Can online video ride the digital rapids?
Hugo Drayton, CEO of InSkin Media: Facebook highlights the market tendency towards ‘winner takes all’ – a market where it becomes tough, if not impossible, for competitors to build viable businesses. Ironically, the disintermediation, removal of barriers and individual freedom, which are hallmarks of our connected world, also threaten plurality of voice, competition, innovation and a truly mixed economy…
Hollywood’s The Social Network has become a defining film statement of our era. It works on so many levels; a courtroom drama, an illustration of human ingenuity and capacity for conflict, a simple tale of greed, indulgence and reward, or – for those of us involved in media and business in the early 21st century – a documentary and business school case study.
In a recent Telegraph article, Niklas Zennstrom, the Skype founder, highlighted some of the key issues facing today’s entrepreneurs and investors. The Facebook story is the clearest example of an ever-accelerating cycle of business successes. The rise and fall of companies happens at such vertiginous speed, leaving no time for businesses to develop, to establish a considered, durable culture, or adequately to experiment with alternative products or extensions.
Zennstrom focused on the commitment and passion of Mark Zuckerberg’s character in the film; the unswerving, almost psychopathic focus that can drive to exponential success. Even if The Social Network is a work of ‘faction’, the human cost is high, especially in this age of over-exposure and blanket publicity, driven of course by social networking.
However, for me, the most dramatic observation – not a new point, but one which is brought into sharp relief by Facebook’s history – is the market tendency towards ‘winner takes all’; the reducing opportunities for fighting brands, or second and third-tier players, to prosper, in an age where bits and bytes neutralise the previous advantages or barriers posed by distance, delivery, language or culture. In a networked economy, with ubiquitous broadband access, permanent mobile connectivity, instant, global markets, comparison engines and endless discount vouchers, market leaders (supposedly the ‘best’ businesses) are more likely to dominate their sectors, as Google and Facebook have in recent times. RIP Bebo, Friends Reunited and MySpace.
One worrying by-product of ‘winner takes all’ is that it becomes tough, if not impossible, for competitors to build viable businesses. In the past, competition nurtured improvements, new approaches, a constant drive for efficiency and customer service, leading innovation and opening new opportunities, creating new markets. Industries have tended to mature and improve over a period of time, with several competitors able to sustain profitable activities – and provide jobs – by exploring valuable niches, while others thrive on lesser margins and seek success through volume.
In an increasing number of industries, the connected world potentially reduces these opportunities, enabling monopolies (or at best duopolies) to take an early grip on the business cycle. Sky-high valuations and healthy cash reserves enable market leaders to invest immediate, significant resources in product and service development, potentially strangling alternative approaches by smaller or nascent businesses. So, ironically, the disintermediation, removal of barriers and individual freedom, which are hallmarks of our connected world, also threaten plurality of voice, competition, innovation and a truly mixed economy. There will be huge social, employment and economic consequences of this shift.
The business I run in London (InSkin Media) invents, develops and distributes innovative advertising formats, primarily around online video. This is a hugely vibrant market, with much innovation, as growing numbers choose to consume video via laptops, mobile devices and increasingly on connected TVs. As in all advertising markets, there is already some ‘commoditisation’, with agencies keen to use technology and buying power to drive prices downwards on behalf of their clients, while our publisher partners understandably seek to maintain the highest possible yields, to support their valuable editorial and publishing activities.
The sector is certainly benefitting from multiple approaches to the challenges and opportunities – InSkins, pre-rolls, mid-rolls, post-rolls, etc. We need more research and development, as video moves centre-stage. High dwell-times, buoyant click-through rates and a positive consumer experience all contribute to an exciting, rewarding marketing activity. Any reduction in innovation and ingenuity would be detrimental to the industry and the consumer.
Last weekend, I press-ganged my 78-year old father, a London retailer of modern furniture, into watching The Social Network. He unhesitatingly declared it the most boring film he had ever seen, though he did admit to sleeping through much of it.