Originally published a series of posts here
I recently started using Brave Browser and reading about its Basic Attention Token (BAT). I think this duo stand a chance of changing the ever more poisonous online advertising industry.
Brave’s main purpose is to improve user privacy and to provide an enhanced browsing experience by doing that. The entire application is built around the concept of maximum user privacy above everything else. This is why by default Brave blocks ads, 3rd party cookies, 3rd party fingerprinting, malware and phishing and provides HTTPS connections everywhere. Brave-BAT want to achieve this by using blockchain technology.
Everyone can easily see how some of these default features are not beneficial for the online advertising industry, the most obvious one being the ad blocking feature. But this project has a plan to to keep this ad-funded online media economy alive. That plan is called BAT.
BAT is a utility token which allows for advertisers, publishers and users to transact in the Brave-BAT blockchain ecosystem. This utility token can enable advertisers to pay for ad space (or user attention as BAT creators would like to sell it), publishers to get paid for their ad space or content, or users to get rewarded for the negative externalities caused by the market transactions between publishers and advertisers.
Here follows an overview of the project as well as some personal views as to how it can be improved.
Economic theory behind it
One of the beautiful things about blockchain-based projects is that they often rely on economic theory to offer alternatives to real world problems. Cryptographically secured blockchain systems are a combination of disciplines, mainly computer science, economics and law.
The current online advertising marketplace is inefficient. The most valuable asset for all the actors, user attention, is transacted poorly. Users whose browsing experience is worsened by the impact of ad delivery aren’t compensated for it. Brave — BAT offer a solution to these inefficiencies using the Coase theorem as the basis.
But before going into the proposed solution, what are the factors that make this market inefficient?
- For Advertisers: multiple middlemen make ad inventory more expensive. User targeting and ad delivery measurement are inaccurate due to technology limitations. Ad fraud decreases the effectiveness of investing in advertising (and fraudsters are incentivized by the fact that advertisers transact with “ad impressions” as opposed to “user attention”).
- For Publishers: multiple middlemen, ad fraud and an increased usage of ad blockers reduce revenues. The need to sell more “ad impressions” contributes to ad clutter and dubious traffic generation techniques. Click-bait articles shift the focus from investigative journalism to mere attention grabbing headlines.
- For Users: privacy concerns, ad clutter, heavy pages, slow load times and increased mobile data consumption contribute to a poor user experience (this in turn incentivizes the usage of ad blockers).
A more efficient marketplace would be one where user experience is less disrupted by the negative externalities that emanate from transactions of “ad impressions” between publishers and advertisers, one where advertisers invest money effectively and publishers maximize yield for their content. By changing the units exchanged from “ad impressions” to “user attention” and improving the conditions under which “user attention” is transacted, this marketplace can become more efficient. And this is the proposed solution.
From a technology standpoint, BAT-Brave can improve the means used to target users and deliver and measure ads. This can be achieved by leveraging built-in measurements tools in the Brave browser, as well as a blockchain that securely and privately records user data, ad delivery data and enables instant economic transactions between advertisers and publishers. These functionalities also contribute to reduce the number of middlemen currently involved in online advertising transactions.
From a user standpoint, the negative externalities (or “ad pollution” in economic Coasean terms) that can’t be avoided with this technological advances can be offset with small payments that reward users for their attention.
So with advertisers paying publishers directly for actual user attention, and with users getting a share of these payments for the remaining negative externalities, the BAT economic theory says a more efficient marketplace can be achieved.
Attention metrics
An online advertising marketplace where “user attention” is transacted, as opposed to “ad impressions”, requires a new measurement metric. To date advertisers have normally bought inventory based on “impressions” which represent the number of times an ad is shown in a page. To transact with “user attention” you need to first define the way in which “user attention” is measured.
Brave-BAT suggested several attention metrics:
- 5 total views of advertising content in a single active window for at least 5 seconds each. These hits would be calculated over a 30-day rolling period.
- Concave score. A score that rewards publishers for the user time spent on the site, with diminishing returns for longer views. So 2 second view would be 1 “point”, 30 second view would be 2 “points, and 60 second view would be 3 points. For example.
The current attention score used by Brave to reward publishers based on user attention is an implementation of the concave score, which has a minimum threshold of 25 seconds in order to achieve a attention score of 1. This is a graphical representation of how the scoring system works, taken from the BAT whitepaper
The utility token
The Basic Attention Token (BAT) is the gasoline that fuels the Brave-BAT ecosystem. BAT can be defined as a utility token that facilitates the access to and the transactions within the Brave-BAT ecosystem. The planned workflow is for advertisers to get access to ad inventory by sending BAT to publishers with the user and Brave browser taking small fees from each transaction.
Workflow as per BAT whitepaper:
The usage of BAT to facilitate transactions allows for a system that eliminates many of today’s middlemen in online advertising as well as the ability to reward users for the “negative externalities” created by such transactions.
Technically in the first iterations of BAT transactions will occur in the “Brave Ledger System”, a built-in ledger that allows users to make donations to publishers based on the attention spent on their site (using the concave score previously described). Further iterations of BAT are planning to use a distributed ledger system (Ethereum) to facilitate the flow of BAT and ads from advertisers to users. The use of a public distributed ledger such as Ethereum for BAT transactions will help with both public accountability and scalability of the system.
BAT as utility token also opens the door to develop other applications that can leverage the system. For instance premium publishers could require users to make BAT payments to grant them access to premium content (an idea I reviewed in a previous post). Or users themselves could user their earned BAT to promote their own small businesses or groups with ads, or even to purchase digital goods from online sellers.
Summary of all the good things and what can be improved
Brave-BAT project in summary.
The good:
A simplified and more efficient online ad marketplace is preferred by all the main actors (advertisers, publishers and users). The public accountability achieved with the use of a public distributed ledger introduces more transparency to the current opaque ad tech sector.
Users win in privacy and are rewarded for the downsides of having to still receive advertising. Advertisers win in spend efficiency and measurement of ad campaigns. Publishers revenue maximizes thanks to a more direct relationship with advertisers and the new revenue streams made possible by the BAT token.
The idea of having a thresholded attention offering with a few layers of attention (from 1 to 7 for instance) sounds appealing. Ad inventory could be distributed into slices ranging from “low attention” quality to “high attention” quality. Advertisers and publishers could expect higher prices and lower availability of “high attention” inventory, and lower prices and higher availability of “low attention”. This attention-based metric triggers other benefits too.
When it comes to privacy, with the proposed Brave-BAT system publishers wouldn’t need to ask for user consent for 3rd party tracking vendors (which is the current GDPR madness in the EU). Data from users never leaves their device and it’s only shared based with others based on the users choices. In other words, users have full control and ownership over the data they generate so Consent Management Platforms such as the ones popularized by GDPR become redundant.
User adoption can be high. The potential market share of Brave can be forecasted based on current user adoption of ad blockers. If users of ad blockers really do care about the survival of the publishers they read and a free internet, then there’s no reason why they would use standard browsers + ad blockers as opposed to Brave browser. For this type of users Brave browser allows the the survival of the free internet that ad blocker users “love”.
Advertiser adoption can be high. Advertisers might find it more appealing to have the ability to buy “actual user attention” as opposed to just “ad impressions”. Dollars currently spread among many of the middlemen in the online ad buying process can be repurposed for a more compelling offering, one that is more rewarding for publishers and users. The future applications enabled by the use of BAT token can also benefit them: forget about coupon codes in ads when you can directly offer BAT tokens which users can exchange for a product or service!
Publishers can benefit from what’s otherwise a lost revenue opportunity (if users use standard browsers + ad blocker extensions). By joining Brave they can still get revenue from users that wouldn’t generate any yield from ads. In the long term online journalism can benefit as a whole by moving away from “click-bait” articles (used to generate high levels of impressions) to high quality investigation journalism (used to generate high levels of attention). Attention-based pricing also justifies high prices for high quality inventory.
The bad:
Publishers might feel their inventory is highjacked by Brave. It might seem that the choice is in between working with Brave’s monetization platform or having your ad inventory blocked by Brave’s built-in ad blocking system. Publishers should still have a choice over how to sell their ads without being forced to work with one monetization partner. What Brave can to is entice publishers to work with them by offering a better user experience, especially when it comes to ad serving and data privacy).
Publishers can also argue that in the short term ads are getting blocked (Brave is not currently fully operative as an advertising platform). The only revenue source for publishers from users using Brave right now are the monthly voluntary BAT donations that are distributed based on the “concave attention scored”.
The scale of the Ethereum blockchain is currently an issue. In order to record user data, ad delivery data and economic transactions between advertisers and publishers Ethereum needs to handle way more than 13 transactions per second. We’re talking millions per second to be viable.
With the blocking of cookies and any type of third party tracking, Brave browser should develop a full suite of tracking capabilities beyond the standard impressions and clicks. This would also enable the creation of new metrics based on quality of “actions” or “conversions”. For instance, “actions” that occur after a user clicks.
There’s not a word about integrating with the current online advertising ecosystem. All the different actors in online advertising ecosystem can easily communicate with each other using what’s known as the open RTB protocol. This is widely used across the industry. Brave should find a way of communicating with all the actors using this protocol to achieve more scale.
Overall I feel that the benefits offered by Brave-BAT outweigh the drawbacks but further developments are needed for this project to thrive.