Here is the article I mentioned:
- ByteDance vs. Kuaishou: Innovator vs. Fast Follower Strategies for the China Attention Market (Asia Tech Strategy – Daily Update)
Related podcasts and articles are:
From the Concept Library, concepts for this article are:
- Platforms: Audience-Builders
From the Company Library, companies for this article are:
- 12: Basics of Tiktok / Douyin and Audience-Builder Platforms
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Welcome welcome everybody. My name is Jeff Towson and this is Tech Strategy and the question for today Is Roblox gonna be the next tick-tock and plus some stuff about the Quaisho IPO? now for those of you who aren’t familiar Roblox is Kind of an interesting company. It’s at the simplest level. It’s it’s kind of a you know a platform for joining into various games and environments where you can walk around and do things with pretty primitive animation and it kind of looks like casual gaming and then you chat with a lot of people. That’s the simplest version. The more compelling bigger vision is this is an online community where you can spend time and it’s really a social network or at least a social environment more than say a game. That’s kind of the next level up. And then the bigger vision, the biggest vision, is this is the multiverse. That this is gonna be one day these environments are gonna get better. And anyone can basically create these various environments and or games depending on what you wanna call them. And one day soon, this will be just this infinite series of virtual worlds that people have created. and you can go sort of live in them. And that’s the multiverse right at a Ready Player One. So there’s a big idea out there on the horizon, but at the simplest level today, it’s a lot of online sort of casual games where you can hang out and chat and do some simple stuff and people are putting up games all the time. So it’s an interesting creature. And that’s why I brought up TikTok, because TikTok was also a new creature. It wasn’t TV. It wasn’t movies, it wasn’t long video, it wasn’t pop songs, it was a new type of media slash entertainment slash sort of thing to engage in, short video. And there was also this question four to five years ago, is this thing popular, what is it, who likes it, well it looks like a lot of kids like it. And then the thing really I think has proven itself beyond a shadow of a doubt. Everybody uses it in every country. age groups all over the place and it behaves differently. It’s a different animal but it really does work and it has succeeded both as a product, a type of media, a type of entertainment, as well as a business without question at this point. And so that’s kind of my question for Roblox. You know this is still in the we’re not sure phase. Could this be the next big new animal to come out? And The potential is there. The trajectory, if it is achieved, is truly spectacular. But we don’t know. Maybe people like it, maybe people don’t. So that’s kind of the question for today. And per the standard process, I’m gonna ask you, later in the talk, do you think Roblox is gonna be the next TikTok-like phenomenon? Now, for those of you who were here in Bangkok yesterday when we had the meeting downtown, and we talked about Roblox, and… A team did a really good presentation on what they thought it was about, the strategy, where they thought it was going. We had some good questions. It’s just a lot of fun. I really enjoy these sort of in-person meetings we’ve been doing and hopefully we’ll start live streaming those out at some point so subscribers who are not in Bangkok, which is the vast majority, can participate in that. But I think we’ve got it down now. So yeah, thanks for those, everyone who came out yesterday. That was a lot of fun. And I’ll see you in, I guess, two weeks when we do a Meituan, right? And for those of you who aren’t subscribers, you can go over to jefftausen.com and sign up there. There’s a free 30 day trial. Try it out, see what you think, join the group. And my standard disclaimer as always, nothing in this podcast or in my writing or on my website is investment advice. The information and opinions from me and or any guests may be incorrect. The numbers and information may be wrong. The views expressed may change or no longer be relevant or accurate. Overall, investment is risky. This is not investment advice. Do your own research. Okay, onto the subject. Now, one of the reasons I like Roblox is it’s really a good strategy question. I mean, this is kind of right in my strike zone because it’s not that clear. It’s still emerging, it’s still evolving. It is a well-thought-out strategy from the get-go in the sense that if this works, if they succeed, it will be a massive global business with fairly powerful competitive advantages. So the strategy’s clear, doesn’t mean it’s gonna work, but they’re playing to win, as we say. Now, there’s a lot of factors in here, a lot of stuff’s unknown. I’m gonna talk sort of about the platform business model, audience builder platforms, various types of media and consumer behavior, but within all of these, it’s easy to get confused and there’s always so many factors you can think about. So how do you decide what really matters? Now, my two go-to questions are always, what is the consumer want and what is their process for buying and using? And second one, what is the competitor view? Those are always kind of my two, this is where the rubber meets the road in all of this. At the end of the day, maybe you can talk about business all you want, but it comes down to a customer walks into the store and decides I’m gonna buy this or I’m not gonna buy this or I’m gonna buy this. but not that competing product and why, and what percentage of the time that goes what direction. That’s where this all plays out. I mean, that’s where the rubber hits the road. That’s where all these factors come to a point or don’t. And it’s always a mix of those two decisions, the competitor actions and the consumer, well, customer actions, but in this case, let’s call it consumer actions. That’s kind of the so what at the end of all of this. And the best companies, the one that do well, they win those questions, they win those competitions at the moment of sale more than their competitors over time. But it’s generally still statistical. Nobody wins all the time. And those two things actually kind of shape each other. When I go in to buy a smartphone, okay, there’s the consumer view in this case. What do I want? What do I care about? What do I need? How do I think about price? What’s my process for buying, usage? How did I, all of that, that comes to a head with am I gonna buy this phone? Okay, that’s the consumer view. But that is also shaped by the competitor view because look, there aren’t 100 phones for me to choose from. There’s a handful of major phone manufacturers. Well, that’s a result of the competitive situation. You know, the competitive dynamics. the competitor actions, generally limits the scope of the consumer choices and vice versa. There are not a hundred types of cola at 7-eleven. There’s probably just Coke and Pepsi. Now there’s other drinks but that’s it. So those those factors always sort of influence each other and you really have to win in both scenarios generally speaking. Now when we start talking about platform business models, which is what Roblox is, and it’s what TikTok is, and I’ll talk about Quaishu a little bit too, and it is that as well. Okay, we’re not just talking about the consumer view anymore, we’re talking about multiple users. That’s how I’ve defined a platform business model. You are serving more than one user group. One of those user groups will be the customer, but the other might be the content creator, might be the merchant on Alibaba. So you also have to sort of think about it from that viewpoint. So when you do the consumer, the customer view, I always do it for the multiple user groups. What do the content creators want? How do they think? What do they act? What do the consumers want? How do they think? What is their process? What do the advertisers want? Now I do that for each user group. So it’s a little bit more difficult when you go from a typical product or service, a pipeline business model, to a platform business model, which is a network-based business model. Now, it gets even more complicated when you start talking about entertainment. And entertainment, I’ve started to refer to this more as the attention business, which is I’m trying to get the consumer’s attention on the smartphone. And that traditionally was entertainment for the most part. You watch TV because that’s all there was. And what’s on TV? Well, there’s TV shows and there’s movies. It was entertainment and media. But that… You know, that definition doesn’t work real well when you’re thinking about, look, I’m looking at my phone. I could watch a video. I could watch a short video. I could listen to a song. I could hang out in this chat room and talk while I’m watching a video. I can watch a video and chat in the sidebar. So this idea of fighting for attention is more complicated than just entertainment or media. It’s kind of entertainment. It’s kind of media. It’s kind of social. It’s kind of a utility. I’ll talk about the various levels there. But that’s a hard game. It’s a zero sum game for the most part and it’s constantly changing. There keep being new type, well with any given media, let’s say music, the genres keep changing. Now it’s pop, now it’s K-pop, now it’s hip hop, whatever. So that bit is always changing. But then the media types are also changing. well now there’s short video, now there’s live streaming, now there’s online books, now there’s excerpt books, now there’s pod. So the media types keep changing and then the technology keeps changing as well. Well now I’m listening on my phone, now it’s playing in my smart home speaker, you know the tech keeps changing and in line with all of that consumer behavior keeps changing. So I mean it’s arguably the most dynamic space for any of this. You know, short video didn’t exist five years ago. You know, 15 years ago, there wasn’t anything called social media, and now people are spending, let’s say, 20, 25 minutes per day in the United States on Facebook. Short video didn’t exist five years ago, and now people last year were spending about 44 minutes per day watching TikTok. It’s now 90 minutes per day, apparently. And QuiShow has come out and said, you know, there’s, it’s 80 minutes per day on QuiShow. So that’s soaking up. So it’s all this fight for attention. Now in the last couple podcasts, I’ve mentioned this idea of that BCG two by two matrix, where you can sort of describe the terrain by predictable versus unpredictable and malleable versus un-malleable. And you put that on a two by two and you get a couple of quadrants and the upper white, upper right quadrant is. This is a terrain, a business type, that is malleable and unpredictable. And that was called the Shaper Terrain. That’s where most media is. You know, yes, it’s unpredictable. You can’t tell what people are gonna be doing with their time and attention in two years. Very, very hard. But it’s also malleable. A leading company can change behavior. Netflix changed the business model for television. and movies. They did. One, it was unpredictable, but they shaped it. They said, we’re going to do discs, we’re going to mail those out, and then they said, we’re going to start doing in-house content, which changed the economics and it changed the competitive advantages within that business. So this is all sort of Shaper. One compelling, clever company can change the landscape pretty significantly, and we see that happening on a fairly regular basis. Now last point on this. If we sort of take apart the consumer view and the competitor view, and let’s say we look at the consumer view, which is a user group, right? Okay, that’s kind of what I’ve just been talking about. Look, for most consumers, watchers, viewers, podcast listeners, it’s a zero-sum game. There’s only 24 hours in a day. You know, you’re always fighting for attention. That’s kind of why I called it the arms race for attention. And in terms of what they’re spending their time doing, you can kind of put this into three to four levels. At one level, you have this idea of a utility, that we spend our time doing things that is sort of like, hey, I’m chatting with friends. Chatting with your friends on WeChat or WhatsApp or Line, that’s kind of a utility. It’s not like it comes and goes and it gets disrupted. It’s kind of a basic utility of daily life. paying for things, chatting with people, and then there’s real utilities like paying your water bill. That tends to be the most stable type of way you can capture someone’s attention. I don’t think there’s any chance that private chats on a smartphone are gonna be totally gone in five years. I think that’s a baseline foundation, and that tends to be a good place to live. Let’s say on top of that, we could talk about social media. communication, being social, not private chat with your family, which I would call a utility, but just sort of social behavior. That’s where you can hang out on Facebook and talk to people. You can hang out in Roblox and talk to people. You can hang out on Twitter, but the social aspect is very important. Now that’s kind of the next level up. I don’t think it’s as predictable. That can change pretty good. One level above that we could call. entertainment, like this is watching a video, this is listening to music, and a lot of these things are kind of merging together. Like you could argue that live streaming is really a combination of entertainment and social, because yeah you’re watching it but you’re also chatting. You could say live streaming in commerce is sort of, well I wouldn’t call it a utility, but generally speaking Social is more stable and predictable than entertainment. If you are a pure entertainment company, the terrain changes very, very quickly. Now it’s live streaming, now it’s short video, now it’s music, now it’s, I mean, you have to move around pretty fast. The best companies tend to do a combination of those, like a WeChat has its foundation in the utility of conversation and payments. But then on top of that, there’ll also be a social aspect and some entertainment, and that waxes and wanes in various ways. They’re focused on live streaming right now, but it sits on top of their utility of communication. Anyways, that’s one way to think about the consumer view. Now, if we’re talking about a platform business model, and I’ve given you five types of these, marketplaces, audience builder slash innovations, payment, learning platforms, and standardization and coordination platforms. This is all under audience builder platforms. where the primary interaction we are facilitating as a platform, whether you’re TikTok or YouTube, is to get certain content creators connected with certain viewers. And the main dynamic is to build an audience for whatever they’re doing. That’s kind of a subtype of what I would call an innovation platform, where maybe you’re building apps, maybe you’re building content, you’re building something on a platform that’s sort of a business or a… or intellectual property or something. And one type of that is where you’re building an audience. But you could also be building games and tools and other things. So let’s say this is all under audience. Well, the user group in that case would be content creators. That’s what TikTok is. It’s a two-sided platform. Well, it’s a three-sided platform, but two main ones. You’re connecting content creators with viewers. Now that can be the same people, but it’s different roles. So you’d ask the same question, what is their view? What do they care about? What is their process? The content creator view, like the consumer view. This is actually a pretty compelling thing to think about when you talk about this business. Why do people create videos on YouTube? The vast majority don’t make any money. The vast majority don’t get too much attention. So there’s a lot going on here. You could put like, okay, maybe they’re doing it for money. Some people get that. Maybe they’re doing it for social capital. Maybe it’s a status game where you want to become well-known. You want your friends to see you, which is a big deal. Maybe it’s about passion and a creator instinct that you’re building because you feel the need to create something. That’s an important thing. And there’s at least three or four different dynamics going on there, depending what type of media you’re talking about, but it can be pretty different platform to platform. People make money live streaming pretty easily. People who make short videos basically make no money. So anyways, and then the third user group would be advertisers and merchants who, you know, that’s usually how these things are funded. Now in the show notes, I’ve put my standard diagram for an audience builder platform, two to three user groups, viewers, content creators. brands, merchants, advertisers, and the main interactions between viewers and content creators. That’s what we’re facilitating with the platform. However, in red around, I’ve sort of put, why audience builders are so much more interesting than marketplace platforms like Lazada. It’s because people care a lot about these things. They watch them a lot more. People don’t spend a lot of time hanging out at Walmart or looking at stuff on Lazada. And if they do buy something, they don’t share it with all their friends and they don’t comment on it and they don’t get angry and they don’t get happy. But when it’s content like an audience builder, you know, videos, things, people actually feel strongly about these things. So content creators tend to share their content with others. People who view content like short videos tend to become content creators. People who view content tend to comment a lot, especially if they get angry, which is a good… strategy unfortunately. They share it with their friends. There’s a lot more going on than just saying, hey I bought some coffee on Lazada. I’m not going to share that with my friends on social media. I’m not going to leave a bunch of comments about the coffee. I’m not going to spend a lot of time. Now it’s a pretty straightforward transaction. So there’s a lot more going on with these audience builders. Anyways, I put in the show notes my standard picture. And the way I wanna do that is I wanna tee up a couple different audience builder platforms and then talk about why Roblox is so interesting and so is Quaishow. So here’s a couple examples based on that diagram and what I’ve just said. So let’s say we’re talking about YouTube as an audience builder. Okay. Who are the viewers? Well, pretty much everyone. That part’s pretty straightforward. But who are the content creators? Well. It’s not everybody, not everyone in the world is a YouTube person. There’s actually a bit of a hurdle to get involved. You probably have to have a little nice camera, at least she used to, and people had studios and things like that. I mean, it’s easier now than it used to be. But what’s most compelling about YouTube is its long tail content. that when you start to look at the robustness of the platform, you wanna look at, how fragmented are both sides? Is it three companies creating all the content or is it a hundred thousand or a million people creating all the content? The more fragmented it is on both sides, generally the more robust the platform becomes. And as you increase activity on both sides, what does that do in terms of the network effect? Well, the network effect, which you have to look at from the viewer perspective and from the content creator’s perspective. It actually increases linearly on both sides. If I’m a consumer, what is the marginal value to me of this product as more content creators join and add more content? Well, it increases. It keeps increasing more and more. And if there’s a million videos, that’s better for me than 100,000. That has a lot to do with the fact that long tail content, small niche type content is actually compelling. And the example I gave yesterday, this is really weird, but on YouTube in the last week, for some reason I came across some dude, I think he’s in Wyoming, who’s got a mink, which is something like a ferret. It’s like a, looks like a really big rat or a really small thin dog. I don’t even know what this thing is. And his job is he takes his mink and his four to five dogs and they get hired to kill rats. So a big farm would hire them. or an abandoned barn that’s maybe sitting derelict and they bring their animals out, he lets all his animals go, he films the whole thing, it’s really weird. And then the title of the video would be like, we just killed 110 and it’s a picture of him in the thumbnail with a big, a huge pile of dead rats. Like this is long-tail content, I never knew stuff like this existed and I’ve watched quite a few of them and it’s kinda interesting. It’s a little morbid, but you know. That’s not a TV show that CBS is going to make. I mean, we are deep in the weeds of long-tail content. I watched another video by an expat who’s just gotten married in the south of the Philippines to a young woman from the province. And he just videos their life. And the videos are funny. It’s like, you know, taking her on an airplane for the first time. And you know, they’re really seem to, it seems like a really nice relationship and they’re just kind of cute. I watched that. I mean, there’s stuff like this all over the place. YouTube really captures that, right? So when you look at the audience builder, it’s fragmented on both sides. We have highly differentiated content on the content creator side. Long tail content’s very important. It’s a three-sided platform, viewers, content creators and advertisers. It’s highly shareable. There’s it’s somewhat commenting. Probably the biggest weakness something like YouTube has is the monetization mechanism kind of sucks. It doesn’t naturally lend itself to advertising. They put the banner ads at the bottom, which is always where the subtitles are, so they always cover up the subtitles. They put these one to two second videos at the start that everyone clicks through. You know, that thing does, I don’t think it makes much money. I haven’t checked recently, but. Okay, so it’s interesting. People like it. The content creators are mostly getting status. It is mostly accumulation of social capital, not monetary capital. But there’s a lot of user-generated content. There’s professionally generated, talk show hosts will put their videos up. It’s a very nice platform in many ways. It’s not terribly profitable, but you know. Having a good platform business model with good competitive barriers doesn’t mean you make money, right? That’s always a secondary question. Okay, now compare that to TikTok, which is video on a smartphone that is short, 15 seconds, although it’s getting longer. At first glance, you would think this is the same. Oh, it’s an audience builder like YouTube. TikTok is like YouTube, which is kind of the closest thing that you can make an analogy to. Turns out the behavior’s pretty different. Turns out the audience builder platform is pretty different. And TikTok really did a couple things well. Number one, they made it for a smartphone from day one. YouTube is not great on a smartphone. It’s built on a PC. It’s horizontal videos. TikTok is vertical videos that cover the whole screen. You don’t have to type. You don’t have to search. You just flip your thumb. I mean, it’s really designed for a smartphone. That’s good. They made the video short, which is very addictive, 15 seconds, 15 seconds, most YouTube videos are not, and they made it much easier to become a content creator. They really converted their viewers into content creators very easily. My standard joke is you’re staring at your phone, watching a video, you turn it around, and now you’re making a video. It’s that easy. So they really kind of democratized the idea of you can be a content creator for video. They made it accessible to everybody. And if most people in the small villages of India can’t create YouTube videos, probably, but they can all create TikTok videos, it’s very easy. So that’s probably the biggest difference. Outside of that, it’s kind of like YouTube, that they have a lot of long tail content. You get a linearly increasing network effect for both user groups. It’s highly shareable. People care about it, they enjoy it. And unlike YouTube, the monetization is pretty awesome. It turns out, watch a video for 15 seconds, flip, watch a video for 15 seconds, flip, and then an advertisement comes up which is a full screen advertisement for 15 seconds by L’Oreal. And it’s pretty great. It’s a natural advertising platform much the way Instagram is. And so their monetization has been fantastic. The numbers they’ve been putting up for digital advertising are spectacular. I think they’re at $35 billion this year. in spite of all the political stuff going on, although they make all that money in China. They’re not really monetizing outside of China yet. But that’s pretty much double from the year before, 18 billion, and that was double from the year before there of like nine to 10 billion. So they’re a rocket ship in terms of usage and revenue. It’s a cash machine, much more than YouTube. Okay, so again, content creators are mostly getting status and things like that. So now think about those two models. Those are both video. Here’s a third video model, live streaming. You could argue all three of these are video, but they’re actually again, very different. Even though they’re all video and they’re all audience builders, again, the dynamics are different. Livestream is built for a smartphone. Like TikTok, they made it very easy to become a content creator. They democratized it. If you want to create your own little show to sell stuff, you don’t need a studio, you don’t need to be on late night TV, you just turn your phone around sitting in your factory and you can start selling your goods. So easy to create from viewer to content creator. However, when you look at the user view, the user experience, you realize live streaming is very different. First of all, it’s live. Live has different dynamics than videos you can watch any time of day. You know, Short video is very applicable for I’m on the train, I watch two to three videos and then I’m in the office and I watch two to three. It’s very good for fragmented time. Livestreaming is more like my favorite live streamer is on at six, I’m going to go home and watch because I want to be there when it happens because it’s more engaging and immersive when it’s live and I feel like I’m almost having a connection with the person and everyone’s chatting at the same time. That’s a very different user experience. It has somewhat of a long tail, but not as much. Nobody wants, and the value of the content decays pretty fast. People don’t wanna watch live streams from two years ago, but they’ll watch YouTube videos from 10 years ago. So that’s a little bit different. And the game for the content creators is pretty different. If you wanna make money in short video, you need a big volume of viewers. It takes time to build an audience, hence audience builder platform. You can do a live stream tomorrow and if you get 100 people watching you, they may give you a little money. You can monetize from day one without having to get any sort of fame or volume. So a lot of the best live streamers, you know, they have a thousand viewers of their live streams, but people are given 10, 15, 20, a hundred dollars. So the monetization is pretty good and It’s a little bit of a different dynamic, but those are all video. Now, one thing within live streaming to keep out, there’s actually two different types, at least, of live streaming. There’s live streaming associated with e-commerce, which is what Taobao Live and JD Live are doing. That’s a very powerful business model, and Alibaba is all in on this. Here’s what we’re selling. I’m selling dresses, I’m selling shoes, I’m selling. whatever, a trip to Paris. I mean, you are in the e-commerce business and live streaming is a channel. Okay, that’s a pretty great business. What Quaishow does when they talk about live streaming, Quaishow does two things, I’ll talk about them in a minute. They call themselves a video platform, but then they mix together two different types of videos, short video and live streaming. And they say it’s the same. They say, we’re in the short video and live streaming business. And my immediate reaction is those are two very different businesses. The consumer behavior is different. The competitive dynamics are different. The business models. Yes, they’re both audience builders, but they’re different, which is kind of the point of this first part. Um, they are in live streaming, but they are not doing e-commerce live streaming like Taobao live JD live. What they’re doing is sort of gifting live streaming where I go online and I juggle. and I do something funny and I sing a song and I dance and people give me a dollar, virtual coins, quiet coins, that business is very different than e-commerce live streaming. And it’s a little more speculative in my mind. I think it’s kind of a hinky, strange type of media. I’m not totally convinced that works. It does work in gaming. So if you look at Huya and YY. those sort of live streaming gaming businesses that are based on gifting. It looks better. But when you start jumping into areas like I’m gonna sing a song and people are gonna give me money, it’s a little unclear to me. And I mean, let’s be honest. If you actually go on a choir show and you look at the live streaming, what you’re gonna see is you’re gonna see a lot of very pretty women and you’re gonna see a lot of guys giving them money. Okay, so that behavior is a significant part of this. It ain’t only fans by any stretch of the imagination, but there is some aspect of that dynamic there. So anyways, that one I have a little question. But again, I’ve just given you one, two, three, four types of audience builder platforms all in video, but they’re very different when you take them apart this way. Long video, short video, live streaming e-commerce, live streaming based on gifting. And the reason I bring this up is because when we talk about Roblox, you have to look at it this way. How is this, what are the dynamics of this audience builder platform? How is it doing? How likely is it gonna do? And is it another TikTok, which was a speculative audience builder platform that has really proven itself beyond a shadow of a doubt? Okay, let me do a little diversion into Kuai Shou just because it’s the big news of the week. So, Kuai Shou has gone public and in Hong Kong. And I mean, it was a massive IPO, $180 billion. I mean, it didn’t go out at that, but it surged up to that pretty quick. So, almost $200 billion. And, you know, this is just going to be the pattern. There are so many, most people outside of China didn’t even know about Kuai Shou. And so, you know, if you’re listening to this, if you’re outside of China, which about 60, 70% of people are listening to this, you know, I think you’re paying attention to the right thing. Like there are so many tech companies that people don’t know about that are on the way. And when they do finally go public, like the rest of the world kind of does a head fake and it’s like, wait, what? How big is it? 180 billion? Are you kidding me? There’s a bunch of these on the way. I mean, this is just the beginning. And imagine where we’ll be in three to five years. I mean, I don’t know how people are gonna invest in technology without understanding what’s, you know, this pipeline of companies coming out of China and Southeast Asia. I don’t know how they’re gonna do it. But I think we’re all beautifully placed. So it’s good for us. Anyway, so yet another massive IPO. And, you know, everyone’s reporting on it. The story of the founders is… pretty interesting. One of the dudes grew up very, very poor, sort of fought his way. I mean, poor like not enough food to eat, poor, right? So when you see these China tech CEOs and you see people like Jack Ma, or like especially Ren Zhengfei, the founder of Huawei, you need to understand like how difficult their life was and what fearsome survivors they are. I mean, Ren Zhengfei slept on the dirt. for years when he was in the army, like in a cabin with, you know, hold next to other people to stay warm on the dirt, you’re gonna compete against that guy? And a couple of the QuiShow people are interesting too. So this sort of rugged, you know, survivor mentality that you see in a lot of these, you know, a lot of these people have really had difficult lives and they’ve fought themselves to the top. I mean, it’s the ultimate rags to riches story for a lot of them. So anyways, the numbers they put out, which are from the IPO filing are, you know, it’s 300 million daily active users on average. Monthly active users, 700 plus million. The average user spends 86 minutes per day, and then they’re running some GMV through e-commerce through the site. That’s kind of their standard numbers. Now, the first thing I would point out is, look, you’re combining live streaming and short video. There are two main issues. products are live streaming and short video. If you open up the app, the first tab is gonna be like a TikTok clone. Looks pretty much the same. The second one is gonna be another short video, but instead of having a TikTok interface where you flip the screen, it’s got thumbnails and you choose the one you want. And then the third screen is gonna be a bunch of live streaming. You can choose the thumbnail and see the one you want. So all three of them are kind of within this app and they describe it as, oh, these are our daily active users. at which I would say, yeah, but those are three different, well, at least two very different products. You’re just lumping them together. So I don’t really wanna see the daily active users all lumped together. I wanna see the breakdown. And when you see the breakdown, as far as I can tell, the vast majority of their attention, daily active users is in live streaming, although I’m not 100% sure of that. The one number I am sure about is the vast majority of their money, 70 plus percent, is coming from advertising, is coming from the gifting within live streaming. And only 20 to 30 percent is coming from the advertising in short video. So they’re more like 30 percent TikTok and 70 percent Huya in terms of money. I’m not totally sure of the breakdown of activity because it’s hard because people flip back and forth. So when they went public and everyone said, oh, it’s like the, you know, it’s like the, the next tick tock, I’m like, well, not really. I mean, there’s three different business models here. And the first one is, okay, there’s the short video tick tock business model. We know what that is. We see the winner. We can, you know, this is clear what this is. And so a certain percentage of their business is, okay, you are the number two of the tick tock short video business model. Got it. But you are way far behind TikTok. Of their revenue, about $2 billion comes from advertising within this type of model. And TikTok just locked up $35 billion. So that is dramatically different. So yes, they’re number two in short video, but they’re much, much smaller. And it’s not clear there’s room for a number two. How many YouTubes are there? Right? The second business model, which is also quite clear, is the Taobao Live model, which is, we’re gonna do live streaming tied to e-commerce. Taobao Live. It’s clear what that business model is, and it’s also very attractive. These first two business models are quite attractive in my opinion, and they’re proven. But there aren’t really any examples. When we talk about live streaming tied to e-commerce, it’s always content plus commerce. But… It’s the commerce people that are moving into content. Alibaba adds content, they add live streaming. I don’t know of any real big examples of it going the other way, where some content company somehow moved into commerce. So it’s not clear to me they have any ability to move from where they are to there. I think this is kind of side money. where they can, you know, if you’re getting a lot of traffic, you can put in some links to some products and make a little side cash, but I don’t see their ability to become a competitive live streaming e-commerce business. And then their third business is their live streaming based on gifting, which is the Huya model, the YY model. I think that’s fine. I think it’s, I think it’s where they started. You know, they started out making gifts and then they moved into sort of short video and live streaming. So that’s how I would view it, is those three things put together, three different platform business models, but you know, just sort of bring it around. All three of those would be considered audience builders, although the e-commerce is a little more complicated. All three of those have different consumer views and different consumer behaviors. All three of those have different behaviors and interests of the content creators. And all three of them have different competitive dynamics. So when you take it back, even though they’re all audience builder platforms, when you take it back to my what’s the consumer view, what’s the competitor view, you get very different answers for all three. That’s why I think when you… Glom this all together. I don’t really buy it. I like TikTok because I think it’s a pure breed I like youtube because I think it’s a pure breed Anyways, okay. That’s kind of a little bit about the IPO but it’s pretty cool And you know, they’re well positioned. You don’t get everything in life. I think they’re well positioned to move And to their credit, even though their business model is a little bit strange In all of this attention game the audience builder game the number one thing you always have to do is get attention. And they have captured the two most hot sectors in the attention market, which are live streaming and short video. So they’ve basically caught lightning in a bottle twice. And that’s awesome. And they get a lot of credit for that. Now they’ll have to figure out the strategy and the business model part as they go. But yeah, I mean, they did get the most critical thing twice. And that’s pretty impressive. Okay, let’s get to Roblox. Now, all of these are audience builders. Roblox is a lot like gaming. It’s closer to gaming than the videos I’ve talked about. And it’s also kind of close to music. If I build an audience builder platform for music, like Spotify, I’ve got users on one side, that’s the listeners, and I’ve got content creators, people who make music or publish music on the other side. It’s not nearly as attractive. There’s no long tail. Nobody wants to hear every garage band and every song that everyone’s written. Actually, they only want the popular content. So it’s a lot less robust of a platform business model and the popular content is controlled by a handful of powerful companies. So we don’t see the fragmentation on the content creator side. We don’t see the long tail. And there’s no long tail mostly because people just don’t like it. Why do they like watching individual videos of a dude catching rats, but they don’t wanna hear that guy sing a song? I don’t know. It’s just quirky. Every media type is different. And the monetization is not great because people don’t want advertisements stuck in their songs, although you can sort of put them between songs. Now on the flip side, music tends to be very, very powerful. People really do love listening to music. People tend to listen to the same songs over and over and over. They don’t do that for videos. Nobody watches a rap video 50 times over three to four years. But people will listen to a favorite song over and over. That’s kind of different. When you listen to music, you can multitask. You can’t do that watching videos. You can go to the gym and listen to music or a podcast. You can’t do that watching a video. So that’s kind of different. So anyways, if you take apart music, it’s different. And when you look at gaming, gaming is kind of in between music and videos in my mind. That, yes, it’s like video, yes, it’s very interactive, but most people wanna play the most popular games. You know. Regardless of the format, it can be online, it can be console, it can be PC, it can be smartphone, it can be very complicated open world games, it can be casual gamings of slicing fruit or something. It can be solo, it can be multiplayer, it can be social, chatting at the same time, it can be asocial, first player. It can be multiplayer and not social. You can be playing battle royale and killing each other, that’s multiplayer, but it’s not social. You’re not chatting with people. So there’s a lot of interesting dynamics. In that sense, I think it’s like music. I think it has a more powerful hold on the consumer. Music and gaming really, it’s impressive what they do. Now, if we were to take apart an audience builder for gaming, a company like Garena, Sea Limited out of Singapore, I love their strategy for gaming. because they clearly were building an audience builder platform. And the language they use in their filings is we are focusing on gaming that is the most immersive and interactive. And they listed it specifically. We want multiplayer role playing games. We want multiplayer battle royale games. They wanted the games that were the most engaging, but also the most social. because that moves us away from these three levels I talked about, a utility layer, a social layer, and just a pure entertainment layer. That moves them out of being just a pure entertainment product to entertainment plus social. And I think that’s much better. The best thing about gaming as an audience builder platform, one of the best things, is the monetization is absolutely fantastic. If you’ve got a good video game like World of Warcraft or whatever, multiplayer, Fortnite. You can put ads everywhere. You can let people buy, I don’t know, Porsche skins that you can then have a car that’s a Porsche and then you charge Porsche for that. You can have live concerts within it. You can have stores of Starbucks in it. I mean, it’s that virtual world aspect. You can monetize and brand everything. That’s pretty spectacular when you compare that to little banner ads on YouTube. So the monetization is awesome, but you know, it’s really social plus entertainment. And that’s kind of, I think, the question finally getting to the point here is what is Roblox? Is Roblox 75% like gaming? That I go online, there’s all these thousands and thousands of virtual games, virtual worlds, and I’m going in there to play. Like a game. Entertainment. Is it 75% entertainment and gaming? Or is it 75% social and then 25% gaming? Or look, I’m going in to play this game, which is a downtown beach community, and the game is stupid, but all my friends are there. And we’re chatting and it’s just hanging out. You know, we know what it is for gaming. It’s usually 75% it’s about the game. You’re in Fortnite, you’re playing, and then you’re chatting with people. But is what Roblox doing, is it the gaming heavy or is it social? I mean, they have both, which is great. So you’re not a pure entertainment platform like TikTok where you’re gonna, you know, it’s gonna be more stable and predictable. But I think that’s an interesting question I have. The other thing I really like about Roblox is they’re basically doing for this, gaming interactive world, the same thing that TikTok did for video is they made it super easy for anyone to become a content creator. They democratized it. If you wanted to make a video game before, you had to really have some advanced skills, you needed to be a company. They’re trying to make it so that pretty much anyone can use their tools and create a virtual world or virtual game. That’s really compelling. Now, if it works, If it turns out that looks like YouTube where there’s tons of little amateur created user generated content videos that are good, then democratizing virtual world gaming creation is amazing. If it turns out it’s like GarageBand where look, anyone can make a song but nobody wants to hear other people’s songs because they all suck. So is Roblox going to be full of interesting worlds that you can just constantly explore because there’s a long tail of content? Or is it going to be 90% garbage stuff that sucks, and we’re all going to spend our time in 20 games, which is kind of what happens with video games, and with music. So that’s kind of the other interesting thing they’ve done. But yeah, I mean, they have an audience builder that is entertainment plus social. It is global by nature, by design. So this could be a globally sized platform. It has fantastic monetization potential. They tried to democratize game creation and they focused on basically social plus entertainment, interactive and immerse. I like all of that. I think if it works, all of that is awesome. And then they did the thing we should always keep in mind is it’s free. The difference between charging someone one cent and zero is a spike in activity. Like one cent is cheap. As soon as you move one cent to zero, your usage jumps. Free is its own world. Like anytime you can offer something for free, adoption becomes much more powerful. And I think that’s good. And then the question is, is this gonna have a network effect? Well, if it turns out it’s gonna be like TikTok, yes. Big, healthy long tail. If it turns out it’s gonna be like music where most of the long tail sucks and nobody wants it, then no. Everyone’s gonna spend their time in a small number of worlds and most of the network effect is gonna come from the social interactions Not from the plethora of worlds and games you can be in. Okay, which brings me to the question for you Okay, these are all audience builders is Roblox going to become the next tick-tock Tick-tock was a new animal It was very unclear what TikTok was, if it was going to work or not for a long time. And then it did and it went global and it’s massive. Roblox is a new animal. It’s a new type of media and attention meets social that’s fighting for your attention on the smartphone. It’s a new thing. Is it gonna win? Is it gonna work and take off like this global phenomenon? And I think that’s the big question if you’re an investor. If you got into TikTok early on, you made a killing. But the opportunity as an investor is to get there before it’s clear. And that’s kind of where Roblox is, right? So that is my question for you. I would say. I’m gonna ask you to pause the recording and write down, is it gonna succeed? And try to answer that with two or three sentences, a couple of sentences on the consumer and the content creator view and on the competitor view. Like, what are the most important factors you would look for? I would wanna see consumers spending a lot of time across a wide spectrum of games. I would like to see content creators growing in their activity and investment in the worlds they’re creating. I would wanna see a strong network effect being built. I mean, what would be the questions within those views that you would wanna see? And then, you know, take a stab and say, based on this, yes, I think it’s gonna happen. You’re gonna have to guess on those questions because nobody knows yet. You could research it, but yeah, that’s the bet. So with that, pause the recording. is this company gonna become the next TikTok? And then come back, okay? Pause now. Okay, welcome back. I’m gonna give you my answers and then I think we’ll call it for today. Here’s my working thinking on that question. You know, this is the attention economy. You live and die based on whether consumers like it or not. Everything else is secondary. The business models, the dynamics, all that, monetization. It’s all second, you know. Live streaming and short video, consumers love them. People love music. You’ve got, I don’t want to be a five out of 10. Hey, people kind of like it. I want to be a 10 out of 10 because there’s too many things vying for your attention. You know, it’s gotta be a nine or a 10 out of 10. So young kids are doing it, teenagers really, and you know, really young kids. Is it a fad? Is it just, hey, that’s what they’re doing, but then they’re gonna grow up and no one’s gonna do it? Or is this gonna break into the mainstream? Short video started out as something for teenagers, and then it broke into the mainstream. And one of the things about short video, which you can pick up almost immediately, is it’s so addictive. Like if you try it, you end up liking it immediately and you spend a half hour. If I try Roblox, I didn’t really like it. I have a hard time getting past that. But that would be question number one, two, and three for me is, How much do people like it? Is it a 9 or a 10 out of 10 on the consumer side? Now a second sort of aspect to that is, is there any sort of hot aspect to this that’s going to make it break out? You know, gaming, like there’s Fortnite. You know, there’s hot games that have really broken out. Certain types of short videos, certain types of YouTube. Is there something that’s going to, you know, jump this thing out? Or is it just, you know, a bunch of mediocre stuff? So that would be my first question. The second question, the more this is about social, the more I like it. The more this is 51% about social behavior and people just chatting, and only 49% about entertainment purely, the more I like it. Tends to be more stable, those relationships with people, people tend to stay. I like that more. I would be far more interested If this turns into a bunch of virtual worlds where people hang out with each other and chat as opposed to a bunch of virtual worlds where you can play games and do things. I think the first is a lot more attractive than the second. That would be number two. And then there’s this idea of how much money are the developers making? You know, you really are dependent on the developers. This is not like people, they’re not doing it for status, like people making YouTube videos. They’re doing it to make money. How much are they making? Because you are really dependent on them investing a huge amount of time and expertise, not just to create the number of games and worlds, but the quality of them. You know, what you really need is a large number of very high quality environments. So I’d be looking at the level, so I’d be interviewing people on both of those user groups, and then based on that, and not formal interviews, I’d just be calling people up, hey, I hear you make worlds on Roblox, what do you think? And I think you’d get a pretty good answer on whether this thing’s accelerating or not. Their numbers look like they’re all going up on the creator side and the… viewer side, participant side, I’d be looking for enthusiasm as much as numbers. I would be happy with a small group of people that were super enthusiastic as opposed to a big group of people that are moderately enthusiastic. Anyways, that’s kind of how I’d take it apart. and see where I end up. And that’s it in terms of content for today. I hope that’s helpful. For those of you who are subscribers, the concept for today, obviously, is audience builder platforms. You can go to my concept library on my home page, click on it, you’ll see audience builders there. That’ll take you to all the articles about audience builders. They are really interesting. I mean, there’s so many different versions of it. They’ve migrated from just pure entertainment to social media. I mean Facebook is kind of an audience builder, but it’s also kind of a communication platform. You know, they’re sort of melding into other types of things that would build an audience, capture attention. I maybe should call them attention, you know, attention platforms or something. Anyways, that’s the concept for today. It all goes under Learning Goal 12, which is the basics of TikTok and audience builders. That’s level four. Oh, I did. I did get some feedback from people about, hey, should I keep doing reading assignments by level? Because I know many of you have been moving through the levels and I didn’t wanna leave you hanging in there. So yeah, I got some feedback saying, please keep doing that. So I’ll keep sending those out. I’ve gotta get those classes sort of done and put up, but I can’t get to it. So I’ll keep sending out the reading assignments by level. But that is it for content for today. As for me, everything’s going well. Nice week here in Bangkok. Pollution’s problematic this time of year, but I’ve got one, two, three pollution detectors in my apartment, a couple air purifiers going up. I’m getting really sophisticated at measuring and impacting the air quality in each room. So that’s a skill I didn’t know I would need. I’m hopefully, hopefully the vaccines are on the way and I’m gonna be able to start flying again. It’s funny, most of my family’s been vaccinated. It was kind of quirky just because my brother’s in dentistry, so they got them early and my parents are elderly, so they got them. And yeah, I was just thinking about it. I’m like, everyone I know has been vaccinated, except for me. So I did talk to a hospital here in Bangkok and they said it was gonna be second quarter that you’d be able to come in and get them. So what is that, six to eight weeks? Something like that, but you know, who knows. Anyways, I guess that’s it. Thank you for listening. I hope that was helpful, and everyone have a great week, and I will talk to you next week. Bye bye.