In the past year, cryptocurrencies like Bitcoin transformed from geeky passion projects on Reddit into a speculative boom that has leading experts scrambling to get up to speed. Just last week, finance luminaries Warren Buffett and Jamie Dimon contradicted each other, with Dimon saying he regretted calling Bitcoin a fraud and Buffet warning that cryptocurrencies would end badly.
[Disclosure: The author invests in several cryptocurrencies including Bitcoin, Ethereum and IOTA and consults on ICO launches. Investing in any cryptocurrency is very risky --you can lose your entire investment.]
For the most part, everyone I talk to (who is not an engineer) doesn’t really get what blockchain is and how it can actually be used (besides as a currency). To those of you who are unaware that there is any other purpose for blockchain, it is important to note that while the press has focused on the 1300% increase in Bitcoin’s value, most of the actual work being done is in creating applications for blockchain that have little to do with currency -- or at least currency is only a component of the applications’ larger purpose.
Ethereum, for example, is the platform on which several new applications are being developed, from universally-accessible (but private) medical records to distributed cloud storage (think Airbnb for extra hard-drive space) to licensing royalty management apps. What these future applications have in common is that humans have been removed as the middlemen who are too costly or inefficient to allow these applications to currently exist. With blockchain technology, the machines transact among themselves, so a patient’s full health history is recorded automatically, you can earn money storing a stranger’s stuff on unused hard drives and you don’t need an agent to protect your photo copyrights.
All of this sounds great, of course, but what does any of it have to do with marketing?
You may have heard this, but the Internet of Things is coming. Quickly. Gartner predicts that by 2020, we’ll have over 20 billion smart devices, many with sensors, cameras and microphones connected to the internet. These are items like smart thermostats, smart TVs, baby monitors and security cameras that alert you when movement is detected, as well as any product you can control with an app.
Right now they’re collecting data, but that data isn’t captured anywhere that can help you understand the person using these devices. But what if all of the behavioral usage data from each of those independent smart objects was captured into a user and household profile? And what if those profiles were connected to a machine-learning AI that could deliver nuanced profiles based on real-world data (rather than 12-person focus groups or surveys of people who may not actually use your product)? You’d know that the 42-year-old guy in 94904 uses the treadmill his wife bought him for Christmas only once a month. You’d also know his favorite beer (always stocked by his smart fridge), that he has a child under two (baby monitor), is a fan of "Stranger Things," commutes 20 minutes to work each day and regularly reorders hemorrhoid pads on Amazon. Amazing for marketers. Creepy for citizens.
With this insight, you'd create much more targeted campaigns, form promotional partnerships you'd never have considered and increase the overall ROI of every marketing dollar spent.
To be clear, this is coming one way or another -- which means a lot of the art of marketing will be supplanted by the science of AI targeting. If you've used Facebook’s Custom Audiences you've seen a glimpse of how powerful this can be.
So how will we get this data? It’s no accident that Amazon, Google and Apple are locked in an arms race to get their home hubs into as many homes as possible. If their hub is the one used to control all your connected devices, they become the data monopoly that all marketing revenue will flow to in five years.
But not if a German nonprofit developing a cryptocurrency called IOTA can get there first. IOTA’s proponents describe it as “post-blockchain” technology and it is technologically different from blockchain but based on its same principles. It wants to be the future method of information exchange between smart products and is developing something called the data warehouse. Don’t go nuts and invest your 401k here just yet -- it’s still early and the technology is not proven -- but it’s promising enough to have attracted some big-name collaborators.
In this concept, data from all of the smart devices in your life would flow through a sort of data bazaar where bits and pieces of it could be purchased by people who want it -- like marketers. In this scheme, the user controls access to personally identifiable data and gets paid if they choose to sell it. Your home hub would still collect data but would no longer have a monopoly. And because the system might create the ability for individual smart devices to interact with each other without going through a central hub or the cloud for instructions, not all usage data might be shared with the home hub.
Aside from the hurdles of engineering this new technology, implementation would require broad adoption across manufacturers of smart devices and security will be a key development and PR challenge (these devices can take video from inside your home!). In the U.S., the market influence of big tech will likely slow implementation, but Europe just passed legislation giving consumers ownership of their personal data so it is more likely to take root there first.
As marketers, either way we’ll waste less money trying to identify who we’re targeting and testing ads with the wrong customers. And we’ll be able to create promotional offers that have real value to customers because they'll be tailored in a way that’s currently not possible. Marketing and product development will continue to meld together as both share the same goal of anticipating and serving the needs of well-defined users. As a citizen, though, I’m hoping the consumer-as-data-owner blockchain model wins out.