Over the past couple weeks, a few folks have offered their perspectives on the challenges that lay ahead for the BAT token and the Brave team. For the most part I’ve been a passive consumer here, but after reading Sriram Krishnan’s thoughtful piece I was motivated to add my own perspective. Contemplating the potential disruption of blockchain technologies to the digital value exchange is a fun thought exercise, so I hope this will prompt further dialogue.

To level set: the digital ad ecosystem is ripe with challenging problems, none of which lend themselves to a single painless solution. I would argue for a more nuanced point of view when addressing some of Sriram’s points about the challenges that BAT faces. I’ve reframed a few of his key points as hypotheses and added my thoughts.

1.1 The platforms already dominate, already solve for the issues BAT seeks to solve, and will therefore will continue to own future growth

Walled gardens are perceived as safe harbors for brands, and digital media budgets have moved accordingly. These budgets look for scale, targeting features, authenticated users, and cross-screen frequency thresholds. Platforms deliver on all of these. However, the foundational issues existing within adtech on the open web (which Brave seeks to solve) have eroded advertiser confidence and helped encourage that budget movement.

Let’s get more specific. What do marketers fear about the open web? Bloated user experiences, fraudulent or non-human inventory, lack of transparency about ad delivery, and opaque fee structures from their programmatic exchange partners. Shifting spend to Facebook is the advertising market’s equivalent “flight to quality”. If Brave solves for some of these open web concerns, perhaps those budget shift will taper off.

1.2 The publishing industry’s begrudging investments into new, closed platform distribution models are not related to fraud/privacy issues

Publishing businesses are ceding distribution control of their content over to closed, proprietary platforms. Aside from consumer time spent, let’s investigate the possible rationale for these decisions:

discarding the layers of technical debt that come from repeatedly replacing programmatic stacks over the years

mitigating the resale of their subscriber bases by open web exchanges and other third parties

eliminating bloated ad-loads, malware, and tracking scripts that drive users to alternative publishers

recouping money lost to adblockers (sweet irony)

eliminating transparency issues they face with supply side exchanges

While it’s difficult to quantify the impact, these are the factors a publisher has to evaluate when deciding where to invest for distribution. Considering the business risks they face by handing distribution over to a third party, it’s fair to say that the open web privacy and fraud issues must weigh heavily.

2.1 Brave needs mass adoption in order to attract budgets from marketers

While I agree that brands follow consumer behavior, I’d add two thoughts on the contention that Brave cannot achieve success without mass adoption:

The characteristics of audiences that use ad blocking software (skewing younger, higher income) also tend to be the ones that marketers pay higher premiums to reach

Said audiences consume media in ad-supported channels at lower rates than the general population. Opportunities to deliver messaging to these audiences are scarcer and therefore command a premium from advertisers

An interesting exercise (if you are a Brave user or install adblocking plugins) is to consider when during your day could you be reached with a marketing message. Do you pay a subscription fee to Netflix, HBOGo, Spotify, or Pandora? Or, do you prefer terrestrial radio, print magazines, and live television? If the former, keep in mind that none of those content streams afford advertisers the opportunity to reach you. The band of attention during which you are receptive to brands is quite narrow. In an attention economy, you are the supplier; it’s reasonable to expect that constraining supply will influence pricing and buyer behavior.

3.1 Audience targeting is more valuable than contextual targeting

Existing data marketplaces prove that audience targeting attracts higher CPMs and better ROI than contextual targeting. However, ultimately that premium is captured by data brokers, not necessarily the publishers that attract and help build these audiences.

Before addressable targeting came about, the advertising industry relied heavily on a communication mechanism called signaling. By placing untargeted advertisements, a brand signaled to consumers that by possessing the funds needed to advertise at scale, their product was very likely to be a well supported, high quality, and successful one. The consumer drew certain conclusions about the brand based on the perceived advertising expenditure, which served as a proxy for brand credibility. After all, who would spend the money to advertise a product if it wasn’t a quality one? This is explored in greater detail in an incredible writeup by Don Marti (short and long).

According to one of the papers he cites, once targeting arrives that signaling effect begins to evaporate. The user’s perception that they might be targeted means they discard the signal as a proxy for quality (whether or not they actually were targeted). In turn, the absence of signaling then has a net negative effect on the overall publisher ecosystem:

We study competition for consumers between websites that can show

targeted advertisements. We find that more targeting increases competition and reduces the websites’ profits, but in equilibrium websites choose maximum targeting as they cannot credibly commit to low targeting.

Regardless, marketplaces for user data may face changing tides of their own. Apple has announced updates to WebKit to prevent cross-site tracking, under the Intelligent Tracking Prevention framework. In Europe, GDRP will require adtech companies to retain a direct, consent-based relationship with any consumer whose data they retain and broker. If they fail to comply, fines of up to 4% of annual global revenue can be levied. Also worth noting that any business operating in the EU (even if HQ’d in the US) will be required to comply. These trends will materially alter the availability of targeting data and heighten business risk for marketers that want to leverage data for targeting.

Still, like Sriram I wonder how Brave intends to implement a localized approach that would allow more specific targeting; perhaps based on an anonymized, truncated browsing history. This would of course be reflected in the revenue share agreement that Brave holds with users.

4.1 Paying users for watching ads misaligns incentives.

For marketers, there’s a general but ill-defined feeling of “ickiness” around incentivized ads, and Sriram’s comment captures that sentiment. However, the Brave FAQs suggest that (1) the revenue share is not necessarily proportional to the number of ad impressions served to a user, meaning it will not be a strict quid pro quo with the user, and (2) the default setting will return that user revenue share to the user’s set of preferred sites, if they choose not to cash out. I’ll be very interested to see what proportion of users will opt to route this back to the publishers that they choose to support rather than cashing out.

5.1 Attention does not equate to a business outcome and therefore is not a meaningful input to marketers

The AIDA model by which advertising engages consumers through a series of sequential stages is well understood, and starts with a big old A. Just ask Alec Baldwin. Reliable, scalable sources of consumer attention continue the make up the majority of marketer spend. These blocks of attention are valued and transacted on based on the exposure event, not necessarily a business outcome for the marketer.

My long term view is that new measurement tools will emerge to better understand consumer attention at various stages of the funnel. This is turn will lead to more accurate pricing and monetization of the resources available at each stage. Finally, these data streams will allow for more precise models to push consumers through the appropriate stages to a real-world outcome. But it will always begin with attention.

Finally: It’s a little mystifying why BAT hasn’t gotten any attention in the ads world or the adtech press.

To jump back to where we started; indeed, coverage of the Brave team or their BAT token is conspicuously absent from the media and advertising trades. Let’s posit a few theories. Perhaps it’s the business risk that BAT introduces to any ecosystem player who relies on tracking or measurement scripts (almost everyone). Perhaps it’s the precedent that the NAA set with the rather aggressive letter sent last year. Perhaps it’s lack of media industry representation on the leadership team (at least by adtech norms). Whatever it might be, given the amount of attention that any “blockchain” headline tends to grab nowadays I am surprised not to see more activity on AdExchanger. I’m hopeful that we’ll see more coverage of the project from mainstream advertising press in the coming weeks.