This post is about how the emergence of blockchain technology affects the strategic landscape of Strossle international AB. It builds upon the principles explained in What Blockchain means for your strategy, if you need a primer on the theories, have a look there.
Across 12 countries, Strossle helps digital publishers recommend content that creates value for them in various ways. As a data-driven business who touches millions of users and hundreds of publishers, Strossles business model is clearly one with economies of scale.
Blockchain technology allows us to create common data resources that provide the positive effects of an aggregator without the associated negative effects of a monopolist in your value chain. In addition we can set rules for how this resource is governed, and make sure the rules stays the same and are adhered to by all participants.
The challenges with recommending content
Without going into too much details, information about the content, information about the user and information about the interaction between the two are all relevant data in Strossles recommendation model.
Whereas our core capabilities lies in using text analysis for recommendation of content, data describing consumer behavior across many sites have always been considered a highly potent source of improvement. These typically increase in value as you ad data from more users and more content, and so it’s a perfect market for an aggregator to take control.
The markets for user data
The tech giants all enjoy monopolistic power in their markets, in a large part based on user data. Amazon have been outstanding for many years – they take our consumption habits and create personalized recommendations of them. With Amazon as a benchmark, users expect all forms of recommendations to be personalized. While we agree personalized information is user-friendly, it leaves us as individuals to trust the algorithm to work for us. We can expect this to be true as long as our interests are aligned with the aggregator. We know they are not.
Early movers had user data integrated in their business model, and the big 4 knows us all better than most of our friends. Later movers, in particular in the data-driven advertising ecosystem, represent modularization of the recommendation systems and the creation of markets for user data and tools to utilize them. Here you find entities like data management platforms, retargeting networks and trading desks to mention a few. Overall, this ecosystem has given us the pervasive hotel ad from the city you visited last week. It’s creepy and most people dislike it.
The common theme for all of the players above is that they seek to establish Aggregator positions for user data. To Quote the Swedish MD for international media agency Group M; – Utilizing Plista could enable us to add a layer of data which would make the campaign more accurate … (partially paywalled article in Swedish). If Group M can channel a large enough share of their clients business through Plista, this should enable them to establish a data aggregator based on the adjacent business of managing campaigns for their customers. This could, in turn, be used to increase Group Ms share of the overall value chain. In any case, it would be based on aggregated data about the end users.
Clearly, firms are still trying to establish aggregator positions by whatever means available.
For Strossle, who incidentally competes with the above mentioned offering from Plista, with 1500 publishers in Europe in our network, the temptation to build a user profile aggregator is tangible.
Luckily, we have seen the Blockchain on the wall.
Strossles adaption to the changed landscape
With the financial and strategic viability of establishing an aggregator position on user data challenged by blockchain technology, how should Strossle adopt?
As we saw earlier, blockchains enable the creation of a shared resource which commoditizes the aggregator position in question. The law of conservation of attractive profits predicts that any superprofit available in the system should move to other (adjacent) stages of the value chain.
Clearly, one adjacent stage for the value chain in question is the consumer. With the emergence of a blockchain powered aggregator, we would expect some value to flow that way. On the other side, however, we would expect to find a recommendation engine. And we should expect some of the attractive profits to move towards the recommendation engine which is best able to integrate effectively with the commoditized data market.
For Strossle, the emergence of blockchain technology in our minds is best met by supporting the creation of a public resource for user data. Our job should be to facilitate its inception and then move to become really good at integrating with it and other similar initiatives effectively. In this way, we can position ourselves where the profit will move tomorrow, and at the same time we acknowledge that the bargaining power we have (or lack thereof) over time will lead to a significant share of that profit to move towards the parties we would most like to see adjacent to us in that part of the value chain – the publishers and their users.
Håkon Tillier, Chief Expansion Officer