Google and Facebook Too Can Be Disrupted
(Bloomberg View) -- I have long considered today's internet advertising model a scam: It's a system in which giant, monopolistic companies -- Google and Facebook -- are selling inflated user numbers and overhyped targeting opportunities to advertisers while collecting way too much information about users and cheating content creators out of their fair share of revenue. It may not be too late to fix it, though. Just ask Brendan Eich, founder and chief executive officer of Brave Software, a San Francisco-based startup whose attempt to change the standards could be considered quixotic if not for Eich's track record.
At first glance, what Brave does should only make things worse for content creators who rely on advertising income. But Eich is looking to build a different model that should work better for them, and for advertisers, than the current one. Eich appears to think and talk faster than most people can follow:
We get direct brand and agency deals that result in a catalog, same for all users in a given region and natural language, who opt in. No tracking. Local machine learning studies multiple inputs from search and e-commerce query logs, to click logs and tab constellations, to ad views (if we have a 3rd party partnership) and actions, to e-commerce consummations, to YouTube and other big site interactions. This is the full dataset Google sees via remote tracking (and so misses where Doubleclick or another tracker they own is not embedded in remote content).
This bears explaining. Brave's idea is to take Google's (and Facebook's) place as an intermediary between advertisers and internet users by offering precise targeting based on what the browser learns about each specific user. The targeted ads would reach real humans, and not bots or multiple accounts set up by the same user, who must actually agree to see ads. In fact, Brave envisions "bank-level" know-your-client rules. As for the browsing data, Brave doesn't want to collect it and sell it on: It's supposed to remain, and be analyzed, on the user's computer.
Why would people agree to see ads? Well, because they'd get paid for that. Starting in the first half of next year, Brave intends to hand over to users 70 percent of gross revenue from ads directly sold by the company. If publishers partner with it as an advertising conduit, the publishers will get 70 percent of revenue and users will get 15 percent.
That's one revenue stream for publishers. Another is supposed to come directly from browser users. Even now, Brave allows them to make voluntary payments for content from a cryptocurrency wallet attached to the browser. A user sets up a monthly catch-all subscription payment, and creators and publishers are compensated from it according to how much content the user has consumed. But one can easily imagine how a media company's own subscriptions could be integrated with the wallets, and how users could spend part of their ad revenue share for the subscriptions.
It's a win-win scheme for advertisers, users and publishers. Its weakness, though, is that it needs massive adoption to become interesting to them all. Eich says Brave has 1 million monthly active users, and he expects that to get to 5 million next year. As browsers go, these are tiny numbers. But, Eich says, "1 million, 5 million, all those are numbers I grew Firefox through to get to 10 million, 50 million, 100 million. I also went through Netscape going from 40 percent of market to 80 percent (and then the downhill side)."
In May, Brave held an initial coin offering, selling 1 billion so-called "basic attention tokens," its local currency that's convertible into common crypto- or fiat currencies. The tokens were sold for 156,250 ether, worth almost $67 million now, so Brave has plenty of cash on hand -- but it has also kept some of the tokens it issued to give away to users so they could pay content creators. This week, it started handing out the token grants. It's a nerdy way to stimulate adoption; but then Eich says he doesn't need a giant user base to drive standard change. He quotes Nassim Taleb's salt example: All salt sold by grocery stores is simultaneously kosher and halal, though neither Muslims not Jews make up the majority of buyers.
"Standards get moved by up-and-comers who disrupt old models," Eich told me. "Firefox did this. Mozilla has punched above its weight on standards."
The idea appears to be to show a better, more equitable model to the world and force the internet advertising duopoly, Google and Facebook, to take notice. There's a good reason for them to do so: Brave offers effective ad-blocking and privacy protection at a time when people are getting tired of the internet giants' use of their personal data as a freely donated commodity they can sell on.
So what does Brave want Google and Facebook to do once they realize the danger? "Buy us at right price, possibly," he replies. "I think Google might, as they would not be able to duplicate our model now without antitrust issues. They would of course consider copying rather than buying."
It's hard for me to buy into Eich's optimism about the duopoly's willingness completely to overhaul the way they do business, especially since Brave hasn't fully rolled out its offering yet and since scaling it depends on technological advances. It requires the company to develop further local machine learning, as well as improvements to the Ethereum platform to allow large numbers of token transactions on a blockchain. Despite its considerable cash reserves, for a startup, Brave is fighting a David-versus-Goliath battle -- and hoping, to boot, that Goliath will pay for David's skill with the sling.
It's difficult, however, not to support the ideas behind Brave -- both as an internet user fed up with today's fraudulent advertising model and the proliferation of bots, and as a professional writer interested in selling my work. I want to see advertising only if I opt into it, and I want to get paid for looking at ads; I want to pay my favorite content creators with that revenue; I don't want to be tracked around the internet; and I think advertisers should be certain they are sending their messages to real, identified people. I hope it's not a utopia. Eich's experiment is certainly worth watching.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
To contact the author of this story: Leonid Bershidsky at email@example.com.
For more columns from Bloomberg View, visit http://www.bloomberg.com/view.
©2017 Bloomberg L.P.