Article Summary :- This article is written around themes of - potential of Business Model Innovation, Major issues with current online advertising landscape & how “Basic Attention Token” powered Brave browser is combining both technical & business model disruption against really powerful incumbents.
Innovation in Business Model
How do you compete against giants such as Google , FB or Instagram?
There are 2 broad methods:-
Build a Better Product/Search Engine/Social Media :- The Google is technical powerhouse & has been working on extremely complicated computer science problems related to Search for close to 2 decades now. Similarly, FB & Instagram have extremely powerful network effects. It may not be prudent to take on such giants head on.
Change the Business Model :- Google & FB offer their Products to consumers for free of cost & monetise their attention with advertising. Now what can be better business model than giving away quality Products for free? The answer is - you pay users for using the Product. If it sounds illogical, let me tell you, this business model already exists & has been doing quite well over almost 3 years now .
Note :-
The privacy angle could be taken to compete & players such as DuckDuckGo have already tried it. However, Google is vastly superior Product & hence players espousing privacy have made little dent to it’s market share. Same goes for Signal or Telegram. In order to make the competition more potent, business model innovation can be more effective.
Ever since Clay Christensen’s disruptive innovation was published in mid 90’s- the focus has been primarily around the technical innovations that leads to lower costs for new entrants vs incumbents, subsequently & results in disruption to large powerful incumbents.
Business model innovation is often an after thought, if at all . This could be due to Technical Background of most entrepreneurs & little interest in business aspects beyond the bare minimum till Product Market Fit is achieved.However, business model innovation can be far more disruptive.
As an example, consider how when mobile emerged as new platform of competition & mobile apps became dominant medium for accessing applications - the technical landscape did transform significantly. However, the incumbent organisations which were fairly large & successful on Web/Desktop( Google, FB , Amazon) were able to transition without much challenge from new entrants. Instead, their power was more centralised & they are bigger than ever. Surely, new players did emerge due to mobile such as Uber, AirBnb, Lyft etc. However, almost all were to serve entirely new use cases & were not direct competition to successful Web/Desktop incumbents.
In comparison, earlier while Microsoft was the powerhouse in late 90’s & seemed invincible - the advent of Web & Business model change away from “License based software selling” to “Freemium/Ad-Supported/Subscription model” led to the rise of new players such as Google & FB.
Brave , with its Browser & newly launched Search engine, might be up against a far more powerful rival in Google. However, it has slowly chipped away in the market share. How? Because it compensates users for using its browser use & is potentially quite disruptive.
Brave has over 36 mn+ MAUs( Monthly Active Users) & over 12 mn+ DAUs(Daily Active Users) as of Sept, 2021. While the number is significantly low compared to incumbents( 2.5 Bn+ for Chrome,460 mn+ for Safari ) , the growth rate is really impressive as shown below.
Within just over a year, the MAU count has doubled. As the awareness around crypto increases in general & current challenges with usability of crypto applications gets solved, the spill over effect on Brave can be immense.
Organisations such as google, FB, Instagram derive its value heavily from the Network effects. The business model innovation of paying the end user for using the Product has the potential to disrupt the seemingly all powerful incumbents.
Issues with Current Digital Advertising
“Digital advertising is broken”. This is how the “Basic Attention Token” white-paper aptly opens. As end consumers, we are directly impacted & exposed to it on regular basis. While the cost of an inefficient & middlemen heavy online advertising market may not be apparent at first glance , specially because Products driving it are often provided free of cost . However, as per the BAT white-paper, we do pay indirectly :-
Digital advertising costs as much as $23 in data plans on average per month, slower page loads & 21% slower battery life. Over 600+ million devices employ ad blockers today to avoid constant tracking & harvesting of data by countless unaccountable & unregulated middlemen.
The bigger cost is, though, the attention. In the age of plenty, attention has become one of the major primary constraints. The products provided for free often rely on monetising your attention via advertising. Attention is a limited resource & products relying on advertising would rather have algorithms that drive engagement up with anger/frustration/erotica inducing content than provide real value to end users.
Since the attention of end consumers have been largely become duopoly between search engines & Social Media Platforms - Publishers such as Media websites & Individual Bloggers have lost bargain power & middle parties owning the consumer attention make majority of the revenue. Traditional publishers have lost 60% of the revenue adjusted for inflation.
How current system works?
It is important to understand the mechanics & business model behind the current online advertising space & how it evolved briefly to understand the issues.
The consumer’s willingness to pay for vast majority of content on internet is low, unless it highly valuable & exclusive content. Therefore, while people used to pay for physical newspapers, the most news sites & content are free to access on the Web. As a consequence, the business model for monetisation of physical newspapers differs from digital ones.Physical newspapers recover costs both from prices charged for the paper copy & added advertising along with articles.
Advertisers reached customers , based on their budgets, via local newspapers, TV ad slots , Magazine Ads, Billboard ads, House walls & physical creative distribution across houses etc. The advertising channels & Ad- inventory were limited. Each advertising medium was selected based on certain parameters( billboard around commute to factories vs celebrity gossip magazines).
In the early days of internet, Blogs resembled the structure of physical newspapers i.e. Ads were linked to Content being published & Advertisers would interact with individual Blog publishers directly for placing ads & payments.
The Web though was quite different from Physical world as in :-
Anyone could become a Publisher on the Web. As a consequence, Publishers & Ad Inventory were growing exponentially & technically Ad-inventory was unlimited for Advertisers to select from.
Earlier in physical world, Content type ( Science topics,Gossips) or location ( Billboard around Suburbs) had built in assumptions around target consumer segment that advertisers wanted to reach. However, on the web the customer could be accessing the publication from anywhere in the world.
Hence, it necessitated a different model for it to realise Internet’s full potential.The need to track customers on web across sites(via Cookies) & profile them minutely emerged.
As the number of Publishers on Web increased - it became impossible for Advertisers to identify & interact with relevant Publishers. The requirement to outsource advertising was also in physical world. Marketing agencies , specialising in creating innovative Ad campaigns according the Ad medium( Radio, TV, Magazines), emerged to fill the gap.
On Web, “Ad Networks”- a new type of entity took up the task of consolidating available ad placement inventory on websites/Blogs across the net and become a single window for advertisers to place their requirements- removing the need for advertisers to interact individually with Publishers strewn across the web & manage payments.
Ad networks, as it increased in size, could now track consumers across variety of sites onboarded on the Network & build a solid & accurate picture of the audience. This in turn would permit them to match the relevant advertiser requirements & place ads dynamically. This way, the blog publishing content freely could monetise & advertisers could display ads effectively across large scale audience.
One crucial difference to note here is how the placement of “Ad creatives” has shifted. Earlier, the ad creatives were built days/weeks in advance & placed alongside relevant content in newspapers/magazines. Generally, the marketing agency was in charge of creative as well identifying & interacting with relevant ad placement entity( newspaper vs Magazine vs Billboard owners vs Scooters Covers on the back-at least in India ). However, ads on internet need to be provided to ad networks & identifying the consumer for ad display was decided by Ad networks in real time programmatically.
This is how is works step by step:-
When you type a blog url & press enter, the publisher behind the url reaches an “Ad exchange” behind the scenes. The publishers work with SSPs( Supply Side Platforms) to sell their ad placement inventories & monetise content.
The ad exchange will take the profile data of the user accessing the url & send it across to “DSP”(Demand Side Platform). The DSPs works with advertisers & based on User profile data received- decides that amount it will be willing to pay for placing an ad to the user on behalf of an advertiser.
The auction process is done in real time & the highest bidding advertiser sends the Ad content to the publisher. The page loads with selected ad on the screen for the user to view.
This works quite well for advertisers. However, as you have experienced, constitutes an increasingly degrading & distracting experience for consumers.
The dynamics of power between Publishers & Ad networks is also increasingly in favour of Ad networks. This is because publishers on internet are not just enterprises or SMBs anymore but increasingly individuals publishing content. An article from “Times of India” is competing for attention on equal footing with a “Food Blogger” residing in an apartment somewhere in a city.
In contrast, Ad networks need scale to function effectively & the market has consolidated significantly around limited number of players. The incentive for Ad networks is also not concerned around user experience since consumer is most probably not even aware of its existence. Additionally, the availability of Ad inventory is limitless & even few publishers were to band together to improve consumer UX & wean some power away from Ad networks, it’s impossible to coordinate & achieve desired goals.
To summarise ,
End Users have limited privacy , slower page load leading to degraded UX & limited control over how their data is collected, stored , processed & utilised.
Publishers have been increasingly marginalised by middlemen ad-exchanges/platforms & have limited control over the eco-system to ensure enhanced user experience. Consequently, Ad-Blocker use is skyrocketing & further squeezing monetisation opportunities of users.
Advertisers have been facing increasing costs pressures & industry is still rife with frauds.
Brave(Browser) + BAT(Payments) as solution
BAT operates a decentralised & transparent ad exchange on Ethereum & has also built Brave - a privacy enabled browser for measuring user attention. Brave has its own crypto token - BAT which is required for interacting with the ad-exchange. BAT can itself be traded on exchanges such as binance & Coinbase. Brave Search Engine was launched recently for extending the privacy theme to Search Engines.
For the end users, brave browser has twin benefits of privacy protection & compensation in BAT coins for ads viewed voluntarily. Brave browser stores the encrypted user data on the user device itself. The browsing experience is also 3-4x faster compared to cookie infested browsers & saves a ton of time.
Publishers can decide to enable ads viewing against their content/domain. Alternately, Publishers can choose to receive payments from users directly in the form on BAT token. Publishers compensation is maintained transparently in the Ledger for verification.
The users view the ads voluntarily & hence have higher likelihood of watching the ad content with intent. For advertisers, hence , it is more effective with higher conversions & lower costs due to removal of plethora of middlemen involved in traditional online advertising.
Users - How does it work?
From end user perspective , it is quite simple. Head over to https://brave.com/, download the Browser & start using it.
As you start using the browser, you will receive ads in notifications view. Based on the device & the OS installed of the user, the notification placement might differ:-
MacOS - Upper right corner in Brave Browser
Linux- Top of the screen
Mobile - Top of screen, similar to other app notifications
If you click on the notification, you will be taken to the landing page of the advertiser with all the relevant details.The more ads you view & engage with, you receive rewards in terms of BAT token. The Ads recommendations are based on your browsing behaviour & all the relevant data is stored locally on your device only. The rewards are transferred to your account monthly ( 8th of each month). In order to withdraw BAT tokens & sell it( in case you want to monetise it), you need to accumulate minimum 15 BAT tokens. Subsequently, you can connect “Uphold Wallet” to the Brave browser account & fund/withdraw tokens.
As you can see below, i have received 2.5 BATs worth 1.8 USD for my browsing. You won’t get filthy rich with such amount .However, as user, i am not doing anything extra - while being protected from countless trackers & cookies.
As a user while browsing on Brave, you can view if the Website creator/Publisher is verified or not with brave platform. For example, you can see in your browser, while accessing, mckinsey.com that it is not yet “Brave Verified” publisher.
If you click on “Send a Tip” Button for such publishers, the below note mentioning the Status is displayed.
As shown above, you as user can either make a one-time payment or make the contribution a monthly recurring transaction.
If the domain/Publisher is verified, the status updates to “Verified” as displayed below & any contribution from you will reach them directly.
Publishers/Creators - How does it work?
Brave has over 1.2 mn+ verified Creators/Publishers on its platform. Verification is required for receiving tips/payments from users. Since the launch , over 39 million BAT token has been paid as rewards to creators. For Publishers & creators a direct mode of receiving payments directly from loyal users without hassle of currency conversion or Payment Gateway Integration with additional costs is a serious boon.
Publishers & creators can sign-up on here for verification & receiving tips directly from their users.
You only need to provide your email ID for account creation. Post email verification, simply ad your content Channel for verification.
Creators receive their own Dashboard for managing all the user contributions received. Similar to users , then can connect their Uphold wallet to withdraw/add tokens.
Click on “Add Channel”. You can receive tips from customers for your own websites, Youtube account, Twitch Account etc.
For any select Channel, a corresponding ownership verification is required.
You as Owner of the channel can either enable placement of Ads your channel or alternately choose to only be verified for receiving direct contribution from users.
Advertisers- How does it work?
790+ Advertisers have run over 4.5 K campaigns on the platform. As of now the primary advertisers are other Crypto organisations & very few traditional centralised organisations are active. However, this will likely change as the Product crosses the Chasm between “Early Adopters” & “Early Majority”. The Brave platform claims to have CTR of over 8% which is 4x the average industry CTR.
Beyond the numbers though, it can be argued that Brave users are often young & have high disposable income to spare. This is because - often crypto enthusiasts - familiar with the value proposition of Brave are likely to be its Early Adopters. Indeed as per a survey done for over 9000+ Brave users in 2020 indicted that over 35% of the users had income levels of 100k+ yearly.
This is an extremely valuable target segment for Advertisers. In addition, since the ads are opt-in basis & require users to have active intent while viewing it, the impact is certainly higher & “Banner Blindness” is reduced significantly.
The Brave user segment is likely to be more technically proficient & hence more likely to transact online.
These users could be gateway into Business Accounts of their respective employers.
Compared a single creative or carousel ads prevalent on social media, “Push Notification” that redirects users to landing pages containing more details expounding the value proposition, the ad effectiveness & Advertiser Brand recall is enhanced .
As an advertiser, if interested, you can
Navigate to https://brave.com/brave-ads/ & click on Contact us button.
The Advertiser end appears to be largely manual since it opens up a Google form for your to fill providing basic details on running the campaign.
As Advertiser, you can either use “Push Notification'“ Ads or Sponsored images ad -displayed on new opened tabs in the browser as default high resolution image.
Once campaign is set-up, advertisers can access Dashboard for viewing key metrics such as Views, Clicks, broader engagement time etc.
If interested in advertising with Brave, you can browse here for more details.