Is digital advertising broken? If you believe Brendan Eich, one of the digital sector’s most respected voices, then yes it is. Eich is developing a blockchain-based digital advertising platform to clean up the mess he sees in the ecosystem, and reward users for their attention.
Not everyone is in agreement. Some of the very publishers the company wants to attract — to monetise the platform — are describing it as “blatantly illegal”.
He explained the problem and his solution in a recent interview with Which-50.
“Digital advertising is broken and is detrimental to its key stakeholders,” he said.
Skyrocketing fraud (and parasitic actors, according to the company blog) are taking billions of dollars in revenue away from publishers and damaging users’ online experience, he said.
“In 2016, ad fraud created by Internet bots cost advertisers an estimated $US7.2 billion. While advertisers face poor reporting and targeting, publishers are losing billions in revenue.”
“Users are also unhappy, relying on ad-blocking in order to protect their privacy and defend themselves against malware,” Eich said.
A blockchain-based ad exchange
The solution Eich and his company are proposing is a radical overhaul of display advertising, built on blockchain technology. It has already attracted funding from Founders Fund, Foundation Capital, Propel Venture Partners, Pantera Capital, DCG, Danhua Capital, and Huiyin Blockchain Venture among others.
The initial phase of the platform is tied to the company’s web browser, Brave, which has a built-in adblocker. If users opt in to see ads online, they are rewarded for their engagement with digital tokens — called Basic Attention Tokens (BATs).
The Brave browser and the BAT platform replace blocked ads with ads from approved publishers, provided users opt in. (Eich raised $US35 million for the Brave browser in under 30 seconds, according to Techcrunch.)
The number of tokens — and who receives them — is determined by user engagement with content and advertisements, which is privately monitored, Eich said.
Users who opt in to advertising have their engagement privately monitored, without trackers, within the Brave browser. Machine-learning algorithms match relevant ads to users based on the content they are engaging.
This engagement also determines how many tokens a publisher receives.
“Publishers will be rewarded accordingly with BATs — tokens of utility in a secure, private, and anonymous advertising system based in the browser and the mobile app web view,” the company blog said.
So why would anyone opt in to view ads, considering the Brave browser does a good job at blocking them?
Under the BAT system, users are also awarded tokens for their participation. The tokens can be “donated” to publishers or exchanged for premium content.
This involves them in a way traditional AdTech never has, and greatly improves their privacy, the company claims in its blog.
“By keeping the data on the device, encrypting the data, and shielding the identities of our users as a core principle, BAT forms a bond with users that proves that not only does their data hold value, it holds substantial value that has been ignored and exploited by the middlemen year after year in the current industry model,” according to the company blog.
Ultimately there will be fewer, more relevant ads and privacy will be more secure, the company promises.
In a tweet pushing the Brave browser last year, Eich wrote “Who owns your attention? Who owns your web browsing experience? Who gets paid? If not you, then you’re ‘product’. Time to get paid.”
Publishers push back
However, not everyone is pleased.
In April 2016, more than a dozen major American newspaper publishers united to describe the Brave browser and its built-in adblocking as “blatantly illegal”.
The group sent a cease-and-desist letter to Eich, in which they said Brave’s ability to remove advertising and replace it with their own through a BAT platform was “indistinguishable from a plan to steal our content to publish on your own website”.
Brave’s response was that the publishers had “fundamentally misunderstood” Brave.
The company proffered its platform as a solution for — not a threat to — publishers and users.
“The news industry is in catastrophic decline and has been for years. Brave has a model to change this dire trend by both funneling more ad revenue to publishers and allowing users to pay them directly.”
That is perhaps the biggest attraction for publishers: a bigger slice of the revenue generated. But it was lost on the publishers, according to Brave.
“We give the lion’s share (pun intended) to web sites. With our ad-share model, the default money flow directs up to 70 per cent of ad revenue to site publishers — far greater than the average percentage in the current programmatic display ad ecosystem.”
For its efforts, Brave will take 15 per cent of ad replacement revenue. The remaining 15 will go to users.
Brave’s complications in conveying its message are not restricted to publishers. Eich identified his biggest challenge as getting his message out to users, who are unaware of Brave.
The battle for adoption
Solving this challenge and generating adoption may prove vital to the platform’s success.
According to Gartner Analyst Andrew Frank, users are the “wildcard” and need to see a clear benefit to switching browsers.
He told Which-50, “It takes a lot of scale to attract the attention of advertisers and publishers.
“This creates a classic chicken-and-egg situation common in network-based markets where a service needs some scale before it can acquire more scale.”
Frank said that BATs are still a “longshot”, but the platform holds promise for AdTech players. “The browser market is pretty settled territory — but I wouldn’t want to bet against it.
“Decentralising the data market for ads and encouraging consumers to opt in to privacy-friendly interest-based targeting would certainly benefit publishers and counter ad blocking.”
Eich is even more positive about publishers’ prospects and uptake. “Over 170 publishers are certified in Brave Payments (such as Wikihow, Archive.org, and Smashing Magazine), and other names will be shared soon,” he said.
“In general, publishers are looking forward to improved revenue, better reporting, and less fraud than what the current digital advertising model subjects them to,” said Eich.
Clarification: An earlier version of this story accidentally attributed a quote from a Brave Software whitepaper to Brendan Eich. The story has since been amended.