A few weeks ago, I wrote about the impending unraveling of the TV industry. I claimed that content aggregators (Netflix, Hulu) and social networks (Snapchat*, Facebook), who are opening up new distribution channels for online video, will steal audiences away from the old media TV networks. I also claimed that a precipitous decline in audience will be catastrophic for these old media networks, which depend on a business model that scales with audience size as a power law. With $73B in ad spend to address, this transfer of wealth may represent the biggest opportunity in digital media we’ve ever seen.
Too often, the discussion of digital media centers around new players stealing share from older ones — assuming the pie is fixed. Nielsen recently demonstrated evidence to the contrary. The pie of total video minutes has actually grown substantially due to a group of users I’ll call “internet fanatics.” (I’ll draw much of my data below from Nielsen’s Q1–2016 Total Audience Report, which I’d encourage you to read for more detail.)
The growing pie of online video
We can see below that, over the last 12 months, the average adult has added a full additional hour to her time spent consuming media:
This additional hour came almost entirely from increased smartphone (37 min), tablet (12 min), and internet on PC (10 min) usage. Surprisingly, the increase in internet video across all platforms has not cannibalized the older mediums, with the exception of live TV, which continues to drop. Instead, the size of the video pie has grown by 10% in only a year.
Driving this dramatic increase are the “internet fanatics” — the top quintile users. Compared to fanatics of offline media, who might account for half of all usage, these internet denizens account for up to 87% of the usage in their respective online channels:
When we dive into the usage of one of these channels — say, smartphones — we can see that up to 90% of the growth in minutes watched is accounted for by the fanatic quintile. In the below chart, we can see that fanatics consume 7x the video of next quintile. Fanatics also grew their daily usage more than 40% in the last year vs. 8% in the next quintile:
The story of the growing video pie is that a small, but extremely active group of smartphone and tablet users are consuming massive amounts of video. Somehow they are finding the time, outside of their other sources of video, to consume this additional channel.
So, who are the fanatics, and how are they pulling this off? I have my suspicions. Here is where we depart from data and enter into speculation.
Snapchat confirmed publicly in April that users are now watching 10B videos daily, up from 8B two months earlier — a CAGR of 281%. More than a third of its users broadcast Stories, and these Stories have increasingly become videos strung together in long sequences. I’ve personally found myself leaning back and watching my friends’ stories unfold from one into the other. That lean back nature, combined with the significant scale of the company, is likely driving much of the mobile video growth Nielsen reported on.
If you don’t believe me, you should meet girls like Brooke:
In an excellent Buzzfeed article How to Snapchat Like the Teens, the author interviews his 13-year old sister Brooke, who claims that she has a friend who “uses 60 GB every month.” Brooke personally wakes up to 40 snaps in her inbox each morning. It’s quite possible that her generation makes up a good portion of the fanatics.
All those darn autoplays
Facebook launched autoplay video in December 2013 and many of its peers took note. Autoplay is now common on Twitter, Vine, Instagram, and lots of newer social networks. Videos that play automatically can obviously suck up a lot of video minutes and eat through cell phone data plans. When a video meme goes viral, like the ALS Ice Bucket Challenge of 2014, havoc is unleashed:
The BBC reported that this meme generated 2.4 million new videos on Facebook and over 28 million interactions. If social media is becoming optimized for these autoplay-able videos, then it’s no wonder that the growth is stunning and incremental to the rest of the media pie.
Ambient live video
If you’ve ever walked the floor of a financial services firm, you’ve probably seen CNBC playing on several large TVs around the office. No one’s really “watching” but every now and then they’ll glance up and pay attention. Same thing for sports games in bars, and game shows in hair salons. Such “ambient video” is a core use case for live TV, especially.
I imagine that many of the 800K peak concurrent viewers of The Great Watermelon Experiment of 2016 were watching it on Facebook Live in an ambient fashion — laptop turned on at the office, with interlopers stopping by and occasionally glancing at the screen, waiting for that glorious conclusion:
How many video fanatics watched this novelty? Hard to say. If not the watermelon, maybe one of them attended a concert and streamed the entire thing on Periscope — to the benefit of her fanatic friends who couldn’t afford tickets. Periscope grew video time watched at a 466% CAGR from August 2015 to March 2016. I imagine Facebook Live has seen similar growth. It stands to reason that, if one of the major use cases for live TV is ambient, ambient online video would be attractive to the fanatics as well.
How big can the pie get?
There are only 24 hours in a day, and we can’t consume media in our sleep. That leaves roughly 16 addressable hours — nearly two thirds of which is full of media today. Is there a rationale for the pie getting even bigger in the future?
Perhaps the most influential technology here will be the autonomous vehicle. In my prior post What Will Humans Do When Cars Drive Themselves?, I wrote:
The commute is pretty much the only large chunk of our day left for companies to place media in front of your face.
The average U.S. commute time is 25 minutes, so if a fanatic watched videos both ways we could conceivably see another hour added to the total media consumption time. A countervailing force may be the cannibalization of AM/FM radio, which has a strong use case in the car, but even another half hour gain would take us to 11+ hours of media per day. It seems like the logical ceiling would top out around there, since the commute is the last bastion of unconnected waking time we still have.
Online video has an even brighter future than one might have expected. The advent of video-first social networks, autoplay, and ambient live video has likely contributed to the growing of the video pie in the last year, and autonomous vehicles may grow it even more in the future. Never has the time been better to be innovating in video, and we look forward to meeting the next generation of companies who are doing so.
* Disclosure: Lightspeed is an investor in Snapchat.
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