How Web3 is Reshaping the Consumer Relationship with Data
Paul Hsu, Founder and CEO, Decasonic
Brands today are facing a real reckoning in the way they connect with digital consumers. The decade-long rise in concerns about data privacy appears to have achieved its goal in terminating the intrusive information system that Shoshana Zuboff famously termed, “surveillance capitalism”.
While that seems like great news for privacy champions, it’s challenging times for brands.
The data infrastructure that has supported the brands’ insights into consumers - infrastructure like 3rd party browser cookies and mobile app tracking - is being phased out over the next two years. Without this data tracking, brands have limited business intelligence to serve their customers.
Take for example Apple’s introduction of user controls over 3rd party tracking in IoS 14.5 in 2021. Anyone with an iPhone will have now likely been asked whether they want to permit a particular app to track their behaviour. Surprise, surprise: 96% of Americans opt-out, while that figure is 88% worldwide.
That, in turn, has caused a huge hit for Facebook: some $10bn in reported losses. Without this crucial user data, Facebook, Twitter, Snap and others are now far less able to sell targeted advertising. Apple effectively blinded them.
Of course many legacy brands, especially those involved in fast moving consumer goods (FMCG) such as Unilever, Nestle and Coca-Cola, have inherently struggled to understand the digital communities they serve. Significant numbers of people don’t visit Coca-cola’s website for example so they are dependent on buying in raw data to figure out how to market existing products and innovate new ones. With Chrome’s imminent termination of the 3rd party cookies on Chrome, that incredibly useful supply of consumer behavior insights is also shutting down.
The replacement options to 3rd party tracking are limited. Brands can still rely on, what is known as, 1st party data: the information directly gleaned by websites and applications about users. This is often shared with 3rd party analytics companies who try and stitch all of this together to form patterns of how people move from one site to another. It’s akin to picking up a trail of breadcrumbs and trying to squish them back into a loaf again. It’s laborious, expensive and very inexact.
Some brands are now turning to NFTs to fill the hole: Starbucks, Mastercard, Gucci, Tiffany to name but a few. These brands are experimenting with NFTs both as a collectable token gated experience but also as a cookie replacement through new forms of opt-in identity. A token’s movement can of course be tracked across a blockchain and be used as an identifier.
There is another, more holistic solution, which is gaining traction among some of the biggest consultants and advertisers in the space, including the biggest mover and shaker of them all: WPP. WPP is a creative agency that employs 100,000 people worldwide and generates over $12B in revenues through its multiple subsidiaries.
That solution is data unions.
What’s a data union?
Look back 25 years ago and you’ll find an incredibly good description of why the world needs data unions. In an article for Harvard business review, John Hagel and Jeffrey Rayport wrote that a data union or “infomediary” as they termed it, would be at the center of a “new kind of information supply chain”. “Infomediaries,” they wrote, “will seize the opportunity to act as custodians, agents, and brokers of customer information, marketing it to businesses on consumers’ behalf while protecting their privacy at the same time… they will be the catalyst for people to begin demanding value in exchange for data about themselves.”
Until very recently the practical issues in delivering such a vision were too great but two major shifts have occurred in the last few years to make monetizing and building data rich communities far more viable: Web3 and public attitudes.
Web3 technology is enabling an ability to unlock scalable, one-to-many micropayments. When Web3 aligns the group incentives to better benefit the individual, every participant in the data union wins. Through what are known as Layer 2 solutions on blockchains, data unions can now deliver instant, real tokens and stream them to users on an even daily basis. That means engaging and paying out users for joining a data union is easier than ever.
Technically again, sharing data with a data union is becoming much more accessible. Realtime integrations through APIs like open banking ecosystems and similar solutions in the automotive world, are ensuring that an individual’s data can be ported with a few clicks. More excitingly in March 2024, the EU will activate new “realtime portability” rights that will give to 450 million people the right to copy their data from Google, Facebook, Apple, Amazon and Microsoft to any other 3rd party at the touch of a button. In short, only in the last few years has sharing data and being paid for it become massively simpler.
The second big shift is the one in public attitudes towards data. The rise in privacy awareness is the most obvious shift. And this would run counter to the data union idea of sharing data for value. But in fact there is a vast silent majority of data pragmatists (53% of people) around the globe who have been awakened to the value of their data and are willing to share it as long as they feel they’re getting a good deal in return. This is where the opportunity lies. This pragmatic attitude is largest amongst younger cohorts and given recent macroeconomic conditions, they are more price sensitive than ever. Avocado toast is out. Discounts and deals are back in.
Let’s take a look at some data unions and what they are doing:
Sweatcoin is a brilliant example of an app which has built a community around wellness, or step data: 120m downloads, issued a token last month on Near protocol and at the time of writing is valued at well over $500m.
According to its users Pogo is doing an amazing job (4.9 stars in the App store) at serving discounts and rewards to hundreds of thousands of US users who connect their banking and location data. Rather like Honey which makes it for users to find discounts, Pogo is taking this one step further, by offering discounts in real time. If you walk past Chipotle, Pogo will notify you should they be offering 10% off a burrito bowl. They recently raised $14.8m in a round led by Josh Buckley, the former CEO of Product Hunt.
Ozone is a browser plugin with 100s of thousands users, is focussed more on helping users monetize clickstream data. For data buyers it’s not only able to produce incredibly high quality clickstream data sets but is also able to combine that with bespoke survey tools that really give brands much deeper insights into the data they're looking at. Ozone is listing on Pool’s data marketplace later this month in order to help drive data sales.
DIMO raised $9m last year, backed by Coinfund specializing in Automotive data. Once you sign up to the Dimo app, you not only gain access to insights into vehicle health and performance but you allow car manufacturers and other drivers to gain them too. Once you're connected, you'll always have the option to share the data to increase the earnings and have a say who accesses your data -it's also your choice to stay anonymous or not.
Opportunity for Investors in The Next Gen Data Economy
We believe there is a large investment $T opportunity in the next gen data economy, especially in the shift to the post-cookie world. Europe is leading this shift, with the rest of the world to follow. We know this as data unions are forming everywhere, kicking off a new Web3 trend with tokens providing a unique opportunity to better align consumer data, data unions and data advertisers. We have made an initial investment in the next gen data economy, as we are investors in Pool. Pool is building the infrastructure for the next generation data economy. Their purpose is simple: to redistribute power, value and control in the data economy.
Pool's platform supports data unions by providing them with a data marketplace, payment rails, combined analytics solutions and a consumer facing Web3 app that helps data unions scale membership fast and also creates a combined advertising solution to allow the whole ecosystem to deliver ad targetting in Web2 and Web3.
With a combined 25 years experience in data unions, Pool’s 17-strong team has superpowers in data monetization, martech, privacy, ID, and Web3. They are working to make it easy for any application to monetize its data on their marketplace by offering consumers not just payment but also tokens they can exclusively spend in Pool’s marketplace. They are building the base layer of the new data economy, catalyzing the mainstream adoption of data unions in the next gen data economy.
We look forward to helping co-build this space and its potential in a new relationship for consumers with their data.
The content of this material is strictly for informational and educational purposes and is not meant to constitute investment advice or a recommendation or solicitation to buy or sell any asset or to make any financial decision. Nothing in these blog posts should be considered legal or tax advice. You should consult with your own professional advisor before making any financial decision. Decasonic offers no warranties on any content in the material posted in these blog posts, including that it is accurate, complete, or correct. The opinions expressed in these posts are those of the authors and do not necessarily reflect the views of Decasonic. Decasonic is not liable for any errors or omissions in the content of this newsletter or for any actions taken based on the information provided herein.