“During the gold rush it’s a good time to be in the pick and shovel business” — Mark Twain
Lately, it seems that everywhere I look, there’s another popular influencer popping up that’s significantly younger than I am and earning crazy money for broadcasting his or her life online. Lifestyle blogging is poised to continue its explosive growth trajectory, with 33% of children ages 6–17 stating that being a live streamer is their desired career. COVID has served to accelerate and cement this trend, with viewers increasingly turning to digital engagement for social interaction. Twitch — the biggest live-streaming platform — is a fantastic proxy for how COVID has impacted lifestyle streaming: hours wathed on the platform spiked 50 percent between March and April and have more than doubled year-over-year. Total monthly hours watched are now up to 1.6 billion.
The influencers who saw the biggest uptick in viewership and earnings have been those that have made the audience feel like an active participant. The reason? Loneliness, which has become increasingly relevant due to COVID-induced isolation. COVID sapped us of our feeling of community and belonging, hitting us squarely in Maslow’s “Love and Belonging” need. Digital events quickly replaced live events as a way to fill this void; however, simply attending an event isn’t enough if you’re alone in your living room — you need to feel like someone on the other end of your screen sees you, recognizes you, appreciates you. True participation and interactivity is key to engaging and monetizing influencers’ core followers.
Another key COVID impact here is the fact that livestreaming provides financial flexibility for individuals facing economic uncertainty, furloughs, or layoffs. In this sense, Twitch leaves a lot to be desired, opening up opportunities for new platforms catering to individual creators that are looking for new ways to engage and monetize their audience.
To unpack this a bit further: historically, the top 1.2 percent of streamers on Twitch, for example, earned the majority of the revenue on the platform. Superstars like Ninja reportedly pulled in more than $500,000 a month. By comparison, most of the platform’s 150,000 “Affiliate” creators, those with smaller followings, earn less than $250 a month. The remaining segment of Twitch’s 2 million creators made little to no money at all.
This surging viewership, increasing supply of creators, and poor monetization infrastructure has led to a bit of a gold rush in the startup and VC space. Platforms have been popping up left and right that promise to provide the best platform to engage and monetize their users. The implications for a venture investor:
- There’s a good chance we’re late to the game in terms of new platform investments (discussed at length in Part 1 of this series).
- If you’re set on making a platform investment, you need to be sure that platform is either: resolving a problem no other influencer platform is resolving, attacking a space no other influencer platform is attacking, or providing a solution that is 10X better than the next closest competitor across every conceivable category..
- If you go the route of a pick and shovel investment, you need to identify specific structural pain points the proliferation of platforms is either creating or failing to address.
In short, venture investors can either invest in platforms or in infrastructure. Given the gold rush into this space, a platform investment must meet a much higher threshold for investment, but winners may continue to emerge. Below are a few subsegments I’ve been seeing significant activity in:
Consumer-facing platforms that stand out:
- Platforms optimized for influencer-audience interaction: Jemi, Maestro. These platforms are channel-agnostic (i.e. creators are not forced to choose a specific site they need to pull users onto) and focus on helping the creator engage with and monetize a dedicated viewership. The priority here is quality of interaction, not quantity.
- Platforms for hosting ticketed events: Patreon, MomentHouse, Reach.live, Playbook, Headliner, The Skills, Ribbon. These platforms focus on providing a platform to help creators in specific verticals generate revenues primarily via subscriptions or ticket sales. For example, Reach.live is tailored towards creators that focus on giving specialized instruction (e.g. cooking or yoga) to an audience of viewers. This was born from the pain these creators felt in mid-March when they had to scramble to engage an audience over sub-optimal platforms like Instagram Live. These same creators often had no tools to collect payments for their content or the skill set to build a working solution themselves.
- Two-way video platforms for improved social streaming: These tools focus primarily on simulating the social component of our hobbies. Recreational activities are always more engaging when the participant feels like part of a community instead of an isolated viewer in a living room. These solutions leverage two-way streaming to simulate in-person participation. Piepacker is building a two-way streaming solution specific to gaming, with a particular focus on vintage games; Rume is another player in this space attempting to build a much more dynamic and social streaming experience.
The important features creators are prioritizing here are ease of use, degree of interactivity, compatibility with existing platforms (e.g. Twitch, Vimeo), and monetization features.
Now, like I mentioned in Part 1, Zoom has also jumped on the “influencer monetization platform” bandwagon recently, rolling out Onzoom. The obvious advantage Zoom has here is their massive user base and the fact that quarantine has forced millions of people to get very, very comfortable using the platform. As such, influencers that were already using Zoom to host everything from yoga classes to coaching seminars, but were dissatisfied with their ability to monetize, can now generate ticketing or subscription revenue directly on the platform. This puts significant pressure on consumer-facing platforms competing for eyeballs, particularly the platforms specifically built to host ticketed events.
Given the hyper-competitive nature of the space and the fact that Zoom now has it in its cross-hairs, I would rather find a solution all those platforms will need in order to be successful — in other words, a “pick and shovel” infrastructure investment.
Infrastructure solutions that stand out:
- Monetization marketplaces: Podcorn, The Lobby. While the platforms mentioned above battle it out for the same influencers and eyeballs, monetization marketplaces provide the tools and infrastructure creators need to generate and scale revenue more efficiently. These platforms solve creators’ pain point related to getting in front of and connecting with the right brands, and they solve the brands’ pain point related to sourcing and managing creator campaigns within a single platform. The Lobby is particularly interesting in that it also captures consumers’ preferences for short-form content and purchasing products endorsed by trusted sources.
- Payment and compliance infrastructure: Willa, Formations. These tools help solopreneurs grow their business from a side-hustle or hobby into a profession, ensuring payment support, financial compliance (e.g. via invoicing tools), and limited company registration. Creators are often unaware of the legal implications of generating standalone revenue and these tools help those creators protect themselves.
- Platform consolidation: Maestro, Reach.live, Beacons. As we saw above, the number of vertically-focused creator platforms trying to pull viewers onto their streaming platforms is expanding every day. Companies that can offer stream-agnostic platforms that enable creators to consolidate their streams, channels, and audiences onto one consolidated page stand to gain even as these new entrants keep battling over eyeballs.
- Multi-stream broadcasting and OBS stack replacements: Restream, Socialive, Dacast. This is probably my favorite play for investing into the interactive streaming space. These platforms hit the market so quickly that very few of these companies worried about resolving the back-end dependencies I discussed in Part 1, and that applies to both enterprise solutions and influencer solutions. These platforms help resolve those back-end dependencies and stand to win no matter what direction viewers choose to go in terms of preferred platform.
Bottom line, most influencers today get stuck trying to figure out where to start. From there, given the amount of options that exist for generating an audience (e.g. Twitch, Instagram, Youtube, TikTok, Facebook Gaming), the question becomes how to maintain relevance across all channels in a way that is engaging, interactive, and personal. Finally, once a creator has built a core audience, questions then become about how to generate sponsorship and process payments (especially when monetizing a global audience). As such, there remains significant opportunity to invest in creator economy infrastructure, but I’m also looking closely at financial tools aimed at the creator economy. Today, there exist few banking solutions tailored specifically for this large, growing, and increasingly relevant market. Dependence on PayPal, international transaction fees, lack of access to credit, and other gaps in the market are increasingly untenable and sure to be addressed in the coming years.