Web3 will bring a deterministic revolution to media and marketing

Newsletter 5, January 26th 2022

It’s been a few weeks since I wrote the last newsletter and so much has happened. First, I want to thank everyone for the warm response to what I am writing. Believe me when I say that every comment, every share, and every LinkedIn connection that comes as a result of someone reading my newsletter is appreciated more than I know how to say. And if you haven’t yet subscribed, you can do so here:

Now onto the content of this newsletter.

Firstly, I will recap a few news items to share my view on what is happening in the Metaversal worlds of Web3.0. Following this is the first in what will be a series of thought pieces on what NFTs, the Metaverse and Web3.0 mean for Marketing – and more specifically, this edition will start to look at how it will impact media.

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While it feels like there is an endless amount of news, and the price declines of just about every token continue to make headlines, what I am focused on is just how quickly the on-ramps into crypto keep growing.

• Facebook and Instagram are reporting planning to integrate and enable the sale of NFTs – Read more

• Twitter has created a bridge to officially link the NFTs you own to your profile picture. It is believed that this may further accelerate the – Read More

• Coinbase partners with Mastercard to facilitate sale of NFTs – Read more

• Walmart files trademark applications signaling their entry into the Metaverse and digital product space – Read more

• StockX launches vault NFTs to facilitate trading and investment – Read more

• Microsoft buys Blizzard Activision for $68.7 billion in a move to enhance their Metaverse capabilities and footprint – Read more

• YouTube is looking into how they embrace Web 3.0 and NFTs - Read more

In summary, big business and the Web 2.0 giants are now building the onramps to Web3.0. Increasingly it feels like all roads lead to Web3.0, but even if that is not the case, one thing is for sure and that is that these actions have the potential to dramatically increase adoption rates.

Now onto What Web3.0 means for Marketing & Media

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“We are still early”

… at least that’s what people continue to say about Web3.0, NFTs, and the overall Crypto market. With the Crypto market being valued at around $2 trillion (down from $3 trillion in November 2021), and NFT sales on OpenSea exceeding $4 billion this month “we are still early” may sound hard to believe, but it is true non the less.

I say this because while money might be flowing into the category through new VC funds, acquisitions, and through direct crypto and NFT purchases and investments, the reality is that most people (even many active Crypto investors) still don’t understand the Use Cases that will be unlocked as the Web3.0 market matures.

This is likely because articles and interest in the applications of Web3.0 are drowned out by the media’s focus on headlines of explosive NFT valuations. In turn, we see a public that fixates principally on NFT valuations and the launch of new NFT projects. (If the sounds critical of NFTs, it is not meant to be as I am very bullish on their future utility as you will see below).

From left to right the above images use worldwide Google Trends data as figurative examples of the explosive growth in conversation around Web3 (the blue line), Metaverse (the red line), and NFTs (the yellow line).

In contrast to talking about valuations, the remainder of this article will explore Web3.0’s potential (and likely) future impact on marketing, media, and CRM.

There are a few different diagrams that regularly do the rounds on Twitter and LinkedIn to try and simplify the differences between Web 1.0, Web 2.0, and Web 3.0. All of them are correct, but none of them provide a satisfactory explanation of what it will mean to brands and the impact it will have on their communications.

There is this diagram which shows the evolution from a functional perspective going from Read Only in Web 1.0, to Read + Write in Web 2.0, before arriving at Web 3.0 which allows for Read + Write + Execute. In short, a move from consuming content, to creating content, and finally to owning content.

Image from the book “Token Economy” by Shermin Voshmgir, 2019

The below diagram is one of my favorites. It takes a more user-centric approach by showing how people will engage and identify themselves to the digital apps and services they use. But unless you already understand the potential for a Crypto Wallet to become your digital identity, this chart won’t really mean much to people

Unsure of original source, but shared by many on Twitter. If anyone knows the original source let me know so I can attribute it properly.

Even if you have a comprehensive understanding of Crypto wallets and how they are evolving, you may still only relate this diagram to login and digital property/content ownership.

Hence the need for a 3rd diagram which I have put together with the intent of outlining what all this means to the brands and marketers who have come to rely on the reach and targeting capabilities of both Web 1.0 and Web 2.0 to connect with consumers.

In the below, you can see how reach and targeting have evolved from Web 1.0’s Publisher based media (a digital replica of how media had traditionally been bought offline), to Web 2.0 and Probabilistic media (in which platforms leverage the digital breadcrumbs left by every action a person takes online to infer their interest such that they can be clustered into groups), to Web 3.0 where the shift to Deterministic media targeting will radically alter both the supply chain and the value chain.

Source: This newsletter

Sitting at the heart of the change is Identity. In the case of Web 1.0 identity data at an individual level was never a factor. It was enough to know broad base demographic details. Web 2.0 brought about a focus on identity and with it the promise of improved relevance, targeting, efficiency, and effectiveness. To fuel and deliver on this promise, platforms needed to track and attribute signals that could be connected back to people. From search history to film views, to likes, to shares, etcetera, the platforms created and owned the signals of intent associated with our digital identities.

In Web 3.0 by contrast, the individual will own and control their identity data. Stored in a Crypto wallet and governed by smart contacts, this will form the basis of how the digital world understands people.  

“I know half my media budget is wasted. I just don’t know which half” – said by every media manager in history.

And when you consider the prevalence of ad fraud, the challenges associated with end-to-end attribution, and the over-reach and margin of error that is accepted in Probabilistic systems, it is likely that what they are saying is true. This is precisely what Web 3.0’s Deterministic capabilities will solve for.

To understand how let’s consider the various technologies and paradigms of Web 3.0:

CRYPTO WALLETS

The big shift for consumers will be the adoption of Crypto Wallets. I wrote in a past newsletter why this will happen and you can read the detail here if you are interested. But in summary, this is because your Crypto Wallet will contain:

• Your Identity Data - Everything will be in your Wallet: from Government documents like driver’s licenses to medical records to the basic PII data such as date of birth, address, etc.

• NFTs as deeds to the digital property you own - Yes, we will all own digital property

• NFTs as deeds to some of the real-world property that you own - The deed to your car will be an NFT, your mortgage will be an NFT, etc.

• POAPS (Proof of Attendance Protocol) - Could be included as indicators of the loyalty programs you belong to, the events you have been to, even the restaurants you frequent regularly. A version of a POAP will also likely capture details of your online behaviors as well. In the way that Google and Facebook track your actions today, this will be done in Wallet in the future.

• Access to Decentralized Financial Accounts - In short, a proxy for your bank account

I could go on and on, but hopefully, you get the idea already. The important thing to know, beyond the fact that “everyone” will have a wallet, is that it will be secure. Accessing all that data through a single wallet might sound like a risk, and yet for this exercise let’s just accept that the information will be secure and that it will be governed by a combination of Private and Public Keys.

• Private keys govern access to identity and other sensitive, valuable, or otherwise confidential data. These areas will only be accessible to 3rd parties through an auditable permissions system and smart contracts.

• Public keys could provide access to behavioral data, POAPs, or other information designed to enhance reputation or communicate areas of interest.

DECENTRALISED AD EXCHANGE

A Decentralized Ad Exchange (DAEX) is to today’s ad exchanges what Uniswap is to centralized online trading platforms. Or to explain it more clearly, a DAEX is an application that acts as the connection between the supply side and demand side by using code to match parties directly, thereby allowing them to transact with the need of a middleman.

What this means for media buying is that advertisers will be able to go directly to the DAEX to buy reach and impressions that target people deterministically based on the data held in their crypto wallet without paying commissions to a middleman.

That sounds great, but most people don’t connect their crypto wallet to every website they visit, so wouldn’t the process simply result in dramatically reduced reach?

Yes, this is true today, but as security gets better, this will change. The Brave Browser already integrates a wallet directly into the browser allowing for comprehensive data collection. This level of integration will soon become the norm, as will the collection of behavioral data within the wallet.

If the data sits in a person’s private wallet, why would they share that data with advertisers? After all, most people don’t even like advertising.

Again true, but there will be an incentive. With brands not paying nearly the level of commissions to middlemen, the money currently associated with placing an ad will instead get paid to the people receiving the ad in the form of a token. An early form of this type of incentive structure is already in place today: it’s called the Basic Attention Token.

To better understand how a Decentralized Ad Exchange will work, I have put together this (deliberately simplified) diagram. Or if you really want to learn more, you look into the Alkimi Exchange which is pioneering technology in this space.

PERSONALISATION

Now that we’ve got the basics out of the way, let’s talk about something fun. Personalization.

Imagine you’re a fast-food chain and you want to serve ads that not only make a person hungry but also remind people that your restaurants are never more than a short drive away. You could tell people how many locations you have nationwide, or you could simply show them ads that look like they were made in their neighborhood.

Advanced AI technologies such as NVIDIA’s GauGAN2 will make this possible – no matter where the person lives. This technology is already able to create photo-realistic landscapes based on simple linguistic descriptions. Combining this will geo-location data and access to a library of images from around the world, these systems will soon be able to simulate any location globally.

Or imagine that you want the audience to see people they can relate to in the ad. With identity data from their Crypto Wallets, age, gender, ethnicity, income – even details about spouse/partner could be available. Technologies like what Soul Machines have developed will allow for the creation of virtual people designed to be relatable to the audience at an individual level.

Image from Soul Machines

But it’s only when we put these two things together, digital scenery and digital people, that we really start to have fun. Think of it like an NFT project, only instead of using traits to build out 10,000 Bored Apes or Cool Cats, the AI will build out an infinite number of different ads using a combination of identity data from your wallet, geo-location data, etc.

Leveraging the same tactics to build your content as people are using to build NFTs might sound strange. But whether moving or static images, it still just comes down to digital backgrounds and digital people. And so as AI continues to accelerate its capabilities this will become the norm – and it will be the cheapest way to do things.

ATTRIBUTION

One of the most valuable improvements that Web 3.0 will for brands will be around attribution.

Its currently almost impossible for a brand to attribute value accurately across media channels, touchpoints, stage-in-the-journey. There are simply too many different data sources, walled gardens, and measurement ideologies that all need to be stuck together for a detailed understanding to be possible. After all, your customer might engage with your brand and content in search, video, social media, mobile web, and even through chat apps and all before finally landing on your site and buying something. That’s a lot of different partners and touchpoints to try and track people across.

Brands like Liveramp are already trying to solve this problem through the development of Deterministic identity graphs. However, it’s not perfect. Their approach relies on stitching together data from multiple parties to build a web of partner data that provides a better understanding than any single party could have on their own.

And while I am a fan of deterministic identity graphs as a tool, they cannot provide the completeness (and as a result accuracy) of data tracked by a single source (crypto wallets) across every touchpoint.

SUMMARY

While I have spent the bulk of this newsletter expounding the virtues of how Web3.0’s deterministic characteristics will offer new promise to marketers and media buyers, the truth is that this is not the end of Web 2.0. We always read headlines about the death of TV or the end of Print. But people still watch a lot of TV and read a lot of magazines. Yes - the numbers are down dramatically from their peaks, but the world isn’t an absolute place with only one answer.

The Deterministic qualities of Web 3.0 will share the stage with the Probabilistic qualities of Web 2.0. In fact, there will even be areas and Use Cases where Web 2.0 is likely to remain the better answer.

But if I look at the signals that I saw over the past 10 days, with Microsoft, Facebook, Twitter, YouTube, Mastercard, and Walmart all making forays into NFTs and Web 3.0, I’d guess that the encroachment of Deterministic Media will happen faster than most people expect.