This week: Catch Li and Nathan discussing the latest passion economy news (including topics covered in this roundup) on Clubhouse. Join us at 5pm Pacific / 8pm Eastern on Thursday!
Last week: We interviewed Allen Lau, the co-founder and CEO of Wattpad—a self-publishing platform with 90 million users and 5 million writers. Listen to it as a podcast or watch it on YouTube!
And now, onto the news...
Top Stories in the Passion Economy, 02/10/21
Snapchat’s Spotlight Program Led To a 22% Uptick in DAUs
What Happened?
- Snapchat’s Spotlight program has registered 100 million users two months since its launch, and creators are currently uploading 175,000 videos per day.
- Snapchat DAUs reached 265 million—a 22% uptick. The company also posted $911 million in Q4 earnings.
- To put this into context: Instagram had 500 million DAUs (as of 2019) while TikTok had 50 million DAUs (only in the US, as of August 2020)
What this means:
Li:
-
Snapchat’s strategy of just throwing money around to incentivize content creation seems to be working. I posted to Snapchat for the first time ever, trying to get that $1 million. (Which I did not.) A lot of creators are really hyped about Spotlight. It has reinvigorated the platform.
-
But I do wonder what the long term potential of this program is. There's a lot of excitement now but most people aren't going to make money. I don't know if they are gonna stick around.
Nathan:
- I agree with you. Step one of the Spotlight program has worked—people will show up if you pay them to. But that's not sustainable. Snap needs to think about step two—how do you translate this momentum into more organic content creation?
- In other words, I think if I were at Snapchat trying to judge whether or not our efforts were succeeding, I would look at what percent of creators keep posting after you stop paying them. Not just the number of posts, but the frequency of posting over time. I’m curious to see what that retention curve looks like.
- One way to solve for this is to just keep paying creators in perpetuity. Li, do you think they can afford to do that?
Li:
- I think they can afford to always keep paying. I don't know what Snap’s annual revenue is, but I assume $1 million is a small share.
Nathan:
- They did $911 million in revenue in Q4. So, if they’re spending $1m a day for 90 days in a quarter, they’re currently spending about 10% of their quarterly revenue on the program.
Li:
- That's pretty small. Paying creators 10% is much lower than what YouTube pays out, which is around 55% of their ad revenue.
Nathan:
- So maybe spending 10% of revenue is sustainable for Snap to spend to attract creators.
- But I still wonder whether creators will be interested in it a year from now? It's kinda like buying a lottery ticket. As competition increases and it becomes harder to win money, will people get bored and just go back to TikTok?
Li:
- That makes sense, but this is also a little different from a lottery ticket: there is skill involved, you can learn things, or invest more time and energy to produce a better video with a slightly higher chance of winning. It's not like a lottery ticket where there’s nothing you can do to change the odds, other than buying more tickets.
Nathan:
- Maybe this is a good strategy. Maybe Every should do it! $1,000 a day to whoever wrote the best article that day?
Li:
- I like that! You're gonna have to raise a bit more funding though.
Nathan:
Are Text Messages The New Newsletters?
What Happened?
- Media companies like Buzzfeed, The Globe and Mail, Inc., and others are using Subtext, a subscription messaging platform that lets their journalists communicate with readers through SMS.
- 500,000 people are connected with 600 publications using Subtext currently. Publications can adopt different models ranging from reader engagement and retention campaigns, to exclusive communication for paid subscribers.
- Pricing starts from $200 for one off free campaigns and a 20% take-rate if readers have a paid subscription.
What this means:
Nathan:
- I don't think SMS is a great channel. Publishers are probably using it because it’s immediate and conversational. But it’s really expensive compared to email, so you need high LTV models like paid subscriptions to justify the cost of sending SMS.
- Unlike email, SMS is pretty terrible at delivering anything other than bite-size content. It’s just a bad experience—the messages end up getting cut into pieces and are sometimes delivered in the wrong order.
- There have been at least two different platforms that have tried this. There is one called Purple oriented towards journalists, and another called Community oriented towards influencers. They are both really good! It's hard to imagine significantly better product execution.
- But it doesn't make a lot of sense cost-structure wise to have individual conversations with subscribers. Publishers will choose to either create an experience with generic responses from customer support (which is not what readers want to pay for) or one that involves texting directly with journalists (whose time could be better spent writing and reporting new stories.)
Li:
- Does anyone want to pay to talk to journalists? You could just tweet with them for free on Twitter.
Nathan:
- Yeah, that’s true! To be fair, you’re not guaranteed a response on Twitter, and I’d imagine you are if you’re paying. But it's a very good point that most journalists are quite accessible on Twitter.
- Again: it's not really a scalable business. It trades off with the thing that journalists need to do in order to do their actual job which is reporting and writing stories.
Li:
-
I think this is the OnlyFans model gone too far! People assume that we want intimacy with every service provider in our lives but sometimes consumers just don't. There's definitely value in texting someone that you desire through OnlyFans; but for journalists? I just don't get this!
Nathan:
- Also, the name is kinda weird. I don't know if Subtext predated Substack and this is just a coincidence but if you’re a tech platform allowing creators to distribute written content and manage paid subscriptions, don't name your company Subtext. Don't confuse people 😅
Li:
-
One interesting thing about this company is it reflects the view that email is getting saturated. And the next channel to reach people directly is perhaps text messaging, which is not filled with spam, yet.
- This is kind of reminiscent of Facebook Messenger bots. The promise was that it was going to be a much better channel for reaching people in a semi one-on-one fashion. But that never really took off because it turned out that customers really don't want to have their private messaging channels saturated with advertising.
Podcaster Joe Budden Decides to Distribute Through Patreon and Joins as Head of Creator Equity
What Happened?
- Popular hip-hop podcaster Joe Budden, who left Spotify in August of last year, recently announced that he will be distributing The Joe Budden Podcast on Patreon. He also joined the company as ‘Head of Creator Equity.’
- His podcast was the first of Spotify’s big content deals in 2018. He subsequently had a very public fallout with the company.
- “I’ve seen firsthand that exploitation is everywhere in this industry – it’s become the status quo, and I’m tired of it. I’m tired of constantly fighting for independence, and I’m tired of proving my value over and over again.”
What this means:
Li:
- Joe moved to Patreon because he felt like his deal with Spotify was very exploitative, so I think Patreon is taking advantage of that. They’re trying to be more attractive to creators who feel that way.
- In some sense, Patreon is to Spotify what Shopify is to Amazon. Shopify gives sellers power and control of their store and customer base that Amazon doesn’t. Patreon is similar—they’re positioned to allow creators to build their own independent businesses, and retain all of the upside and own their customers.
- Of course, they don’t go all the way. Patreon currently makes it very difficult for creators to move off the platform.
Nathan:
- Yeah, agree! I think the number one thing they'll need to do to actually execute on the promise of giving creators control, is to allow them to connect their own Stripe accounts.
-
If creators own the Stripe account, they own the payment processing relationship with their customers directly. Which means they can move off of Patreon to any other platform easily.
- If I was running Patreon I would strongly consider using Memberful (which they acquired in 2018) to support this shift towards giving creators ownership. It’s a good white-label platform if you want to use your own WordPress site and have subscription billing. I believe Stratechery uses it.
- But it's obviously a hard decision because as soon as you give people that access, it's easier for them to leave. If creators can leave easily, then it quickly becomes a race to the bottom where the lowest-cost platform wins. Which is bad for Patreon.
- It’s like airlines. People need them. But what they want is pretty basic: a safe, on-time flight and the lowest fare possible. That's not a very profitable business to be in.
Li:
- To bring this back to Joe, the way I think Patreon is solving for this is to give creators equity in the company, rather than control over their audience. They’re trying to figure out how creators can actually have an upside in the platform's growth. They want Joe to spearhead this move.
Nathan:
- That's interesting! So instead of owning my Stripe account (and therefore my audience) Patreon is leaning in to giving creators equity in the platform instead.
- Seems cool, but also not scalable. There's only so much Patreon equity to go around and the vast majority of creators are gonna make close to $0 on it. To be honest, this feels like a red herring to me.
Li:
- Yeah, I think so too. It actually brings me back to Spotify: maybe Spotify isn’t so bad after all. Their solution to offer really generous up-front deals to exclusive creators. They’re large enough that they lose money on them as a way to gain paid subscribers.
- For example, I find it hard to believe that Spotify is directly profiting off of the Joe Rogan deal and making more than $100 million in advertising or subscription revenue.
Nathan:
- Yeah, it's unlikely. But what you’re giving up if you take that deal is your audience ownership in exchange for a large guarantee.
Li:
-
Do you think most creators actually care about audience ownership? Or would they choose monetization over it?
Nathan:
- That's a really good question! I think historically most creators haven't really cared. Because it hasn't even been an option. Now that it is, everyone's trying to figure out how much they should care.
Li:
- Joe Rogan obviously traded it all for a $100 million. There's probably a price tag in everyone's mind.
Nathan:
- Totally. It's quite relevant to what we're doing at Every. We're trying to offer a lot more ownership compared to Spotify in this analogy, but it’s not total ownership. It's really different from building your own Substack or Patreon. There are benefits to that; but also downsides. Most creators are trying to balance the two.
Question of the Week: Is Clubhouse Eating Podcasts?
Li:
- A lot of companies have spent the last few years executing an exclusive podcasting strategy. The biggest one is Spotify which has spent a ton of money acquiring technology companies, and podcasting producers, as well as signing exclusive podcasting deals to try and get inventory onto their platform.
- What's happening now with Clubhouse derails those plans. It has come out of left field with an entirely new format, an entirely new app.
- This creates a lot of new inventory that’s not on Spotify which probably won’t be monetized with advertising. So I’m really curious to see how the podcasting ecosystem unfolds in the future.
Nathan:
- I should contextualize—for now, even the largest Clubhouse show is tiny compared to big podcasts, or even medium sized podcasts. But it's important to not evaluate it based on what it is today, but based on what it’s dynamics are causing it to become.
- On Clubhouse, if something's happening live, it jumps to the top of your priority stack. You don’t want to miss it because anything could happen. Maybe you can find a recording. Maybe not. It promotes a sense of urgency in your consumption decision.
- The other big thing is that Clubhouse actually has content discovery built-in. It's social from the ground up. It will be a challenge for Spotify to replicate the discovery mechanisms that Clubhouse has natively.
- Clubhouse, also powers a strong network effect. Just the fact that I can see who else is listening right now is a huge deal. It is so important in deciding what I want to listen to. And there are familiar faces everywhere, whereas Spotify is like looking at a magazine. Content on the other side may be interesting, but it doesn't have anything to do with me or the people I know.
- Social media versus traditional media is an inherently different experience. In traditional media there's a big wall separating you and the content. Social tears that down.
Li:
- Yeah, totally. Clubhouse is a little reminiscent of what Breaker was trying to do—the ability to see what your friends are listening to. But it has much more powerful network effects than Breaker ever did.
Nathan:
ICYMI
Anime streaming service Crunchyroll Crosses 4 million Subscribers
What Happened?
- WarnerMedia-owned anime streaming service Crunchyroll recently registered 4 million paid subscribers.
- Crunchyroll has a library of more than 1,000 titles with 30,000 episodes. Currently, the platform has a total of 100 million registered users.
NYT Reveals Key Metrics in Quarterly Earnings Call
What Happened?
- The New York Times added 1.7 million paid subscribers in 2020, bringing the total to 7.5 million. They reported their podcasting revenue for the first time, which was $36 million in 2020, up from $29 million in 2019. They also reported a 39% drop in print ad revenue and a 2% drop in digital ad revenue
- They also revealed details of their future strategy:
- They want to test their consumer reviews section Wirecutter, which they acquired in 2016 for $30 million, as a separate subscription offering.
- They plan to build a standalone service around Audm, another service that they acquired in March 2020.)
HubSpot is Acquiring The Hustle for $27 million
What Happened?
- Publicly traded sales and marketing service provider HubSpot is acquiring The Hustle, a business and tech publication for $27 million.
- The Hustle’s main revenue stream is advertising. It also operates a premium subscription service called Trends.
- The company raised around $1 million in funding prior to its acquisition..
Pinterest Registers Q4 Revenue of $709 Million With 459 Million MAUs
What Happened?
- Pinterest recently announced revenue of $709 million in Q4 with 459 global MAU due to an uptick in ecommerce advertising, spurred by the holiday season.
- Pinterest shares (NYSE: PINS) were up 10% after the announcement.
What Happened?
- Social platform Hive became the No.1 free app on the App Store after going viral on TikTok.
- Hive was launched a year ago. It lets users post images like Instagram, text like Twitter, and even lets them add music to their profiles like MySpace.
- The sudden surge in traffic led the platform’s servers to crash multiple times.
Instagram is Building TikTok-like Vertical Feed for Stories
What Happened?
- Instagram is working on a vertical feed for Stories. They are testing vertical swiping like TikTok’s FYP instead of the horizontal swiping interface they borrowed from Snapchat.
TikTok Launches On Android TV
What Happened?
- TikTok recently launched on Android TV, expanding its presence to larger screens.
- Viewers can scroll vertical videos on the homepage, access specific video categories, and view their profiles through the TV app.
What Happened?
- Social music streaming platform Turntable.fm recently announced its comeback with the launch of a mobile-first product this April. Joseph Perla, one of the original founders has raised $108,000 for the project through crowdfunding.
- The platform, which was centered around social music discovery and community-building for music creators was forced to shut down in 2011 due to licensing problems.
The Washington Post is Using Instagram to Boost Their Subscription Business
What Happened?
- The Washington Post is planning to focus on vertical visual-storytelling on Instagram to boost their subscription business.
- They recently promoted Travis Lyles to full-time Instagram manager. Since joining, he has taken their Instagram account from 675,000 to 4.5 million followers.
- Currently, the publication has 3 million subscribers and wants to attract a younger demographic using Instagram and TikTok.
Create Music Group Launches a Credit Card for Music Creators
What Happened?
- Create Music Group, a company that helps music creators claim unpaid royalties recently launched a credit card which lets them spend these royalties.
- The card uses the Mastercard network and pays out creators in real-time as royalties are earned; instead of the typical 60-90 day pay out period.
- The company has paid out $200 million in unpaid streaming royalties so far, with support from celebrities like Jennifer Lopez, Future, and Migos as well as corporations like PepsiCo.
Adult Content Creator Belle Delphin Earned $1.2 Million in One Month Through OnlyFans
What Happened?
- Adult content creator Belle Delphin recently earned $1.2 million in one month through OnlyFans.
- In 2019, Instagram permanently banned her from the platform when she tried selling $30 jars containing her bathwater.
- Side Note: Actress Bella Thorne made $2 million in one week when she joined the platform last year.
Yahoo News Reaches 1 million followers on TikTok
What Happened?
- Yahoo News recently reached 1 million followers on TikTok by targeting Gen-Z audiences. They grew by sharing breaking news on relevant topics such as student debt and social justice issues.
- They join other mainstream outlets such as NBC News, USA Today, and CBS News who are trying to do the same.
Passion Economy Financings
-
Stir, a platform that builds SaaS tools for creators to manage their businesses recently raised a Series A round valued at $100 million led by Andreessen Horowitz. The investment amount has not been revealed.
-
Reddit raised a $250 million Series E round led by Vy Capital, at a $6 billion valuation. The platform has been under the spotlight recently due to the role of subreddit r/WallStreetBets in the GameStop fiasco.
-
SplashLearn, a game based ed-tech platform raised a $18 million Series C round led by Owl Ventures. The platform offers math and reading lessons to children upto grade five. It charges a $12 subscription for access to more than 4000 interactive games.
Every Content
AI&I Podcast
Monologue
Cora
Sparkle
Spiral
Front-row access to the future of AI
In-depth reviews of new models on release day
Li Jin
Comments