Patrick Orton

@porton1968

Decentralization and Marketing

April 10th 2018

One of the most important aspects of any business is marketing. Whether this comes in the form of selling the earliest releases of the product or developing a vibrant community to encourage further public adoption, marketing is vital to the future success of any company. Unfortunately, we believe that this is one area where many recent blockchain-based companies have fallen short.

This need for marketing is particularly acute for these companies because their sales cycle is significantly different than for conventional alternatives. It is easier for potential clients to simply stay with what they already know than switch to a brand new- untested product. Customers need to be convinced to switch over to the new alternative, this is accomplished through marketing and visibility of the company.

An excellent example of insufficient marketing is Storj. Storj has developed a truly revolutionary protocol for file storage. Because it is based on blockchain, storage on this platform is significantly safer than conventional single server based platforms like those offered by backup services such as Mozy. This is because all data is replicated around numerous locations. In addition, Storj rents out unused storage space from many different providers around the world, lowering opportunity costs and maintenance of these computers. This lowers operation costs and ultimately storage prices.

Storj Logo

However, as anyone who has installed their client software has seen, Storj have been plagued by continually low demand for storage services. Storage providers aren’t able to run at a high uptimes and their resources sit idle waiting for contracts to be placed. This is surprising considering that Storj offers a superior product to conventional non-blockchain based services in nearly all respects. While it is very likely that Storj will ultimately succeed, they have not truly fulfilled their potential growth rate. The question, then, is why? We believe that this is due to a lack of significant marketing and visibility. When you search “file storage” of Google, the first results that come up are Microsoft Azure, Dropbox, and AWS. Storj does not even appear in the first five pages of search results.

This problem is not unique to Storj, many blockchain companies are failing to to achieve significant market penetration for this reason.

Amazon Web Services

This deficit of marketing is due to the very structure of these blockchain companies. Within any given company’s network, blockchain allows for direct transactions between the buyers and providers without the need for a central intermediary. This is one of the key benefits of blockchain. However, when the company which develops the network does not take any cut of each transaction, as is the case with many two sided networks, they have no incentive to promote market development and grow the user base. If the company’s revenue does not increase with success of the network, they will have no financial incentive and no resources with which to promote the growth of that network. This comes down to aligning the incentives between the central company and the network itself.

Incentive alignment is an important consideration in developing any platform and has a lengthy history in economic thought. The idea is that each participant in a network must only participate in actions which benefit all other participants. In this case, the central authority in a trustless networks should be encouraged to market the network itself thereby bringing in more users.

This has led to a rise in a funding structure wherein the decentralized company takes a “fee” out of each transaction. The idea here is that while transactions remain direct, a key hallmark of the decentralized model, there is still funding to support and encourage marketing. Growth of the ecosystem will increase revenue which should encourage further marketing by the central participant and so on. This is the design of a number of new companies in the decentralized space including Shardix and Filecoin. Shardix, for instance, is a decentralized database company which utilizes a two sided network much like Sia and Storj. Transactions are direct between the two sides, however, for each payment, they take a set fee which can be used for future development and marketing.

Shardix Logo

Ultimately, in order to fulfill the potential blockchain brings to different sectors, each company has develop a comprehensive marketing plan. This includes creating a funding strategy and forming the structure of the network to provide an ongoing growth incentive. This will enable blockchain companies to finally begin competing on a level playing field with conventional alternatives.

Sources:

https://storj.io/

https://aws.amazon.com/

http://www.shardix.com/

https://filecoin.io/

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