This week’s podcast is about audience builder platforms.
You can listen to this podcast here, which has the slides and graphics mentioned. Also available at iTunes and Google Podcasts.
Here is the link to the TechMoat Consulting.
Here is the link to our Tech Tours.
Here are the main points:
- Misconception 1: Audience Builder Platforms Are Just Content Hubs with Libraries
- Misconception 2: Audience Builder Platforms Are Highly Profitable
- Misconception 3: Audience Builder Platforms Get You “Winner Take All” Dynamics
- Misconception 4: Audience Builders Have Two Main User Groups – Creators and Viewers
- Misconception 5: A Content Library Is a Barrier to Entry
—-—–
Related articles:
- Lessons from My Visit to Alibaba Cloud (Tech Strategy – Podcast 244)
- AutoGPT: The Rise of Digital Agents and Non-Human Platforms & Business Models (Tech Strategy – Podcast 163)
- Why ChatGPT and Generative AI Are a Mortal Threat to Disney, Netflix and Most Hollywood Studios (Tech Strategy – Podcast 150)
From the Concept Library, concepts for this article are:
- Audience Builder
From the Company Library, companies for this article are:
- n/a
——-transcription below
Welcome, welcome everybody. My name is Jeff Towson and this is the Tech Strategy Podcast from Techmoat Consulting. And the topic for today, the audience builder business models behind YouTube, TikTok, Instagram, Kuaishou, Spotify. mean, the list goes on and on. audience builders as a platform type. I’ve talked about this kind of a ton over the years, but I thought I would sort of bring it together and talk about some of the subtleties because it just keeps coming up. We see this model everywhere. I really like it. I think it’s kind of one of the coolest, if not the coolest one. Like I like it a little bit better than marketplaces because the dynamics are interesting. We see some interesting phenomena. So, I’m going to go through some of the quirks. the more subtle things, I think the things people get wrong. For those of you who are subscribers, I did send a pretty long email about this a couple days ago. I kind of went to town a little bit on this one. I think it was pretty good. You know, a lot of times you write stuff and you’re like, well, that was okay, it wasn’t great. I felt pretty good about this one. So, it’s full of graphics too. It’s probably a bit too much. But anyways, I’m going to talk about that today and just go through some of it. A little bit of housekeeping stuff. We’re doing two tours coming up July, August, and then again September, October. Those are approximate, but about right. We’re going to do an urban tech China tour. So that’s going to be kind of different. It’s going to be focused a lot of things about smart cities, green cities, development, urban planning. And this is me and Lola Wetzel who’s sort of the… the big urbanization thinker of China and McKinsey. So, we’re going to go together, go to a lot of cool stuff. The details of that are on TecmoConsulting.com. Might be appropriate if you’re more on the real estate side, the sovereign wealth side, the investment side, a lot of sorts of the big trends that shape how cities and really countries are developed. That’s going to be a lot of fun, actually. And then the other tour is going to be up September, October, which will be basically e-commerce retail merchants. and brands in China, everything that relates to anyone who’s trying to sell anything online for the most part because the China companies really are the best in the world at that in my opinion. They’re on the frontier, they’re pushing things quickly, so there’s a lot of great lessons there that can be taken pretty much to anywhere you’re actually building, you’re working on your business, Europe, Latin America, US, anywhere. So that’ll also be September area. can go over to techmoopconsulting.com, you can see the tours, they’re both going to be posted. there with all the details, including price and all that stuff, because obviously that matters. So anyways, that’s the housekeeping for today. Standard disclaimer, nothing in this podcast or my writing or website is investment advice, the numbers and opinions and information from me and any guests may be incorrect. The views and opinions expressed may no longer be relevant or accurate. Overall, investing is risky. This is not investment legal or tax advice. Do your own research. And with that, let’s get into the topic. So obviously the concept for today is audience builder platforms, but we’ll also talk a bit about network effects, barriers to entry, things like that. Now the audience builder platform, I’ve talked about this a ton. So standard platform business model, you’re in the interactions business, you’re enabling interactions, which can be transactions, marketplace, can be payments, payment platform, or it can be sort of innovation. Now innovation is something like an operating system. people build on top of your platform, they write apps, then the users of the computer use those apps. Well, a subset of that is something I call the audience builder platform, where yes, you’re innovating on the platform, but it’s really specific to content to gather an audience. So, you can consider that a subset of innovation platforms, and there’s a whole bunch of them. Now the simplest version of these would be, okay, it’s a platform business model. The two user groups are people that create content and people that view content. Could be videos, could be books, could be JPEGs, could be blogs, could be a lot of things. But. we very quickly realized, well, they’re a little bit more complicated than that because how do you monetize it? Well, usually you’re monetizing by advertising. So, you kind of get a third user group on there as well. And then you can start to break the content creators into different buckets like influencers. That’s a type of content creator. They can not only create content, get a lot of views and engagement, but they can do deals with the advertisers directly. So, you get a little bit of marketplace on the side between influencers and advertisers. You can get user generated content, regular people uploading basic stuff, you can get professionally generated content, know, Amazon, Netflix, Disney, they’re posting clips up there as well. So, a lot of complexity in all of this, but that’s the simple version and, you know, in theory you should get a network effect between the two user groups, the more content. the better the product is. can watch more videos, listen to more songs, read more articles. The more users, viewers, well that’s better for the people who create content. So, you know, you describe all these sort of interaction-based business models, the thing I always try to crystallize in my mind is what is the key interaction being enabled? Marketplace is easy. Transactions, that’s what you’re optimizing for. This one, that’s why I kind of call it an audience builder because the main activity is people trying to build themselves an audience. And then you can monetize that in different ways. But that’s just my take on it. Other people think about it differently. Okay, so that’s the simple one and I’ll put some, you know, some basic graphics in the show notes about that. I like to draw pictures of these things. All right. But then it gets really complicated because you realize quite quickly that some of these audience builder platforms are absolutely dominant. They are some of the most powerful business models we’ve ever seen. YouTube. YouTube is huge. It’s globally dominant. Try to think of a competitor to YouTube. Okay, you got rumble and a couple small ones, but not really. And you know, it’s got global dominance. Now these things do break down a little bit according to language where, you know, English speaking videos would be very different than Spanish speaking. And that does create openings for local versions of something like YouTube to jump out. But generally speaking, it adapts quite well across multiple languages. It hasn’t been a huge problem. Similar into the, you know, oh my God category would be Instagram and probably TikTok. Like all three of those business models are absolutely dominant. least the second to Instagram and TikTok are just cash machines. They just print out cash. It turns out the Instagram, mean, TikTok is really just a short video version of Instagram. And one of the reasons Instagram and TikTok did so well. Well, one, it turns out shorter videos and just JPEGs, consumers like those more. You know, you can flip through them more quickly. It turns out the shorter and more bite-sized the content is, the more people get addicted, literally addicted on the dopamine. It also turns out when you design Instagram and TikTok for just a smartphone screen, it becomes a tremendous advertising platform almost from day one. know, TikTok, you can go interesting video, interesting video, and then… a 10 second video by L’Oréal which is an advertisement and it looks great on the smartphone. you know everything just sort of perfectly worked out for those two particular companies. Powerful. Okay. Kind of the exception. Because then you get to a whole list of audience builder platforms that are kind of in the middle. Maybe the monetization didn’t work out so cleanly and nicely. Maybe. the fundamental offering to consumers, let’s say a big library of videos on YouTube, okay, it wasn’t so powerful. It was good, but it wasn’t that great. It turns out people just really love videos. So, you get kind of a mixed picture. You get some specialty platforms that are a little bit more niche. Maybe the economics don’t work out quite as well. Maybe the network effects aren’t so good. Maybe they’re more regional. And that’s a pretty good list of companies. go through. I’ve been writing about some of them like Kwai Show. Okay, it’s kind of like TikTok, but it really started out as a GIF sharing platform. Instead of sharing JPEGs, you share GIFs. And then it kind of got into live streaming mostly, and then it kind of pivoted over to short video. And even now it’s sort of live streaming plus short video. Spotify on the podcast side. Spotify podcasts are pretty good. It’s a nice big sort of content creator base. Very different than Spotify music, but Spotify podcast, kind of interesting, different media format. Bilibili, I was at their headquarters a couple weeks ago in Shanghai. That was pretty fun. They do anime, comics. Traditionally, they’ve been focused on sort of a niche approach of they do anime, comics, and gaming. which has different types of content creators obviously and it also turns out they get much more enthusiasm out of their fans because people tend to be enthusiastic about anime and gaming and things in a way that they aren’t super enthusiastic about travel vlogs. People like travel vlogs but they don’t go to conventions for those. Xiao Hong Shu, Red, doing quite well in China right now. I go on Xiao Hong Shu almost every day. really good videos, interesting stuff. A company called China Online Literature, is authors who have franchise or sort of famous book series or maybe famous characters, and they will continually write additional chapters and there’s a lot of interaction between them and fans of those particular characters or authors. Pretty interesting platform. They most, they… to a large extent they monetize by then taking the IP that’s created and turning it into TV shows and other stuff. anyways, you get a big, when you get into audience builders, you realize it is kind of a messy but interesting set of business models you can dig into, much more varied than let’s say marketplaces or payment platforms. So that’s interesting. And then you can get into sort of weak. audience builders, would say Spotify music is the example there where, you know, three, maybe four companies control most of all the popular music that people like to listen to, the YouTube, Sting, whoever. And it turns out people don’t really want to listen to amateur music that much. You know, people will listen. It’s very weird. You have to really start thinking about how consumer behavior is dramatically different. media type by media type. People will watch comedy videos, let’s say stand-up comedians. They will watch them over and over, lots of times, over 10, 15, 20 years. People still watch Eddie Murphy’s stand-up from the 80s. People don’t watch TikTok videos from two months ago, right? They trend, they disappear. It’s always new. Music is arguably the strongest version of that. People want to listen to their favorite songs and they will listen to them Hundreds if not thousands of times That’s very strange. Well, and you know, it’s an interesting behavior but unfortunately the artists and a couple record labels control that makes it hard to build a platform business model Which is why Spotify quite smartly You know pivoted from just doing music to doing podcast which is much more of a user-generated content platform So I think it made their platform much more robust Very interesting. Okay, so One last point on this. So those would all be sort of pure breeds. Right? If I was making an animal analogy, okay, those would all be, I don’t know, birds. They’ve all got beaks; they’ve all got wings. But then you look at models that kind of bleed audience builder platforms into other things. The most common one you see is communications networks and platforms. So that’s meta. That’s Facebook. Yes, they have a newsfeed, and they have Instagram. Newsfeed and Instagram, which is where they make, I think, most all of their money. I haven’t looked at it recently, but let’s say a lot of their money. Okay, those are mostly audience builder platforms. The newsfeed for Meta is a little bit more complicated. But then on top of that, they have their messengers. They have Facebook Messenger, they have WhatsApp Messenger, and then they have just Messenger. Well, those things kind of link together in interesting ways. And it turns out, you know, when people like videos or they like JPEGs or they like a joke they heard, they share it with their friends on social networks. So, communication. So, you see this blurring between audience builders and communications and social networks. That’s kind of interesting. We see that in China with WeChat. which was always messenger payment and then they offered WeChat channels, which is short video and live streaming. And now they kind of go together, very similar to Meta really. And then we’ve got Twitter, X, I still don’t like the name X, I like Twitter. And that’s just its own strange animal. mean, it’s really the behavior on there, the product type. I don’t even really know how to think about that one to tell you the truth. That one… You know, these frameworks are very useful for putting things, looking at things in a way that’s understandable and you can take them apart. But they don’t always fit. Sometimes they fit nicely like YouTube. Sometimes it’s kind of messy like Facebook. And other times, you know, I feel like I just don’t have it. Like Twitter, just don’t feel like I have a great framework for explaining that. I’m sure people do, I don’t. That’s interesting. And now you have threads, which… people aren’t talking about, which was the Facebook clone of Twitter. If you go on downloads on iOS, it will be in the top five, if not the top, no, let’s say top 10 for sure, maybe top five. It’s been stuck in the top five to 10 since like last November. And I assume their numbers are impressive. So yeah, this whole Twitter X thing, it’s evolving. It’s pretty interesting. They have blue sky; they haven’t done that well. But threads, which was kind of a bomb when they started, keep an eye on them. Interesting. Anyways, okay, so you got all these interesting complexities. Why is this cool for me? Why do I think this is cool? Number one, I think video is just shockingly powerful. There is something very strange. about staring at a screen that’s addictive, captivating, chemically addictive, highly influential. I almost view it like I’m being programmed. Sometimes I view it like I’m being entertained. Okay, I watch Netflix. Oftentimes, if it’s a newsfeed and I’m just scrolling, I almost feel like I’m being programmed. I used to think like I’m looking at the screen. More and more, I think like when I’m staring at the screen, I’m just opening up the software and letting them reprogram. I’m not sure which of those two phenomena is the more powerful. So video is particularly powerful. In an economy, in an age when keeping people’s attention seems to be the number one currency, okay, video is powerful. The others can be as well, so. You know, these platforms are all about capturing attention and that seems to be a game we all have to play almost no matter what you’re selling these days. So, I like that. Network effects. Yeah. A lot of these platforms can get linear network effects where, you know, the more content you upload on YouTube, the longer tail content that is there, the more strange niches that you can build out. the more valuable it is to consumers. Unlike a lot of categories with network effects, this one doesn’t flatline very easily. There seem to be a lot of linear increasing network effects, which I like. You can get a barrier to entry, although this I’ll talk about. It’s a little complicated. If you want to compete with Netflix, well, not Netflix, they’re not an audience builder. When you go into China and you start talking about these audience builders like Tudou, iQiyi, Tencent Video, they’re really a mix of a YouTube and a Netflix business model. They kind of do both and they’re probably more heavily weighted on the Netflix version. Or you could say iQiyi doesn’t like that. They consider themselves more of an HBO, high quality dramas, things like that. You can get barriers to entry based on the size of your library. Some companies have it, YouTube has it. If you’re going to compete with YouTube, you better have a massive library of content from day one. Others like TikTok don’t really have it, which is one of the reasons like these other companies have been able to jump into that sector, Kuaishou, WeChat, I’m sorry, not threads, of reels on Instagram. We see companies successfully breaking into short video all the time. TikTok’s still number one, but it’s pretty dynamic, unlike YouTube. There’s an unpredictability to this whole sector. Short videos was a new thing. Nobody saw it coming. Instagram was a new type of media format. Every media format gets you knew consumer behavior. Usually, it’s every technology enables a new media format which gets you knew consumer behavior. That’s kind of interesting. Fun to watch that play out. AR and VR have not taken off. short video and podcast did. I don’t know. It keeps changing. And then there’s lots of misconceptions and that’s kind what I’ll go through there. But anyways, there’s a lot going on here. It’s a lot of fun. I’ll put a lot of graphics in the show notes. That’s how I kind of keep all this stuff straight in my head is I have to draw things out visually. Then I kind of got it. So, I’ll put those in there. Okay, so let’s talk about some misconceptions, things I think people get wrong. Yeah, you’re going to, it’s so easy to think about YouTube as, okay, it’s a massive video library. That’s what it is. And that’s true. I mean, that is the core of it. You know, creating content, uploading, but it’s really gone beyond that now. I mean, I always sort of think about it like, look, you’re in the interactions enabling business. So, I’ll put a picture I made on chatGPT of like, you know, just a graphic of a bunch of people on one side of the room, working on their laptops, uploading videos, and then another people, know, group of people on the other side of the room watching the videos, right? That was kind of the initial way to think about it. Look, we’re ultimately in the interactions business, enabling interactions between these two groups. Now the simplest and most powerful version of that was let’s create a massive video library. and you can find anything you want. You know, if you want to, I’m always amazed when I go down these weird rabbit holes on YouTube. Like, what was I watching? I was watching some guy in South Africa who has a pet marmot. Some sort of animal. And he gets gigs to go to farms and clean out their rats. And the little marmot or whatever it is, minx, marmot? crawls underneath all the sheds and kills all the rats. And I’m like, how in the world did I end up watching this content? This is so weird. You can just go down these crazy little niches of long tail content because the library is massive. Okay, fine. But if you view this as just some sort of content hub and library, think, no, that’s one type of interaction. But because we’re connecting humans to humans, the types of interactions are going to evolve. They’re going to evolve with the sophistication of the users. They’re going to evolve with the sophistication and the behavior of the content creators. mean, we’re connecting human beings and those relationships are going to evolve and the platform has to evolve with them. So now we see comments. We didn’t used to see tons of comments. Now the comment section can be super fun. Like it’s really fun. see people kind of trolling and doing other stuff in the comments, having conversations. When you move into live streaming, you know, I like to watch live streaming videos. I pay more attention to the comments and the back and forth there than I probably do about the video. If you go over to Bilibili, the comments stream across the video itself. So, as you’re trying to watch the video, the text is literally going over the front of the screen, which is kind of fun when you type in your comment and you see it going across. So, the interactions keep changing. And that’s, you know, that’s really interesting. So, the interactions can be, you know, viewer to viewer, but they can also be live streamer or author creator to the viewer. So, you can interact with your favorite content creators, something like that. We get advertisers in there. We get merchants and brands in there. We get influencers in there. And then we get viewers and content creators, which more and more are not separate groups of people. They can be the same group of people, but the idea of a viewer versus a content creator, that’s really just a role. And the same person can act as a content creator and then flip right over and be a viewer and a commenter and back to a content creator. So as the interactions grow, it stops looking like a library with a big, huge database of videos and it starts to look almost like a social interaction or a community. So, you kind of want to think about all that stuff and see where they’re interacting and when you start to look at companies like Roblox, it really starts to be a community. But what is the community based on? Well, literally every community is based on chatting and content. That’s how you build a community. Every religion begins with a book. Well, it used to. And then it’s a community, a meeting, couple times a week, and there’s discussion. So, there’s both the content and the interactions. Is that still just a library with a lot of content? No, it’s something much more interesting and really powerful. anyways, that’s part of it. And then you can sort of break these things apart based on… you know, user generated content. Is it TikTok where anyone is uploading and creating? Well, a lot of the most interesting user generated content is reaction videos. This idea of composability. So, if you’re a major sort of content creator on TikTok, do you want to just sit and talk into a microphone or do you want to create trending videos that others create reactions to and then make their own videos? Well, that’s interesting. And they build on top of it. know, China literature, this idea of an author with some popular characters is going to write a new chapter to their book. Well, do you just write it and post it? Or do you have a discussion, hey, I’m thinking about writing a chapter where, I don’t know, Captain Kirk goes to this planet and meets this, and your audience starts helping you to create the content. So, the whole thing is a lot more interesting and I think it’s evolving pretty quickly. So that’s number one. Like don’t just think about this like a YouTube business model. Hey, it’s a lot of content. Let’s create a big library. Most of them are not that. Well, I shouldn’t say most of them. A lot of them are not that. YouTube is, but a lot of them aren’t. Anyway, so that’s kind of, we’ll call that simplification or misconception number one. Okay, number two. that these things are profitable. Audience builder platforms are profitable. Not necessarily, not necessarily. Definitely TikTok, definitely Instagram, definitely Reels, short video and JPEG sharing turns out to be, yeah, kind of a cash machine. TikTok is up there at $100 billion in revenue. That puts it neck and neck with Facebook. I don’t like meta either. I still like Facebook and Twitter as names. So yeah, these things can be absolute cash machines. But if you’re YouTube, I mean, how many servers do you have to have to keep literally all of those videos? I mean, it’s massive. It’s huge. The server costs are off the charts. And then if you’re operating, let’s say in the EU, well, or China. content moderation, which is a catch-all phrase for you know, some very nice stuff like hey, let’s not have you know pornography and children abuse and horrible things, which is good. You need moderation in that thing to this politician doesn’t like that you counteracted their narrative and they’re going to fine you if you don’t take it down which we saw during coven and some other things and it turns out a huge portion of that if not most of it that was being censored aggressively turned out to be true. So, there’s a lot of nefarious activity in there, but all that sits under the bucket of content moderation. And unfortunately, nobody has really cracked the code technologically on how you do content moderation at large scale without using a huge army of people flagging videos. Now Elon Musk may be the person who figures this out because he’s a technologist at heart. And when he built Twitter and started fixing it, he actually went after that core technological problem, which is content moderation doesn’t scale very well. And you know, they’re working on it with community notes and now it looks like Facebook is creating a version of community notes that looks like it’s copied from, you know, from ex Twitter, which is good. But yeah, there’s a lot of these costs in there that you can’t really control, unfortunately. That’s one of them, which is a real problem. As mentioned, if you’re going to do music streaming, well, you’re going to have to get the rights from a couple large music publishing houses. That’s going to be expensive, not going to be terribly profitable. Live streaming does not tend to be super profitable. If you’re sharing videos, it tends to be profitable, especially short videos. If you’re doing live streaming, well those influencers and their agencies that you need to do that because it’s kind of a, know, certain influencers command the popularity. Well, the gross profits drop dramatically when you go from short video to live streaming. It’s a problem. Gaming sites, gaming streaming sites, same problem. The business is very hits driven. A couple companies control all the hit games. If you go into mobile gaming, it tends to be much better. But if you’re doing the real popular games, yeah, the profitability can be not great. So, a lot of these live streaming, live streaming tends to be centered on gaming. Well, that’s bad in a couple of dimensions. You need the popular streamers and you need the popular games. Profits are not great. Anyways, so yeah. These things can be great. They can be all over the map, but audience builder platforms don’t necessarily tend to be profitable. Now the saving grace for all of that is if you have a lot of if you have a solid audience builder platform, it can be small. It can be a specialty business. You can pair it with another business model like e-commerce, B2B. You can pair it with a lot of things. and make your money somewhere else because if you command attention here, you can monetize it elsewhere. So, as I generally say, like we are all in the content creation business, but you generally don’t want to be only in the content creation business because it’s a pretty hard place to make money unless you own a dominant platform, which most people do not. So, that’s kind of point number two. doesn’t necessarily tend to be profitable. kind of got to take apart the details. Number three. audience builder platforms don’t necessarily get you winner take all dynamics. You can, TikTok, I mean, YouTube does, no question. But TikTok does it really, I mean, five years ago, TikTok had winner take all. We absolutely dominate. I would argue that didn’t follow from their business model. I would argue that followed from the fact that they were first mover. and a very aggressive first mover who spent billions on advertising on Facebook, which is kind of funny, to really dominate the US and other places. But there’s a difference between dominating because you were first and being dominant because you have the dominant business model. I don’t think they really have that. I think they have a good business model. I think it’s an oligopoly. I think we’re going to see for, I we’ve seen a lot of short video audience builder platforms do quite well. as I’ve mentioned. So no, not necessarily. Usually when you’re dominating with an audience builder platform, the closer it is to a utility, the better off you are. It helps if you have a barrier to entry. But no, don’t, most of these business models, the first version of them tends to be an audience builder platform. But what tends to happen in version number two and version number three is we start to see a more complicated business model emerge. It’s a short video platform. It’s a live streaming platform, let’s say like Taobao Live, but it’s paired with e-commerce. It’s Xiao Hong Xu, which does live streaming and short video, but it also pairs with e-commerce, Alibaba in particular. You know, it’s WeChat channels. but it pairs with mini programs and it pairs with messenger and it pairs with payment. We generally see these as part of a combined or linked business model, not so much as a standalone business model. We see some of those, but it tends to get more complicated than that pretty quickly, just because it makes sense to do so. So, I’m sort of interested if my argument on Twitter versus threads, Couple years ago when Elon Musk bought Twitter and you know became highly political and you know Whatever, whatever and then threads launched shortly after My initial take was I thought I was wrong. I basically said look I think threads is well positioned to beat Twitter and One of the things I thought they were well positioned why I thought that was the case was because this was not going to be a standalone audience builder platform. It was going to be tied with Instagram, Facebook News Feed, Messenger, and then within that you would have Threads. That looks a lot more like a WeChat business model, and I thought that was a more powerful version, know, overall. And then Threads didn’t do well, and I kind of read another post and said, hey, it looks like I got it wrong. And my argument was all of this business model power, that’s question number two. Question number one is, is it a good product and do people like using it? If you don’t get adoption and you don’t get users, it doesn’t matter if your business model is more powerful than theirs. You know, that comes second. Well, now I’m kind of reversing myself again because it looks like threads is getting users. And if it does, then I think I’m back to my first take. Look, if you get significant users, I do think that business model is probably more powerful in the long run. So, I’ve been wrong once, twice, but I may end up being, what does that mean? Does that mean I was right the first time or does that mean I’ve been wrong three times? I’m not sure. I’m keeping an eye on them, very interesting. I think this is the Bilibili question. I’ve been writing about Bilibili as a standalone specialty video business, much smaller than the big boys. And my take was basically, I think they’re maybe too small to be a standalone audience builder platform. I think that’s focused on anime, comics, and gaming. I think they need to become an across-the-board short video platform for all Gen Z, Gen Z plus. And from what I’ve heard from them and I’ve talked with them a bit, I think that’s what they’re doing. I think that even might be too small. Kuaishou, Bilibili going across the board in terms of content types, I’m not even convinced those are going to be viable long-term. I think they might need to pair up with e-commerce or something else. But definitely being just anime, comics, and gaming is too small. They got to go across the board. I think I got that one right. So that’s number three, which is like, look, audience builders don’t necessarily get you winner take all dynamics. They can as a singular business model, but a standalone audience builder versus a more of a conglomerate approach. I’m not convinced that works. In fact, I think content in general works better when it’s part of a conglomerate approach business model. most of the time. Now not Facebook, I’m sorry, not YouTube, but yeah, maybe. So that’s number three. Okay, number four and then I’ll finish up here. I kind of said this one already that like, you don’t want to think about just two user groups with a core interaction. That’s where it begins. Content creators, content consumers. Yeah, as I kind of said, I think those are roles that the same group can play. And I think when you start getting reaction videos and different types of composability where, you know, an influencer on TikTok might go into a fashion show in Milan or Paris and do a walk down the runway. And what they will do, you know, they’re probably, being paid to come and create content about the fashion show. They don’t sit there and say, hey, I’m at the fashion show. Look how cool this is. No, what they will do is they will… film themselves doing a funny walk down the runway and then they will sort of encourage all their viewers to make their own video doing the same interesting walk. So, a lot of these content creators are really sort of going for reaction, response videos, mimic videos. Okay, in that case, who’s the content creator and who’s the content consumer? No, it’s much more interactive than that. and that stuff is actually pretty cool. You can get tremendous views. These big influencers, especially out of China, they will go into Paris and Milan and get hired to do this. And they will get tens of thousands of mimic videos of what they did in addition to millions of, know, hundreds of thousands or millions of views. They’ll get tens of thousands of these mimic videos, or at least thousands. That’s really interesting. So, this idea of users, creators versus viewers, That’s the starting point, but you don’t want to stop there. Okay, misconception, last one, number five, which is more in my area, which is this idea of you can get a network effect. Fine. I mean, I argue there’s two types of competitive modes you can build. You can build a network effect, a competitive advantage against rivals. The bigger player is a superior offering to the smaller player. That’s a network effect, a demand side economy of scale. You can also build a barrier to entry against a new entrant who’s not a rival yet but could be. A content library, a library of what we will call user generated content, which is increasingly being called by a library of digital assets. Companies like iQiyi, that create TV shows, they will talk about their TV shows as a library of digital assets. YouTube will talk about their user generated content and their professionally generated content as a library of videos. But we’re really talking about the same thing. We’re talking about when digital assets, whether user generated or professionally generated, when those start to become a barrier to entry that is difficult to replicate and it’s necessary to replicate it if you want to be viable. competitor in this space that you want to jump into. So, you start to look at a couple questions. You start to look at how high is the barrier? If I want to jump into a YouTube like business model, from day one I have to have a tremendous digital library ready to go. The barrier is quite high. I can’t come in there with just a handful of videos. People won’t watch. If you jump into a TikTok like scenario, it turns out the barrier is not that high. You don’t need 10 years’ worth of videos. You just need a bunch of videos for the last week and a half. Well, let’s say the last six months, because most of these videos degrade in value to the user quite quickly. So, you want to look at the height of the barrier. How big is the digital asset base I have to have to play in this space? And which goes hand in love with that is the question of how quickly does the content degrade in value to the user? People generally don’t watch short videos from five years ago. They just don’t. They watch a lot of videos from five years to like long form videos. They can. Do they watch sports videos from a year ago? Most of them they don’t. They want to watch the games or they want to watch reaction videos to the games in the last week. You could say the same for political videos where people have reactions to whatever happened in the news. The news degrades incredibly quickly in terms of value. Travel vlogs are not bad, they last longer. Weather videos, well they don’t get views anyways. Storytelling tends to last, which is interesting. Comedy tends to last, but you kind of have to go topic by topic to see what the value is. And what you realize quite quickly, short videos don’t last very long. Educational videos, which is kind of what I do. I mean, I don’t really talk about current events in tech very much. I’m mostly wearing the professor hat, and I try and talk about how to think about the subject. with frameworks that hopefully, you they don’t last 20 or 25 years, but they probably last 10 years. Educational videos last pretty long. So, you think about the degradation of the content, and that sort of goes hand in love with, do you really have a barrier to enter here? And I mean, I’ll tell you flat out, like my strategy from day one was not only to create educational content, which is why I’m always talking about concepts, concepts, frameworks. Like not only to create sort of a library of content that the more I do, the more valuable it is and the more difficult it is to replicate. Not only that, but I want the content to build on itself. So, if you understand network effects, then you can understand economies of scale. You can understand switching costs. You can understand barriers. Actually, the more of those concepts you understand, they make you smarter about each concept. It is kind of cumulative. Your frameworks make you smarter the more you have. Because you take lessons from each one and they apply to the others. So, I’m sort of going for an educational digital library where the more I do this, the more valuable the whole framework becomes. That was really the strategy from day one and this is video 246. So now that said, some of my older ones are not awesome, but I think generally speaking, it’s additive in value. At least that’s what I’m going for. Anyways, that’s number five. Think about when does a content library become a barrier to entry? Think about the content, does it have value? Think about the interactions, think about the community that might be built around this content. That’s all there. Anyways, that is the content for today. I’ll write all those misconceptions and the main points in the show notes if you’re curious. you know, literally just go to the Concept Library and click on audience builder. And, you know, there’s articles going back two to three years on this subject. But I thought it was useful to pull some of it together. I do find it very helpful for understanding a lot of what’s going on. I go to this framework all the time. So, yeah, that’s it. Hopefully that is helpful. As for me, I’m doing pretty well. Just working away, very productive week. I’m going to get on a plane here in a couple days. I’m going to go to a conference, spend a couple days at the beach, go to the water parks, things like that. The girlfriend is… She is more excited and interested in water activities than literally anyone I’ve ever met. It is the go-to activity like Indonesia, let’s go river rafting. Philippines let’s go swim with the whale sharks. Let’s go swim with, let’s go canyoneering. Let’s go swim with the sardines. Well, this trip it’s going to be, we’re going to a big water park. We are going swimming on a couple famous beaches, just hanging out. swimming a lot, that sort of thing. Probably going to take a boat ride, go out and visit some islands. I it is just water activities all the time, which I got to admit, I’ve lived in Southeast Asia for five years and I was never really in the water very much. And now it’s every week and you know what, it’s pretty awesome. Like, it was pretty stupid of me to be living in Southeast Asia and not being in the water like all the time. because it’s fantastic. Now, unfortunately, I can last about, I’m, you know, am sort of supremely white skinned. I will go from white skinned to burned. Man, I might make 15 minutes, I might make 13 minutes, it happens so quickly. So, there’s a whole preparation process that goes involved into this, which unfortunately does not work well with water slides. like lotion and water, it comes off pretty quick. So that’s a whole process in itself. But generally speaking, pretty awesome. And we’re planning all these trips around water activities. I’ve been looking up white water rafting, which I really love. I did that when I was young in California. And turns out Nepal is like the best place in Asia to go white water rafting, which I didn’t know. I mean I kind of knew Indonesia was because you need mountains, need volcanoes, you need peaks right to get good rapids. You know don’t see that in Malaysia or Thailand or Cambodia or any of that. Not really. There’s a couple here and there but they’re pretty small. Nepal obviously the Himalayas. Great white-water rafting so that’s now on the to-do list which is really fun. So anyways we’re going to do that coming up. Anyways that’s going to be the trip a whole lot of water sports coming up which is great. having a good time. Anyways, that is it for me this week. I hope everyone is doing well. I’ll talk to you next week. Bye bye.
——–
I write, speak and consult about how to win (and not lose) in digital strategy and transformation.
I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.
My book series Moats and Marathons is one-of-a-kind framework for building and measuring competitive advantages in digital businesses.
Note: This content (articles, podcasts, website info) is not investment advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. Investing is risky. Do your own research.
