New Solutions for Attention Economy; Roboadvisors to Maximize Assets or Accounts? Getting Used to Mixed Reality - via Autonomous ?NEXT

Hi fellow futurists -- here are our top 3 favorite thoughts. 

Better Solutions for the Attention Economy.  

A fascinating tweet from Ark's Brett Winton posited that per hour newspapers monetized reader attention at $1.15 in 1995, websites monetized it at $0.15 in the web advertising era, and in the future attention will be monetized at $0.02. Slate just published an article about how click-oriented journalism tore Newsweek apart. What is going on here?

First, the attention economy is the lifeblood of large tech firms. They ingest human attention through social or entertainment ecosystems, and sell that attention, targeted through personal data, for advertising revenue. According to eMarketer, Google and Facebook generate over $100 billion in net revenue from digital ads. That's about as much as Alibaba, Baidu, Tencent, Microsoft and everyone else combined. Most tech platform building activities from these companies is a way to grab personal data and repackage it as a product, rather than charging a consumer for the product. None of the privacy initiatives to undo this, like Ello, have worked until now.

The law of conservation of energy prevents people from creating perpetual motion machines. In a similar way, attention is a limited resource. Attention has scarcity, and can be turned into a digital asset that is traded and used as currency. Projects like Steemit, Zappl, and LBRY are networks with consumers and producers. Consumers have mechanisms for rewarding content with their interaction, and producers get paid in native tokens. The source of the currency is based on proceeds from an ICO, or from speculation on the attention coin. Others, like Brave / Basic Attention Token or GazeCoin have a mechanism for capturing attention as part of their product. Whether it is powering micro-crypto transactions through a browser, or by recording the view of a user on a particular piece of content, these projects automate the curation aspect. And then there is the swath of ICOs, like Kodakcoin or Poet, that are trying to build crypto aspects into the content itself. All three approaches challenge algorithmic advertising as a the default monetization model of the web.

Quantifying this at such an early stage is tough. Facebook has over 2 billion monthly active users, while Steemit has 150,000. If we rewind back to look at young Facebook, it had 1 million users in 2004 and 6 million in 2005. So crypto social media usage is .01% relative to current Facebook and max 10% of Facebook at the same stage. From a value perspective, one crude metric is to look at the implied marketcaps -- STEEM around $1 billion, BAT at $400 million. We can think of these as aspirational market prices for the value of the attention economy that can be enabled by these systems. If global digital net advertising revenue is $200 billion or so, at a 10% discount rate, it represents an asset of $2 trillion. This implies about 0.1% of expected attention economy value, as priced by the markets, is in crypto.

But there is another solution, and it is the answer to the question posted at the start -- browser-based crypto currency mining. On visiting a website, the user's browser is hijacked (or willingly given) for the purpose of mining the privacy oriented coin Monero. Because Monero is CPU and not GPU intensive and is untraceable, it is the perfect candidate for sites like The Pirate Bay (already doing it) or the New York Times (should be doing it) to monetize their content. In a sense, this is a frictionless, effortless way to actually get readers to move away from the assumption that content is free, and also reduce the friction inherent in paywalls, adoption of blockchain-based software, or re-engineering of content packages. We never gave consent for the big tech firms to take our data -- do we need to consent to hand over our CPUs?

Source: Newsweek / Slate, Symantec

Should Roboadvisors Maximize Assets or Accounts? 

Here is an interesting property of digital wealth management and B2C Fintech startups building brands in the space. We took a look at the most recent regulatory filings of the first wave of roboadvisors (e.g., Betterment, Personal Capital) and the following wave of micro-investing services (e.g., Acorns and Stash). And there seems to be some invisible tradeoff between devoting resources to gathering assets versus gathering users. 

Betterment has $11 billion or so in assets under management with a $40,000 average account size. Personal Capital is at $4 billion ($6.5 billion according to their site), with a $150,000 average account size. From an attention economy perspective, the numbers of accounts is quite modest -- 400,000 and 30,000 respectively. In the tech world, less than a million users is not particularly impressive. Their audience however is an order of magnitude greater than that -- the Personal Capital freemium model has 1.6 million registered users, which is about a 2% conversion rate.

When looking at the micro-investing services, we see around 1.3 million users for both Acorns and Stash. This is an impressive metric on its face, until we dig into average account sizes - between $100 and $600 per client. So the overall assets under management are really quite small at $200-500 million. If this were a single advisor team at Goldman Sachs, with a $50 million budget for marketing (i.e., VC money), they would have been fired for under-performance on asset gathering by this point. But from the point of a tech play, they are similar to a more modern Mint.com (25 million users), with a monetization option bolted on that is attached to workflow automation.

Similar things can be said about digital banking and lending. For example, take the multi-million user bases of Venmo, Digit, Transferwise or Revolut which maximize for engagement. The transactions and balances are all small. But their account totals will be much higher than that of neobanks trying to gather assets and underwrite loans, like Bank Simple or Moven. We don't think this is just a matter of going downstream in a market to smaller customers. Instead, it is about focusing the product to behave like a media/tech company or a finance company. There is an exception to this trade-off today, and that is Coinbase and other crypto startups. There, we see both a massive number of users and the associated economics behind the business. Coinbase custodies $9 billion in assets from 13 million users -- that's not quite the $5 trillion of BlackRock, but certainly a win both for the operating business and the attention economy. No surprise then that Robinhood is betting on crypto as well -- digital wealth will collide with digital assets.

Source: Autonomous NEXT

  Getting Used to Mixed Reality. 

Virtual reality is still missing its killer app, though VRChat is showing some real potential with 3 million downloads and 7,000 daily users. The app is an open environment where users can render both their world and their avatars. Think about a rudimentary version of Ready Player One that looks like Second Life. The app has had success for three reasons: (1) user generated content and thus endless variety, (2) the ability to use it even without VR on a regular desktop computer, and (3) video streaming of the app on popular video site Twitch, with nearly as many people watching the the virtual world as are actually in it. 

VR games are essentially behavioral training for augmented reality commerce. If users build and value objects and experiences in a virtual world, users will value them when overlaid on the physical world. Think about how video games from the 1980s and 90s became the blueprint for gamified mobile interfaces in the 2010s (see Mary Meeker's thesis on this here, pp 103-155). And we already see this happening. One sign is the planned entry of Magic Leap into retail. Another sign is fashion brand Chanel investing into tech company Farfetch (which had already raised $400 million from Asian fintech JD.com). Chanel is explicitly not interested in distributing through mass online retail, but are moving towards creating highly personalized augmented reality shopping experiences. 

Weaving together some crypto projects in the space can also help us see ahead. AR glasses manufacturer Lucyd has partnered with Gaze Coin, so that interactions with objects rendered in AR can be monetized. Similarly, there's a partnership with gaming network Gizer and algorithmic advertiser Advir.co. Combined with a rights-management overlay like Bubbled, you get a coherent integration of services that replicate digital advertising and commerce infrastructure in the physical world. Because in reality, we search for things not by typing or speaking, but by looking.

Source: Steam / RoadtoVR, Lucyd, WindowsCentral/VRChat

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If you are attending Finovate Middle East this week, catch us on Day 2 at 10:25 talking about Fintech from the perspective of the banks. And give a shout if you're in Dubai and want to meet up!

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