How Blockchain Will Help Small Businesses Challenge Even the Largest Rivals

Businesses that embrace modern digital technologies see significantly higher growth margins than those that are slow to adopt them. But while large companies like Microsoft and IBM are already applying blockchain to their infrastructures, small businesses are lagging when it comes to implementing the technology.

Data has become the lifeblood of business, but companies of all sizes are limited when it comes to what information they can acquire and from whom they can acquire it. Businesses looking to add customers typically have to earmark funds to get data from third-party vendors like Facebook or Amazon -- and this is on top of the money they already spend for advertising campaigns.

Amazon and few other behemoths have cornered the market when it comes to acquiring and selling data. Everything from shopping habits to political leanings to health concerns of their users is information the buyer can trust.

However, blockchain stands to revolutionize this process by making data trustworthy all on its own. The distributed ledger offers full transparency, so buyers and sellers can see the source of any information, and whether it has been tampered with. Ultimately, this means internet giants will no longer be the only trusted source for data and small businesses can now begin to reap the benefits.

Related: Why Blockchain Matters to Small Businesses

Cutting out the middleman.

Acquiring data today is akin to shopping at a big box store like Walmart. The seller is big and has the final say on what inventory will be available and at what price. But what if acquiring data was more like visiting an open-air bazaar? Since data can be trusted thanks to blockchain, the "big-box model" is now in jeopardy. Theoretically, any business can offer up the data they are currently unable to monetize, and buyers will know it's genuine information.

If small businesses can share data with one another directly, they can make a wider variety of it available at a lower cost, provided there are privacy mechanisms in place when it comes to how the information is used. For example, acquiring data through Facebook or Google generally means a business can get some user information, but not critical business information like email addresses and phone numbers.

Direct data commerce means smaller businesses can get more types of trusted information at a lower cost, and then better target their promotions and advertisements. This in turn means their ad budgets can come down significantly.

Related: How Blockchain Might Change Payments for Small Businesses

What will direct data commerce look like?

When enterprise data is verifiable, transparent and readily available, small businesses in search of data should be able to see a snapshot of what kinds of information is available and from whom. No one wants to shop in a massive, open-air bazaar without a guide to what goods might be found in which areas.

A buyer should be able to submit a query in a blockchain-enabled environment and get back information on which businesses have the type of data they want. For example, an email marketing company looking to target female consumers over the age of 60 who live in the New York metropolitan area, should be able to enter those parameters into a query and get back a list of businesses that have such data.

The businesses that have this particular data -- instead of sharing all of the contact information for all of those consumers -- could use blockchain to circulate an advertisement to every person in that exact demographic on behalf of the buyer. This way, the seller could make use of email addresses of customers without making that information available to anyone else, hence protecting privacy.

Related: 8 Benefits of Blockchain to Industries Beyond Cryptocurrency

Consumer benefit.

When small businesses team up through direct data exchange, there will also be new and unexpected benefits to consumers. Blockchain will bring transparency and trust to online transactions, but its influence will likely be far more disruptive than that. It will give consumers more choice and enable smaller businesses to slash costs by working together directly that will challenge the dominance of much larger rivals.

No mechanism like this has ever existed before, and the timing for it couldn't be better. As Facebook's recent travails illustrate what happens when too much power, or in this instance, data, is consolidated among too few players. Regulators may be changing the way Internet giants collect and sell data, but the influence of blockchain could be far more disruptive.