Crypto Is a Distraction to 99% of Media
With all the rage around NBA Top Shot and people collecting digital moments of basketball players, there has been more discussion about the use of decentralized finance (DeFi) and NFTs for creators and the media.
It’s an exciting narrative and something I’ve watched being built for years now, first when I was an independent freelance journalist covering the crypto space and then working at CoinDesk for four years.
My concern whenever I see a new and exciting technology pop up is that it acts as another possible distraction for media operators. And while I think all of this technology is incredibly fascinating, media went through this roller coaster once before and it was a colossal waste of time.
Back in late 2016, early 2017, enterprise companies like IBM, PwC, and Deloitte started to push forth this idea that blockchain technology could be used for literally everything. It got so bad that the joke became “a blockchain could fix that” whenever a problem presented itself.
The advertising business was no different. Since a blockchain is a distributed ledger, many thought ad buying/selling would be a good use case. Anytime a new ad deal was signed, it would be added to the blockchain. As ad impressions were delivered—and somehow verified, though I never quite heard a good explanation of how—the publisher would receive payments.
At the time, I was optimistic. We all agree that advertising, especially on the programmatic side, is rife with fraud. If we could figure out how to recapture some of this money—reports suggest it’s up to 50% of all ad money is stolen—it would have a significant impact on media. Naturally, all the major firms were spending millions of dollars in marketing to try and prove that they were going to solve all sorts of problems—advertising included.
Some media companies started to pay attention. Consortiums were launched. I even found myself sitting on a committee where we discussed blockchain education and finding ways to convince media companies to integrate the technology.
I learned a lot during that period, but one thing was abundantly clear… this technology was nowhere near ready to help our businesses.
The “blockchain for everything” bubble, like crypto before it, burst and we were left with the simple reality that it was all vaporware. People had wasted time and money with nothing to show for it.
Fast forward to today and I am now starting to see suggestions that media and crypto might be able to work together. To try and explain it, here are a few definitions:
- DeFi: Decentralized finance, which is the new financial system being built on blockchain technology. No banks.
- Smart Contract: A self-executing contract where the terms between buyer and seller are built into the code. No lawyers.
- NFT: Non-fungible token. A provably scarce and non-replicable digital creation. No physicality.
People are already starting to talk about how NFTs could be the missing piece for media companies to reclaim ownership of their content. I’ve seen people suggesting that smart contracts are all that stand in the way of individuals finally reaching their potential as creators. We’ve trusted centralized solutions for so long, a decentralized, crypto approach must be better, right?
This is unfortunately not the case.
Centralized solutions exist because we want things that are easier and cheaper. Crypto is not easier. It is not cheaper. When there isn’t much usage, the network runs smoothly, but the second there is a ton of excitement, things get clogged. I have a friend who went to purchase an NFT and the fee to transfer the funds to buy it cost more than the price of the actual token.
These systems do not scale in the present day. When things don’t scale, we naturally try to find solutions to that. And the first thing we do is centralize things. Suddenly, what was once a decentralized system is actually just a system that runs on various AWS accounts. That’s just a centralized system.
Why do I bring this up?
When a lot of big, fancy words are thrown around, it’s easy to think that it matters. But decentralized technology is not a solution for the vast majority of the problems we are dealing with in media. A drop in ad revenue won’t be solved by a decentralized solution. An NFT won’t suddenly increase content’s value.
For most media companies, this is a distraction. To say it more specifically, it is a waste of time and if you’re spending time on it, you’re neglecting things that will actually help your business. The same goes for creators by the way. The media company of tomorrow is better spent figuring out how to create great content and providing upside to the creators than figuring out how to create decentralized autonomous organizations that issue NFTs (big, fancy words). If we want to reward the product creators, let’s do so in a simple way.
There are two examples that contradict this rule a little. The first is the crypto media companies. Digiday recently published a story on Decrypt (I was interviewed for it), which has created its own cryptocurrency.
“This is an example of eating your own dog food,” said Jacob Donnelly.
Rewards systems for loyal readers are not a new strategy for engagement, but Decrypt’s token offering is a unique take on that model because of how endemic it is to its coverage, Donnelly said.“They write about crypto, they write about blockchain. So having a wallet and a token baked in is interesting,” he said.
Donnelly equated this to Bustle Digital Group’s brand Inverse that has a newsletter incentive program, which enters subscribers into a drawing for a prize if they open newsletters regularly. Only Decrypt is taking it a step further by guaranteeing rewards once enough value is accrued.
“Inadvertently, they are assigning value to every action on their platform. That’s very hard to do that — if you talk to 99% of media companies, they still can’t tell you the [lifetime value] of a reader,” Donnelly said. “This is a very interesting exercise” but it works in a closed ecosystem.
This is incredibly fascinating if you really think about it. To incentivize intense engagement with the platform, Decrypt created a token that has value, which it then distributes to readers. Those tokens can then be used to acquire stuff from the media company.
If you dig in deep, these token transactions are actually built on top of Ethereum. It’s rather ingenious.
Except for one fact… it doesn’t actually need a token. As I said in my interview, Inverse does the same thing with its newsletter incentive program except all engagement is tracked in a centralized database. Rather than treating it like a lottery, Inverse could assign value to a newsletter open. If a reader accrued enough value, they would then be able to acquire prizes.
The reason this doesn’t need a token is that it’s a closed ecosystem. Decentralization matters when you’re working around the world and don’t want middlemen. But when it’s a system that is part of a single app, decentralization is just a waste.
But, like I said, it’s them eating their own dog food, so that’s not a terrible thing. I just wouldn’t advise any media company to try this at home.
The other aspect of media that could benefit from this is the companies that own ridiculously valuable IP. I’m not afraid to admit that I have fallen down a Pokémon rabbit hole over the past few months. I’m a die-hard Star Wars fan and have been rewatching all the movies in chronological order over the past few days. Before that, I watched all of Harry Potter.
These are examples of incredibly strong IP. Creating NFTs that are provably scarce is a fascinating use case. I would love to own a limited edition digital card of Darth Vader. That’d be awesome.
But the thing is… this sort of content has to be something people really connect with because that’s the only way it will have value. The desire to collect things is strong and, for any company that has really strong IP, a digital product might be appealing.
On the other hand, most media companies—especially those of you that read AMO—will find little use with this technology. Don’t get distracted. Focus on operating your business.