TaTaTu and Lambo?

The peak of internet 2.0 (the social one) feels far behind us — once hot digital publishers are dying, everybody hates Facebook, and adults still don’t understand Snapchat. I think we’re all ready for an upgrade.

What‘s in store for internet 3.0? The jury is still out but a valiant effort is being made by a new breed of crypto (decentralized, blockchain based) internet apps which have risen from the Bitcoin primordial soup. Six months ago, I wrote a post that gave an overview of these mutated species. It probably won’t age well as no content, including this piece, can expect to in the crypto wild west. Fortunately, nobody knows what’s going on and we’re all here to learn so why not devote mind share to analyzing and speculating around this mesmerizing social experiment.

A couple weeks ago, a press release announced that Lady Bicardi invested $100M in a crypto media company, TaTaTu. As a media strategist, a year deep into the crypto rabbit hole, I’ve been determined to understand as much as I can about TaTaTu ever since. After scouring the internet, reading the white paper, and stalking the Telegram group, here’s my attempt to make sense of the endeavor.

To start, what is TaTaTu?

TaTaTu is a blockchain based entertainment platform launched by AMBI Media’s co-founder and CEO Andrea Iervolino. From the whitepaper:

TaTaTu will be a fair and transparent social media and entertainment platform. People will be rewarded for both creating or providing content and for watching it.

By rewarded, TaTaTu is referring to compensation in the form of its digital token, TTU. TTU is an ERC20 token meaning it’s built on the Ethereum protocol and meets a specific set of standards. More on Ethereum and ERC20 standards here.

Specifically, and in its complete vision, TaTaTu is several products:

• Digital Right Manager (DRM):

Managing video content distribution contracts is complicated. Distribution rights are sold to different parties, over different time periods, in different locations, for different prices, and with other different details. TaTaTu’s DRM will use blockchain technology to manage these contracts.

Why blockchain?

I have little to no practical experience to speak from but TaTaTu and other blockchain DRMs would probably tell you that Ethereum based smart contracts make it easy to establish deal terms as well as automatically manage content payment and access. Also as content is sold, new owners will have access to outstanding contract with confidence that they are comprehensive. The net result is less work, fewer lawyers, and less piracy.

Content owners, such as movie studios and distributors, will pay TaTaTu, in their native TTU token to manage their content through the DRM. I believe the assumption is that content owners that use the DRM are more likely to distribute their content through TaTaTu’s Advertising Video on Demand platform.

• Advertising Video on Demand (AVOD)

Similar to YouTube except advertisers will pay TTU tokens to insert their ads into TaTaTu’s content. The kicker here is that advertiser paid TTU tokens are automatically rewarded to content providers and viewers.

This promo video simply explains TaTaTu’s AVOD to potential viewers:

Here is a TTU distribution visual from the whitepaper:

Why blockchain?

Tokenized rewards can gamify the content consumption experience. Replicating the system through fiat micropayments would be relatively expensive as third-party payment services would be required to facilitate transactions. Of course, all of this could be replicated with some kind of redeemable point system.

The real differentiation in my mind is that the value of TTU tokens are likely to increase in value if the platform is successful, therefore TTU holders are incentivized to contribute to the platform’s success.

a16z’s Chris Dixon articulates this concept well in his Medium post, Why Decentralization Matters.

• A social media platform

TaTaTu will also reward users for sharing video content with their contacts. It will then allow, and reward, influencers (and regular people) to create and share their own content on TaTaTu. The rewarded TTU tokens will come from advertisers that pay to insert their ads within the social media feed (a la Facebook Newsfeed).

Why blockchain?

Token incentives reward word of mouth virality that can help TaTaTu’s AVOD platform create the network effects required to become a social media platform i.e., a social media platform is only fun when your friends are on it.

A smart contract automated token distribution system ensures that advertising revenue is transparently distributed among contributors thus incentivizing them to contribute to the platform’s success.

There is a downside. With token rewards as a carrot, users are more likely to contribute in the interest of making money (i.e. greed) rather than the genuine desire to share moments with their loved ones (i.e. vanity or attention seeking). When social sharing is a side hustle, every post is effectively an advertisement. The difference ultimately depends on the sin that incentivizes engagement.

• An e-commerce store

TaTaTu plans to create an e-commerce store that offers content related, and other, products to users in exchange of their hard earned TTU tokens.

If TaTaTu is able to achieve any degree of traction, I presume their TTU token would also be listed on cypto currency exchanges through which users could sell them for their fiat currency of choice. However, an e-commerce store creates another option for TTU token liquidation. Exclusive, high ticket options could also create goals for users to gamify the experience of saving TTU tokens.

Leaving TTU liquidation options aside, here is a visual of TaTaTu’s products, contributors, and exchange of services for TTU coins:

The Potential for TTU Token Price Appreciation

For the price of the TTU token to increase over a sustainable time period, TaTaTu needs to:

1. Create a virtuous cycle of user demand
2. Facilitate favorable TTU token economics

1) Create a Virtuous Cycle of User Demand

According to Ben Thompson’s Aggregation Theory, the key to dominating a digital category is to aggregate user demand. Since internet distribution costs are effectively zero, end user demand drives a virtuous cycle of attracting advertisers, content providers, and users, at minimal cost.

In this frame, the question of TaTaTu’s potential depends on the ability of its unique traits to create a virtuous cycle of increasing user demand.

Those unique traits are the following:

• AMBI Media Group’s Content Library

TaTaTu is created by AMBI Media co-founder and CEO, Andrea Iervolino, and financed by AMBI Media co-founder and co-president Monika “Lady” Bicardi.

According to IMBD, AMBI Media owns the rights to over 250 film and video titles, such as Memento, Sound of Freedom, The Devil May Care, The Same Sky, This Is The Year, 50, and La Dolce Vita.

A foundation of content is required to attract initial users to TaTaTu. To the extent that AMBI Media is willing and able to distribute their content through TaTaTu, their investment required to seed that foundation will be lowered.

From their website, here’s TaTaTu’s content launch plan:

• TaTaTu’s Digital Rights Manager (DRM)

For the DRM to contribute to the virtuous cycle of user aggregation, the first requirement is that it offers a unique value proposition to content owners.

The second is that it incentivizes content owners to distribute their content through TaTaTu’s digital entertainment platform. It’s not completely clear to me how this will be executed however the potential for TaTaTu to sell content owners on the platform’s value proposition through the DRM is conceivable. If they’re able to, the DRM could lower TaTaTu’s content acquisition costs.

• Engagement reward system

People generally decide what content to consume through a subconscious assessment of three variables: content, convenience, and cost. The ranking of those variables depends on the person and the moment, however I think a strong argument can be made that each is significant in every content consumption decision.

The strength of TaTaTu’s engagement reward system can directly and indirectly impact all three:

• Cost: TaTaTu aims to turn the cost variable on its head by rewarding people to view content. If they successfully convince viewers that TTU coins are valuable, it’s fair to say that some people in some moments will choose to view TaTaTu content over their next best option.
• Convenience: Under the same assumption that viewers see value in TTU coins, rewarding app referrals can drive signups. As the app is installed on more devices, accessing content becomes more convenient and drives usage at the margin.
• Content: While the relationship is indirect, if TaTaTu’s engagement reward system drives usage, the platform will attract more advertisers which in turn will attract more content.

Here’s a visual of the traditional AVOD virtuous cycle and how TaTaTu’s unique traits can support:

The net impact of TaTaTu’s unique traits to jump start and maintain the demand momentum of the AVOD virtuous cycle depends on execution. Even with perfect execution, success is far from guaranteed but these traits can serve as valuable fuel to push TaTaTu through the uphill battle faced by all startups.

2) Facilitate Favorable TTU Token Economics

A platform that successfully aggregates users does not necessarily equate to TTU price appreciation. To assess TTU’s appreciation potential we need to understand the token’s economics. Here are the TTU token inflows and outflows through TaTaTu:

The supply of TTU tokens is fixed. Therefore when the buy volume from inflows is greater than sell volume from outflows, the price of TTU increases, and vice-versa. Buy volume will be determined by the attractiveness of TaTaTu’s DRM and AVOD products to content owners and advertisers as well as investor price expectations. Sell volume will be determined by TTU owners’ incentive to hold TTU tokens vs. sell:

• Content Owners

At first blush, it would seem that content owners have no incentive to hold TTU any longer than necessary — they have businesses to run that do not include cryptocurrency speculation. However, TaTaTu’s DRM could make it in their best interest to maintain a TTU balance. From the white paper:

Content providers will need to utilise the token in order to access the DRM and track distribution rights to their work. Logging licensing rights into the blockchain via the DRM will be a fixed amount of tokens. Throughout the life of the licensing agreement, terms can be amended, edited, added to, and so on. All of these actions must utilise the TTU token which is the only way to access the DRM.

If a content owner earns TTU through distributing content and they plan to use the DRM in the near future, the path of least resistance may be to keep some of their TTU tokens. This way they avoid selling the tokens only to buy them back soon after. Also, since TTU tokens are required to amend, edit, and add to license agreements, relatively frequent TTU transactions may be required which further incentivizes content owners to maintain a balance.

Of course, all of this depends on the pretty big assumption that content owners will consider the DRM to be a worthwhile product.

Beyond the platform, TaTaTu’s industry aspirations could create additional token applications that extend TTU ownership. From the website:

Content Owner incentive to hold TTU: MEDIUM

• Advertisers

I do not see any reason for TaTaTu advertisers to hold TTU tokens for any longer than necessary. If they want to advertise on TaTaTu, they will buy TTU tokens in that moment.

Advertiser incentive to hold TTU: LOW

• Users

Through a gamified experience, TaTaTu users could be incentivized to hold their TTU tokens. They could receive special platform privileges for owning a significant quantity of tokens or they could be enticed to save tokens for a high-priced product in TaTaTu’s e-commerce store. If users feel ownership through their token stake and they believe in the platform’s prospects, they will be even more likely to hold.

User incentive to hold TTU: MEDIUM

• Investors

Investor hold periods vary greatly depending on the type of investor. Generally, investors will buy TTU if they believe in TaTaTu’s potential for success and therefore are likely to HODL or at least for the medium-long term.

Investor incentive to hold TTU: HIGH

• TaTaTu

TaTaTu’s white paper states that the company will keep a portion of TTU inflows for reserves to be traded with exchanges. I take this to mean that TaTaTu has the liberty to “buy back” TTU when they believe the price is attractive and sell TTU when overvalued.

They will also sell TTU when they need fiat currency to finance operations. I expect the cost to finance their AVOD product to be significant. YouTube has 1.5B+ monthly active users and yet their profitability is debatable. The reality is that financing AVOD content and storage is expensive.

I suspect these economics are, at least partially, the reason for TaTaTu’s vision of becoming a social media platform. Facebook booked nearly $16B in profit in 2017. The economics of a social media platform are so much better than AVOD economics because the content is free and social content naturally supports a greater ad load. While TaTaTu’s social media platform would compensate users for their content, the required compensation, adjusted for advertising value, would be significantly less than the amount required for professionally made content.

TaTaTu incentive to hold: MEDIUM

TaTaTu’s ability to incentivize stakeholders to hold TTU tokens is essential to TTU token price appreciation. This will come down to product development, user experience, and future price expectations with the former two largely driving the latter. I’ll be watching closely throughout the product roadmap:

Conclusion

In order for TTU’s token to appreciate in price, TaTaTu needs to:

1. Create a virtuous cycle of user demand
2. Facilitate favorable TTU token economics

The low quantity of companies that have accomplished #1 in internet 2.0 demonstrates how big of a challenge this is. However, TaTaTu does have unique traits to improve their odds.

The task at hand to accomplish #2 is a new frontier for media platforms that has not been conquered by any company for a time tested period.

With these risks come the potential for big rewards. CEO, Andrea Iervolino stated a goal of signing up one billion subscribers within six years. If TaTaTu is able to even approach this goal while mastering their token economics, early TTU token holders could be driving Lambos on the Moon.

Win or lose, TaTaTu is a pioneer. Anything close to success will pave the way for new entrants to re-calibrate the voyage and with lots of luck, maybe even give us our long-awaited internet 3.0.

Disclaimer

I do not own any TTU tokens nor do I plan to in the near future, unless I earn them from watching TaTaTu content. Nobody is paying me to write this.

If you want to, feel free to throw me some BTC. Along with it, send me a note of another project you’d like me to look into.

BTC: 1GfLNJMBAx37KDb82aoiBzSiS529D1NL22

If you don’t, that’s fine too. You can yell at me on Twitter instead.