The future of media: from platforms to AI driven ecosystems!
- Business Model Shifts
Everyone that grew up in the 80’s and 90’s will remember spending hours waiting in front of the television, with the remote in your hand, ready to record your favorite video once it got played on MTV. And once you got it, you played it over and over again, only dreaming of ever being a rockstar yourself.
Nowadays young music lovers have all music content at their disposal. They watch their favorite (music) video’s on demand on YouTube. And with the mobile app Musical.ly, recently rebranded to TikTok, they can easily shoot their own music videos and become true popstars, with millions of fans. German 15-year old twins Lisa and Lena, for example, started making their lip-sync music videos on Musical.ly on December 10th, 2015. And now have over 30 million fans on TikTok and 13.5 million followers on Instagram. They have become the new billboard for several advertisers and fashion brands and their net worth is estimated to be around $175,000.
The story of Lisa and Lena shows how the internet and mobile technology has changed the way we consume and receive content and how content platforms like TikTok create entirely new marketplaces and new exchange of value.
Pipeline to platform
Traditionally content was created by publishers that used their content to engage audiences through their media channels, like television, radio, magazines and newspapers. The better the content, the bigger the audience and the more valuable the advertisement space. The traditional media business was a pipeline business model, with the publisher being the pipeline (and curator) for the advertiser to reach the consumer.
With the internet, media became social and it evoked the rise of the digital platforms. Facebook, Youtube, Twitter and Instagram shifted the old pipeline model to platform business models and became the new media giants. The essence of these platform models lies in connecting supply and demand and the core interaction between them that the platform facilitates. The building blocks that drive the (quality of the) core interaction are the participants, the value unit, filters and the network effect.
In (social) media platforms the supply side are the content producers and the demand side the content consumers. Often, they are accompanied by a third customer segment: advertisers (which can be seen as content producer by the way).
The value unit
The value propositions of platforms business models aren’t based on ownership of any physical products or services. YouTube doesn’t create and own any content, and neither does TikTok, Facebook or Instagram. In platform models (also outside the media industry) the value proposition for the demand side is the information provided by the supply side. On YouTube and TikTok this information-based value unit is the video’s created by the producers. The value proposition for the supply side is easy and direct access to the demand side. In the case of YouTube and TikTok; a (potentially huge) audience.
Next to the value unit the value delivered by platforms is created by the user experience. Performance, speed, usability and seamless cross device interaction are all important factors to create a valuable user experience. However, they increasingly become hygiene factors than discriminating elements of the value proposition.
Filters help to deepen the value proposition based on type, time, specific needs, etc. On social media platforms like YouTube, Instagram and TikTok the main filters are the people and channels you follow. They are the curators for the content you value. By following them, you don’t need to search for the right content every time. You trust them to provide the content you want. This is why Youtubers and vloggers are so massively popular. They provide instant entertainment and get the best out of your spare time. The same goes for YouTube’s ‘Up Next’ feature, which can be seen as a ‘curator algorithm’.
The network effect is the positive effect that an additional user of a good or service has on the value of that product to others. For platform models this seems quite logical as supply and demand are connected and the larger the supply and demand sides the faster, easier the right connection is made. This leads to repeatable, sustainable interactions and the network becomes self-reinforcing.
And the network effects go even beyond that. As more people start using the platform, the more data is collected. This data gives deeper insights in how the users use the platform, which transactions are established, and what value they seek. This way new segments (niches) are found and new value propositions for these segments are developed. YouTube, for example, developed YouTube Music, YouTube Gaming and recently released new tools for parents and content for older kids in the YouTube Kids app.
The platform mechanics described above also account for non-media platforms (i.e. Uber, Airbnb, Waze). Use these mechanics to shift your own business model to a platform model!
What is next?
So, the platform business model is the new dominant business model in the media industry. But what will the future look like? To answer that question, we need to ask ourselves: where is value created next?
The answer to this question starts by understanding the customer, their job-to-be-done and their behavior. Did you know that millennials check their phones 150 times a day? For what? For new (social) content. We love to be triggered by new social, entertaining and informative content. We ‘hire’ new content snacks for our job-to-be-done of being up to date and preferably be the first to see something new that is interesting to share with friends.
The Chinese news aggregator Toutiao (owned by tech company Bytedance) understood this very well. With over 120 M daily users, spending 74 minutes a day (compared to 50min on Facebook!), Toutiao is one of the most used content platforms in the world. It serves its users content snacks aggregated from its 4000 content partners. All this content is collected, labeled and provided to the user by AI Technology. Toutiao uses machine learning algorithms to measure and analyze the engagement of the content. What do people watch, how long, when, what do they share, watch next, how often, etc. Based on this data, Toutiao personalizes the content offered. So, the more often you use the platform, the more personalized and there more valuable it gets.
With big data, machine learning and personalization Toutiao continuously enriches their user profiles and is able to tell which person is most likely to convert for a certain add at a certain time. Of course, this is of huge value for advertisers. A shift from mass media to targeting the right person at the right time with the right content. A great value proposition for advertisers.
Toutiao is always in need of new content fast. The remarkable thing is that Toutiao not only increases the number of content partners but that they use bots (artificial intelligence) to create new content. During the 2016 Olympics, a Toutiao bot wrote and published news about the sports event more quickly than traditional media. The articles written by the bot had similar read rates as the articles produced by human writers, but at a higher speed and lower cost on average.
The Toutiao bots not only create content but also read the content. This way Toutiao develops an ever enhancing and automated eco-system of continuous profiling and personalized content creation.
So, back to where this article stated, Musical.ly. Musical.ly was bought by Bytedance in 2017 for $1 billion and added to Bytedance’s portfolio of content platforms, of which Toutiao is the biggest. Other platforms in the portfolio are TopBuzz, Huoshan, Xigua Video, Duanzi and News Republic. The AI technology of Bytedance works across all these platforms. This way Bytedance not only builds a profile of Toutiao users, but much broader user profiles of users within its cross-platform ecosystem. Its building the future of content discovery and creation. A future where all content you value is provided to you automatically. The Bytedance bots know you (even better than your friends and family!) and serve you. This way ByteDance wants to wipe away the concept of search.
So, in the nearby future, you might watch the newest music video of your favorite, artificial Bot band. Far-fetched? This article about Hatsune Miku might change your mind.
Do you want to know more about Exponential Business Models? Join our workshop in Amsterdam – November 29.
Keep up to date on what our clients have to tell, new tools, training and cool content.