The Future of Advertising: Brave and the Basic Attention Token

The advertising ecosystem has three principal players: the user, the publisher, and the advertiser. The publisher provides content that is valuable to the user. The user does not pay for this content directly, but instead provides their valuable attention. The publisher then sells this attention to the advertiser (through an intermediary layer of ad exchanges and other middlemen) who uses it to influence the user.

The team at Brave makes the case that this current system is broken. They have re-imagined the entire advertising stack, and are using blockchain technology and the Basic Attention Token (BAT) to build a new and transparent ad exchange.

The Problem with the Current Advertising Ecosystem

The Basic Attention Token (BAT) whitepaper points to the complexity of the current advertising ecosystem as the cause of it's problems.

Cross-device tracking, retargeting, and segmentation solutions are loaded onto the browser by JavaScript. This slows page loads, drains battery life, and costs users increased mobile data charges (estimated to be $23/month in the whitepaper). The user's privacy is also lost. The whitepaper shares a disturbing diagram detailing all JavaScript files that are loaded when a content site (in this case is visited:

The growing unhappiness with this experience has caused many users to install ad-blockers. The increased adoption of ad-blockers, and the many middlemen that require payment (ad exchanges, audience segmentation platforms, tracking services), has led to lowered revenues for publishers.

In addition, advertisers often don't have a clear grasp of their ROI. Data becomes obfuscated as it passes through multiple middlemen in the fragmented pipeline. Furthermore, analytics products that are provided by the advertising platforms (such as Facebook) are prone to principal-agent conflicts.

The existing situation is far from ideal.

The Brave Browser

Brave took the first step in providing an alternate stack by launching the Brave browser earlier in 2016.

The Brave Browser

The Brave browser blocks all ads and JavaScript trackers out of the box. With ads removed, it provides an alternative (albeit insufficient) replacement source of income for publishers: user donations.

Users deposit money into their browser's "wallets" and decide on a monthly budget for donations. The browser then anonymously tracks all sites visited by the user over the following month. It then divides the earmarked donation funds amongst the sites, in proportion to the amount of attention spent by the user on each of them.

Since the browser, and not an external JavaScript file, is doing the tracking, more accurate metrics can be collected. Attention is measured based on the browser's active tab and the "incremental duration and pixels in view in proportion to relevant content". Specific algorithms are proposed in the whitepaper which fill in the details.

The granular attention metrics never leave the user's browser and are instead communicated to the Brave ledger using an anonymizing Zero Knowledge Proof scheme.

This system is currently operational. Publishers are receiving donations. Brave has shown that an alternative is possible, and made impressive progress towards it.

Donations alone cannot support publishers, however, and advertising is required in most cases. This brings us to the second part of Brave's solution: the Basic Attention Token and the advertising economy.

The Basic Attention Token

The BAT is an ERC20 token built on the Ethereum blockchain. It is the unit of account in this new advertising ecosystem.

The flow of value in the Brave ecosystem begins with the advertiser. They send BAT tokens to the user's browser. As the user views the ads, the received tokens become unlocked and are shared between them and the site publisher. Brave also receives a payment, which according to the team will never be larger than the amount received by the user.

This is described in the whitepaper:

The high-level concept is the advertiser sends a payment in token along with ads to users in a locked state. As the users view the ads, the flow of payments unlocks, keeping part of the payment for their own wallet, and passing on shares of the payment to Brave and passing the remainder on to the Publisher.

Value flow of the Basic Attention Token

This is interesting for multiple reasons:

First: the flow of value between the advertiser, the publisher, the user, and Brave take place on a public ledger. This brings transparency to the ad exchange.

Second: the user is remunerated for their attention. This means that over time, users will accumulate BAT tokens as they browse around. They will then be able to add these tokens to their monthly donation allowance, withdraw them, or use them in new interesting ways (described below).

According to comments in a Coinfund Q&A by Brendan Eich, Brave's CEO, Brave does not anticipate the cost for advertisers to increase even though an additional stakeholder (the user) is now receiving payment. Brave argues that the system simply redirects what is currently lost through inefficiencies and payments taken by middlemen to the user.

A New Economy

Users will passively accumulate BAT tokens as they browser the internet. These BAT tokens could then be used for new applications, some of which are listed in the whitepaper:

  • Sending premium content to friends: it is currently onerous to share content that is behind a paywall. Within the BAT ecosystem, one might be able to "wrap" an article with the BAT required to view it before sending to a friend.

  • Ranking or voting on comments by using BAT tokens (similar to upvotes / downvotes but tied to monetary value).

  • Provision of higher-quality content for a BAT transaction (e.g. high-quality video or audio playback).

  • Purchase of digital goods. This will be especially useful for one-time transactions such as getting access to high-resolution photos or data feeds. It is analogous to how thinks about transactional API access.

  • Users using their BAT income to create highly-targeted and smaller scale ads of their own.

  • Simpler subscription models for websites or newsletters.

  • Simple in-browser games. The whitepaper makes the valid point that people won't necessarily "get out their credit card" to pay for such applications, but "they may be willing to part with some value they acquired in normal browsing activity".

This is all very exciting. Brave is essentially capitalizing on digital currency's long-anticipated potential for micropayments to explore the frontiers of a new web economy.

Also noteworthy, as gleaned from the Coinfund Q&A, is that Brave does not foresee the necessity of strict financial regulations enforcement within the BAT ecosystem. Brave does not hold custody of funds and all transactions transpire on the shared network. Furthermore, BAT tokens are only usable in the "real world" when traded for other currencies. This will happen on external exchanges, allowing Brave to perhaps get by without needing to integrate KYC requirements.

Final Thoughts

The Brave team has a genuinely new take on the web advertising model. The browser is open-source and it's internal operations transparent. Payments between advertisers, publishers, and users will take place on a public auditable blockchain. Users will get payed for their attention. And they will in turn be able to use this income to form a new economy.

There will, of course, be real obstacles to overcome. In particular, I see potential problems in two areas:

  1. Botting
    Users are remunerated based on their client-side browsing habits. The metrics which these payments are based on are aggregated and anonymized before leaving the user's browser. This seems like fertile conditions for the creation of bots. To be fair, this is a problem in the existing system, but is something that Brave might have to deal with at a higher level.

  2. Will the algorithms responsible for matching ads to users be open-source?
    The Brave browser is already open-source. Creating an open-source matching algorithm could increase credibility and provide a much-needed counter-point to the opacity of Facebook and Google's advertising systems. However, this could also lead to attempts to game the system.

That being said, the Brave team has a history of solving difficult problems, and these could prove to be no different. Brendan Eich, Brave Software's cofounder and CEO, is the creator of Javascript, cofounder of Mozilla, and has had a hand in developing the Netscape and Firefox browsers. The rest of the team is just as strong.

The Basic Attention Token crowd-sale begins on May 31st 2017. The team is planning on raising a minimum of $4m USD and a maximum of $15m USD. Whether you participate in the crowd-sale or not, this a project to keep an eye on.