This is an article by Nick Rojas. He combines 20 years of experience working with and consulting for small to medium business and a passion for journalism to help readers grow. He writes about technology, marketing, and social media for the aspiring entrepreneur. When Nick is not sharing his expertise, he can be found spending time at the beach with his dog Presto. You can follow him on Twitter.
Large and small businesses alike are becoming excited about the opportunities that cryptocurrency provides—some of them are even adopting it as a form of payment for goods and services. However, for those in the digital marketing world, cryptocurrencies pose a challenge. Understanding the effect that widespread use of cryptocurrencies stands to have on digital marketing practices will be an essential part of staying ahead of the curve during the next three years, as the user base for tokens such as Bitcoin is expected to multiply by as much as five times.
An End to Convenient Data Mining?
The major problem that cryptocurrencies cause for digital marketing is that they can be used for anonymous purchases. Cryptocurrencies are based on blockchain technology, which uses a decentralized network of multiple devices to verify every transaction conducted. In simple english, that means that transaction records are copied and stored on a large number of random devices each time a transaction occurs. This makes the transaction records extremely difficult to alter fraudulently. One might also assume that it makes transactions easy to trace, but such an assumption would be incorrect. Popular tokens such as Bitcoin do not require users to link their accounts to legal names or home addresses. Moreover, a single user may hold multiple accounts, even for the same kind of cryptocurrency.
Anonymous transactions are a marketer’s worst nightmare. Here’s why: most digital marketing currently relies on the use of marketing analytics derived from publicly available data. Let’s say you work in marketing for a major retail chain. Basically, your customers agree to let social media applications, search engines and other platforms collect their personal data in exchange for the ability to use them free of charge. Those platforms then sell the data to you and your team, who use it to refine your efforts and target potential customers with similar profiles. By doing so, you spend more of your resources reaching people who are likely to become customers, and your business grows at a faster rate. However, the entire process hinges on knowing who your buyer is. A transaction that can’t be traced back to an individual offers no valuable information to marketers. Even if you were somehow able to develop a profile based on someone’s Bitcoin address, the ability to hold multiple accounts could result in the same individual having vastly different buyer profiles if they used separate accounts for different types of transactions.
Alternative Ways to Gather Information
The advent of cryptocurrency use in everyday transactions doesn’t spell the end of digital marketing, but it may require a creative workaround. One such solution has already been proposed by Alex Zhavoronkov, the CEO of Insilico Medicine. According to Zhavoronkov, consumers will likely begin selling their data voluntarily to digital marketers when cryptocurrency renders traditional data farming methods obsolete. Under this model, marketers would compensate individual buyers for monthly records of their shopping data. The price per consumer would likely be much higher than it is now, but it would also be a great deal more accurate. As such, companies that embrace this model could have access to data that is practically infallible.
As secure online exchanges and other platforms make it increasingly easy to purchase cryptocurrencies, marketers need to prepare for the potential rise in transactions that can’t be analyzed with current tools. The sooner your company is ready to adopt a different model for collecting consumer data, the more you’ll know about your customers when crypto usage becomes commonplace.