The CMO’s Guide to the Blockchain

May 5, 2017

What are blockchains, and what do marketers need to know about them?

IBM’s simplest definition for a blockchain is a tamper-proof, shared digital ledger that records transactions in a private or public peer-to-peer network. Transactions are recorded in chronological blocks linked within the ledger, called a blockchain. Member nodes in a blockchain network use a chosen consensus model to agree on ledger transactions.

Blockchain technology emerged alongside Bitcoin in response to the global financial crisis of 2007 as a way to remove banks and middlemen from financial transactions. But the applications go beyond crypto-currency. As explains, blockchains’ decentralized digital record of transactions can be applied in any industry where information or assets are transferred.

Why is it important for marketing leaders to understand blockchains? Blockchains are an emerging technology that have the potential to transform many areas of marketing and business processes — including ad verification, loyalty programs, and customer data management. And early adopters will have a big advantage. Harold Geller, executive director of Ad-ID (co-founded by the ANA), states that “Blockchains are an area where the media supply chain must rapidly become more educated.”

Read on for definitions of key blockchain technology terms and predictions of how the technology will shake up the marketing industry.

Blockchain 101

  • Blockchain 101 Infographic
    IBM, 2016.

    IBM’s infographic is a simple way to visualize how transactions come together as blocks to form a blockchain record:

  • The Truth About Blockchain
    Harvard Business Review, January–February 2017 Issue.

    Blockchains — a peer-to-peer network that sits on top of the internet — were introduced in 2008, with Bitcoin as the technology’s first application. True blockchain-led transformation of business is years away because it’s not a “disruptive” technology but rather a core one. The authors believe blockchains have the potential for enormous impact, but the process of adoption will be gradual and steady.

    Blockchains have five basic principles underlying the technology:
    1. Distributed database: Each participant of a blockchain has access to the entire database and its complete history.
    2. Peer-to-peer transmission: Communication occurs directly between peers, and each node (or user) stores and forwards information to all other nodes.
    3. Transparency with pseudonymity: Each node on a blockchain has a unique alphanumeric address. Users can choose to remain anonymous or provide proof of their identity to others.
    4. Irreversibility of records: Transaction records cannot be altered because they’re linked to every record that came before them (hence the word “chain”).
    5. Computational logic: Users can set up algorithms and rules that automatically trigger transactions between nodes.

The article also provides a framework for how executives can figure out where to start building their organizational capabilities for blockchains today. Future success depends on employees learning about blockchains and investing in blockchain infrastructure.

  • Blockchain Basics: Introduction to Distributed Ledgers
    IBM, May 2016.

    This in-depth feature from IBM is designed to take readers from the basics to getting started with blockchains. Sections cover how a blockchain network functions, the business benefits of blockchains, and enterprise blockchain requirements. The thesis behind IBM’s investment in blockchains is that “Blockchain technologies represent a fundamentally new way to conduct business.”

    To determine whether your use case is a good fit for blockchains, IBM established these questions:
    1. Is a business network involved?
    2. Is consensus used to validate transactions?
    3. Is an audit trail, or provenance, required?
    4. Must the record of transactions be immutable, or tamper-proof?
    5. Should dispute resolution be final?
  • IBM’s Blockchain Glossary and Use Cases
    IBM, May 2016.

    IBM provides definitions for blockchain terms, perfect for quick referencing. Key definition summaries include:
    • Blockchain: A shared ledger distributed across a business network
    • Transaction: An asset transfer onto or off of the ledger
    • Asset: Anything that can be owned or controlled to produce value
    • Digital signatures: A way to ensure the receiver gets the transactions without intermediaries modifying or forging the contents, and also a way to ensure transactions originated from senders

Blockchain and Marketing

  • Why Marketers Need to Get to Grips with Blockchain
    Marketing Week, April 2017.

    This article declares Blockchain a disruptive technology with “astronomical” potential for marketers, who will lose ground to competitors by not getting ahead of the curve now. Supply-chain monitoring, viewability, customer data storage security, brand safety, and ad verification could become key areas of impact of the technology for brands.

    Blockchains could also eventually provide a mechanism for marketers to know exactly where their ads have been placed and to blacklist against fraud. Atom Bank’s head of marketing, Neil Costello, is even quoted as saying, “Blockchain could not only eradicate the lack of trust marketers feel around programmatic delivery but also simplify the process by one day helping brands go direct to publishers.”

    Several early examples of the technology in action are also shared:
    • Everledger started tracking diamonds in 2015 through the supply chain in a bid to encourage consumers to seek responsibly sourced stones.
    • Walmart teamed up with IBM on a supply chain verification project to digitally track the movement of pork through the retailer’s Chinese supplier base. “This year we’re going to start seeing a lot of emerging use cases of blockchains on an enterprise level,” says IBM’s innovation services leader in EMEA, Hugo Pinto.
  • How Blockchain Might Be Useful in Marketing and Advertising
    Digiday, December 2016.

    Many experts believe blockchains are at least four or five years into the future from being applied in advertising. The notable exception is BitTeaser, a Danish ad network that uses blockchains to collect revenue in bitcoins. But here are the four ways execs think blockchains could be used in the media industry:
    1. Ad-delivery verification: Think of this as decentralized ad auditing which could potentially blacklist fraud in real time.
    2. Corporate/social responsibility: Blockchains can bring accountability and transparency to CSR pledges. They are already being used to verify the authenticity of a product.
    3. Marketing: Blockchains can be used to advertise a product in an “authentic” way that doesn’t come off as marketing. For example, customers could scan a tag to see the story of a product.
    4. Customer data management: Blockchains could be a way for brands to maintain customer data so it’s detailed, anonymized, and secure.
  • Blockchain Will Transform Customer Loyalty Programs
    Harvard Business Review, March 2017.

    Blockchains could provide a single platform for multiple loyalty-point currencies; the average U.S. household participates in 29 different loyalty programs. Travel industry loyalty programs, which are typically more complex than retailer programs, are particularly ripe for this type of disruption. Ultimately, the authors expect to see key players band together for blockchain-based loyalty networks that are anchored by a major airline or hotel chain. IBM has already partnered with the startup Loyyal to develop blockchain infrastructure for loyalty and rewards programs. Other early adopters could benefit considerably.

  • Digital TV Players Eye Blockchain to Block Facebook, Google
    Advertising Age, February 2017.

    Marketing technology startups and established players are exploring how blockchains could transform current ad tech infrastructure, focused on everything from fighting fraud to challenging the digital ad supremacy of Facebook and Google. Blockchain technology could be used to track everywhere an ad impression went in the supply chain, and (in real time) where an ad is and who saw it. Over-the-top television digital ad delivery systems are seen as a channel where there’s still time for smaller players to beat Facebook and Google by using blockchains to share targeting data.

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"The CMO's Guide to the Blockchain." ANA Ask the Expert, May 2017.