I have a few different cryptos here and there for 10% of my portfolio but I’m pretty much all in on BAT and I wanted to explain why.
Quick Background
BAT stands for Basic Attention Token. The plan is to use BAT for many different things going forwards but initially the concept will be used in conjunction with the Brave Browser to basically pay people to view adverts.
In terms of my background and why I value this concept, I have been self-employed online my entire working life. I’m 36 and have worked with web design, online gaming and online gambling. Throughout that whole time I have spent thousands and thousands of pounds on online advertising and I believe the whole industry has gone beyond breaking point and is now pretty much useless. I now do not use any paid advertising at all.
Changing Online Advertising
If you are reading this, you’re going to be computer literate and you’ve probably got an ad-blocker in your browser. You more than likely view ads online as an annoyance, but if you got paid 5-10 cents every time you viewed an ad, that changes things completely. Sure, not everyone would be on board with that concept but enough people will be to make this a game changer. I will be. Most people with a bit of spare time will be.
From an advertiser’s perspective, you don’t want your ad to be viewed as a nuisance and you actually want people to pay attention to it. I run an online game (MMA Tycoon) and I stopped using google ads completely about 3 years ago because it slowly became less and less effective at bringing in new customers. My assumption is that all the people I wanted to attract had started using adblockers and I’d been left pretty much advertising to the computer illiterate, who are never going to play my game. Completely contrary to that, I expect early adopters in a project like BAT to be computer literate, young and generally interested.
To give you some price examples, for a single click on Google Adwords, you’re looking at an absolute minimum of 10-15 cents but for anything competitive, you can be paying multiple dollars per click (up to $55 per click for Insurance searches).
On Facebook ads, you will be paying at least a dollar for one like on your Facebook page and if you look at who’s actually clicked like, 90% of the time it’s just some random dude who has literally clicked everything he sees and apparently “likes” about 15,000 pages. AKA utterly, utterly useless.
* My completely ineffectual Facebook ad campaign
It’s an extraordinarily expensive game to be in and honestly, it has descended into farce.
Brave The Browser
As mentioned, the home for BAT is on a new browser called Brave. Brave is impressive.
- It blocks all tracking cookies and ads by default.
- It auto converts http to https for improved security.
- That lack of ads/trackers means it’s fast.
- The browser also enables micro-donations to your favourite sites, which I will cover later.
Just that improved security and privacy is enough to get a lot of users on board. The payment for viewing ads is a bonus.
The Team
Lots of cryptos have nice sounding white papers but ultimately it’s all just words until it actually happens. The difference with BAT, for me, is that I fundamentally trust that this will get done and get done well. Brendan Eich is the founder of BAT / Brave. He invented Javascript and was a co-founder of Mozilla Firefox. He’s not a salesman, far from it. If you watch him talk about BAT you’ll cringe about how bad he is at explaining it.
For now that’s a good thing; it means BAT is massively under-valued because it has not been hyped at all. Ultimately he’s the sort of guy (and is behind the sort of team), that doesn’t over-sell the project, they just get it done and then let it sell itself.
Potential Market Size
In terms of a market, online advertising is gigantic. I used to spend $250 a month on advertising for one small site. I had a quick look for total market spend on Google Ads and I found $51.81 billion income for Google, from their Ads in 2015. That doesn't include the cut they give to the publishers for displaying the ads so let's say it's roughly a $65 billion a year market for Google Ads in 2015. Their market share is roughly 30%.
In terms of total online spend, I found the following graph from a couple of years ago, so let's say we're at roughly a $23o billion market for total ad spend, per year (and growing).
source website link
So what can Brave / BAT achieve? Well, Firefox used to have a dominant market share. It has dwindled to under 10% now with Chrome having a massive breakout. I feel like Brave / BAT differentiates enough as a concept to get at least 10-15% browser market share.
I think that’s fairly conservative and realistic. If Brave could get just 5% market share in a $229bn market, that's $11.45bn per year. BAT is currently ranked as the 40th most valuable crypto according to Coin Market Cap, with 0.56% of the Market Cap of Ethereum. There are a LOT of coins / tokens ranked ahead of BAT which literally don’t do anything. In a market place where probably 95% of coins / tokens will fizzle out into nothing, you have to back the right horse. I am sticking to what I know and what I understand and that’s advertising.
First Mover Advantage
The open source nature of crypto means you’re constantly at risk of being copied and out-done. You have to make it as hard as possible for direct competitors to out-do you and first mover advantage is a massive part of that. If you do it first, do it really well and reach a certain level of market share, it basically means nobody can take your market share unless the do something significantly better.
Nobody else is trying to do what Brave / BAT are doing. Their road map is quick. They already have a lot done. They plan to integrate BAT into Brave in the next couple of months and the whole integration of paid advertising is targeted for 2018.
Considering that speed of progress, I view BAT as significantly under-valued compared to the level of development we’re seeing from other projects, rated as more valuable in terms of Market Cap. Most are in alpha testing. Some don't even exist at all.
To compete with a finished BAT / Brave combo, anyone else looking to do the same thing would have to design and build their own browser, as well as all the crypto integration. I just don’t see it happening.
Micro-Donations
The concept basically is that you can give a small donation to each of your favourite sites each month, to help support them. This is already integrated into Brave but currently uses Bitcoin and will change to using BAT soon.
This is massive. Honestly, I was completely sold on BAT just purely based on the paying to view ads, but the more I think about it, the more important this aspect is, not just for BAT but for the whole of crypto. One of the main issues with crypto at the moment is the barrier to entry. You have to sign up with Coinbase, Kraken or Gemini, or even go through something like Bitcoin local. None of it is particularly efficient or user-friendly.
These micro-donations will earn site owners BAT without them even knowing what crypto is.
When a site reaches a certain $ earnings, let’s say $100 worth of BAT, Brave will email them telling them they’ve earned x amount of money and explain how to claim that. To claim it they’re going to have to create a crypto wallet.
That’s another person, with influence in the form of a decent sized website, with their foot in the door of crypto. They’ll keep earning without doing a damned thing. Plenty of those people will blog about it. Plenty of those people will be invested in the concept of crypto as a whole and that’s great for the whole of crypto. Ultimately though, most of those people will have a soft spot for BAT for as long as it exists (hopefully forever). That word of mouth and goodwill is massive.
*The microdonations screen in Brave Browser
Potential Coinbase Partnership
If you buy Bitcoin on Brave, to get involved in micro-donations, Brave are currently redirecting to Cubits.com. However, in the Brave Payments FAQ, they mention a partnership with Coinbase.
There will have to be a FIAT to BAT payment gateway somewhere because realistically you cannot expect people to buy Bitcoin, change it on an exchange into BAT then transfer it to a Brave wallet. Coinbase have talked about adding alt coins for a while and a partnership between Coinbase and BAT makes sense to me.
If anyone can confirm or deny this in the comments, I did see someone post on reddit that Coinbase and Brave have offices very close to each other in New York. I have been unable to confirm that personally.
It’s just speculation on my part but obviously that partnership would mean a significant increase in exposure for BAT.
Future BAT Application
The team have discussed the development of different uses for the BAT token. They will be developing plugins for different browsers, use of BAT to pay for online services and subscriptions and much more… I wouldn’t say the possibilities are endless but let’s say they are numerous.
Price Projection
Obviously the key question is how many times can the price multiply.
- The price is currently around 10 cents.
- Current market cap is $102,616,000.
- Actual market cap is $153,924,000 because there are 50% more BAT set aside for development purposes.
We don’t have to be particularly accurate to see that it’s a good value investment. Let's guesstimate.
In my opinion, the price projection depends mostly on the browser market share attained by Brave. With a conservative 10% browser market share and an equally conservative 5% market share in online advertising, I've come to that figure of $11.45bn per year as a very, very basic income projection.
Generally you value an online business at 2.5 years’ income, so that would value BAT/Brave as a $28.625billion entity.
I mean.... That's kind of a crazy figure. It feels kinda crazy to even type it. If you set that value as a market cap it's between Ethereum and Bitcoin's current value. It's a 185x increase on current market cap, with an individual BAT being worth roughly $19. That assumes the value of BAT accurately reflects the income generated by it, in the same way shares would in a company. I think we're yet to see whether that's a fair comparison long term, when it comes to crypto.
Ultimately it’s up to you to scale that projection up or down based on how optimistic / pessimistic you think it is.
Worst case scenario and Brave get 1% of the advertising market; it’s still $2.3bn yearly income. Multiply that by 2.5 to give a rough value / market cap and it's still a 45x return from the current market cap.
Well.... calling that the worst case scenario is a lie… Worst case scenario is that the whole thing folds and you lose your investment but then we’re back to the same point I made earlier – I actually trust this team to do it and do it well.
As a couple of examples of that trust: A lot of people are backing ANS. It may well end up being the Chinese Ethereum but we know very little about this coin to be throwing significant amounts of money at it. ANS/NEO only allows the transfer of whole coins and the transaction fee is 0.35 ANS, or $2.52 at the time of writing. That seems extremely limited and investment seems extremely speculative. Whilst the current market cap is listed as $363,375,000, there are double the ANS total supply compared to current supply, so ANS really has a value of $726,650,000, which ranks it 8th, nearly 7x the value of BAT.
EOS Is another hot coin where people are placing immense trust in something that doesn’t exist yet. The market cap is $447,986,976, but if you take into account how many coins are actually going to be released, the current price would mean a market cap of $1,770,000,00, sitting it in 5th place, nearly 10% the value of Eth and 17x the current value of BAT*.
Both may turn out to be good investments but personally I view them as far more risky and I doubt either will out-perform BAT in terms of ROI.
Summary
I don't really think many people investing in crypto realise quite how big of a market online advertising is. I also don't think many people will realise quite how shocking the returns are if you invest in an online advertising campaign. According to this site, the average "cost per acquisition" for a Google ad (i.e. getting an actual customer on board), is $60. For legal ads it's $150. That's shockingly bad and it's because people do not like ads, they don't look at the ads and yet Google and Facebook can pretty much charge what they want. That's a pretty terrible combo for the advertiser and the person who is forced to view the ads whilst getting nothing in return.
I have invested $8,000 into BAT, which is 90% of my portfolio. I’m hoping that I’ll be able to buy a BATcave in a few years but if I have to settle for a BATmobile, I won’t be too sad :)
*Note: I am currently developing a website to quickly illustrate relative values of each crypto. You can find the work in progress page here.
I will post a new blog when that if finished and up on its own website so please follow to find out when that’s sorted.
