LiC Pt.3: Can Web3 Save Advertising?
Lost in Crypto: Part 3 – Can Web3 Save Advertising
This is the third in a series of posts I’m writing to digest and reflect on what I learnt in the Blockchain and Cryptocurrency space where I spent a large chunk of my time professionally last year
I started my career in advertising, in June 2008; almost 12 months out of university and following on from a year of jobs and internships in e-commerce, publishing, and a soft drinks start up as well as intermittent stints on building sites to be able to afford the unpaid internships I finally felt. after a very listless year, that I was getting somewhere. That September, on the same night as Damien Hirst’s fire sale at Sotheby’s (appropriately named Beautiful Inside My Head Forever) became the highest grossing auction ever of new work offered by a living artist and exactly a year and a day after Northern Rock sounded the first clarion blast of the crisis, Lehman Brothers tanked. We’d climbed the lift hill and crested the trick drop, the real roller-coaster of the Financial Crisis was under way.
But this is not a post about my time in advertising during the Great Recession – nor my love of roller coasters. This isn’t really even about what happened around this same time, when Social Networking metastasised into Social Media, and brands, looking for greater efficiency in a downturn made a midnight deal with the adtech devil. The story of surveillance capitalism has been told by many better writers; The commentariat are well honed in ‘admiring the problem’. For well over a decade we have been tracked by tech firms who have been recycling the waste gasses of our digital exhaust and applying algorithmic pressure and heat to make digital diamonds. It’s a well worn cliche now, but we have become the product. We all know we’re being sold. But what about the buyers? The reality is, that whilst we’re being exploited, advertisers are being duped. The only ones really benefiting from this trade are the middlemen.
I joined advertising because I grew up watching the classics of late 20th century Ad-land. In the late 90s, works such as Tango’s St George, an epic absurdity of self-deprecating British bombast were frankly better than the TV that they were there to interrupt. Even the ads from a half generation before, such as Heineken’s ‘Water’ from 1985, the year before my birth, were infused in the popular consciousness. A decade or more after it aired, during my time working in market research, 1999’s Guinness ‘Surfer’ was still one of the most cited ads when I asked a focus group for their favourites. If I played any Brit the Flower Duet from Lakme, it would probably trigger a Proustian recollection of packed suitcases, suntan lotion and the smell of Jet-A.
Digital Performance Advertising changed all that. Though digital display ads had since the first banner ad in 1994, data from social media marked a new phase. Coupled with a climate of Austerity, only what could be measured mattered. Ad tech promised scientific efficiency by packaging up our behaviours and serving them up to advertisers so they could change our behaviours in each perfect micro moment.
The reality instead has been a dumpster fire that has neither delighted consumers or delivered for brands. In the process, core skills such as storytelling and creativity have been relegated by efficiency. But as Field and Binet have demonstrated time and again, efficiency is not necessarily effective. And the industry has suffered. Losing the smartest and most innovative thinkers, ironically, to places like Tech. It’s been a long time since I met a really inspirational big-idea Ad Strategist.
Talent in the industry is collateral damage compared to the great brand robbery carried out by adtech. Ex-Madison Avenue contrarian Bob Hoffman, who recently shut down his newsletter on the topic, has been a vocal critic of ad-fraud, highlighting the mounting evidence for the inaccurate, fraudy reality of the scalpel-like efficiency the big platforms have claimed. The ANA reported that ad fraud was costing US brands $120 billion in 2022. That’s more than 4x the 30ish billion spent on market research in the US. Big marketers are spending four times more trying to sell to the wrong people or people that don’t exist than they are on understanding the right people so they can swerve them better.
So advertisers are getting fleeced and we are getting flogged. What’s to be done?
As you might have guessed because this post sits in a series on Web3, I believe that this really is a case where “Web3 fixes this.” Blockchain offers the genuine possibility of redemption for advertising, impact for brands and fairness and transparency for users and consumers, specifically Self Sovereign Reputation and Self Sovereign Identities.
Put simply (by the internet’s very own talking parrot, chatGPT)
Self-sovereign identity refers to a system where individuals have full control over their own digital identities, rather than relying on centralised organisations to manage and verify them. This means that individuals can create, manage, and store their own digital identities, and share them with others as they see fit. It also means that individuals can retain control over their personal information and how it is used. This is different from traditional systems where organisations such as governments or corporations hold and control personal information. Self-sovereign identity is a way to empower individuals and give them more control and privacy over their own identity information.
Self-sovereign reputation builds upon the idea of self-sovereign identity by giving individuals control over their reputation information as well. Conventionally, information such as credit scores or more pertinently, browser and cookie data, social posts and interactions and online shopping and purchases are centrally held by big platforms or data brokers. Self-sovereign reputation lets users create, manage and control their own reputation information, and share it with who they want to, when they want to.
Allowing users and consumers to have absolute control over who knows what about them has huge implications for debiasing anything from loans to hiring processes. The two together offer total autonomy and agency for the individual both online and potentially in the physical world too depending on its implementation.
There are a number of interesting companies in this space already, such as Permission.io and the privacy-focused Brave browser includes a surf-to-earn 1st party advertising model that users can opt into. Protocols like Lens or the Farcaster ecosystem that are setting up infrastructure that is designed to allow users to maintain their reputational sovereignty and could form the foundation for better advertising for consumers.
This level of privacy and control, ironically, could also be the savior of digital ads and the advertising industry more broadly:
Being able to guarantee real human viewers could massively reduce the adtech fraud, plugging some of that 120 billion dollar hole. Trustless verification could push back on bots and spoofing and increase efficiency and effectiveness.
SSI and SSR could also be used to ‘opt in’ to more accurate targeted advertising, with the potential to even revenue share when combined with tokens and wallets between media owners and users. In theory you could be paid to watch ads that are either more informative, more useful or more entertaining for you personally. And if you didn’t like it or you changed your mind you could opt out, withdrawing your data and your consent without leaving a trace.
Lastly, there is also a potential boon for creativity. Less targeting means there would be a greater need for seduction and better upper funnel comms. AirBnB has already proved the power of brand; many others would be forced to follow suit.
This outcome is by no means inevitable and there is a big question over whether anyone cares enough to move away from our seamless, centralised, shitty solutions; but decentralised technology has created the opportunity to deliver a fairer, more equitable internet for consumers and brands. I say we take it.
Lost in Crypto Pt.1: “Yes. And…”
Lost in Crypto: Part 1 “Yes. And…”
This is the first in a series of posts I’m writing to digest and reflect on what I learnt in the Blockchain and Cryptocurrency space where I spent a large chunk of my time professionally last year.
It’s been a while
Late in 2021 I quit a role I had growing client business and delivering marketing insight and strategy at an “AI Startup”; like many of the business that hoovered up the free-floating capital that lay strewn about us during the era of of ZIRP, the core value proposition for investors was little more than the leadership of a charismatic psychopath, a good story and a few hundred outsourced human coders somewhere in the Global South – a story for another time.
After getting a mortgage approved and seeing a few too many things I was not comfortable with – not necessarily in that order – I left to “explore other options” which initially meant drinking a lot of natural wine in Northern Spain and riding my bike. After my decompression, I was inspired by one of my informal brain trust to spend some time exploring different areas and roles, bankrolled by freelance brand strategy work; what one friend of mine recently referred to as my “High-value pint-pulling”. And that is how I ended up in Crypto…
Early last year I began a number of both paid and unpaid engagements, in healthtech and fintech (as well as a few other sectors that didn’t have a sexy portmanteau to convince investors that what they were doing was exponential rather than incremental.) I joined IOV Labs as an external consultant late in January, initially as just one of these many gigs, to support marketing strategy and annual planning ahead of the start of their new financial year. I left, in somewhat bizarre circumstances in October (again, a story for another time) having spent 8 months as their acting VP-Marketing, following the abrupt departure of their CMO last March.
Along the way I learnt a huge amount about marketing and leadership, putting into practice many things that I had only advised on in the past – putting my budget where my slides were. As I come to the end of this short series of pieces, I’ll spend some more time reflecting on what I learnt as a marketer and as a leader sitting for the first time – and hopefully not the last – on an executive leadership team, but I want to take this first piece to reflect on the world of Crypto and Blockchains as an “insider-outsider” – someone who went deep into this world, but because they had a skill-set from beyond it that might be useful. I have a natural tendency towards cynicism that has served me well in life, and from the outside, this sector looks like there is a lot to be sceptical about. But I leave – at least for now – as both a sceptic and an evangelist. Which is why every time someone offers me an SGHT (‘Sub-Guardian Hot Take’) on the world of Web3, my first reply is “Yes. And…”
Real Deep Tech
So, Blockchains; based on the principle of a decentralised ledger, are unwieldy things that take a ton of computing power and therefore electricity to run (SGHT – “Bitcoin uses more power than Argentina, what’s wrong with a big spreadsheet”) and provide no real world utility – solutions in search of problems. While the former is a problem faced by any energy intensive sector, the latter is somewhat true and I’ll touch upon this later.
The ‘and’ here is that this is foundational technology that is still in its infancy. Like the earliest days of the internet, the smart folks in this space – and I will say that is far from being everyone – are developing numerous foundational protocols; ways of interacting with, regulating, and accessing blockchains that are still to be fully standardised and codified. Think of it another way, in the 15 years since Bitcoin was born, thousands of Web3 builders have all been experimenting with different ways of creating distributed, permissionless, immutable computing.
Cryptocurrencies and blockchain technology has yet to have its TCP/IP moment, whilst numerous cypherpunks, saviours and charlatans are building and experimenting on a range of fragmented application layers. Kudos to the makers of multi-chain wallets who have created cross-chain access points to this Precambrian era. And because this isn’t THE internet revolution but a profound evolution incubated within a mature internet, these early stages are happening in full public view. I can’t imagine anyone dicking around on ARPANET could have imagined a world where we watch the world’s (second?) richest man back up a world-famous autistic teen who has been insulted by a celebrity sex-trafficking rapist in real time via a (near) globally accessible (sorry China) public messaging forum. No one can predict where these latest technologies will take us (though as someone who has worked and consulted in this space from a behavioral rather than technical angle, I have some ideas – hit me up!) but to write them off now, without knowing what will come of them, seems foolish. No-one thought they needed internet on their phones until they did. Try and ‘Be More Bowie’.
The other thing that is exhilarating about Crypto is that the smart people, not the Do Kwons, SBFs or CZs, but the ones doing the foundational technical work – the core developers, computer scientists and mathematicians, are smart. Really fucking smart. Behind the hucksters and quacks are a cadre of brilliant talents sharing ideas that in 20 years time will become a fundamental and invisible part of our lives.
Fuck knows what part though.
Crypto is crossing the chasm. And no-one knows what will survive the leap.
There’s more to life than the Shitcoin Lottery
When I have spoken to people about Web3 in the broadest terms, it’s usually the same three things that I can stamp off on my bingo card. Token Speculation. NFTs. The Metaverse. Usually in that order. I’ll start at the end of the list.
If I were a betting individual, I’d wager that whatever version of the Metaverse (or more properly Metaverses) crosses over won’t be decentralised. There are decentralised metaverses, but that isn’t what Meta is building, nor is it how Roblox – arguably the most mature metaverse out there – is. There is no need for AR/VR worlds to be decentralised, but it would be nice if they were. Occam’s razor though says that the ones that get traction likely will be data-harvesting Zucktopian 3D Web2 worlds where we continue to be monetised unless there is a big shift in either regulation or how few fucks in reality most of us give about privacy. Also, Zwift, Peloton, MMORPGs. Metaverses. And by the way, do you remember Second Life? It’s still a thing.
NFTs. “Art” NFTs are bullshit. Expensive JPEGs. They are an ahistorical anomaly spawned by a decade of free money and brought to the boil by stay at home orders and stimmie cheques. But they do prove the scalability of that particular type of unique smart contract that can support some very interesting use cases. Think gig tickets that give the band a 30% cut of every resale made by scalpers, or your own health record that you could compile and grant access to whichever doctor you needed to see anywhere in the world. Those are unique tokens that you want to control access to. Y’know, Tokens that are Not Fungible. But Art NFTs? Expensive JPEGs.
Token Speculation. This is probably the one that has had the most sustained coverage and where it’s worth spending a little time. At their most basic level, these are just unlicensed securities (Oh, hai there Howey!), usually sold with the promise of some kind of vague use case in the future. By buying them you get to fund this ‘project’ which in return will bring value to the token by creating utility for it. That project could be a new blockchain of some sort (EOS), a blockchain-based application or service (Tatatu) or a more conventional app (Telegram Open Network). Some have actual utility in established networks – usually as gas to pay for those who support the infrastructure of the network – nodes, miners, etc. but a lot of it has just been speculation. Most of the time the project doesn’t really matter, it’s the speculation that counts; all three of those above, the three biggest ICOs of the 2018 craze came to nothing.
Post 2018, new token’s were primarily focused on Financial protocols, whether DeFi or CeFi, and were essentially an enclosed bubble of imaginary value. Tokens that could be swapped exchanged or staked for profit and speculation. Essentially, it’s an investment bank, broken into bits, without any regulation, where over-confident young men bet money on things that don’t exist. So in fact, just an investment bank with more memes.
Again, the explosion here was a result of the same long and short-term causes as the Expensive JPEG Bubble (EJB) but is more interesting as it did develop protocols and technologies that could be out to real world use cases. However, over the course of 2022, the amount of money washing around in this very expensive financial circle jerk was $96bn, which is still the same as the GDP of Cuba or Slovakia, but is down more than two-thirds from the high water mark of December 2021. Shout-out to Terra, Celsius, Voyager, and of course FTX.
The evangelists will explain that these examples all prove why we need more decentralisation, not less, and most of these amount to frauds and Ponzis carried out by bad faith actors. Which is true. But any company offering 19.45% to anyone that buys their magical made-up dollars and puts them in another magical made-up bank that they also own is probably best avoided. Thankfully as the vast majority of this has no real world utility, the only people who got burned were the greedy and foolish few who went all in.
Most of this is happening either in the wider Ethereum ecosystem or alternative Layer 1s (other ‘challenger’ ledgers), not on Bitcoin, the OG cryptocurrency. Bitcoin is the Ur-token, but also occupies a special place in the cryptosphere and I don’t want to mention it here because (a) I son’t want to cause offence to the believers and (b) I believe there are some unique qualities about it that will mean that it has a pivotal role to play in our future financial system, whatever that looks like after the current dumpster fire..
Meanwhile, the world keeps turning.
It’s not for you. Yet.
The third and final aspect covered here is probably the most important. Whilst a troop of bros in developed markets were participating in the shitcoin lottery, decentralised financial technologies were quietly proving their utility far from that madding crowd. IOV Labs’ focus was on non-speculative use cases in developing and middle income markets, providing services and stability otherwise unavailable to aspirant lower and middle classes in those countries. While global mainstream media – particularly English-language media – was focused on the headline grabbing froth, something substantive has been fermenting beneath the surface. And it’s borne out by the numbers. At the end of 2022, Chainalysis, one of the most respected crypto data firms, published its latest global crypto adoption report, looking at penetration, usage and value adjusted for PPP. And the top nation? Vietnam. Followed by Philippines, Ukraine and India. The only developed major nation in the top ten was the US, coming in at number five.
This data puts into numbers what becomes very obvious when you spend any time in this space, away from the speculative hype. It’s not for you. Not yet anyway. The problems that the technology in this still-nascent space is currently solving are not rich-country or rich-people problems. You need some combination of tight currency regulations, over-regulated or inaccessible banking services, crippling inflation or general instability to have a reason to look beyond the fragmented landscape, pitiful UX and non-existent regulation to persevere. Essentially, if you can get Monzo, it’s probably another 5 years before you ‘get’ blockchain. And when you get it, you may not even know that that is what you are using, no more than many of you would have ever heard of TCP/IP before reading this (if you have even got this far…!)
From Latin American savings and loan platform Tropykus to emerging market business lending platform Goldfinch or Kenyan digital wallet BitPesa specialising in cross-border transfers, this technology is solving problems that you probably don’t have if you are reading this, whilst at the same time, pushing forward technology that you’ll almost certainly benefit from soon.
But like I said earlier, fuck knows how.