interweaving payments and marketing

The other night I watched the film Nomadland…I found it rotten. The film whitewashed the lives of iterant, gig workers by portraying their struggle for survival as a proactive ‘lifestyle’ choice rather than a desperate scramble to survive. I won’t give points for featuring elderly characters as Amazon warehouse pickers if they are smirking at work and commenting on their ‘good pay’, when we all know the reality is quite different. Even more despicable and ironic were the endless product placements for brands like Amazon, Progressive, and Campbell’s Soup. Two thumbs down.

The pseudo-social-commentary may not have stuck with me, but the movie’s product placements kept me reflecting on the future of marketing and payments.

tech-agencies today

For all their hype, Facebook and Google and many other Silicon Valley companies are glorified advertising agencies. Their business models are simple: collect reams of information on individuals, package it, and use the knowledge to present advertisements which influence purchasing behavior. Attributing a purchase to an ad is the holy grail for advertising agencies, as it warrants their services and fees.

Over the past decade technology companies have filed increasingly sophisticated patents on measuring attribution. The trouble is the more accurate the attribution, the more invasive the tracking. Aside from goofy or unwieldy patents like Sony’s allowing customers to skip ads by saying the advertised product’s name out loud, many are breathtaking in their audacity. Microsoft holds a patent on using television sensors to track people within a room, differentiate them by age based on their body proportions, and show or restrict content accordingly. Likewise, Facebook has won a patent which allows them to understand what media a user is consuming based on monitoring the camera, microphone, and GPS of their phone “to pick up audio from a TV show the user is watching, which would be sent to Facebook for the company to analyze the data and determine what the user is watching.” Intriguingly this system would rely upon ‘sonic fingerprints’ embedded into media which would be inaudible to the human ear. Of course Facebook insists: “the technology in this patent has not been included in any of our products, and never will be.” Right.

Regardless of how it is measured, higher quality attribution is here to stay. Although governments worldwide are restricting overly-invasive advertising through legislation like the European Union’s GDPR and the California Consumer Privacy Act (CCPA), industry now has an insatiable appetite for stronger attribution. And why not? With it (if we trust the advertisers) businesses can reach relevant customers more easily, communicate more effectively, and most important, close more sales. Of course this last step of an influenced purchase is where payments fits in.

payments in advertising

The payment is the culmination of advertising. A sale not only validates marketing success, but also manifests a buyer’s intentions and suggests future behavior. In this way sales builds advertiser business by proving value and guiding subsequent marketing techniques.

Changes in payments promise to stretch this model. As discussed in prior essays, payments are growing smaller, faster, and cheaper. Instant micro-payments combined with high quality attribution means it will be possible to incentivize advertisers in ways never before possible. Most notably, advertising business models will shift irreversibly from one-off fixed fees to ‘pay-for-performance’ models wherein fees are awarded based on viewers, behaviors, and - of course - sales. Corresponding payments to marketers will be made in real-time to incentivize constant advertisement refinement and maximum campaign performance. Imagine an advertiser receiving $0.005 per adult seeing half an ad, or $0.010 for a full viewing.

To better understand this future, consider the following scenarios:

  • A consumer reads an online influencer post about vacationing in Alaska. The next week, they purchase a vacation flight to Anchorage. The influencer earns a small fixed financial award by the State Tourism Board for the (i) consumer reading the post, (ii) purchased flight, and (iii) for each purchase made by the consumer while on their trip.
  • A marketer receives a micro-payment for each viewer of its billboard, variable based on the amount of time the billboard is viewed.
  • A consumer watches a cooking show. The next day she purchases groceries. The show earns a commission on purchased ingredients and their amount.
  • An agency receives a micro-payment each time its slogan or jingle is said and/or sung by a target demographic within range of a microphone (smartphone, television, personal assistant, etc).
  • A department store receives a micro-payment each time its decorated shop windows featuring a specific brand is photographed or admired for more than 30 seconds by a passerby.

Modern payments’ data enrichment will further evolve marketing. Real Time Payments (RTP) will allow merchants to dynamically embed reams of information within a given purchase. These changes enable including all sorts of data points valuable to a marketer within the payment details, including:

  • purchased item characteristics (down to the serial number);
  • customer’s loyalty information;
  • customer’s time in store;
  • proximity of item in store to print advertisement;
  • relevant sales associate;
  • whether a discount was used, and if so, relevant details;
  • and more.

Novel, more accurate data will further empower agencies to tie their marketing to sales and bolster their claims of attribution. More relevant advertising will in turn drive more relevant marketing and cull those deemed less effective. On the payments side, advertisers will petition payment services providers to define marketing-specific data standards to streamline operations. Loyalty software providers will integrate payment data into their systems to provide more holistic customer views. Likewise, financial services providers will face the balancing act of consumer privacy, enabling agency-desired features, and how to leverage this data to their own business benefit.

A major question of enriched payments is how privately their information will be transmitted, as the data will be valuable and may even contain competitive intelligence on the seller. Will the merchants populating this information encrypt it to hide its contents against nosy financial service providers looking to bundle and sell the data? How would regulators wary of criminal activity react? These and related questions have not yet even begun to be discussed.

Clearly new payment models will spur greater advertising industry sophistication. Whereas agencies of the past relied upon squishy qualitative measures like focus groups, modern advertisers will compete ruthlessly against hard performance metrics. Such rivalry will inspire innovation in marketing techniques, models, and measurement tools - particularly those on attribution. In a future with universal behavioral tracking via an ‘ever-present-capitalistic-internet-connected-digital-ecosystem’ it is reasonable to assume everything we see, hear, and do will be assigned a price by an advertiser as soon as its possible to do so.

no-adland

This brings us back to Nomadland and its product placements. I’m not crazy - the market for product placements has grown annually by double digits for a full decade! Streaming video providers like Netflix and Hulu are eagerly subsidizing new contents’ high production costs by weaving brands into storylines of movies and shows. At what point does the show end and the advertisement begin?

Future product placements may grow even more prevalent with micro-payments. Consider a viewer watching Nomadland on Hulu. In a future scenario, perhaps the agency is awarded only once a viewer watches enough of the movie to see a product referenced. Next, a bonus is awarded if the viewer purchases the product beyond their typical propensity to do so. In this way, agencies and directors alike will be financially incentivized to make as many references as possible.

image01 Figure 1: Would Warhol’s art have meaning if he was sponsored by Campbell’s? Source.

Because new payment technologies enable financially incentivizing everything, everything is at risk for being financially incentivized. Yes, tomorrow’s faster and cheaper payments promise to disrupt a torpid financial system and unlock countless efficiencies throughout broader society. However, as we enter this future it is worth exploring how not all innovations will be necessarily welcome (see my earlier post on behavioral nudges). Unintended consequences - like the dilution of art - will undoubtedly abound. Financial technologists designing tomorrow’s systems must be thoughtful of the possibility of such inadvertent outcomes, and must future-proof and/or design safeguards to limit them.

I’m frustrated to admit I don’t have a novel answer. Professionalism, industry standards, regulation, and general citizenship are needed to build payments systems which encourage positive outcomes. As with anything, the first step is to acknowledge and discuss these topics. Only by doing so can we build a payments infrastructure which enables more than personalized advertisements.

I welcome your feedback. Please don’t hesitate to reach out through the contact section of the website if you would like to discuss, comment, or have any suggested edits.