BAT: Building A More Free And Fair Internet (Cryptocurrency:BAT-USD) (2024)

The BAT token (BAT-USD) is one of the more interesting long-term speculative bets in the digital asset space. I take this view as both an investor and as a content creator. To understand the potential opportunity in BAT, I think we need to first understand exactly what BAT is and why the Brave browser is so important.

Brave and BAT

BAT stands for "Basic Attention Token." BAT is essentially a utility token that is used in the Brave browser advertising exchange and in the Brave rewards program. Advertisers utilize the Brave browser advertising platform to run ad campaigns targeting Brave's user base.

The Brave browser offers users a robust ad-blocking browser with opt-in advertising. In exchange for being served a pre-determined number of advertisem*nts per hour in the Brave browser, users are compensated for their ad-viewing with BAT. These tokens are paid out to users on a monthly basis and upon receiving them, BAT recipients have the option to keep the tokens for themselves, trade them for other currencies like dollars, or support their favorite content creators through "tipping" the BAT.

What Brave is ultimately trying to orchestrate is a massive paradigm shift in consumer data monetization and trusted advertiser acceptance. While some of these intended goals might seem lofty and unattainable, we have to look at the participants in the ecosystem to grasp why everyone involved has something to gain from Brave's success.

The Media Disruption Component

It's no secret that content distribution channels are dealing with serious disruption thanks to the internet. What started with the newspaper industry a couple of decades ago is now also rapidly breaking the current linear television system. There are a few factors driving this, one of the biggest is the improvement of internet bandwidth. We've seen this play out in the rise of streaming media platforms. While YouTube has taken a sledgehammer to the old way we watched video, most of the platforms we now use for video and print are still very much centralized. This new version of centralization has enabled a lower barrier to entry for independent creators.

For instance, the caliber of writers who are currently creating content for online platforms like Substack and Medium is very good. In the past, the talent on display on some of these websites would have almost certainly been more driven to traditional media publishers like the New York Times or the Wall Street Journal. Everything is different now. Gone are the days where you had to have the right mix of connections, degrees, and abilities to get some place in media. Now, if you can hack it, you can build an audience just about anywhere. As great as Substack and Medium are, they're just the stepping stones from fully centralized media to true media decentralization. I believe Brave and BAT are going to have a significant impact on this movement to full content decentralization.

While they offer payment for attention, entities like Substack and Patreon are still ultimately centrally controlled. Given the current environment we are in politically, we're already seeing cries from some to de-platform content creators on these sites. It is my hope those cries for censorship of thought will be ignored. However, I don't think they will be. Brave and BAT seem like an essential hedge to the risk of more widespread de-platforming. With the Brave rewards program, content creators can become "Brave verified" through their own websites. This means content consumers can directly pay Brave verified content creators with BAT token. It is direct patronage without the risk of de-platforming because there is no platform overlord other than the creator of the content.

The Network Effect

What will ultimately drive widespread adoption of the browser is the attention compensation and the promise of more privacy. Brave is not the only entity to reward attention. There are other browsers that offer something similar and people have been paid to take surveys for a long time. But it is the Brave browser that the market is truly adopting. Brave sporadically reports user figures at key milestones and the trend in monthly active users is impressive.

Source: Brave

According to basicattentiontoken.org, the daily active user number is currently sitting at 9.8 million. Judging from past blog posts by Brave, the DAU/MAU stickiness ratio of the browser has consistently been in the 33-35% range. While that might not be as high as the 50% enjoyed by platforms like Facebook (FB), it's still a very good percentage and shows a truly engaged user.

Source: Google Trends, last 5 years - red is "brave browser" blue is "basic attention token"

There is clearly a market for what Brave is doing. The search interest through Google Trends is showing a multi-year upward trajectory for the browser. While the token search isn't as robust, it is also near a 5-year high. The more users of the browser, the more users of the token. I believe we are still in the early innings of Brave/BAT adoption.

Advertisers are Taking Notice

Finally, there are the advertisers. They are ultimately the grease that keeps the machine moving. What motivation do they have to move to an ad exchange like Brave? There is a stated complexity to the advertising industry that Brave is trying to disrupt. From the BAT white paper:

Sales planners currently budgeting for brand advertising are required to account for an excessive number of intermediaries that stand between the ad and the end user. Agencies, trading desks, demand side platforms, desktop and mobile network exchanges, yield optimization, rich media vendors and partnered services often consume significant portions of creative and delivery ad budget.

Stated more simply, the current online advertising ecosystem siphons too much value from the campaigns through a multitude of middleman layers. This minimizes the efficiency of the ad spend and hinders the ability of ad campaign to actually work.

One might expect advertisers on browsers such as Brave to be highly geared toward cryptocurrency and privacy enthusiasts. There is certainly an element of truth to that. We can see that play out as anticipated with ad partners like Nexo.io, BlockFi, and eToro. But there are quite a few more broad national advertisers who have run campaigns through Brave as well. Brave cites business from Verizon (VZ), Home Depot (HD), Progressive Insurance (PGR), Chipotle (CMG), Amazon (AMZN), Harry's Razors, Grubhub (GRUB), Lenovo, and Quickbooks.

As one may have already concluded from this article, I'm a user of the Brave browser as well. Having utilized this product now for several months, I can attest that it is a better form of advertising for all parties. The fine people at Upland.me can now consider me a customer because of Brave. Apparently I'm not the only one. Upland noted its Brave campaign resulted in three times the revenue per user attained from a Facebook campaign.

With a reported click-through rate of 9%, ads run through Brave's advertising platform are seeing engagement better than 4 times the industry average. This is considerably impressive considering the character traits and demographics of Brave's user base. 6 out of 10 users utilize an ad-blocker when they're on other browsers. As time continues, the adoption of ad-blocking should continue to rise. This demographic breakdown of users shared in Brave's sales deck shows a correlation between adoption and age.

The trend with younger Americans is generally a higher adoption of ad-blockers the younger you get. Finally, the traditional consumer most advertisers have always tried to reach is the 25 to 54-year-old adult. Brave's audience demographic survey showed 69% of its user base falls in the 25-49 age range. Putting it all together, Brave has users who advertisers have traditionally coveted and who are more likely to utilize ad-blocking technology that can make them difficult to reach through other digital ad platforms.

More in the pipeline

As if disrupting digital advertising and taking user share away from browsers owned by much bigger companies wasn't ambitious enough, Brave laid out some pretty big goals in a recent Roadmap 2.0 post. The company has plans to roll out a DEX aggregator that will provide added value for BAT holders by way of discounts on transaction fees and token swaps. Additionally, the company intends to facilitate decentralized web adoption with VPN and IPFS integrations.

Risks

The BAT token has been flying lately. While I view this as tremendously positive in the long run, it could indicate the price could be due for a pullback. Potentially even a sizeable one after rallying over 500% year to date.

Additionally, right or wrong, Brendan Eich is controversial. The former head of Mozilla, now Brave CEO, recently came under scrutiny for COVID-related views he expressed on Twitter. Whether or not Eich should be allowed to voice his opinion is not the point. That he does and could conceivably turn users away is something to keep in mind.

Conclusion

BAT is sitting right at the center of three potential trend shifts. The move to true decentralized direct-to-consumer media, the move to more consumer data privacy, and the move to more efficient advertising spend optimization. Brave, and by extension the BAT token, could potentially play a very significant role in a more fair and free relationship between advertisers, consumers, and creators.

As more use the Brave browser, the BAT token becomes a currency with more value and utility. It's the "network effect" so often mentioned in the cryptocurrency space. If Brave is successful, the interests of advertisers, consumers, and creators will be very much aligned. Everybody wins except legacy middlemen.

Mike Fay