Emerging Technology and Media Newsletter (May 21–27 Edition)
Providing news and analysis on emerging technology and media.
The third edition of this newsletter contains the following…
- The Big Picture: Esports as an evolution of gaming and where it is today.
- Media Channel: YouTube experiments with curation and sponsorship; Twitch marathons Doctor Who and gains a sports partnership; Buzzfeed explores Twitch; Amazon adds a critically-acclaimed show to Prime.
- The Feed: Tinder uses location data with the help of Foursquare; Airbnb adopts stories; Instagram gives users a mute button.
- Fun and Games: Fortnite becomes an esport; ESPN secures broadcast rights to the NALCS; Tencent invests in another gaming company and China looms large for Western developers.
- Alternate Reality: Battle royale games are coming to VR; Oculus is enabling developers to charge for downloadable content; SuperData releases a new market report; HTC announces features for the Vive Focus headset.
- Words on the Blockchain: Coinbase announces Coinbase Pro and acquires a company; Bitcoin Gold, a top-30 cryptocurrency suffers an attack; the Department of Justice opens investigation into market manipulation; viral games congest the ethereum network.
- Other Stuff: Amazon Alexa breaches a family’s privacy while Google gains ground in smart speakers; Microsoft demoes its own duplex assistant; Sweden experiments with implanted microchips; Slack expands the capabilities of its platform for third-party developers; engineers invent a wireless, robotic insect that can fly.
- Recommended Media: an excellent blog post about understanding growth trajectories for technology companies; a podcast episode about the cellular telecommunications industry.
The Big Picture: Esports is not esports, esports is gaming
While this post is meant to be a newsletter, it is also worthwhile to dig deep into emerging trends and explore in greater depth and context. So, starting with this edition, I will be splitting out the full Big Picture section as a standalone essay and merely previewing it here. If you find the premise of the essay interesting, please check it out here.
“When people discuss esports, they are really talking about more than the esport itself. Sure, when fans engage with esports they are engaging with high-level competition and professional players. They engage with the fans and community around the esport. They see the game played the way they would like to play it. Some of the younger fans, like those in previous generations who looked up to Michael Jordan, imagine becoming those professional players. But it is the game at the center of the esport that is critical and games have come a long way in the past forty years…”
Click here to read the entirety of Esports is not esports, esports is gaming.
Media Channel
Media companies rely on aggregating and curating content to attract and grow audiences. When the content is primarily user-generated, as is the case with YouTube and Twitch, the needs of the company can run counter to the needs of the content creators. Adding new types of content is an attractive strategy for the platform owner, but it can compete against the platform’s existing content creators. Changing content curation to optimize engagement can siphon attention and business from content creators who have optimized for their channels and curation of the past.
YouTube is experimenting with personalized feeds for users, which is proving controversial among creators. These creators are concerned the change will result in less views of their content and eat into their business. Ultimately, it is an experiment and YouTube will have the data to decide whether or not the benefits are worth the backlash with creators. Algorithmic feeds have proven controversial elsewhere, but are increasingly common.
YouTube is also experimenting with channel sponsorship, which is similar in principle to subscriptions on Twitch or patronage on Patreon. Channel sponsorship on YouTube rolled out in a beta for gaming channels late last year and will expand this year. This is a direct threat to Patreon and Twitch, but it remains to be seen how powerful the perks of sponsorship on YouTube will be relative to the perks provided through Patreon or Twitch.
Twitch continues to expand its catalog of available content. This week Twitch announced a Doctor Who marathon that will run for two months and will feature over 500 episodes of the popular TV show. This marathon will be similar to previous marathons featuring Bob Ross, Power Rangers, and various anime shows. Twitch users get excited for new emoji and there will be plenty of new ones coming from this marathon. Twitch is also adding sports content to its platform through a partnership with Stadium, a collegiate sports network. The partnership will lead to a 24/7 feed of Stadium content and will also include a second channel for co-streaming, which is an interesting model that I don’t believe will work out in this instance. I doubt the content will be compelling enough for smaller streamers to leverage it to grow their audiences.
Twitch is also gaining the attention of publishers such as Buzzfeed. Buzzfeed, seeking to grow the distribution of its video content, is exploring streaming on Twitch. Twitch compares favorably to alternative platforms such as Facebook Live, where funding and views are no longer favorable to Buzzfeed. Cheddar, another media upstart, is already on Twitch but struggles to gain consistent viewership.
It is the time of season where TV shows are cancelled and two critically-acclaimed shows received the axe only to be saved. Brooklyn Nine-Nine, a police comedy, was picked-up by NBC. Amazon saved The Expanse, a science fiction show based on a popular book series, and will add it to Amazon Prime Video. It is a sign of the times in the entertainment industry that a tech company like Amazon picks up a critically-acclaimed cable program in order to bolster a subscription product. The fan base of The Expanse put in a strong effort to get the show saved, coordinating campaigns towards both Netflix and Amazon executives. One fan even launched a model ship from the series into near-orbit.
The Feed
Social apps are incredibly diverse in how they are used and the kind of information they can interact with. Ultimately, users need a lot of flexibility and control to shape these products to their intent. Successful social apps need to be attuned to users and provide them the flexibility they need. However, they also need to curtail unintended consequences or negative behaviors that can disengage users. They also need to be sensitive to privacy implications, given the recent scrutiny into tech companies and recent regulation in Europe.
Tinder announced a new, location-based feature to augment match-making called Places. This feature, powered by Foursquare, will allow users to opt into location-sharing and then see potential matches that have gone to the same places. While privacy concerns have been stoked by recent events, this feature indicates that people are still willing to share this sensitive data. Tinder is not the first dating app to leverage location data, but is probably the largest.
Facebook is not the only major company to adopt the story format pioneered by Snapchat, as Airbnb now has its own version of it. Just like the feed was a novel UI, stories are a compelling new storytelling and sharing format. I expect them to show up in many more apps, despite the initial industry criticism of Facebook for copying the format. Airbnb’s version is called Travel Stories and they are meant to share trip experiences. You can see a sample travel story here.
Instagram is in an odd position as a product, as it offers both a social graph and a curated interest graph. The platform initially grew in a similar manner as Facebook, with friends and family connecting with each other. However, the platform has become a powerful way for celebrities and companies to connect with fans and many people use it this way. A new feature, muting, will help empower users to silence connections that share too much.
Fun and Games
Esports is a powerful trend influencing gaming, with companies trying to figure out how to leverage esports to build and strengthen franchises while audience and distribution channels develop. Competitive multiplayer games that develop audiences are now likely to get the esports treatment. Meanwhile, the Chinese market has given rise to a new industry giant in Tencent which is unafraid to deploy its resources. The influence of Tencent and the massive Chinese market will only grow.
With Fortnite reportedly earning incredible amounts of money, it should come as no surprise that Epic Games is supporting the game with an esports initiative. Epic will deploy $100 million towards funding Fortnite competitions during the 2018–2019 season, topping the previous record of $35 million that went to Dota 2 competitions in 2017. As part of this effort, Epic is hosting a Fortnite celebrity pro-am at E3 2018 which will include many top Twitch and YouTube streamers. The Fortnite streaming community has already been active in organizing tournaments to build on the game’s momentum. This included a tournament at the Luxor Esports Arena that peaked at 667,000 viewers. Fortnite continues to dominate viewership on Twitch.
ESPN continues to experiment with esports itself, as it just secured broadcast rights to the North American League of Legends Championship Series (NALCS) and will broadcast it on its new ESPN+ service. This won’t affect the other streaming platforms which stream LCS content. The NALCS is one of the most popular esports events on Twitch, so this is great content for ESPN to secure for its nascent ESPN+ service.
Tencent, which already owns stakes in leading game developers such as Epic Games and Riot Games, bought a majority stake in the developer of Path of Exile, Grinding Gear Games. Tencent is likely to help Grinding Gear Games adapt and grow the game in China. China is a receptive gaming market, as Minecraft just topped 100 million users in that market and early access hit Slay the Spire discussed gaining more users in China than other markets.
Alternate Reality
The technology and content for the alternate reality market continues to evolve, in some cases mirroring developments in other markets such as gaming. This can be seen in a move by one of the market leading VR apps towards the battle royale genre. This can also be seen in one of the main VR platforms adopting a capability used in mobile and desktop apps to extend monetization. As the alternate reality market resembles more traditional software markets, developers are more likely to see the potential there and adapt products for it.
Battle royale games which typically feature large player counts, permanent death, and last man standing win conditions have been a sensation for the last year. Now, virtual reality is joining the craze. The popular Rec Room app is gaining a battle royale update. The design is similar to Fortnite, but the game can handle only 16 players and the movement mechanics are much slower. Building is also not part of the game’s mechanics.
Oculus is enabling paid downloadable content on the Oculus Mobile Store, which is significant since it allows VR developers to monetize existing titles through additional content releases. This emulates one of the business models that has been dominant in PC and console gaming for the last decade. Paid DLC is not yet available on the desktop-centric Oculus Rift store but will be added in the future.
The Vive Focus is an exciting headset that will be available in the US later this year (it is currently available in China). The Focus is similar to the Mirage Solo in that it has 6DoF capability, is untethered to a PC, and is rather expensive at $600. HTC announced some new features for the Focus this weak including a Surroundings Mode that will toggle a see-through mode, a Passenger Mode that enables a seated VR experience, and streaming content from a nearby PC. The company teased even more features for the headset in Q3. This is a device to watch out for.
SuperData released a new report on virtual, augmented, and mixed reality. The report states that the majority of the $4.5B in 2018 VR revenue will come from hardware, with AR and MR overtaking the VR market in 2021. The report also enumerates the top game titles on PC VR and PSVR, with RPGs from Bethesda taking the top spots. The AR estimates are, in my opinion, somewhat inflated as they contain significant revenue for smartphone games that are arguably not solely AR experiences such as Pokemon Go.
Words on the Blockchain
Cryptocurrency is in some ways a victim of its own success. The rapid appreciation and wild swings in price of many cryptocurrencies is now attracting regulatory scrutiny into market manipulation. This should come as no surprise, given the number of new currencies that hit the market and the use of Telegram and Discord to build communities to hype these currencies. ICOs were very successful at raising money on favorable terms for the founders, but attracted conmen and vaporware. The sheer value of cryptocurrency attracts sophisticated attempts at hacking and theft. The regulatory oversight of this industry is a story that will be playing out for some time.
Cryptocurrencies such as bitcoin have grown tremendously in value but have also experienced dramatic price swings, creating and evaporating fortunes in mere moments. This has attracted the attention of the Justice Department, which is launching a criminal probe into bitcoin manipulation. This comes alongside the dozens of probes that the Securities and Exchange Commission has opened into initial coin offerings.
Bitcoin Gold, the 27th largest cryptocurrency by market cap at the time of this writing, suffered what is known as a double spend attack this week. A malicious miner was able to gain the majority of the network’s hashpower and used it to launch the attack. This attack resulted in a theft worth up to $18.6 million. Bitcoin Gold is accelerating plans to move to a new hashing algorithm to reduce the risk of similar attacks.
Following its spate of announcements last week, Coinbase once again was in the news with the announcement of Coinbase Pro. Coinbase Pro is meant for active crypto traders, similar to Coinbase’s current GDAX product which will be rolled over to Pro in June. Coinbase also acquired Paradex, a startup that allows users to send cryptocurrency from wallet to wallet without the need of an exchange. Coinbase will be integrating Paradex services into its platform. For more insight into Coinbase, which is one of the most interesting tech companies right now, check out this Washington Post profile.
One of the first decentralized applications to go truly viral was CryptoKitties, a simple game about collecting and breeding kittens. This viral popularity was enough to temporarily clog the ethereum network. Three new ethereum-based games (Ether Shrimp Farm, Pepe Farm, and Ether Cartel) went viral last week and caused similar congestion and increased fees.
Other Stuff
Amazon suffered some embarrassment this week as a family experienced a breach of privacy through the Alexa platform. A private conversation was accidentally recorded and sent to a family contact. Meanwhile, there are some signs that Google is catching up to Amazon in the smart speaker market, according to recent research by a research firm. The firm’s research indicates that shipments (which are not necessarily sold units) for Google Home speakers outpaced Echo speakers in 1Q 2018.
While Google caused a stir earlier this month with Duplex, Microsoft one-upped the company by demoing its own social chatbot Xiaoice at an event in London. Xiaoice has been active in China since last August and has spoken to over 600,000 people. In a blog post on LinkedIn, Microsoft announced that full duplex capabilities will be available to partners and developers in their own applications.
Sweden has been experimenting with surgically implanted microchips. Around 3,000 Swedes have opted for the microchips, which use Near Field Communication (NFC) tech to hold data and communicate with nearby sensors. These chips are used for things such as holding train tickets and pass codes used by employers.
Slack, the popular collaboration application, is enabling developers to leverage “action buttons” which let Slack users perform actions on integrated services directly from Slack messages. Developers such as Asana, Pocket, and Zendesk have already integrated action buttons. With 8 million daily active users, Slack has the potential to be a powerful platform for developers.
Engineers at the University of Washington have invented the RoboFly, a wireless robot insect. The notable achievement here is powering the robot without a cord, which was done using a stationary laser beam and a solar cell on the back of the RoboFly that converts the light to electricity. Since the laser doesn’t move, the robot fly can only take off and land at the moment.
Recommended Media
Invisible asymptotes by Eugene Wei
This blog post by Eugene Wei examines the ability for tech companies to forecast growth, estimate total addressable market, and understand inflection points around growth over time. He is particularly interested in the concept of the “invisible asymptote” that can limit the growth of a company unless it is properly understood and an effective strategy is undertaken to transcend it. Eugene’s background with Amazon provides good context to the post and he applies his ideas beyond Amazon to Twitter, Facebook, Instagram, and Snap.
Acquired Podcast, Episode 8 of Season 2: T-Mobile / Sprint
As I’ve mentioned in previous newsletters, I have a fondness for the Acquired podcast because Ben and David take a long-form approach to examining tech trends and milestones such as IPOs and M&A. This episode tackles one of the industries that fundamentally shapes technology and media, the cellular telecommunications industry. As such, I found the history of it as well as the narrative around T-Mobile very interesting. One specific callout to this episode is that they mention an article about the cell phone market that predicted 10% penetration by a certain date and discussed the risks of companies investing in the technology, which sounds ridiculous today. It is helpful to think about moments such as that, where technology is just misunderstood and under- or over-estimated. It is incredibly difficult to be right about emerging technology.
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Finally, here is the link to the previous edition if you’d like to catch up.
