Why Blockchain Will Drive Push Advertising Into The Ground
Decades ago, if you searched the web for a Prada bag and then found an email in your inbox offering one at 20% off, you would have thought the universe’s forces had aligned to make your wish come true.
At that time, there were only a handful of retailers able to afford costly retargeting campaigns — serving an ad to a specific group of people based on their past web-browsing behaviors. This practice is used by thousands of retailers today. Brands are leveraging several more methods and tools to aggressively target, retarget and shadow consumers, taking over their privacy and digital threshold with billions of push advertisements that only contribute to unwanted noise.
Aside from burdening consumers, the industry hasn’t been held accountable to provide a clear ROI on advertising dollars, as phony metrics like cost per click (CPC), click-through rate (CTR), cost per thousand (CPM) and cost per acquisition (CPA) have gradually overshadowed a more relevant but rarely discussed metric: cost per transaction (CPT).
As a serial entrepreneur and blockchain enthusiast, I believe it's important to address the lack of transparency and trust in the retail marketing value chain. Below, we'll define how blockchain and cryptocurrencies can be a solution for removing the bad actors and middlemen from digital marketing.
The State Of Digital Marketing Spend
It’s been over a century since John Wanamaker, the father of advertising, complained that half of his advertising dollars were wasted — he just didn’t know which half.
In reality, marketers would be happy if Wanamaker’s estimate still held true. According to Proxima, 60% of digital marketing spend is now wasted. That’s $37 billion of worldwide marketing budgets squandered on poor marketing performance. According to Google, 56% of display ads are never seen by consumers, and average display ad CTR across all advertising formats is only 0.05% globally. In 2016, $7.2 billion was lost globally to bot fraud or non-human traffic.
In this broken system, consumers, flooded with irrelevant push advertisements, desperately try to push back. Ad blocking, which grew 48% in the U.S. from 2014 to 2015, cost global publishers an estimated $22 billion in 2015.
Push Versus Pull Advertising
Modern consumers are not brand-oriented anymore. Discovery today starts from impressions, content and information that creates an emotional connection between products and consumers — through social media, movies, magazines, and rarely from stores, websites or mobile apps.
As old models of content monetization — such as push advertising — are losing ground, storytelling can emerge a new model for driving sales. Monetizing the emotional connection between content and products not only helps audiences discover new products, brands and trends but also allows retailers to activate a vast crowdsourced sales force.
Shoppable content is the ultimate form of pull advertising, where shoppers see products within a context — in movies, blogs, magazines, fashion shows, etc. — and get directed to a site where they can purchase them, like Pinterest's model.
Hyperlinking words and pictures to product pages is the oldest and most overused form of creating shoppable content. Image recognition, virtual and augmented reality and shoppable content publishing platforms are some of the promising technologies for shortening the path to purchase.
Affiliate Marketing Loopholes
The affiliate marketing industry is set to grow to $6.8 billion over the next five years. The industry is responsible for 16% of e-commerce orders, putting it on par with email marketing and ahead of social commerce and display advertising as a driver of e-commerce transactions.
However, there's a loophole in the affiliate marketing system.
When our company ran a pilot for our shoppable content publishing software in 2016, we noticed an extraordinary rate of user engagement among organic users. The platform automatically processes tons of data for aiding shopping decisions (i.e., coupons, look-alikes, reviews, product locations and proximity) and puts shoppers into the last checkout page of major retailers. But our gross merchandise value (GMV) was minuscule, and there was no way that almost all of them had left the platform before the transaction.
We found out that affiliate networks allow last-click hijackers, such as coupon and rebate sites, to claim the transactions, replacing our cookies with their own before the transaction, even if the coupon was invalid. These practices are contributing to a drastic margin of error in attribution analysis.
Another time, our company launched a product enabling retailers to work directly with millions of influencers and publishers with no affiliate networks in the middle. However, retailers were reluctant because of back-office management burden and fear of not having a middleman to help manage infrastructure. As the only scalable option, retailers don’t have a choice but to rely on these middle infrastructures, many of which employ “opaque optimization” techniques like last-click attribution models.
Marketers agree that fraud (58%), viewability (56%) and poorly targeted ads (46%) are the most prominent impediments to programmatic advertising.
Creating algorithmic fraudulent campaigns by generating invalid clicks and traffic is very simple for savvy bad actors because they're rarely caught. The main metric for marketers to show the result of their work to CEOs is generating traffic to the site — not sorting through legit and fake traffic. On the other hand, advertising networks benefit from very basic fraud-protection mechanisms, about which detailed information is rarely disclosed to advertisers. This tacit agreement has contributed over time to the emergence of an ineffective industry that relies on a lie for its very existence.
Transparency, trust and scalability, without needing middlemen to handle self-seeded bureaucracy, seem like an eminent remedy to a broken industry like advertising and its immediate constituencies (sellers, buyers and influencers).
Blockchain technology, leveraging verifiable data, transparency, cryptography and game theory, allow parties with potentially divergent incentives to collaborate, own and transfer fiat currencies and values across a decentralized network without the need for a central trust authority or middleman.
With the advent of blockchain and smart contracts on credible platforms, brands can easily mobilize a large community to produce content around their products and track marketing-to-sales dollars without a need for middlemen to score the value transfers. It’s like an Uber for retail sales, where retailers directly reward the real influencers of their sales using cryptocurrency, entirely removing the need for paperwork, back-office burdens and colossal transaction and management fees.
Transparency, scalability and removing the middlemen are the values, in a nutshell, that blockchain introduced. These are inherently against push advertising’s DNA. Therefore, blockchain is not here to give a facelift to push advertising, but it will most likely disrupt it to the ground.