multiple parties without the need for a central authority. What’s revolutionary about it is how secure it is. This makes it a compelling solution for a variety of applications.
Because of the secure nature of blockchain, it makes a promising addition to any industry that can benefit from a high level of transparency and trust. Traditional marketing ecosystems are plagued by opaque data handling and the consumer skepticism that results from it. The features inherent to blockchain present a solution to these challenges. A blockchain-powered marketing ecosystem is one where transparency isn’t just valued, it’s baked into every transaction and engagement.
Understanding Blockchain Technology
To understand why blockchain is so transparent and secure, you have to first understand how it works. It starts with a transaction. This could be a transfer of cryptocurrency, a record of sale, or any other type of data exchange. This transaction is bundled together into a block and its contents are put through an algorithm called a hashing algorithm. A hash is a unique string of characters that is formed from the specific data in the block. If the data changes, the hash changes.
These blocks, as you may have guessed from the name, are connected together in a chain. Each block in the chain contains its own hash, and the hash of the block before it. This means that you can’t change any block in the chain without changing all of them. To further secure the data, the blocks are stored across a large number of connected computers that all have to agree for the contents to be valid.
From these features, we gain three major benefits from blockchain:
- Decentralization: Because the blockchain is stored on many computers, no central authority controls it.
- Immutability: While other data can be tampered with, blockchain’s chained hashes and distributed nature make it immutable.
- Transparency: Anyone can look at any record in the blockchain, making it impossible to hide transactions.
The Transparency Problem in Marketing
The current marketing ecosystem is plagued by a lack of transparency. The problem exists for every stakeholder in the equation.
The Concerns of Consumers
From a consumer perspective, a lot of trust must be placed in the marketing company and in other information they receive about a product. Are the reviews they read genuine, or are they just part of a marketing effort to inflate the popularity and perceptions of a product? Are the products they receive genuine or knock-offs? Do the marketing department’s claims regarding ethical sourcing or other logistics stand up to scrutiny? There are a lot of questions, and a lot of fraud to make a consumer skeptical.
Data security is another major issue facing marketers. Concerns over how data is collected and used have prompted all the major browsers to put an end to third-party tracking cookies. That change alone has had a significant impact on the marketing industry. But the concerns around data still remain. Consumers currently have little control over how their data is collected and used.
The Concerns of Marketers
Marketers face the same uncertainty. If they pay an ad platform for 1000 clicks or impressions, how can they be sure that they actually received what they paid for? Were the impressions from a real human that might potentially buy the product or service being advertised, or from a bot crawling the web? Are the ads being placed when and where the contract agreed for them to be placed? There’s almost no transparency into any of these questions that doesn’t involve simply taking someone’s word for it. Granted, there are plenty of reputable companies in the marketing ecosystem. However even reputable companies make mistakes, and the current system provides little to no way to audit the system to detect those mistakes.
How Blockchain Improves Transparency and Trust
We’ve seen how blockchain works and how the unique features of its operation can build a more transparent and secure ledger system. Now let’s look at how that system works in the context of the marketing problems we just discussed.
Blockchain’s Role in Enhancing Consumer Trust
For consumers, blockchain will usher in a new level of assurance in marketing claims and product authenticity. The immutable ledger provided by blockchain allows companies to track and verify the origin of their products along with every step they take in their journey to the consumer. It does this in a transparent and immutable way that can’t be manipulated by shady marketing tactics. By viewing this information, consumers can verify that the product isn’t counterfeit and that it was sourced in the way the company they bought it from claims.
To solve the data security issue, the blockchain allows users unprecedented access to the data that is stored about them. Entries in the blockchain can even be equipped with smart contracts. These small programmable bits of the block ensure that the data within them is never used in a way that hasn’t been agreed upon. In the future, consumers may be the ones selling their data directly to marketers instead of being at the whim of a potentially dishonest middleman.
How Blockchain Can Improve Transparency in Marketing Operations
Similarly, blockchain can solve the problems marketers face with transparency. Clicks and impressions can be stored on the blockchain, where companies can have an easy audit trail to verify that what they’ve paid for is what they’ve gotten. This audit trail can cover every aspect of an ad campaign. From the first ad placement to the audience engagement, it can all be tracked and verified on the blockchain.
Challenges to Adoption
One of the biggest hurdles preventing the widespread adoption of this technology is the complexity and associated costs. Right now, implementing blockchain systems requires a significant amount of infrastructure and expertise. The technology in its current state also struggles with high transaction volumes, leading to delays and increased costs.
Despite these challenges, the future of blockchain looks promising. Technological advancements are continuously making the issues of scalability and cost less and less of a factor. As these advancements continue, it will become more feasible for companies to introduce the technology into their offerings.
