$BAT Part II: BAT FAQ

Part 2 of our BAT Informative Series of articles authored by Nestor.

Nestor again. I hope you enjoyed my first post on Basic Attention Token. I intend to produce several more pieces on this subject as well as regular data updates. When I find a project that I like enough to invest in, I like to dig in deep & publicly. If you have a project that you’d like me to consider, message me on Twitter at @Ajax1729. If I do invest significantly, I may dedicate several long research pieces to it.

Now without further ado, here is part two. The purpose of this is to handle frequently asked questions from part one. If you didn’t read part one, here is the very quick version:

1. Through December, the 6 month revenue CAGR is 622%. This is driven by user growth of 121% CAGR and rev/user CAGR of 256%. Over the period they are annualizing at ~$20mm/y of BAT buys.
2. If this growth continues at just one-third of the current pace, by 2025 BAT buys will be over $1.5bn. At the current price of ~$1, that means the annual buys equal all the BAT in existence.
3. Every year after that, as Brave revenues grow further, Brave will have to come in and buy MULTIPLES of the supply every single year. If users don’t spend them immediately, or if Brave ever alters contract logic to burn BAT, there very quickly won’t be any BAT left to buy. Period.

And now here’s the FAQ, based on real responses I’ve gotten:

1. “LOL 2025 who is going to wait for your coin to crab for 4 years, have fun with that.” I think a lot of people who are new to markets in the last few years haven’t yet gotten their heads around how markets price in future events. For many growth stocks 4 years is a short discount period. Markets don’t wait until events have already happened in order to price them.
2. “$1.5billion of Ad buys? There’s no way that will ever happen. Nobody likes Brave Ads, nobody uses them, blah blah.” Obviously advertiser disposition towards BAT ads is not in doubt as the rev growth of the past 6 months has shown (triple digits annual growth). $1.5bn is still quite small in the online advertising space, and I see it as easily achievable. Google ad revenue is ~$200bn/y. Facebook is doing ~$100bn/y. Even BING does ~$10bn. And those are 2021 figs, in 4 years they could all be double given historic growth rates.
3. “Brave user growth has slowed, they will never reach those figures.” After a summer dip, the user growth rates are back to ~100% annualized. Given Firefox’s stagnant ~220mm MAU, Brave should surpass Firefox (and its 7% desktop market share) by some time in 2024. When Brave is 10% of desktop market share, will it be easier or harder to sell ads? I think as user growth reaches a critical mass, rev/user will spike higher as advertisers perceive legacy advertisers as “blocked” by Brave and this drives Brave price per ad view up.
4. “If there aren’t enough BAT, then this will never actually happen!” The whole point of this post is that this can only be solved with a higher BAT price. That reduces the number of BAT that each ad dollar buys.
5. “If BAT price is higher then advertisers won’t buy ads because it won’t be worth it!” You don’t understand how Brave/BAT work. Ad buys are denominated in USD. These are converted to BAT at the market price to reward users. Go read the whitepaper.
6. “What about the competition? The supermajors could deploy 1000 engineers to crush Brave if they really wanted.” Competition is indeed the danger. I am optimistic in the short-medium term, since Google’s attempt at introducing FLOC has failed for now. I think there’s a 12–18m window of opportunity for Brave to continue growing fast while their competition is regrouping. By the time Brave approaches 200 million users it’s probably too late to stop Brave entirely.
7. “You seem to be relying a lot on historic growth rates — are those sustainable?” Great question, I have wondered this myself. In my model I’ve assumed rev growth is 1/3 of the realized rate, and part of this lower expectation is user growth CAGR of 75% over the next 5 years. There is no question that larger products start to grow more slowly, but I don’t think there’s a fundamental reason that the slowdown should take us meaningfully below 50% until well into the hundreds of millions of users. I put together the below chart of FB growth rates by size, and I would note that this was mainly accomplished from 2010–2015 when worldwide internet adoption was lower.

8. “What about your revenue per user? Why do you think that’s going to increase?” FB global revenue per user is approaching $50 p.a. Google ARPU hasn’t been published in some time, but given ad revenues approaching $200bn p.a., I can’t see their ARPU being below $50 either. By my calculation, Brave is making something like $2 for each monthly user who has opted into ads. Needless to say, there is lots of room for this to expand. In my scenario I outlined I have revenues growing to $21.10 p.a. in 2025. By that time Google + FB will probably be well >$100 per user. My scenario omits the very bullish possibility that ARPUs get supercharged as Brave exceeds 10% market share and advertisers perceive legacy ad platforms to be blocked by Brave. This could very well trigger a bidding war for Brave ad space and drive revenues through the roof. Finally, if Brave does get Themis to work, the increased value driven by AI-powered browser ads could drive ARPU even higher.

9. “How many BAT haven’t been moved?” I’ve gotten this question a few times. I don’t have an answer for this one yet, but a holder analysis of BAT is forthcoming. I think Braveco may be sitting on many more BAT than we think, and this is bullish for price.

That’s all for now. Another piece on the burn option for BAT is forthcoming soon.

laudetur XP

-Nestor