Will Web3 wallets disrupt media planning and the entire ad tech industry?

In this latest article from my series on the impact of Web3 on legacy business models, we will look at how decentralised digital identity could significantly disrupt the $600bn advertising; and specifically ad-tech, industry.

Let’s begin by considering how campaigns are planned today. Put simply, a brand owner segments their market to define a target audience. Profiling information on this target audience is then used by their advertising agency to create an effective ad and by their media agency to create an efficient media plan. We will put aside the creative and focus here on the latter: addressability in media planning.

The challenge for any media agency is to find the brand's target audiences in the real world. What inventory can be bought (on behalf of their client) whose actual audience profile will deliver the closest possible match to the target audience profile being sought? What inventory can they buy that minimises wastage? Using highly (some would say alarmingly) detailed third party data, the media planner will build a lookalike of the target audience inside the tools they use to buy media. Although this probabilistic planning can be incredibly accurate, it is not perfect, and invariably some people who fall outside of the target will be exposed to the ad.

But what if we refuse to accept any wastage from probabilistic planning, and only want to the ad to be exposed to 100% verified target audiences? To find exact matches between verified customer targets and verified media audiences requires two rich datasets to be mapped to one another. Such deterministic planning is not without its challenges either… Firstly, the two datasets are likely to be private, commercially sensitive and sitting inside their own unique CRM walled gardens. Secondly, even if both parties agree to share their data, the datasets may exist in incompatible data formats causing analytical challenges. Thirdly, and potentially most challenging of all; these datasets will likely contain personally identifiable information (PII) which will trigger GDPR risks and necessitate data clean rooms. Assuming all these hurdles can be overcome, a final challenge remains: that the resulting intersection of the Venn Diagram can be disappointingly small, meaning only a limited number of legitimate targets.

So how can Web3 facilitate better planning and addressability?

Fundamental to Web3 is the concept of wallets. These wallets play multiple roles, with new use cases developing all the time, but put simply, just like a physical wallet; they hold your money and your ID. While much is written about cryptocurrencies, it is again the second of these use-cases that we are interested in here: your Web3 wallet as the holder of your public ID. This public ID is a combination of the wallet address itself, the transactions that wallet address records and most importantly; the unique collection of tokens it holds – including NFTs: non-fungible tokens.

To many people, NFTs are still associated with crypto bros speculating on monkey pictures. And while art speculation remains a use-case, there are so many more important applications for NFT technology. Instead of thinking of NFTs as expensive JPGs, think of them as micro-contracts or digital receipts (that may or may not have a picture on them). These NFTs can be receipts for your personal, professional and educational lived experience. POAP's definition is helpful here, calling their NFTs 'the bookmarks of your life'.

A commonly used example of the utility of NFTs is as tickets. Imagine you buy a ticket to an event and this is downloaded to your Web3 wallet as an NFT. Like a physical ticket, it will allow you access to the event and again like a physical ticket is can be kept afterwards as a souvenir. Indeed, Ticketmaster has already minted over five million tickets as NFTs. But what are the benefits of an NFT ticket in a Web3 wallet over a PDF ticket on a Web2 email?

Public blockchains are open source, meaning that the transactions on them, including those in and out of your Web3 wallet, are visible to anyone who wants to see them. The owner of the wallet (you) might choose to remain anonymous but the key to the impact of Web3 on marketing is that the NFT ticket you are holding in your wallet is visible on a public blockchain and so can now be instantly verified by anyone, anywhere in the world. In some small way therefore, being a public ticket-holder forms part of your public identity. Choosing to display it says something about your interests, and hence you.

Ad tracking cookies performed a similar role in Web2, but with one important difference. By tagging each websites you have visited, the cookies allow media planners to targets ads at relevant audiences. But unlike cookies which are somewhat dropped on you surreptitiously, this NFT ticket is something you have chosen to hold in your wallet.

Now let’s imagine how a media planner might tap into this pubic wallet ID for campaign addressability. Say a T-shirt maker has released an exclusive range of T-shirts connected to that ticketed event and would like to advertise these shirts to fans months later. Traditionally they would ask their media agency to find people who ‘probably’ went to the event because they show signs of being fans - by say discussing the event online. This may work well enough but as we have seen, there will invariably be some wastage in the media budget. Alternatively, if the T-shirt maker is affiliated to the event organiser, they can request CRM data on ticket buyers to send direct mail. While theoretically possible, as we have seen this could present technical, commercial and even legal challenges for both parties. But now with Web3, they can simply address any wallet containing this event NFT ticket. The target audience self-selects by choosing to hold this NFT in their public wallet (as such a kind of 'reverse cookie').

What’s more, through a technology called zero-knowledge proofs, the T-shirt maker doesn't need to know anything about the wallet holder. The campaign will address the wallets that hold these NFTs, not the humans who own them. Indeed, it doesn’t matter who owns the wallet. Your privacy is maintained.

This is self-sovereign ID (SSI). It is curated by you and owned by you via you Web3 wallet. It is not fragmented across endless Web2 apps, accounts and logins. Nor is it owned by faceless corporations whose business model is to harvest and sell your data. You now own your ID. This is why some people call Web3 ‘The Ownership Economy’, and many believe The Ownership Economy will replace The Attention Economy.

The benefits of public ID don’t stop there. Instead of an advertisement nudging you to do something in the future, Web3 allows for ‘token gating’. The T-shirt maker can whitelist a design exclusively for wallets that hold the original event NFT ticket. The smart contract on the sell side, verifies that the wallet holds the NFT and adapts the offer without the end user needing to identify themselves. No need to rummage through your email archive to dig out the old PDF ticket to prove you were there – your wallet allows this verification to happen instantly.

And now imagine you buy the exclusive T-shirt unlocked by your ticket NFT, and that the T-shirt maker issues an NFT ‘receipt’ for that sale too. Without the need to search back through their sales records, the T-shirt company can use their own NFT receipt to apply a discount if you buy another shirt any time in the future. It has now become a loyalty scheme too.

And maybe most exciting of all is that this need not be a transaction between just two parties. Because all this is visible on a public blockchain, other third parties can address campaigns at wallets that hold both the original event NFT ticket and the subsequent exclusive T-shirt NFT receipt as ‘proof of fandom’ that levels that wallet up to even greater offers or exclusive community access.

And all that’s just from holding two NFTs. Imagine now your wallet full of NFTs covering a lifetime of the interests and behaviours. Imagine the richness of that freely accessible identity graph as a planning tool…

Token-gating is a fascinating brand partnership tool, and one that many brands are already experimenting with. Spotify have offered token-gated playlists to holders of specific gaming NFTs and more and more brands are experimenting with cross-sector promotions. Imagine another use case: this time an NFT ticket for an international flight. Unrelated businesses (i.e. not partners of the issuing airline) might use this identifier to offer tailored insurance, car rental or hotel stays. All of which can happen instantly and at scale without the current challenges of GDPR, data matching and walled gardens explained earlier. And, because NFTs can be dynamic, your car rental company can even be alerted to your flight being delayed and adjust your pick-up automatically. And, your insurance company can automatically process your claim because it has already verified the delay as real. The commercial applications are endless.

And these are just some of the commercial applications. Education businesses are also actively exploring (and some already offering) qualifications ‘on-chain’ as NFTs. An employer would not need to request proof of exams or university attendance in the recruitment process saving considerable time and effort. This data would be instantly and trustlessly verifiable through your public wallet ID on a blockchain. And while the most obvious application might be the big educational achievements (e.g. public examinations and university degrees), NFTs can be issued at such low cost it is feasible to collect one for even the smallest courses or training sessions. Every conference you attend, every subscription you read, and every group you are a member of can – if you like - be trustlessly verified by third-parties through your Web3 wallet. Instead of trying to remember everything you ever did when writing your LinkedIn profile, if you chose to, your educational credentials and lived experiences can be continually accumulating in your Web3 wallet allowing a new generation of incredibly precise recommendation engines to serve you ultra-personalised and non-duplicative offers.

Beyond educational applications, government are also looking at this technology for ‘centralised’ ID wallet proofs (to issue universal basic income, validate vaccination records etc) but this is a huge subject worthy of its own article.

So how will this token-to-token wallet-based transactional future impact branding, marketing and communications planning? Here are two areas marketers can explore:

1. Firstly, consider which elements of your business can be tokenised. In 2021, companies were tripping over themselves to issue their own NFTs but few were considering the utility of theses tokens. Many were just digital art collectables but as we have seen here; the true value is in the interoperable utility. What does holding this token allow that would not otherwise be possible? Think of NFT releases as membership clubs or loyalty schemes. As well as being a badge you might want to show off to others, what continuous benefits accrue to the token-holder? And what third-party benefits become possible via your brand partners? If the NFT is a ticket to a football match, what will the club’s shirt sponsor offer token-holders? And what whitelist will the stadium sponsor add them to? How do these benefits change in real-time if your team wins; or loses? And what additional benefits can you claim when the club can instantly verify you have been collecting their NFT for years? All this is possible now.
2. Secondly, explore the richness of on-chain analytics. Many marketers and Web2 data analysts don’t appreciate that Web3's on-chain transactions are publicly and freely visible. This is a public dataset unlike anything marketers will be used to from the secretive walled gardens of Web2 – its open-source accessibility and census accuracy can take some getting used to.

Web3 wallets and the public IDs they contain require a genuine step-change in thinking from marketers. The more you think about them, the more you realise their transformative potential. If you are a marketer reading this and don’t have a web3 wallet and have never claimed an NFT, I recommend you do just that.

Christian Brent is Managing Director of advisory business Damask Consulting

Originally published August 2023.

(C) Damask Consulting Ltd.