Ironwood's Full Report on SocialFlow's Universal Attention Token

Key Points

  • Blockchain: ERC20
  • Classification: Security Token
  • Function: Equity
  • Circulating Supply: 1,000,000,000
  • Project Status: Ongoing
  • Total Supply: 1,000,000,000
  • Market cap: $25,000,000 USD
  • Consensus Algorithm: Proof-of-Work
  • STO: July 2018 – January 2019
  • Website: https://socialflow.com/uat

Points of Confidence:

  • SocialFlow is a well-established business with solid revenue over a five-year period. This project is not just a website and whitepaper.
  • SocialFlow has long-standing existing relationships with a large amount of the world’s biggest publishers and media companies. They are already poised to leverage those relationships to bring their blockchain-enabled solution to life.
  • SocialFlow has a strong team with 45 employees and experienced leadership necessary to guide a project of this magnitude to success.

Risks:

  • SocialFlow’s Universal Attention Token is effectively a micro-subscriptions system. This is not the first time this has been attempted, though it may be the first time it could actually be viable.
  • Digital advertising is a ripe target for disruption. There are a number of plays operating with and without blockchain-enabled technology attempting to achieve similar goals as SocialFlow.

Overview:

SocialFlow is a social media optimization and monetization platform currently in use by nearly 200 of the world’s top media companies and publishers. They leverage real-time data from the social media platforms along with their own proprietary algorithms and software to efficiently optimize delivery of information and messages on various social media platforms. Additionally, SocialFlow has supported campaigns that have generated tens of millions of dollars in revenue for their clients, giving them a deep understanding of the challenges and opportunities in the digital advertising space.

SocialFlow believes that the current digital advertising system is broken across publishers, advertisers and content consumers. Media companies and publishers receive poor engagement and face increased competition for a limited amount of consumer attention. Publishers also lose money to the multi-layered intermediary system that take cuts from advertising budgets, reduced referral traffic due to changes in social media algorithms, and fraudulent ad impressions.

Advertisers waste money on non-viewable ads, fraudulent clicks, and impressions, while content consumers switch to ad blockers. Increasing amounts of ads and disruptive ads that result in a poor user experience only generate further friction for content consumers. Ad blockers result in a negative effect to publisher revenue as well as hampering the ability of advertisers to reach audiences.

SocialFlow's Universal Attention Token LogoUniversal Attention Token is a utility token built upon the Stellar Network to create an immutable ledger of user attention and engagement. UATs will circulate between users/publishers to account for engagement and advertising dollars will fuel circulation. User clicks on content published by SocialFlow will provide the initial basis for attention. SocialFlow’s existing proprietary link proxy will generate unique click ID’s and timestamps that will be hashed via a one-way hashing algorithm. These are then published to the blockchain along with a device ID.

SocialFlow's Universal Attention Token - Full token flow diagram
SocialFlow – Full token flow diagram

This will create a ledger of user behavior and interest with UATs moving between users and publishers as blocks are created. Users will be able to replenish their tokens by engaging with branded content, and publishers will be paid for units of attention based upon their accumulated UATs. Publishers will be able to see click IDs as well as the URL that was clicked on. These are identified by the one-way hash identifier and are not personally identifiable. Users will also be able to use these hash identifiers to see that their clicks have been published to the blockchain.

Click settlement correlates user clicks with publisher media properties and will occur approximately every ten minutes. Transaction settlement will appropriately debit/credit UATs and create individual blocks. Transaction information will be transferred to the Stellar network where the Stellar Consensus Protocol will validate and distribute blocks. Blocks can only be audited by users with permissions and any transaction data involving user browsing history or personally-identifiable information will not be transferred to the Stellar network.

Social Flow's Universal Attention Token - How UAT clicks are settled to the blockchain
SocialFlow – How UAT clicks are settled to the blockchain

SocialFlow will use their proprietary AI Classifier to create segmented audiences based on aggregate link content types, content categories, geography, and language. Users will also be able to share other criteria on an opt-in basis. Advertisers will be able to target these segmented audiences with opt-in ad modules, and users will be able to replenish their UAT balance with attention to these modules. SocialFlow will build an initial prototype that will allow users to view ads, answer surveys, or share preferences to replenish their token balances.  These modules will provide a better ad-viewing experience for users while creating value for advertisers. Ad modules will initially be browser-based but future iterations could include browser plugins and apps. SocialFlow intends to create a set of APIs to allow advertisers and other participants to create their own modules. This will maximize advertiser creativity and effectiveness while providing users with the choice of different experiences to replenish their UAT balance.

SocialFlow's Universal Attention Token - Advertiser Participation
SocialFlow – Advertiser Participation

Why Blockchain?

Universal Attention Token will offer benefits to all three parties involved in the digital media industry. Publishers will have a new potential revenue stream and a different method to monetize users without negative experiences like running into paywalls. Users will be able to consume the content they wish to consume behind paywalls without subscribing and will get a better browsing experience with fewer, less intrusive adloads. Advertisers will have an immutable record of attention and engagement allowing them to buy flower-frequency, higher quality ads. They will have access to opt-in audiences segmented by content interest.

Security tokens, such as tokenized equity in the case of SocialFlow, offer numerous benefits. Transaction fees are lower due to middle-men bankers being removed, and future innovations to smart contracts may reduce the need for legal teams. By reducing the number of people involved, the execution of deals will accelerate increasing ease of issuance for both issuers and their investors. Instant settlement on secondary markets will also attract issuers and investors.

Security tokens will give a larger, more global investor base potential access to invest in security tokens as well as buy/sell on secondary markets. Regulation for security tokens has been in place for nearly a century and there is no grey area clouding investors’ minds as to whether or not they are staying within the letter of the law. Using blockchain and smart contracts can increase transparency by publishing information in real-time as opposed to endless one-off disclosures.

Coin/Token Use:

Universal Attention Tokens are intended to account for user action within the ecosystem. Each token represents a fraction of a unit of engagement, such as clicks, views, or impressions. The initial allotment of tokens is 7.5 billion, though more can be created to ensure appropriate volume for the system. SocialFlow has sole signing authority of the virtual wallets created for users/publishers, and as such, the UAT ecosystem is effectively an internal tracking system for the company. Token limits in user wallets will prevent gaming of the system. UAT’s will not have a set amount and will not be exchangeable. Their price will be set by SocialFlow and only publishers or media companies will be able to exchange them for cash. Users will only be able to use the UAT for services within the ecosystem, such as clicking through paywalls without converting to a subscription. SocialFlow intends to airdrop initial tokens to publishers participating in the system at launch and for users who opt-in to the system.

The SocialFlow security token is an ERC20 token that will function as a tokenized form of equity on the SocialFlow capitalization table. Their quantity is fixed at 1 billion tokens, and their price will be determined by the market. The security token will not confer voting rights, profit-sharing rights, or dividend rights. However, SocialFlow intends to use excess cash generated from UAT operations to fund tender offers for security tokens. The token sale will be preceded by a pre-sale SAFE (Simple Agreement for Future Equity). The SAFE will convert into Security Tokens when the minimum threshold defined in the Offering Documents is met.

Competition:

Basic Attention Token: Created as a unit of exchange for digital advertising, BAT intends for advertisers to reward users for their attention or engagement. BAT is an ERC20 token created by former Mozilla CEO Brendan Eich and uses the blockchain as a foundation for transparency to overcome the problems of fraud, bots, and false clicks in digital advertising. The Brave browser is designed to cut out middlemen so that a publisher must only pay when a reader actually views a page. However, BAT requires users to switch browsers, and as it aligns with ad blocking technology, their approach could be considered adversarial to the publisher-audience relationship.

Ironwood has a full technical report available on Basic Attention Token 

Invisibly: Led and funded by Square Co-Founder Jim McKelvey, Invisibly is attempting to move publishers and content creators beyond the traditional subscription model by offering users more choices. A non-subscribing user visiting a paywalled site may be offered options including payment-per-article, day passes, week passes, or viewing a video-based ad served by Invisibly along with a questionnaire. The length of time the user may peruse the site has not been determined. An invisible wallet tracks brand engagements and content expenditures, and if they wish to avoid ads completely, it can prompt users to input credit card information to unify all their subscriptions into one monthly bill. However, if a user is unwilling to subscribe to the publisher initially, it begs the question why they would wish to do with Invisibly.

AdEx: AdEx is a blockchain-based decentralized exchange using their own ERC20 token. They are attempting to address the issues of fraudulent clicks, user privacy, and consent to receiving sponsored messages through the transparency inherent with the blockchain. The beta of the exchange launched in early 2018, and future dapps that will connect to the AdEx network via the Ethereum blockchain are already in development.

adToken: adToken is an ERC20 token for operation in a blockchain-based digital advertising network, which attempts to eliminate fraudulent clicks/views while helping advertisers account for budgets and publishers show that ads were served. The token confers voting rights and depositing privileges for the adChain Registry. The registry acts as a smart contract to accredited legitimate publisher domain names.

AdBank: AdBank is an ERC20 token for a decentralized platform to create payment transparency between advertisers and publishers, and is attempting to eliminate middle-men and reduce fraud through anti-fraud AI technology and blockchain transparency.

The Team:

SocialFlow is a well-established company with 45 existing employees. Though each employee has contributed to SocialFlow’s success uniquely, we are focused on covering the individuals directly contributing to the Universal Attention Token.

Jim Anderson, CEO: As the CEO of SocialFlow, Jim Anderson has led the company for over five years. Prior to his tenure at SocialFlow, he was Chief Operating Officer at Vitrue where he was key to the company’s acquisition by Oracle. He spent a decade at two early ISPs, EarthLink and MindSpring, developing early consumer-facing experiences. He has over 25 years developing and launching B2B/B2C products and technologies.

Frank Speiser, President/Co-founder: Frank Speiser is the current President and Co-Founder of SocialFlow. His skills in applied mathematics and language analysis were key in the development of the proprietary algorithms used by SocialFlow. Prior to SocialFlow, Frank held Chief Technology Officer positions at Takkle, Inc. and HEAVY. He was an advisor to NabeWise Media, Inc. and was the Managing Director of Spectrum Data Technologies.

Sam Kaufman, CTO: Sam Kaufman is the current CTO at SocialFlow and is the founder of BugReplay. Sam is the leader of SocialFlow’s technology team and previously developed interactive apps for Dow Jones, UrbanDaddy, and NextNewNetworks. Prior to his tenure as CTO, Sam was the VP of Engineering at SocialFlow and worked at Takkle, Inc. and HEAVY.

Joe Papperello, VP Engineering: Joe Papperello is the current VP of Engineering at SocialFlow, where he leads the engineering team on new product efforts through every stage of development. His previous experience includes fintech at an algorithm-based block trading company.

Gururaj Hathwar, VP Development: Guru Hathwar is the current VP of Development at SocialFlow along with being a senior software engineer himself. He leads the software development team and has over a decade of development experience. His previous experience includes Citigroup, VWR, and Bowker.

Advisors:

Sarah Fay: Sarah Fay serves as the Independent Director for the board of SocialFlow and several other technology/digital media companies. She is the former CEO of Aegis Media North America and the former president of Carat US and Isobar US. She is currently the Managing Director at Glasswing Ventures, where she leads and evaluates early stage AI-powered companies. She has served on the Executive Board of the Ad Club of Boston, as Director on the Board of The Massachusetts Innovation and Technology Exchange (MITX) and as Board Advisor to Advertiser Perceptions. She is a Board Advisor to Adelphic Mobile, clypd, Colspace and Viral Gains. She received a BA in English from the University of Vermont and has 20+ years in the marketing services industry.

Rob Norman: Rob Norman serves as an advisor to SocialFlow and is the former Chief Digital Officer at GroupM. Following his retirement from GroupM, he became a Senior Advisor at WPP Media Agency. In 2018, he was appointed a member of the Albert Technologies Board of Directors. He has had a 30+ year career with WPP and excelled in leveraging technology to improve and expand digital marketing.

Mark Ford: Mark Ford serves as an advisor to SocialFlow and is the former Executive Vice President and Senior Strategic Sales Advisor at Time Inc. He previously served as EVP of Global Advertising and as Chief Revenue Officer. He has had a 32+ year career with Time Inc., and holds a degree in journalism from Kent State.

Barbara Goose: Barb Goose serves as an advisor to SocialFlow, is the Chief Marketing Officer at John Hancock, and is a member at Glasswing Ventures. She is the former CMO of Altisource and the former president of DigitasLBI Boston and Detroit. She currently serves on the board of Cradles to Crayons, previously served as chair of the New England American Association of Advertising Agencies, and on the board of the Massachusetts Innovation & Technology Exchange (MITX). She has 20+ years in the digital marketing industry and holds an MBA from Harvard University and a BA in Economics from the University of Pennsylvania.

Rudina Seseri: Rudina Seseri sits on the board at SocialFlow and is the founder and Managing Partner at Glasswing Ventures. Rudina has led technology investments in startup industries such as enterprise SaaS, IT software and data, marketing technologies and robotics. She has a BA in Economics and International Relations from Wellesley College and an MBA from the Harvard Business School. She serves as Advisor for GSK Consumer, L’Oreal USA Women in Digital, and is on the Philanthropy Board for Boston Children’s Hospital.

Market Capitalization:

One billion security tokens will be minted and up to five hundred million of these tokens will be made available for the sale. The price per token is $0.05 with the first one hundred million tokens sold at a price of $0.04 reflecting a 20% pre-sale discount. The sale has a target of $15,000,000 with a hard-cap of $25,000,000.

  • 500,000,000 Tokens allocated to the sale
  • 370,000,000 Tokens allocated to existing investors
  • 105,000,000 Tokens allocated to current and future employees
  • 25,000,000 Tokens allocated for other uses

The Broad Solicitation phase will continue though the end of December, 2018. Broad solicitation is regulated under SEC Regulation D, 506(c) and is limited to accredited investors within the United States, or International Investors who adhere to SEC accreditation guidelines. The offering will be conducted with a private placement memorandum. The purchase agreement will be either SAFE if less than $5M of security tokens have been sold, or equity purchase agreement if more than $5M of tokens have been sold.

SocialFlow's Universal Attention Token - Use of funds over three year period
SocialFlow

Conclusion:

SocialFlow’s dual token model represents an interesting step forward for the digital asset space as well as potentially large disruption for the digital media industry. Content consumers are frustrated with a greater amount of more disruptive ads. Media companies and publishers are frustrated by the lack of transparency and accounting of engagement from their ad dollars. Universal Attention Token could solve both problems while enhancing the relationship between publishers and the audiences that wish to consume their content.

There are a large number of players operating in this space and consolidation of the advertising focused digital asset companies will absolutely occur. However, we believe SocialFlow will survive this potential consolidation. The company has a good head start and can hit the ground running by leveraging their longstanding relationships with publishers. With their existing products and the large media companies that use their services SocialFlow is in a great position to change how digital advertising works as we know it today.

Separating their utility token from the fundraising just makes good sense. They are capitalizing early on the upcoming tokenized securities wave while clearly staying within the regulations that govern them as a business. Their offering gives people a chance to own equity in a small, rapidly growing business that has a solid foundation and an excellent team. We believe SocialFlow’s dual token model is a fantastic investment opportunity in the early era of security tokens.

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