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One of the longstanding complaints against Big Tech is that they “exploit” user data for their own profit.
In some sense, I guess that’s true. I’ve used Twitter for years, and was never paid a cent for giving up any information about my demographics and interests.
But is that “exploitation?”
Sure, my data is valuable in hindsight. But billions of dollars in cloud infrastructure and data analytics had to be invested to turn it into something economically valuable that marketers want to buy.
InfoFi, short for “Information Finance,” is a niche sector in crypto looking to do something similar.
Is InfoFi an investable category? Consider Kaito, the leader in this space.
Kaito has two main products. Both of these products generate a substantial $33 million in annualized revenue, based on Dune.
The first is its data analytics platform, offering structured, sentiment analysis of public information. This is packaged as a monthly $833 subscription service that is sold to traders, AI agent companies and funds whose businesses depend on accurate sentiment tracking.
The second is a B2B service for crypto companies doing marketing. Dozens of prominent projects use Kaito for this purpose today.
The rough idea is this: Companies want to do marketing. Rather than the traditional top-down way of sponsoring events, media or paid influencers, Kaito offers an alternative way to incentivize bottom-up and organic content marketing.
Anyone can register on Kaito, start tweeting about a listed project on Twitter, and earn a share of these rewards. dYdX, for instance, is committing $50k a month in tokens for such a campaign with Kaito.
The problem, of course, is that this opens the door to all manner of trolls and low-quality content.
That’s where Kaito’s proprietary AI tech comes in. It’s supposedly filtering out slop from genuinely thoughtful content. So if you’re just posting “gmdYdX” or “bullish dYdX,” you’ll likely qualify for almost no rewards.
In sum, what Kaito’s really doing is using the blockchain to place a market value on attention, clout, social capital, or whatever you want to call it. Hence, “InfoFi.”
Based on partnerships with companies like Story, EigenLayer, Berachain and more, Kaito has helped distribute $72.3 million to yappers (this excludes KAITO’s own airdrop).
The KAITO token isn’t simply a governance token, either. The token can be staked for an 11% APY, and the team has committed to buybacks — about $3.9 million cumulatively so far.
At a circulating market cap of $502 million today, KAITO is trading at a ~15.8 P/S ratio. If you’re willing to comps KAITO to traditional SaaS companies (~20x), then it suggests KAITO is undervalued.
The tricky thing, of course, is that no one really knows what the “right” multiples are for a crypto company, let alone one in a niche subsector.
I think Kaito is leveraging token incentives to do something genuinely innovative. It’s struck up partnerships with major crypto teams like EigenLayer, Berachain and more.
Its success has attracted a few emerging competitors. One of them is Cookie DAO, a data analytics platform that rose to prominence during the AI token craze earlier this year. As far as I can tell, Cookies DAO is doing something almost identical. Instead of yaps, you have snaps. Instead of yappers, they’re called snappers. You get the idea.
This brings into question how strong Kaito’s moat is.
Anyone can scrape public social media data. Switching costs are also fairly low. In theory, it’d be easy for Kaito’s clients to switch to another sentiment analysis platform.
Where its edge lies, I think, are in its AI tools, and how well it scores user-generated content and filters for high-quality content. That’s crucial because it determines what kind of marketing is rewarded, which in turn determines continued usage.
The devil’s in the details.
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