This article is part of a 10-piece Digiday series that explores the value of NFTs and blockchain technology. Explore the full series here.
This article was originally published in October 2021.
To many media and marketing executives, the blockchain still feels like a mystical part of the internet happening apart from where they do business. But the reality is more and more companies are using blockchain technology to make money, solve business problems and reach new audiences and customers.
In fact, you may have heard the term “blockchain” in a recent business meeting or come across it more than once while scrolling on Twitter. But beyond knowing it’s the technology behind non-fungible tokens (NFTs) — such as, digitized versions of magazine covers auctioned off for hundreds of thousands of dollars’ worth of cryptocurrency — you may not know why or how the blockchain can impact, and even benefit, your business.
NFTs are becoming increasingly demystified, and companies are beginning to hold cryptocurrencies on their balance sheets. As a result, the blockchain is weaving itself into the way companies do business, so knowing what it is and how it works, even at a high level, will help industry leaders become more proactive and receptive to these innovations, ultimately leading to a better chance at revenue diversification and growth over the course of this new decade.
The fact of the matter is, the revenue possibilities from both publishers’ and marketers’ experimentations on the blockchain are not limited to selling NFTs to the highest bidder. Many of the challenges and questions companies have about the state of the media, marketing and advertising industries and the way they do business can be solved with blockchain technology — if they are willing to experiment.
So by now, you may be wondering: WTF is the blockchain?
Allow me to explain …
- Blockchain: A system for recording, authenticating and verifying transactions or agreements using a network of computers or people. It is not controlled by any one company or institution.
- Consensus algorithm: A process used to legitimize and verify actions performed on the blockchain.
- Cryptocurrency: Often referred to as “crypto,” a digital coin that stores value.
- Decentralized: The blockchain is not regulated by a central authority, making it a decentralized system.
- Metaverse: A digital version of the physical world that echoes video games like “The Sims” or “Second Life” but at a larger, more immersive scale. (Read more about the metaverse here.)
- NFT: Short for “non-fungible token,” a certificate of ownership for a digital good, such as an image or song, that cannot be duplicated. (Read more about NFTs here.)
- Proof of stake: A type of consensus algorithm, in which an individual serves as a “validator” to record, authenticate and verify actions performed on the blockchain. The validator is required to put up collateral in the form of cryptocurrency and loses that collateral if they are caught falsifying information or acting maliciously.
- Proof of work: A type of consensus algorithm that relies on a network of computers, called “nodes,” to run, record, authenticate and verify actions performed on the blockchain as well as to mine new cryptocurrency coins.
- Security Token: A type of cryptocurrency that is used as an investment, such as bitcoin or ethereum, and can gain or lose value as people buy and sell the tokens.
- Utility token: A type of cryptocurrency that is used internally at one company or in the metaverse, similar to the virtual currencies used in video games. It is used to provide value and reward participation within that environment, but does not have value outside of that.
- Wallet: An online storage locker for the blockchain where individuals store their cryptocurrencies, NFTs and other digital assets. It can be connected to a browser extension and accessed across a variety of websites.
- 21.2 million: The number of U.S. adults who own cryptocurrency, according to crypto exchange company Gemini in its 2021 State of U.S. Crypto Report.
- 63%: The percentage of U.S. adults who are considered “crypto curious,” meaning they do not own crypto but are interested in learning more about it, according to Gemini’s crypto report. Of that group, 19% of the U.S. adult population said they are planning to buy crypto for the first time in the next 12 months.
- 70 million: The number of wallets that have been opened on Blockchain.com, one of the top-used crypto exchange platforms in the country, as of Oct. 10, according to Statista.
- 5.6 million: The number of total downloads of the top 10 most popular crypto exchange mobile apps in January 2021, compared to 2.2 million downloads in December 2020.
As publishers look for ways to continually diversify their revenue, the blockchain poses an appealing opportunity.
Below are some use cases for how the blockchain — including cryptocurrencies and NFTs — can help publishers innovate and advance their business strategies. The blockchain creates an appealing opportunity to transact in digital currency — and do it somewhat quickly to earn a few thousand dollars by selling NFTs or to grow existing revenue sources by allowing advertisers and subscribers to pay with a variety of cryptocurrencies.
To better understand how the blockchain operates, here’s a look at some of its potential processes.
Cryptocurrency as payment option
Time was one of the first media companies to start allowing sponsors to pay in bitcoin, a cryptocurrency that the media company’s president, Keith Grossman, said he considers a store of value, like gold, versus a currency that is open to fluctuation. Bitcoin is the most expensive cryptocurrency on the market (at the time of publication, 1 BTC (bitcoin) was worth over $62,000). Theoretically, as this value increases (or decreases), the money earned from brand deals and ad campaigns can increase as well.
The publisher has also allowed its readers to pay for subscriptions with more than 30 different cryptocurrencies, the same idea being that as those coins increase in value, so does the value of its subscription business.
- Read more about Time’s approach to cryptocurrency here.
A majority of the publishers that have experimented with the blockchain have been selling NFTs as collectibles, or limited-edition content that is often produced through a collaboration with an outside party.
USA Today dipped its toe into the NFT world by using a historical moment from its own history to excite buyers. The newspaper created an NFT called the “1st Newspaper Delivered to the Moon,” which was a series of 300 photographs, illustrations and front pages related to space from over the course of five decades. It used those images to recreate the cover of the first newspaper delivered to the moon in 1971 on the Apollo 14 rocket. The NFT was launched on June 28 and sold for $8,165. There were nine bidders by the time the auction closed.
“Having an ability to sort of own those historic moments or be part of that, I think that’s exciting. And it allows journalism and everything that we do to be accessible to audiences,” said Kris Barton, chief product officer at USA Today’s parent company Gannett.
Other publishers, like Bleacher Report, are minting limited edition NFTs that use a “drop model” in which a number of them are dropped at once to create demand from their audience. After launch, its top performing NFT sold for more than $70,000.
- Read more about Bleacher Report and other publishers’ NFT strategies here.
Recurring revenue from royalties
Sales of the NFTs do not have to be one-and-done. The smart contracts that NFTs are built upon can include wording that allows creators to earn a royalty on any future sales of the NFT in secondary or tertiary markets.
For example, if Bleacher Report were to release a limited-edition, physical sports jersey in its online store for $150, the publisher would only earn money off of that initial selling price. Since it is a limited edition, however, there is a high probability of it being resold for a much higher price point by the original buyer. B/R misses out on the resale of that physical item, of which it would have no way of tracking.
An NFT of a digital version of the limited edition jersey, however, can be tracked as it is bought and sold at every point. Within its smart contract, B/R can include language that automatically pays the publisher a percentage of the sale price, so the company continually earns money from that asset, even after it leaves its ownership. B/R has implemented this within its NFT strategy, but did not disclose what percentage it earned from residual sales.
The approximate range of royalty percentages industry-wide range from 5% to 20%, according to entertainment attorney Anita K. Sharma, Esq.
Taxes and fees still exist in this space as well, such as capital gains on large earnings and withdrawals and transaction fees from the third-party platforms where NFTs are bought and sold.
Exchanging NFT revenue for brand-building
While some publishers have kept the money earned from these NFTs, a lot of them have been choosing to (at least initially) donate this new source of revenue to a variety of charities. USA Today donated half of the earnings from its NFT to the Air, Space, and Missile Defense Association and half to the Gannett Foundation, its parent company’s charitable arm. A company is not required to donate this money and can mark it as revenue, but as with any product launch, the optics of donating “quick cash,” especially when it’s thousands of dollars, can be good for the brand.
The next iteration of the NFT strategy is using these digital assets as membership exclusives or community-building items. This can be done by giving NFT holders exclusive access to events or content, as well as rewarding them for engaging with the publication and having a say in how the company is operating.
“NFTs are smart contracts, so instead of selling a $200 subscription a year for content, [you] can issue an NFT as access to the content. NFTs can also be a ticket to a digital conference,” said Gary Vaynerchuk, the co-founder and chairman of VaynerX, which owns Gallery Media Group, and a vocal crypto entrepreneur. When readers have their crypto wallets linked to a website, the NFTs within their wallet can give them seamless access to content without requiring them to ever log in, he said.
Governance and rewards
NFTs can be used to give holders a say in how a company is running or what content gets published, almost like being a shareholder. They can also be a rewards tactic for engaging with the publication and being regular readers.
A governance token can exist as NFTs or utility currencies that are bought or shared with audiences. They enable super fans of the publication to voice their opinions through voting on what content is published or how the company grows in certain ways. As the publisher, you determine how much of a say this cohort of governance token owners receives, but those holders feel like they have a stronger share of voice in the publication they love.
Digital blockchain publisher Decrypt issued a rewards token that rewards engagement with the brand (reading, commenting and sharing articles within its proprietary app). For each action, readers were given a certain number of tokens (which were limited in quantity and only released every few months) that they could then exchange for prizes. Decrypt has since iterated on this idea by giving those token holders a share of voice, turning its in-house cryptocurrency into a governance token as well.
- Read more about Decrypt’s reward token here.
- Read more about Decrypt’s latest approach to community building through governance tokens here.
Expanding intellectual property
Once you decide to mint an NFT, whether it is for a collectible or a membership purpose, you have to figure out what it will consist of. If you want to use any kind of image, video or intellectual property, make sure you own the copyright as well. Keep in mind that just because the blockchain is decentralized, the copyrighted materials that are used there are still owned by one person or entity.
- A note about NFTs and copyright law:
- “Copyright law applies to the blockchain, and it applies to NFTs. What people don’t understand is that ultimately, the platform that you sell on is very much centralized,” even if the blockchain itself is decentralized, said Sharma.
- Sharma also said that the copyright ownership does not have to be (and probably shouldn’t be) included in the NFT smart contract. In other words, don’t sell away your IP rights.
Syndication and content tracking
For publishers who have content syndication businesses, the smart contract capabilities of the blockchain can give them better control over how their content is used, distributed and monetized by tracking it every step of the way.
Larger publications give smaller publications the ability to use their content for a small fee or in exchange for a share of the corresponding revenue. But after the initial deal, it can be hard to track exactly how that content is being used and how much money is being earned off of it. The basic blockchain application will include language within the initial syndication deal that will track where the content goes, what advertising gets placed against it, what commerce tie-ins exist and how the audience interacts with it. All of that information will automatically determine how much the original publisher receives financially from that one piece of content.
This business model has not been built or executed yet, but it is a possibility for future blockchain application in the media industry.
Marketers and brands should be interested in the blockchain because consumers are becoming increasingly interested in the blockchain. This year, approximately 14% of the U.S. population reportedly owned some form of cryptocurrency, according to a Gemini study. This goes beyond allowing customers to check out with cryptocurrencies. There is an audience of people who are ready and willing to engage with a brand in an online-only manner and demonstrate their affinity for a brand by buying an online collectible versus a physical item.
There are also new advertising opportunities taking place with NFTs and in the metaverse where massive global audiences are coming together and spending hours of their time. For example, as of May 2020, there were 350 million registered users of the Fortnite metaverse, an online video game, and at any given time, 3 to 4 million people play concurrently, according to video game block TechACake.
NFTs for marketers
Marketers are already getting into the NFT space. Sometimes they are minting their own NFTs themselves or with the help of an agency, or they are creating the NFTs through media companies that use their audiences to publicize the NFT project.
Rebecca Minkoff worked with Yahoo on a New York Fashion Week NFT collection to reach digital audiences who weren’t able to attend the event but still wanted to feel connected to the designers’ latest collection. That NFT package was subsequently shared to Yahoo’s network and millions of readers.
- Read more about the designer NFT collection here.
Taco Bell launched an NFT collection of taco art that was priced at $1 —the cost of one of its tacos — but created hype around the product by giving a voucher for a year of free tacos to the initial buyers.
- Read more about the Taco Bell NFT experiment here.
Advertising in the metaverse
This is becoming a more and more regular occurrence as brands enter the metaverse through the world of esports, advertise to online communities through virtual billboards, or blimps, and release digital outfits for avatars to wear. The way that the blockchain ties into this environment is largely through NFTs, which can be in the form of digital assets that are bought and sold in the metaverse to add personality to users’ online spaces.
“Think of people wearing Adidas on the sidewalk. I see Adidas, and I know what that [brand] is. The same thing happens in these digital spaces,” said Caitlin Higgins, an analyst at digital agency Dragon Army, whose clients include Home Depot, HBO Max and the American Cancer Society.
More coverage of brands’ dalliances with the metaverse here:
- Why companies are using virtual concerts to introduce their users to the metaverse
- As non-endemic brands eye the gaming space, a lack of industry standards is delaying their arrival
- AT&T and 100 Thieves are bringing their partnership into the metaverse with the AT&T Station
- Why an exercise bike wants to bring gamified fitness to the metaverse
- How NASCAR is getting in on the race to develop a brand identity for the metaverse
Tracking ad spending
In 2019, Digiday reported that Unilever was using the blockchain as a way to uncover any hidden costs in its marketing spend.
This was not a widely adopted strategy at the time, nor since, but could be updated and revived in the modern day era of blockchain.
“The blockchain technology used on those Unilever campaigns acts like an old-school accountant book where every transaction, from the initial investment to the publisher, is registered on a decentralized ledger. The transparency that comes with this decentralized ledger guarantees that all parties including Unilever see any differences between what media was bought, what media was billed and what media was planned, which should leave no extra room for hidden costs,” wrote Seb Joseph, senior news editor at Digiday.
The third-party cookie solution no one saw coming
One of the biggest potential use cases for the blockchain in the marketing and media landscape is how it can be used as a solution for ad targeting in a privacy-compliant way.
Rather than relying on the first-party data collected by agencies or media companies — and building the solutions to collect that data — the blockchain could enable marketers to directly collect that data from people themselves in exchange for cryptocurrency.
Basically, a value exchange would be built on the blockchain where a person could go on a website and an advertiser on that page can automatically offer micropayments of cryptocurrency to that visitor in exchange for data about themselves, like their age, where they live and what their interests are.
This blockchain-based data exchange becomes possible as more people invest into personal crypto and build their online wallets. With that wallet linked to their browser, they can indicate on a website that they will share certain forms of personal data, and a payment will automatically be deposited into their wallets.
This system has not been built or implemented yet and will take several years — or a miracle of innovation — to come together. Mainly because it will require a lot of people to own cryptocurrency. There will also have to be verification factors implemented to ensure that the audiences are genuine and not lying about who they are.
Once the system does exist, adoption and implementation will be important in order to get people on board. Marketers and publishers should be introducing audiences to this system of micropayments in exchange for data as widely as possible in order to familiarize them and make it well known that sharing a portion or all of their data will lead to incremental crypto payments that in the long run can add up to big (blockchain-based) bucks.
Watch out for snake oil sellers
As with any burgeoning technology that promises riches and solutions to your problems, there will always be people willing to take advantage for personal gain. While reporting for this guide, more than one blockchain expert warned me of people pitching vaporware and selling false promises to an extent that I’ve never seen before. This is likely to be true as you begin to explore partnerships and vendors in this space, as well.
Both companies and individuals are making gobs of money, sometimes overnight, on new cryptocurrency investments or NFT sales. This is appealing, but scams are not uncommon right now either, especially since this is decentralized territory. Take sales pitches with a grain of salt. If something sounds too good to be true, it might be.
Beware of the environmental impact
As mentioned in the WTF is the blockchain video, blockchains operating under a proof of work consensus algorithm rely on excessive computational energy. Mining bitcoin, which takes place on one of the largest blockchains using proof of work in the world, is estimated to use 121.4 terawatt hours a year of energy, according to an analysis by the University of Cambridge. That is more than the consumption of Google, Apple, Facebook and Microsoft, combined, asserts Columbia Climate School’s “State of the Planet” report from September.
Due to this environmental impact, publishers, marketers and brands concerned about their carbon footprint — and their social images — should bare this in mind.
The blockchain will be a long-term investment into your business strategy
A lot of these use cases for the blockchain won’t be widely used or implemented for several years, according to multiple experts that I spoke to for this article. Most of the media and marketing industries are in phase one of the blockchain revolution, according to David Cohn, the head of research and development at The Alpha Group, an in-house tech and media incubator for Advance Local. A lot of the programs and algorithms needed for these applications haven’t been created yet, and people’s adoption of blockchain-related technologies is only just now entering the zeitgeist. Therefore, these concepts can be viewed more so as goal posts for what the future holds, versus what you should be implementing right now.
In all likelihood, as blockchain innovation presses forward, you will interact with some customer, client or competitor who is asking about “crypto.” At the very least, it’s best to be equipped with the knowledge to have a productive conversation about this new area of the internet. You don’t have to be the first one in the space, but don’t be left out of the conversation either.
Like the feature image? You can own it! Each of the robot avatars featured in this series is an NFT available for purchase on our OpenSea storefront. All of the earnings will be donated to the non-profit organization Sandy Hook Promise. Digiday is using this NFT drop to gain first-hand experience in creating and minting NFTs in order to get a better grasp of these digital assets and inform future reporting. Learn more about why we’re experimenting with NFTs here.