Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Is the Basic Attention Token (BAT) the Future of Advertising?

The brains and big money behind the Basic Attention Token (BAT) are betting tokenization is the future of advertising.

In essence, BAT’s creators gamble that a different advertising business model is developing for the 21st Century. The old; 20th Century, business model is advertisers or content providers deciding what people want to see, hear, or read.

In traditional radio; for instance, a disc jockey or manager creates a list of songs he hopes people will listen to. Meanwhile, in traditional television network executives guessed what programs viewers wanted to watch.

How Advertising used to Work

In the new; 21st Century, business model the viewers, readers, and listeners decide what media they consume. For example, you pick what movie or show you will watch on Netflix (NASDAQ: NFLX); what news story you will read on Apple News, and what song you will listen to on Spotify (NYSE: SPOT).

The old business model was perfect for advertisers because it provided a captive audience. Back in 1979, if you wanted to watch Dallas or MASH you had to sit through whatever advertisements CBS (NYSE: CBS) put in front of your face.

Consequently a company could reach 100 million viewers by buying an ad on Dallas. To clarify, Dallas; America’s most popular TV show in 1979, sometimes attracted 100 million viewers. CBS made money by broadcasting its shows for free but running lots of advertising.

Today, however America’s most popular “TV network” Netflix is a subscription service with no commercials. Hence, advertisers cannot reach Netflix’s 60.1 million American subscribers.

How the Basic Attention Token could Save Advertising

The BAT Platform could save advertising by reversing the traditional advertising model. In traditional advertising, advertisers pay for access to viewers.

The idea at BAT is to pay viewers for their attention or eyeballs. The hope is to pay the viewer with a Basic Attention Token (BAT) each time she looks at content.

For example, Procter & Gamble (NYSE: PG) could pay you in BAT if you play its Tide-themed Freemium game. Or the Trump campaign could pay you in BAT for watching the President’s infomercial.

Hence, BAT intends to tokenize advertising by turning your attention into a commodity. The BAT platform could make money by serving as a marketplace for your attention.

How the Basic Attention Token Platform (BAT) could protect advertisers

The BAT creators bet that advertisers and marketers will pay for attention to get better information about consumers and advertising use. Advertisers lack good information because today’s advertising ecosystem is inefficient and prone to fraud.

Media buyers at Group M estimate digital ad fraud cost advertisers $22.4 billion in 2018, Fox News claims. The most popular scam is bot fraud in which criminals use digital robots to create fraudulent traffic. Fraudsters use the traffic to inflate click rates for websites then sell advertising on those sites at inflated rates.

How the BAT Platform could Make Money

BAT’s creators think tokenization can verify that a real human being is seeing an ad. Hence, BAT could charge higher rates for its advertising and make money.

In addition, BAT can make more money by selling verifiable and quantifiable data about viewers to advertisers and others. In particular, BAT has built the Brave browser which allows users to decide who tracks their searches.

If you allow BAT to track your searches on Brave, companies could pay you in Basic Attention Token (BAT) for data about your searches. Procter & Gamble (NYSE: PG) could buy data about searches for laundry detergent or toothpaste, for example. Theoretically, P&G could pay people interested in laundry for the privilege of seeing Tide advertisements.

Theoretically, BAT could make a lot of money because the advertising market is growing. Statista estimates spending for advertising worldwide could grow to $602.4 billion by 2020. Moreover Statista calculates that global advertising spending is growing at a rate of 4% a year.

Can BAT Profit from Old Media’s Death?

Thus, advertising spending is increasing when traditional media are dying fast.

Specifically, Warren Buffett predicts most American newspapers will disappear in a Yahoo! Finance interview. Buffett believes only a handful of big-name papers like The New York Times, Washington Post, and The Wall Street Journal will survive.

Buffett thinks newspapers are toast because they are no longer a source of pertinent information for average people. Instead, the internet and social media have replaced newspapers as an information source.

“No one except The Wall Street Journal, The New York Times; and now probably The Washington Post, has come up with a digital product; that really in any significant way will replace the revenue that is being lost as print newspapers lose both circulation and advertising,” Buffett said. Buffett made the statement at Berkshire’s 2018 shareholder question-and-answer session, The Wrap reports.

Warren Buffett’s Theory of Advertising

Buffett has a fascinating contrarian theory of advertising I think could apply to BAT. In particular, Uncle Warren thinks many consumers view advertisements as a source of useful information.

Oddly, Buffett thinks some consumers will pay for the useful information in advertising. Under those circumstances, consumers could pay content providers in BAT tokens to see advertising.

“I mean, it upsets the people in the newsroom to talk that way, but the ads were the most important editorial content from the standpoint of the reader,” Buffett tells Yahoo Finance. “They want to know what supermarket’s having the bargain on Coke or Pepsi this weekend and so on.”

“If you were looking for a job, you had one place to basically look, and that was the classified section,” Buffett notes. Today, in contrast, you go online to LinkedIn or Craigslist to look for a job.

In Buffett’s view, newspapers made money by offering access to useful information and charging advertisers for the privilege of offering that information. Today, Alphabet (NASDAQ: GOOGL) makes money by offering access to useful information through Google.

How BAT plans to Tokenize information and advertising

BAT hopes to make money by offering users a higher level of control over that their viewership of that information. Instead of the advertiser paying the publisher, BAT is betting advertisers could pay users to look at their information.

Buffett’s theory of advertising supports BAT’s business model. For instance, many Americans used to pay a newspaper subscription to see the weekly advertising circulars printed by supermarkets and department stores.

Thus, Kroger (NYSE: KR) could pay you BAT to look at the weekly specials at your local Ralph’s or King Soopers store. Kroger could pay the BAT hoping you will go to its store or order groceries online. Moreover, Kroger could rebate the BAT it paid for looking at the ad, if you order groceries through its app.

What is the Basic Attention Token?

The Basic Attention Token (BAT) is an Ethereum Request for Comment (ERC20) token. In detail, they build the BAT and the BAT Platform on the Ethereum blockchain.

The plan is to have the Brave browser monitor user attention. Advertisers will pay users in BAT for attention. In addition, advertisers will pay BAT to publishers who attract a lot of eyeballs to their site. For instance, Procter & Gamble could pay BAT to a mommy blogger whose household hints attract a lot of eyeballs.

There are some serious roadblocks in front of the BAT plan. Notably, current versions of Ethereum probably cannot process transactions fast enough to do the volume of business necessary for BAT to make money.

Why BAT May Not Work

To clarify, the current consensus is that Ethereum can only process 15 to 25 transactions per second (TPS). Hence, the BAT Platform could crash if 30 people try to use it at once.

Moreover, Hacker Noon’s Taygun estimates it takes six minutes to process an Ethereum payment. Hence, Ethereum’s blockchain could be too slow and too small for the volume of business BAT hopes to attract.

There are potentially faster and more scalable cryptocurrenices out there including EOS (EOS). Notably, the EOS Network Monitor estimates EOS was processing between 64 and 87 TPS on 27 September 209However BAT is not using EOS’s architecture.

However, the Basic Attention Token (BAT) is part of Bancor’s liquidity network. Theoretically, Bancor’s network offers fast conversion between EOS-based and Ethereum-based cryptocurrencies. Bancor is an Ethereum platform that makes conversion fast by backing Ethereum and EOS tokens with cash or liquidity.

What Value Does the Basic Attention Token (BAT) Have?

Mr. Market gives the Basic Attention Token (BAT) some value. For instance, CoinMarketCap named BAT the 30th most valuable cryptocurrency on 10 October 2019.

CoinMarketCap gave BAT a Coin Price of 19.5₵, a 24-Hour Market Volume of $35.215 million, and a Market Capitalization of $263.845 million on 10 October 2019. They base those prices on a Circulating Supply of 1.35 billion BAT and a Total Supply of 1.5 billion BAT.

In contrast, CoinBase estimates BAT had a Market Cap of $264.8 million, a 24-Hour Market Volume of $35.2 million, and a Coin Price of 20₵ on 10 October 2019. Bancor gave BAT a Coin Price of 19.5₵, a 24-Hour Market Volume of $12,922 on its network, and a Liquidity Depth of $121,840 on October 10, 2019. The Liquidity Depth is the value of the BAT in Bancor’s network.

I like BAT because Mr. Market puts a realistic price on it and its creators have a plan to make money from an established business. However, the Basic Attention Token’s (BAT) current value is purely theoretical.

I advise speculators to stay away from BAT until they prove that the BAT Platform can make money.