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Zuckerberg misunderstands the huge threat of TikTok

Published October 1, 2019

“It’s almost like the Explore Tab that we have on Instagram” said Facebook CEO Mark Zuckerberg in leaked audio of him describing TikTok during an all-hands meeting. But it’s not. TikTok represents a new form of social entertainment that’s vastly different from the lifelogging of Instagram where you can just take a selfie, show something pretty, or pan around what you’re up to. TikToks are premeditated, storyboarded, and vastly different than the haphazard Stories on Insta.

That’s why Zuckerberg’s comments cast a dark shadow over the future of the Facebook family of apps. How can it beat what it doesn’t understand? He certainly can’t ignore it. Facebook’s copycat Lasso has been installed just 425,000 times since it launched in November, while TikTok has 640 million installs in the same period outside of China. Oh, and TikTok has 1.4 billion total installs beyond China to date.

TikTok

Casey Newton of The Verge today published two hours of audio and transcripts from two internal-only all-hands Q&As held by Zuckerberg at Facebook in July. His comments touch on the company’s plan to fight being broken up by regulators, especially if Elizabeth Warren becomes President. He thinks Facebook would win, but on resorting to suing the government, he says “does that still suck for us? Yeah.” Zuckerberg also describes how Facebook is working to launch a payments product in Mexico and elsewhere by year’s end as Libra deals with regulatory scrutiny.

But beyond his comments on regulation, it’s his pigeonholing of TikTok that’s most alarming. It foreshadows Facebook failing to win one of the core social feeds that its business depends on. Perhaps his perspective on the competitor is evolving, but the leak portrays him as thinking TikTok is just the next Snapchat Stories to destroy.

Zuckeberg’s Thoughts On TikTok

Here’s what Zuckerberg said about TikTok during the internal Q&A sessions, (emphasis mine):

So yeah. I mean, TikTok is doing well. One of the things that’s especially notable about TikTok is, for a while, the internet landscape was kind of a bunch of internet companies that were primarily American companies. And then there was this parallel universe of Chinese companies that pretty much only were offering their services in China. And we had Tencent who was trying to spread some of their services into Southeast Asia. Alibaba has spread a bunch of their payment services to Southeast Asia. Broadly, in terms of global expansion, that had been pretty limited, and TikTok, which is built by this company Beijing ByteDance, is really the first consumer internet product built by one of the Chinese tech giants that is doing quite well around the world. It’s starting to do well in the US, especially with young folks. It’s growing really quickly in India. I think it’s past Instagram now in India in terms of scale. So yeah, it’s a very interesting phenomenon.

And the way that we kind of think about it is: it’s married short-form, immersive video with browse. So it’s almost like the Explore Tab that we have on Instagram, which is today primarily about feed posts and highlighting different feed posts. I kind of think about TikTok as if it were Explore for stories, and that were the whole app. And then you had creators who were specifically working on making that stuff. So we have a number of approaches that we’re going to take towards this, and we have a product called Lasso that’s a standalone app that we’re working on, trying to get product-market fit in countries like Mexico, is I think one of the first initial ones. We’re trying to first see if we can get it to work in countries where TikTok is not already big before we go and compete with TikTok in countries where they are big.

We’re taking a number of approaches with Instagram, including making it so that Explore is more focused on stories, which is increasingly becoming the primary way that people consume content on Instagram, as well as a couple of other things there. But yeah, I think that it’s not only one of the more interesting new phenomena and products that are growing. But in terms of the geopolitical implications of what they’re doing, I think it is quite interesting. I think we have time to learn and understand and get ahead of the trend. It is growing, but they’re spending a huge amount of money promoting it. What we’ve found is that their retention is actually not that strong after they stop advertising. So the space is still fairly nascent, and there’s time for us to kind of figure out what we want to do here. But I think this is a real thing. It’s good.

To Zuckerberg’s credit, he’s not dismissing the threat. He knows TikTok is popular. He knows it’s growing in key international markets Facebook and Instagram depend on to keep user counts rising. And he knows his company needs to respond via its standalone clone Lasso and more.

Lasso

But while TikToks might look like Stories because they’re vertical videos, and TikTok might algorithmically recommend them to people like Instagram Explore, it’s a whole ‘nother beast of a product and one that may be harder than it seems to copy.

To crystallize why, let’s rewind to Snapchat. With the launch of Stories, it started to blow up with US teens. Facebook’s attempts to clone it in standalone apps like Poke and Slingshot never gained traction. In fact, none of Facebook’s standalone apps have succeeded unless they splintered off an already-popular piece of Facebook like chat and users were forced to download them like Messenger. It wasn’t until Zuckerberg stuck his clone of Stories front-and-center atop Instagram and Facebook that Snapchat’s user count went from growing 18% per quarter to shrinking. There, Facebook used the same strategy laid out in Zuckerberg’s comments — push its good-enough clone in countries where the original isn’t popular yet.

But Facebook was fortunate because Stories really wasn’t that dissimilar to the content users were already sharing on Instagram — tiny biographical snippets of their lives. Snapchat CEO Evan Spiegel had originally invented Stories as a vision of Facebook’s News Feed through the lens of an ephemeral camera. All users had to know was “I take the same videos, but shorter and sillier, posted more often, and then they disappear”. The concept of Instagram and Facebook didn’t have to change. They were still about telling friends what you were up to. Choking off TikTok’s growth will be much more complicated.

Why TikTok Is Tough To Clone

TikTok isn’t about you or what you’re doing. It’s about entertaining your audience. It’s not spontaneous chronicling of your real life. It’s about inventing characters, dressing up as someone else, and acting out jokes. It’s not about privacy and friends, but strutting on the world stage. And it’s not about originality — the heart of Instagram. TikTok is about remixing culture — taking the audio from someone else’s clip and reimagining the gag in a new context by layering it atop a video you record.

That makes TikTok distinct enough that it will be very difficult to shoehorn into Instagram or Facebook, even if they add the remixing functionality. Most videos on those apps aren’t designed to be templates for memes like TikToks are. Insta and Facebook’s social graphs are rooted in friendship and augmented by the beautiful and famous, but don’t encompass the new wave of amateur performers TikTok elevates. And since each post to the app becomes fodder for someone else’s creativity, a competitor starting from scratch doesn’t offer much to remix.

That means a TikTok clone would have to be somewhat buried in Instagram or Facebook, rebuild a new social graph, and retrain users’ understanding of these apps’ purpose…at the risk of distracting from their core use cases. This leaves Facebook hoping to grow its standalone TikTok clone Lasso which TechCrunch scooped a year ago before it launched last November. But as we’ve seen, Facebook struggles growing brand new apps, and that effort is further hindered by its increasingly toxic brand and sheen of uncoolness. Nor does it help that Facebook must divert development resources to comply with all the new privacy and transparency obligations as part of its $5 billion FTC fine and settlement.

The Next Feed

Facebook’s best bet is to assess the future value of the ads it could run on a successful TikTok clone and apply some greater fraction of that grand sum to competing directly. It’s already made some smart additions to Lasso like tutorials for how to remix and the option to add GIFs as sections of your video. But it’s still failing to gain serious traction in the US. While typical videos on the TikTok homepage where I’m spending a few hours a week have hundreds of thousands of Likes, the top ones I saw in my Lasso feed today received 70 or fewer.

TikTok trounces Facebook’s Lasso in the US iOS App Store charts

I had Sensor Tower run some analysis comparing TikTok with Lasso since its launch last November, and found that Lasso gets 6 downloads for every 1000 for TikTok in the US. Some more stats:

US Total Downloads Since November: Lasso – 250,000 // TikTok – 41.3 million
US Downloads Per Day Since November: Lasso – 760 // TikTok – 126,000
Average US Google Play Social App Chart Ranking: Lasso – #155 // TikTok – #2

Beyond the US, Lasso has only launched in one other market, Mexico in April, where it’s been faring better but could hardly even be considered a competitor to TikTok. Facebook needs to lean harder into Lasso:

Mexico Total Downloads Since April: Lasso – 175,000 // TikTok – 3.3 million
Mexico Downloads Per Day Since November: Lasso – 1,000 // TikTok – 19,000

Zuckerberg may need to find a coherent place for TikTok style features inside Instagram and potentially Facebook. That could be another horizontal row of previews like with Stories and/or a header on the Explore page dedicated to premeditated content. Certainly something more prominent than a single button like IGTV that still no one is asking for. One opportunity to best TikTok would be building a dedicated remix source browser into the Stories camera to help users find content to put their own spin on.

Facebook will also need to buy out top TikTok creators to make videos for it instead, and even quasi-hire some of the most prolific video meme or challenge inventors to give users trends to jump on rather than just one-off clips to watch. Its failure to offer IGTV stars monetization has led many to ignore that platform, and it can’t afford that again.

If Zuckerberg approaches TikTok as merely an algorithmic video recommender like Explore, Facebook will miss out on owning the social entertainment feed. If he doesn’t decisively move to challenge TikTok soon, its catalog of content to remix will grow insurmountable and it will own the whole concept of short form performative video. Snapchat’s insistence on ephemerality makes it incompatible with remixing, and YouTube isn’t nimble enough to reinvent itself.

If no American company can step up, we could see our interest data, faces, and attention forfeited to an app that while delightful to use, heralds Chinese political values at odds with our own. If only Twitter hadn’t killed Vine.

Not all is predictable on Facebook’s social Horizon

Published September 27, 2019

Most of the people I spoke with at Facebook’s Oculus Connect see the proliferation of virtual reality as a foregone conclusion, one that’s just a matter of timing at this point. For Facebook, the conference’s “The Time is Now” catchphrase showcased that they feel their hardware is ready for everyone.

But despite the success they feel like they’ve tapped into when it comes to hardware iterations, the company’s bread and butter social networking prowess feels like it’s barely improved in-headset in the past several years of VR experimentations.

“On the social side, looking back, it’s kind of embarrassing all of the stages we’ve gone through at Oculus,” Oculus CTO and veteran programmer John Carmack conceded onstage during his signature rambling annual keynote, noting that his own social APK was followed by Oculus Rooms, Oculus Venues, Facebook Spaces and now the company’s latest shiny pearl Facebook Horizon.

Horizon’s debut this year included a flashy trailer for what quickly seemed to be the company’s biggest gamble and first potential social hit, a massive multi-player online world. In introducing the software, Zuckerberg talked about people-centric software as Facebook’s “bread-and-butter,” noting, “We build a lot of the best social experiences for phones and computers, and we want to do this for virtual reality as well.”

But Facebook does not actually appear to hold that much of an advantage over much smaller game studios in terms of understanding how to make social virtual reality experience take off.

How Peloton made sweat addictive enough to IPO

Published September 22, 2019

It makes lazy people like me work out. That’s the genius of the Peloton bicycle. All you have to do is velcro on the shoes and you’re trapped. You’ve eliminated choice and you will exercise. Through a succession of savvy product design choice I’ll break down here, Peloton removes the friction to getting fit. It’s the leader in a movement I call “pushbutton health”. And this is why I think Peloton will be a big succes no matter what short-term investors do when it IPOs this week after raising $994 million in venture capital.

The bike

Basically, Peloton is a $2300 stationary bike with an iPad stuck to the front. The $40 per month subscription unlocks thousands of live and on-demand video cycling classes where instructors positively yell at you. When you think you’re tired already, they look into your eyes, tell you “you got this”, the soundtrack crescendos, you crank up the resistance, and you pedal harder at home. The resulting endorphin rush is addictive, and you find yourself persuading friends they need a Peloton too.

That viral loop which adds to its 500,000 subscribers is how Peloton plans to raise ~$1.16 billion going public this week at an ~$8 billion valuation. Its revenue doubled this year as it began to dominate the connected exercise equipment market, though losses quadrupled as it burned cash to become a household name. But after riding 110 of 150 days I’ve been home since buying its bike, I’m confident in the company. Whatever it invests now to build its lead will likely be paid back handsomely by its increasingly handsome customers who can’t bear to clip out. Here’s why.

Peloton classes are recorded in front of a live studio audience of riders

The Brilliance Of This Bike

The Shoes – Usually the activation energy to start a workout requires dragging yourself to the gym or suiting up to face the elements outside. That can be daunting enough that you rarely do. But once you slip into the Peloton bike shoes, you can hardly walk normally which means you can hardly procrastinate. You’re home so you don’t even need clothes. Just a few velcro straps and you’re over the hump and resigned to exercise.

The Clips – Home gym equipments reduces the barrier to entry but also the barrier to exit. You can tell yourself you’ll keep doing push-up sets or squats jumping rope, but you can stop any time. Yet after you’re clipped into the Peloton bike, you’re almost assured to keep pedaling until the instructor gives you that end-of-ride congratulations.

Just put the shoes on and you’ll exercise

The Schedule – You can get a sweat in just 10 or 20 minutes going hard on a Peloton. Combined with zero commute, that means you’ll practically always be able fit in a ride regardless of how busy you are. No more “I don’t have time to make it to the gym so I’ll just skip out”. When my calendar gets crunched or I dawdle a little before deciding to ride, classes as short as 5 minutes ensure there’s no weaseling out.

The Instructors – I wish I had these coaches to motivate me through sorting email. Peloton’s 20+ instructors range from hippie-dippie gurus to no-nonsense trainers that fit your personality type. You find yourself craving your favorite’s special brand of relentless positivity. I burn far more calories in a shorter time than exercising solo because they inspire me to push a little harder or they slow their countdown to add a couple all-out seconds to the end of a sprint. They’re even becoming celebrities, with bankers lining up for selfies during Peloton’s IPO road show. Sick of them? You can always Scenic Ride through video of some of the world’s prettiest bike paths.

Peloton instructors (from left): Alex Toussaint, Emma Lovewell, Ben Alldis, and Leane Hainsby

The Intimacy – You’re eye-to-eye with those instructors as they stare into the camera and out of the giant screen bolted to your handlebars. That generates intimacy despite them broadcasting to thousands. Even in person, a SoulCycle coach across the room can feel further away. You’re mostly guided by audio cues, but their gaze compels you to perform. Peloton almost feels like FaceTime, and that’s a sense of connection many long for more of these days.

The Pavlovian Response – Your brain quickly begins to associate the sounds of Peloton with the glowing feeling of finishing a workout. The rip of the velcro shoe straps, the click of clipping into the bike, but most of all the instructor catch-phrases. You get hooked on hear the bubbling British accent of “I’mmmm Leeaannne Haaaaainsby” as she introduces herself, Ben Alldis’ infectious “You got 5, you got 4…” countdowns, or Emma Lovewell reminding you to “Live, learn, love well”. That final ‘namaste’ followed by wiping down the bike and jumping in a cold shower forms a ritual you’re inclined to repeat.

Eye-contact with the instructors creates an intimate bond

The Soundtrack – Popular songs are more than just a pump-up accompaniment to Peloton classes. Your pedaling pace is often pegged to the tempo, with sprints starting when the beat drops. As your legs tire, you feel obliged to maintain your speed so you don’t fall behind the drums. You can even search classes by music genre and preview each’s playlist. Peloton has paid out $50 million in royalties for its music, and faces $300 million-plus in lawsuits for copyright infringement. But having the best tunes to bike to might end up worth the penalty since it helped Peloton race ahead in a lucrative market.

The Bike As Decor – Most home exercise equipment ends up in a closet or as a clothing rack. By designing its bicycles for beauty, Peloton coerces you to place them conspicuously in your home. You might have seen the hysterical Twitter thread parodying this practice, but it’s funny because it’s true. You’re a lot more likely to ride it if it’s central to your home (ours is between our bed and the doors to the veranda), and you’ll be embarassed if visitors ask about it and you haven’t hopped on recently.

“A good place for your Peloton bike is between your kitchen and your living room facing the cactus garden so you always remember virtual spin class” –ClueHeywood on Twitter

The Network Effect – Many of these smart product design moves could be copied by competitors. But by amassing a community of 1.4 million members to date, Peloton benefits from social features and economies of scale. You can ride together with pals over video chat, send each other digital high fives, or race and compare achievements. Each friend that joins Peloton is one more reason not to sign up for a competitor. The whole concept virtual personal training is being legitimized. And the cost of producing more classes gets spread wider as membership grows.

The Shared Accounts – Peloton has even built in a way to feel noble about your sanctimonious prosyletizing about how it “jumpstarted your metabolism”. Each $39 on-bike subscription allows unlimited accounts on up to three devices, so you can hook up some friends if you convince them to buy the big-budget gadget.

High-five fellow riders as you virtuall pass them

The Growth Hacks – Peloton streaks are for adults what Snapchat streaks are to kids: a clever way to reward consistent usage. But beyond the achievement badges displayed on your profile, you’ll get in-ride leaderboards full of people to proudly pass, progress bars to fill by pedaling, and kilojoule output high scores to beat. Peloton makes exercise a game you want to win.

The Shoutouts – Yet Peloton’s most explicit levering of our psychology comes from the in-class name-drop shoutouts instructors give. Whether mentioning the screen names of a few participants at the start of a session or congratulating users hitting their 50th, 200th, or 500th ride, the recognition pushes people to join the dozen live-streamed classes each day that add urgency to the on-demand catalog. Proof it works? People strategize to ensure their 100th ride is a long live class to maximize the chance of a shout-out.

A free cult shirt after your 100th ride

The ‘Transcendence’ – Peloton minimizes the isolation from working out at home. In fact, its whole product enables people to feel ‘glamorous’ and ‘manifested’ yet nonchalant in ways going to a sweaty gym or using a personal trainer can’t. It’s like being able to buy a little piece of the smug satisfaction and in-group affiliation of going to Burning Man. That’s why the company even sends you a free “Century Club” t-shirt when you hit your 100th ride. You’re meant to feel cool sharing that you “Peloton”, using the startup’s name as a verb.

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Conspicuous Self-Actualization

Still, Peloton has plenty left to optimize. There’s room to expand use of its camera to offer premium one-on-one coaching, head-to-head racing, group video chat with friends, and augmented reality filters to make people feel comfortable on screen and take shareable selfies. A wider range of intense but short classes could appeal to overworked professionals who picked Peloton precisely because they don’t have an hour for the gym.

Novelty could come from celebrity guest instructors, or themed classes for pre-gaming for a night out, fans of a particular artist, or songs about a certain topic. And it should definitely have some iconic sounds like an om or singing bowl chime that play before each class to center you and after to release you.

Most excitingly, the Peloton screen has the potential to be a platform for exercise-controlled gaming and apps. Whether pedaling to escape zombies chasing you or piece together a puzzle, maintaining an output level to keep your cross-hairs locked on an enemy plane as you dogfight, or making a garden bloom by growing each flower during a different interval, Peloton could evolve riding to be much more interactive. Apps could offer training simulators for different sports focused on sprints for basketball or marathons for soccer. Or just put Netflix on it! By opening up to outside developers, Peloton could build a moat of extra experiences competitors can’t match.

With the strengths and opportunities of its core product, Peloton is poised to absorb more of your fitness time and money. It’s already branching out with yoga, meditation, lifting, bootcamp, and jazzercise classes you can do standing next to your bike or without one on its $19 per month app. Its second gadget is a $4300 treadmill.

From there it could break into more of the “pushbutton health” business. I categorize these as wellness products and services that rely on convenience instead of your will power. Think delivery health food instead calorie-counting apps that are a chore. My pushbutton regimen includes Peloton, six salads per week dropped off in batches by Thistle, monthly packages of Nomiku vacuum-sealed meals that RFID scan into its sous vide machine, and a Future remote personal trainer who nags me by text message.

It’s easy to get hooked on the positivity

Peloton could easily dive into selling meal kits, personal training, or a wider range of workout clothes to compete with Lulu Lemon. If it’s the center of your fitness routine, the company could become a gateway to new health products it owns or partners with.

I’m bullish on Peloton because I’m betting people are going to stay busy, lazy, and competitive. It offers the effectiveness of a spin class but with scheduling flexibility. It removes every excuse for staying on the couch. And in an age of visual communication where many seek to share both the journey to and the destination of an Instagrammable body and the discipline to ge there, Peloton provides conspicuous self-actualization through consumerism. Plus, finishing a ride feels damn good.

Instagram may allow creators to syndicate IGTV videos to Facebook

Published August 29, 2019

Following the departure of Instagram’s founders, Facebook is working to more closely integrate the photo-sharing app with its flagship social network. It’s already added its brand name next to Instagram’s, and is working to make both platforms’ messaging products interoperable. Now, Facebook is prototyping a means of syndicating Instagram’s IGTV video to Facebook’s video site, Facebook Watch.

In another find from noted reverse engineer Jane Manchun Wong, Instagram was found to have under development a feature that would allow Instagram users to post their IGTV content to both Instagram as a preview, as well as to Facebook and Watch — the latter by toggling an additional switch labeled “make visible on Facebook.”

Instagram is working on IGTV Series pic.twitter.com/SLOWCnicLJ

— Jane Manchun Wong (@wongmjane) August 28, 2019

Wong says the feature is still in the prototype stage, as the buttons themselves aren’t functional.

This move, should it come to pass, could prompt more video creators to use IGTV, given that it would boost their videos’ distribution by also including Facebook as a destination for their content. The videos could also be part of an ongoing, episodic series, Wong found.

This, in turn, could help IGTV — an app which hasn’t quite taken off as a standalone video platform. Today, IGTV takes inspiration from TikTok and Snapchat’s vertical video. It’s meant to engage Instagram users with longer-form, portrait mode video content both within Instagram and in a separate IGTV app. But IGTV has often been filled with poorly cropped and imported web video, rather than content designed specifically for the platform.

Meanwhile, the IGTV app has struggled to rise to the top of the App Store’s charts the way its parent, Instagram, has. Today, it’s ranked No. 159 in the Photo & Video category on the App Store, and unranked in the Overall top charts.

To address some of the issues that creators have complained about, Instagram this week rolled out a few changes to the upload experience. This included the new ability to select the 1:1 crop of an IGTV thumbnail for the creator’s Profile Cover as well as the ability to edit which 5:4 section of the IGTV video shows in the Feed.

IGTV will also now auto-populate Instagram handles and tags on IGTV titles and descriptions, and will now support the ability to upload longer video from mobile. With the latter change, IGTV has increased the minimum threshold to upload on mobile to one minute, and is allowing mobile uploads up to 15 minutes.

Instagram declined to comment on the possible syndication of IGTV content to Facebook and Facebook Watch.

The Void’s Curtis Hickman on scaling, creative IP and the future of VR experiences

Published August 26, 2019

What can you do with virtual reality when you have complete control of the physical space around the player? How “real” can virtual reality become?

That’s the core concept behind The Void. They take over retail spaces in places like Downtown Disney and shopping malls around the country and turn them into virtual reality playgrounds, They’ve got VR experiences based on properties like Star Wars, Ghostbusters, and Wreck-It Ralph; while these big names tend to be the main attractions, they’re dabbling with creating their own original properties, too.

By building both the game environment and the real-world rooms in which players wander, The Void can make the physical and virtual align. If you see a bench in your VR headset, there’s a bench there in the real world for you to sit on; if you see a lever on the wall in front of you, you can reach out and physically pull it. Land on a lava planet and heat lamps warm your skin; screw up a puzzle, and you’ll feel a puff of mist letting you know to try something else.

At $30-$35 per person for what works out to be a roughly thirty-minute experience (about ten of which is watching a scene-setting video and getting your group into VR suits), it’s pretty pricey. But it’s also some of the most mind-bending VR I’ve ever seen.

The Void reportedly raised about $20 million earlier this year and is in the middle of a massive expansion. It’s more than doubling its number of locations, opening 25 new spots in a partnership with the Unibail-Rodamco-Westfield chain of malls.

I sat down to chat with The Void’s co-founder and Chief Creative Officer, Curtis Hickman, to hear how they got started, how his background (in stage magic!) comes into play here, how they came to work with massive properties like Ghostbusters and Star Wars, and where he thinks VR is going from here.

Greg Kumparak: Tell me a bit about yourself. How’d you get your start? How’d you get into making VR experiences?

A guide to Virtual Beings and how they impact our world

Published July 29, 2019

Money from big tech companies and top VC firms is flowing into the nascent “virtual beings” space. Mixing the opportunities presented by conversational AI, generative adversarial networks, photorealistic graphics, and creative development of fictional characters, “virtual beings” envisions a near-future where characters (with personalities) that look and/or sound exactly like humans are part of our day-to-day interactions.

Last week in San Francisco, entrepreneurs, researchers, and investors convened for the first Virtual Beings Summit, where organizer and Fable Studio CEO Edward Saatchi announced a grant program. Corporates like Amazon, Apple, Google, and Microsoft are pouring resources into conversational AI technology, chip-maker Nvidia and game engines Unreal and Unity are advancing real-time ray tracing for photorealistic graphics, and in my survey of media VCs one of the most common interests was “virtual influencers”.

The term “virtual beings” gets used as a catch-all categorization of activities that overlap here. There are really three separate fields getting conflated though:

Virtual Companions
Humanoid Character Creation
Virtual Influencers

These can overlap — there are humanoid virtual influencers for example — but they represent separate challenges, separate business opportunities, and separate societal concerns. Here’s a look at these fields, including examples from the Virtual Beings Summit, and how they collectively comprise this concept of virtual beings:

Virtual companions

Virtual companions are conversational AI that build a unique 1-to-1 relationship with us, whether to provide friendship or utility. A virtual companion has personality, gauges the personality of the user, retains memory of prior conversations, and uses all that to converse with humans like a fellow human would. They seem to exist as their own being even if we rationally understand they are not.

Virtual companions can exist across 4 formats:

Physical presence (Robotics)
Interactive visual media (social media, gaming, AR/VR)
Text-based messaging
Interactive voice

While pop culture depictions of this include Her and Ex Machina, nascent real-world examples are virtual friend bots like Hugging Face and Replika as well as voice assistants like Amazon’s Alexa and Apple’s Siri. The products currently on the market aren’t yet sophisticated conversationalists or adept at engaging with us as emotional creatures but they may not be far off from that.

What we can learn from DTC success with TV ads

Published July 16, 2019

Kevin Krim and Sebastian Chiu
Contributor

Kevin Krim is EDO‘s President & CEO. His 21-year career has spanned search, social and TV advertising across start-ups and major companies like Yahoo and NBCUniversal. Sebastian Chiu is EDO‘s Chief Data Scientist. He earned his undergraduate and post-graduate degrees from Harvard, working previously as a data scientist at Dropbox.

One of the most-discussed plot twists in recent advertising has been the pivot of Direct-to-Consumer (DTC) brands to linear TV. These data-driven, digital-first players are expanding well beyond Facebook and Instagram—and becoming serious players on the largest traditional medium in advertising.

A January 2019 Video Advertising Bureau study found that in 2018, 120 DTC brands collectively spent over $2 billion in TV ads—up from $1.1 B in 2016. 70 of those 2018 advertisers ran TV ads for the first time.

But while we know that they’re advertising on TV, what may be less discussed is whether they’re succeeding on television—and what strategies they use to achieve their success.

At EDO, we have a unique and differentiated ability to measure how DTC advertisers perform on TV by tracking incremental online searches above baseline in the minutes immediately following individual TV ad airings as viewers translate their interest in advertised brands and products directly into online engagement with them.

By measuring incremental search activity across 60 million national TV ad airings since 2015, we are able to effectively isolate the effects of TV ad placement and creative decisions that are most likely to cause online engagement.

We ran the numbers on DTCs as well as advertisers in various other categories to better understand how DTCs specifically are succeeding in TV ads—and what DTCs who are considering TV advertising can do to achieve success on TV.

Does the David vs. Goliath story play out on TV?

The DTC revolution is a quintessential David and Goliath story. In vertical after vertical, small, digital-native upstarts are changing the game and overtaking major brands. Does that story play out on TV as well—or is TV advertising one area where DTC marketers have finally met their match?

To answer that question, EDO looked at how effectively TV ads elicited viewer activity since September 2018 across eight major industry categories including DTC. Guided by historical ad performance across billions of ads, we rated ad performance based on how closely the DTC ads came to meeting the benchmark volume of brand-related online activity in the minutes following each TV ad airing.

We index each industry accordingly—giving an index value of 100 to an ad that meets benchmark standards, and below-par ads getting a score under 100 while higher-scoring ads receive a score over 100. We chose to set our index baseline of 100 to the average Consumer Packaged Good (CPG) ad since it is such a large and broad ad category. Our results are as follows:

The need-to-know takeaways from VidCon 2019

Published July 15, 2019

VidCon, the annual summit in Anaheim, CA for social media stars and their fans to meet each other drew over 75,000 attendees over last week and this past weekend. A small subset of those where entertainment and tech executives convening to share best practices and strike deals.

Of the wide range of topics discussed in the industry-only sessions and casual conversation, five trends stuck out to me as takeaways for Extra Crunch members: the prominence of TikTok, the strong presence of Chinese tech companies in general, the contemplation of deep fakes, curiosity around virtual influencers, and the widespread interest in developing consumer product startups around top content creators.

Newer platforms take center stage

Photo by Jerod Harris/Getty Images

TikTok, the Chinese social video app (owned by Bytedance) that exploded onto the US market this past year, was the biggest conversation topic. Executives and talent managers were curious to see where it will go over the next year more than they were convinced that it is changing the industry in any fundamental way.

TikTok influencers were a major presence on the stages and taking selfies with fans on the conference floor. I overheard tweens saying “there are so many TikTokers here” throughout the conference. Meanwhile, TikTok’s US GM Vanessa Pappas held a session where she argued the app’s focus on building community among people who don’t already know each other (rather than being centered on your existing friendships) is a fundamental differentiator.

Kathleen Grace, CEO of production company New Form, noted that Tik Tok’s emphasis on visuals and music instead of spoken or written word makes it distinctly democratic in convening users across countries on equal footing.

Esports was also a big presence across the conference floor with teens lined up to compete at numerous simultaneous competitions. Twitch’s Mike Aragon and Jana Werner outlined Twitch’s expansion in content verticals adjacent to gaming like anime, sports, news, and “creative content’ as the first chapter in expanding the format of interactive live-streams across all verticals. They also emphasized the diversity of revenue streams Twitch enables creators to leverage: ads, tipping, monthly patronage, Twitch Prime, and Bounty Board (which connects brands and live streamers).

Digging into the Roblox growth strategy

Published July 12, 2019

Could Roblox create a new entertainment and communication category, something it calls “human co-experience”?

When it was a small startup, few observers would have believed in that future. But after 15 years — as told in the origin story of our Roblox EC-1 — the company has accumulated 90 million users and a new $150 million venture funding war chest. It has captured the imagination of America’s youth, and become a startup darling in the entertainment space.

But what, exactly, is human co-experience? Well, it can’t be described precisely — because it’s still an emerging category. “It’s almost like that fable where the nine blind men are touching and describing an elephant.

Everyone has a slightly different view,” says co-founder and CEO Dave Baszucki. In Roblox’s view, co-experience means immersive environments where users play, explore, talk, hang out, and create an identity that’s as thoroughly fleshed out (if not as fleshy) as their offline, real life.

But the next decade at Roblox will also be its most challenging time yet, as it seeks to expand from 90 million users to, potentially, a billion or more. To do so, it needs to pull off two coups.

First, it needs to expand the age range of its players beyond its current tween and teen audience. Second, it must win the international market. Accomplishing both of these will be a puzzle with many moving parts.

What Roblox is today

One thing Roblox has done very well is appeal to kids within a certain age range. The company says that a majority of all 9-to-12-year-old children in the United States are on its platform.

Within that youthful segment, Roblox has arguably already created the human co-experience category. Many games are more cooperative than competitive, or have goals that are unclear or don’t seem to matter much. One of Roblox’s most popular games, for instance, is MeepCity, where players can run around and chat in virtual environments like a high school without necessarily interacting with the game mechanics at all.

What else separates these environments from what you can see today on, say, the App Store or Steam? A few characteristics seem common.

For one, the environments look rough. One Robloxian put the company’s relaxed attitude toward looks as “not over-indexing on visual fidelity.”

Roblox games also ignore the design principles now espoused by nearly every game company. Tutorials are infrequent, user interfaces are unpolished, and one gets the sense that KPIs like retention and engagement are not being carefully measured.

That’s similar to how games on platforms like Facebook and the App Store started out, so it seems reasonable to say Roblox is just in a similarly early stage. It is — but it’s also competing directly with mobile games that are more rigorously designed. Over half of its players are on smartphones, where they could have chosen a free game that looks more polished, like Fortnite or Clash of Clans.

The more accurate explanation of why Roblox draws big player numbers is that there’s a gap in the kids entertainment market. So far, only Roblox fills that gap, despite its various shortcomings.

“The amount of unstructured, undirected play has been declining for decades. [Kids] have much more homework, and structured activities like theater after school.

One of the big unmet needs we solve is to give kids a place to have imagination,” explains Craig Donato, Roblox’s chief business officer. “If you play the experiences on our platform, you’re not playing to win. You go into these worlds with people you know and share an experience.”

Games like The Sims tried to do the same, but eventually faded in the children’s demo. Roblox’s trick has been continued growth: it provides kids with an endless array of games that unlock their imagination. But just like we don’t expect adults to have fun with Barbie dolls, it’s unlikely most adults would enjoy Roblox games.

Of course, it would be easy to point at Roblox and laugh off its ambitions to win over people of all ages. That laughter would also be short-sighted.

As David Sze, the Greylock Partners investor who led Roblox’s most recent round, pointed out: “When we invested in Facebook there was a huge amount of pushback that nobody would use it outside college.” Companies that have won over one demographic have a good chance of winning others.

Roblox has also proven its ability to evolve. At one time, the platform’s players were 90 percent male. Now, that’s down to about 60 percent. Roblox now has far more girls playing than the typical game platform.

Evolving to new demographics

Videos lead brand creative growth with 3x increase since 2017

Published June 27, 2019

James Winter
Contributor

James Winter is currently the VP of Marketing at Brandfolder, a leading digital asset management solution; prior to joining Brandfolder, James was the Director of Marketing at AspireIQ where he grew the marketing team from zero to seven.

As brands pursue audiences online, they are producing more creative content than ever — particularly around Instagram.

In the past twelve months, Brandfolder‘s Brand Index (check out the full Brand Index Report at the end of this article) tracked an 80% increase in videos and other creative material targeted for the platform.

With the Instagram community being a highly engaged group, brands rely on rich, visual content to connect to them. With the proliferation of new Instagram features, like video, Stories, multi-photo carousels, and IGTV, each subset requires its own content, further inflating the need for more brand creative.

The growth in brand creative isn’t just due to audience demands, however. The shelf life of brand assets has fallen as more brands compete with other content (and each other) for user attention.

In 2016-2017, the average asset shelf life was 395 days. From 2017-2018, it was 280 days, with varying lifespans across file type and industry. That’s a 29% decrease in lifespan. Over the next few years, we predict this number will continue to decrease.

Check out the full Brandfolder Brand Index Report at the end of this article.

Which means, as brands are becoming increasingly dynamic and getting serious about personalization, the need for brand creative, more frequently, will continue to skyrocket in order to stay current and relevant.

To bring this to life, think about the last professional sports game you watched. You noticed one team on the field was wearing a throwback jersey with an old school logo. At a different game, they were back to wearing their normal jerseys with the most current logo.

Later in the season, however, the team is wearing pink jerseys for Breast Cancer awareness. This is a prime example of a dynamic brand expressing their creativity while adapting to varying circumstances, events, and audiences. All of this necessitates fluid brand creative.

But what exactly is brand creative? In the broadest sense, it refers to the all-encompassing collection of online and offline creative assets that a business uses to represent its brand. When we refer to brand creative, we refer to assets of all types–like videos, social media posts, product photography, lifestyle imagery, sales materials, logos, fonts, 3d renderings, and much more.

At Brandfolder, we are focused on delivering intelligence about our customer’s brand creative. We house and manage millions of creative assets from companies of all sizes–anyone from small-scale mom-and-pop shops to large-scale Fortune 10 companies.

And within this massive creative data set, our data science team extracts actionable insights through asset scoring algorithms, prediction formulas, collections, classification tools, and uniqueness analysis, to name a few.

Through these analyses mentioned above, our data science team created the Brand Index– a collection of high-level brand creative trends that CMOs, brand managers, agency professionals, and designers should use to guide their strategic campaigns and deliverables. It was built on discoveries from tens of thousands of creative assets stored in our digital asset management platform from more than 6,000 brands between 2016-2019.

Some brands house asset counts as low as 60, while others house as many as 38,000 assets or more. Specific information analyzed within the Brand Index includes amounts of assets, file formats, asset orientation, asset shelf life, event-based interactions with assets, and more. This information was then combined with the customer’s industry and anonymized to remove any identifying and brand-specific information.

In the Brand Index, companies can learn things like why and how brands’ digital footprints are growing exponentially. From 2017-2018, total asset count on a by-brand basis skyrocketed by 81%. And, it’s on track to continue climbing.

Check out the full Brandfolder Brand Index Report at the end of this article.

A major factor for this digital asset boom could be the increasing demand for rich and personalized media on multiple channels, putting an even greater emphasis on the need for a robust digital asset management platform.

Additionally, as CMOs and design directors are putting more time and effort into their brand creative, the need for understanding which assets perform better, when and where, will continue to rise. Brands are already taking advantage of optimizing their creative content based on rich insights.

Thus, by integrating testing data with a platform that provides asset-specific performance insights, brands will have the competitive edge they need to continue retaining and building equity in the minds of their consumers.

Our findings also show that companies should take note of the shift in file type and how brand creative needs to become increasingly dynamic in order to keep delighting their customers. Rich media files used for engaging and dynamic advertising are on the rise–with video being a key player.

Videos have become the go-to file format supporting a variety of marketing and business goals like sales, retention, upsell opportunities, customer experience, education, thought leadership, and more. JPGs still tend to be a brand favorite, however, gone are the days that these JPGs only live in one place. Asset versatility and responsiveness are critical for the increase of digital channels. Which leads me to my next point: brand identity.

Most brands now have at least four logo orientation and color variations that contribute to consistency and cohesion across their growing portfolio of channels. The brands that are succeeding in the marketplace have animated logos and other engaging asset types that they can switch out on any channel with the snap of a finger.

And as mentioned earlier, if the average shelf life of an asset differs by file type with a current average being 280 days or less, which file formats should brands continue to invest in order to maximize their ROI?

But, what does asset shelf life really mean? Asset shelf life is defined as the number of days between when an asset was created and its latest event date (the last time it was accessed, viewed, downloaded, distributed, etc.). An asset is just like a living, breathing creature. It moves from creation through purpose and finally reaches retirement or its, sometimes timely, archival.

Not all assets are created equal, however. With the creation of AI & ML technologies, brands are getting smarter about their content’s performance. High-performing brands are quicker to remove underperforming content from their arsenal and generate new brand creative to keep things fresh.

And with video on the rise, that also takes a big chunk of change out of marketing and creative budgets. Thankfully, but not ironically, we’re seeing that the asset types that take a larger investment also have longer shelf lives.

Companies should invest in a management solution for more expensive assets to ensure they are generating the maximum reach and profitability throughout their lives.

As brands look to scale their identities and creative asset production, as well as their distribution and delivery strategies, companies should take advantage of the Brandfolder Brand Index in order to ensure they aren’t left behind with the constantly evolving landscape.