Blockchain for marketing? Perhaps, but privacy issues abound
Individuals and organizations use blockchain for distributed control, anonymity and immutability. But its permanence can create privacy issues as companies try to leverage the technology for their marketing strategies.
In a recent paper, “What Blockchain Can and Can’t Do: Applications to Marketing and Privacy,” MIT Sloan professorurges marketers “to be thoughtful about where and whether to adopt blockchain-based systems.”
Marketers may seek to adopt blockchain in contexts where trust is difficult to establish, Tucker said in an interview. And given the significant existing fraud in non-blockchain systems, marketers can look to blockchain to foster a more reliable supply chain.
However, “marketing as a discipline should still be wary of creating immutable data about an individual if there is no real need for it,” Tucker writes in his paper. “Temporary marketing data can be used to predict persistent traits, and even the fact that someone once displayed a particular trait or interest can become ammunition for malicious actors.”
Here’s a closer look at blockchain technology, marketing’s use of consumer data and what the interaction between the two could mean for privacy.
Advantages and disadvantages of blockchain
Blockchain keys are anonymized, preventing the public from identifying their holders. Transactions are recorded chronologically on a distributed ledger – which is regularly updated and verified by the blockchain’s participants – and all ledger entries are permanent.
However, blockchain’s anonymity means that if someone loses their blockchain key, that account can no longer be accessed. And immutability means that anything and everything recorded on the ledger is there forever.
Blockchain and marketing
The immutability of technology poses most problems for marketing strategies, writes Tucker. For example, blockchain can be used to track digital identifiers—login information, social security numbers, dates of birth—that are linked to customers’ views of a particular ad or other tracked content.
Let’s say a marketer uses blockchain to advertise to a specific customer segment (eg someone interested in chartering a private jet). When a person clicks on the private jet ad, the blockchain records not only that click, but also online purchasing behavior and identifying information associated with the computer where the click occurred.
But what if the person was only temporarily interested in private jets, or they accidentally clicked on the ad? Or what if a child without the purchasing power of private jets clicked on it?
“The immutability of a blockchain record doesn’t tell you if the person is actually interested in charter jets, just that some entity has registered them as such,” Tucker said. “The way blockchain communicates accurate information is simply by saying that a transaction occurred between X and Y at a given time. Any statement about X or about Y reintroduces the necessity of verifying information.”
Companies seek verification because they want to know, rather than infer, information about transaction participants, Tucker said. So the firm will still need to verify whether the information the blockchain recorded about X and Y was true.
“The risk is that firms can adopt blockchain methods to record transactions and then believe that the transactions can work ‘trustless’, without even worrying about whether the information about the participants is true,” Tucker said.
Concerns about customer data
Another concern is that firms using blockchain-based marketing strategies could end up retaining customer data, depending on the nature of their technology setup. But the usefulness of this data is short-lived, writes Tucker.
While chartering a private jet usually involves some long-term planning and organization, a person may want to buy a pair of shoes in the morning but may not be interested in buying them a few hours later. The information about that person’s interest in shoes is no longer useful, but “a lot of things can happen at this point,” Tucker said.
If it’s a public blockchain, the information that the person is in the “interested in buying shoes” segment is public for anyone to see — whether they’re a marketer or not, Tucker said. “If it’s a private blockchain, it’s going to be harder for marketers to access that information.”
And marketers can use this data for purposes other than selling shoes. For example, they may know from other sources that a high interest in buying a particular pair of shoes is correlated with other things, such as the likelihood of developing a certain disease, Tucker said. Marketers can take the shoe-related information from the blockchain and construct a segment of shoe-interested participants whose information can then be sold to health insurance companies or pharmaceutical firms.
“The key question is whether a person’s preference data regarding certain types of shoes from decades ago can be used to make predictions about other, more sensitive characteristics that apply to them today, such as their likely health status,” Tucker said. “People should be able to reinvent themselves if they want to.”
Data management challenges
The cost of storing data is getting cheaper every year, but implementing good quality protocols to clean it isn’t getting any easier, Tucker said. So it’s not necessarily the companies wishes old data. “It’s that to preserve customers’ privacy, they have to actively think about what to clean and when, which takes time and skill to figure out,” she said.
This protocol is not so much about buying off-the-shelf, third-party software as it is about internal systems for computing, Tucker explained. Consider a police department that contracts with a technology company to store and periodically delete data from police cameras.
“The police are not computer scientists, and they are eager to outsource this process to software,” Tucker said. “But that just shifts responsibility; it does not change the fact that the question of which camera data to delete when is complex enough that simply leaving it to software risks significant problems with both over- and under-deletion.”
Retaining or failing to clean old customer data is also a problem for companies operating under privacy rules such as the General Data Protection Regulation. The GDPR gives people living in the EU the right to know how their data is collected, processed and protected by a company, as well as the right to ask for the information to be deleted if it is no longer needed. Tucker said EU-based companies often rely on guidance issued by the French data protection authority, which advises against storing unencrypted data on a blockchain and suggests limiting access to data through defenses such as fingerprinting.
Cautions and Wisdom for Blockchain Marketing Applications
Remember, marketers should not use blockchain to market to customers. It should be used to improve trust in transactions and reduce fraud.
“The best applications for blockchain in marketing are where records of immutable, purely digital data are useful now, such as keeping track of digital ad purchases, and where there are no deep real-world implications to be anticipated from existing privacy laws , [or] company or law enforcement review of these transactions a decade later,” Tucker writes.
Read: 7 ways to promote blockchain in the enterprise
