- INVESTMENT IDEAS
Pay attention to the BAT
- The Brave ecosystem is looking to disrupt the $330bn digital advertising industry.
- Brave has over 36 million monthly active users and has created a powerful incentive system for users, creators and advertisers.
- Challenges include tough competition, regulation and achieving critical mass.
- Privacy concerns and appealing incentives may make Brave a success.
Imagine getting rewarded to surf the web privately, safely and quickly. This is what the Brave browser does with its Basic Attention Token.
Their fundamental thesis is that “Digital advertising is broken”. They fix this through the use of BAT, which creates a synergy between users, creators and advertisers. Users can opt in for rewards and earn BATs when they view ads. A portion of these tokens is then distributed to their favourite creators on platforms such as YouTube and Twitch. Advertisers, for their part, reach users without violating their privacy.
Brave has created a compelling use case for blockchain. By making a desirable product, underpinned by a native token, they have created powerful synergies. In this process, they are carving out a space in the digital advertising industry, while transforming the browser’s role from passive intermediary to active participant.
Brave’s user base has almost doubled in the past year. They have 36.2 million monthly active users and 12.5 million daily active users as of August 2021. Brave’s ad platform has seen revenues grow 14x over the past 18 months. They claim the average clickthrough rate on Brave ads is 8%, which is multiples higher than the industry average. They have had over 4,500 ad campaigns with almost 800 advertisers.
BAT is listed on the major cryptocurrency exchanges and has a supply cap of 1.5 billion tokens. It is shaping up to be one of the most successful altcoin initiatives.
Brave’s major challenge will be acquiring a critical mass of users in an industry dominated by some of the biggest companies in the world. Google’s Chrome is the most widely used browser on the internet, with an estimated 60% of market share, followed by Apple’s Safari. These players can commit vast resources to adapt their offering should Brave become a threat to their business models. They could add similar security and privacy features or improve the user experience in some other way to make switching browsers less likely.
Another serious risk is regulation. As anti-money laundering regulations increase their scope, it is possible that the privacy provided by Brave and the BAT will be challenged. Finally, Brave took a hit to its privacy-conscious image last year, when it was discovered that the browser was redirecting users to urls that gave its parent company affiliate commissions. This feature, however, was quickly removed.
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