ICOs Banking on Advertising the Basic Attention Token and Adbank
Two rival Ethereum-based blockchain solutions are betting that advertising profits can be translated into cryptocurrency cash. The Basic Attention Token (BAT) and the Adbank Network (ADB) designed for the same purpose; to offer digital advertisers and website publishers an alternative to a corrupt advertising ecosystem.
Both ERC20 tokens are designed to be used in digital advertising exchanges built on the Ethereum blockchain. The companies behind solution are offering tools that are designed to detect fraud, and guarantee payment to advertisers.
A key difference is that the Basic Attention Token initial cryptocurrency offering (ICO) was held in 2017. Adbank has scheduled its ICO for January 2018. Another is that Brave, the organization behind BAT is based in San Francisco, while Adbank is headquartered in the Toronto suburbs.
Two Ethereum Solutions trying to solve the Same Problem
The truly fascinating part of the Brave/Adbank story is that both organizations are trying to use the same technology; Ethereum smart contracts, to solve the same problem.
The problem is that digital publishers are having a hard time making money online because of widespread fraud, corrupt middlemen and an ecosystem dominated by giant corporations like Alphabet (NASDAQ: GOOG) and Facebook (NASDAQ: FB).
Ad fraud is so pervasive that nobody knows how much it costs – the commonly accepted figure is that 20% of digital advertising spend is lost to fraudsters. The best estimate for ad-fraud losses I found was that from the Adloox Auditing service; which estimated that advertisers lost $16.4 billion (€14.09 billion) to fraudsters in 2017.
One thing is certain, website publishers are getting screwed in today’s advertising ecosystem. Adbank estimated that between 30% and 60% of ad revenue is being taken by middlemen. To make matters worse a lot of advertisers cannot tell if ad traffic is real or generated by fraud bots.
Building a New Advertising Market
The plan at both Brave and the Adbank Network is to build a new advertising market based on the blockchain and tools that detect fake ads. Brave will go one step further by offering an ad-free next-generation browser.
Adbank plans to offer what amounts to an Ethereum-based bounty for fraud detection. That company also plans to offer some ad-blocking solutions to the public in exchange for bonuses.
Another part of the plan is to use Ethereum smart contracts and decentralized applications (DApps) to ensure the authenticity of ads. Both Brave and Adbank claim to be able to generate smart contracts that will verify when an ad has been viewed. That will create an ecosystem in which advertisers will only get paid if an actual human being looks at the ad.
Trying to cash in on a $220 Billion Market
The market that Brave and Adbank are trying to cash in on is certainly lucrative. The value of digital advertising globally in 2017 has been estimated at $220 billion.
The demand for alternatives to giant corporate-owned advertising ecosystems like Facebook and Alphabet (NASDAQ: GOOGL) is also huge. The $220 billion question is can Ethereum really offer those alternatives. So are alternatives to smaller advertising networks that are non-transparent and racked with fraud.
A major challenge will be getting the notoriously conservative and corrupt advertising industry to adopt new technology and methodology. Advertisers have long consigned themselves to the inevitability that 90% of their investment is ineffective. Publishers are used to being paid a pittance for their ad space.
Is Basic Attention Token a Good Investment?
Investors will be attracted to these tokens by the vast amounts of money that can be made in advertising. Most of the $27.8 billion revenue Alphabet reported in 3rd Quarter 2017, came for advertising, Reuters reported.
Alphabet’s advertising revenues are also growing dramatically they increased by $4.2 billion or 29% in Asia alone in 3rd 2017, according to Reuters. Much of the growth is driven by mobile revenue, which has been exploded.
Brave and Adbank are simply too new to judge their effectiveness. One group that is certainly not skeptical of the potential payoff from digital advertising is investors.
The Basic Attention Token had a Market Capitalization of $408.112 million (551,273 ETH) and a Market Volume of $18.0755 million (24,416 ETH) on New Year’s Day, 2018. That was certainly impressive given the fact that BAT had a Coin Price of just 40.8¢ (0.00055 ETH) on the same day. Those figures were based on a Circulating Supply of one billion BAT; and a Total Supply of 1.5 billion BAT, on the same day.
Adbank has some success as well it had raised over $4.6 million (63,334.19 ETH) through the presale of tokens by January 1, 2018. Adbank plans to use the money raised to build its network and launch a package of artificial intelligence based fraud detection tools. The company also plans to start buying up existing advertising networks next year.
Can Blockchain Advertising Markets Compete with Google (and Facebook)
There are some serious challenges in store for both organizations. The greatest of which will be challenging Alphabet and Facebook on their own turf.
Those behemoths are the two largest digital-advertising middlemen and they are both fierce and ruthless competitors. Alphabet and Facebook control between 73% and 99% of the digital advertising market, Brave estimated.
Matching the giants’ resources will be impossible, and convincing publishers to use alternatives will be difficult. Alphabet reported $104.596 billion in revenues and $24.376 billion in free cash flow on 30 September 2017. Facebook reported $36.490 billion in revenue and $17.156 billion in free cash flow on the same day.
Although there are some opportunities in the market, a major one is in the European Union where Alphabet has run afoul of antitrust regulators. That might create an opening for alternatives like Brave and the Adbank Network if the EU forces Google to release some of its market share to competitors.
How Many ICOS is Too Many?
The situation between Brave and Adbank raises an intriguing question what happens with different companies with similar technology are trying to solve the same problem.
How are they supposed to get ICO investors to differentiate between the two? How is Adbank supposed to raise funds from investors who may have already bought BAT? Investors are likely to say Brave and Adbank are basically the same thing why do we need another one.
This might be an indication of the kind of fatigue that will destroy the ICO market. What happens when there are several different ICOs offering similar solutions for the same problem?
A likely scenario is that entrepreneurs will have to start tapping other sources of finance such as venture capital. Another is that some ICOs will fail not because they have a bad product, but because investors have already spent their money on similar tokens.
Will Adbank and Brave Make Money?
The ICO market is going to have to start growing, or Adbank and Brave will have to start generating some actual revenue from the ads. The business model of tapping ad revenue to build up a tech company is a proven one, Alphabet used it. The companies may no choice but to try and make money from their business because the ICO market is likely to get saturated.
Watch Adbank and Brave closely because these companies are offering a potentially lucrative solution in a business that is historically a cash cow. If either Adbank or Brave can do half of what it claims; these Ethereum-platforms have the potential to be big moneymakers and their tokens can achieve respectable Coin Prices.
