The importance of diversity in the digital age
As diversity continues to become a global conversation, Team ITG’s Managing Director of Digital Services, Chris Perks, explains why it’s crucial for brands to embrace diversity in their revenue streams to survive in an ever-changing world.
We all know the consumer web space is huge, with companies from Amazon to Yahoo earning billions each year from content-hungry, socially engaged consumers. But if you look at all of their revenue streams, there’s a surprising lack of diversity!
The top ten consumer internet companies are all making between 80 and 100% of their revenue from one, single stream: either selling ads or selling products.
When you look at the brands and business on the UK high street, the same lack of diversity is apparent, which has sadly brought an end to many well-known and well-loved high street names.
At least that’s very much the situation in the West. If we look at China, Africa and India, it’s a completely different story. Tencent, for example, is the largest Chinese consumer internet company. Sitting just behind Facebook in terms of revenue, the contrast between the two companies is stark. 98.5% of Facebook’s revenue comes from advertising. For Tencent, it’s less than 17%. Gaming is Tencent’s largest revenue stream – they’re the largest gaming company in the world – but this only accounts for 37% of their revenue.
Because China, India and Africa (amongst others) largely skipped the desktop phase of tech, the mobile-first and mobile-only nature has made them much more adept at monetising customers without simply chucking ads or content at them.
Every brand is a content producer
What if, instead of producing reams of mediocre content at a huge cost, freely sharing this content online with audiences that overwhelmingly ignore it, we looked to turn our content operations from a ‘cost of doing business’ to a diversifying revenue stream?
Chinese companies are already leading the way with this approach.
Let’s take music, the choices here are either to buy songs or subscribe to a streaming service. Tencent music, on the other hand, has some revolutionary features that add social and gaming aspects to music and, crucially, reward users for taking part.
Artists can offer limited-access content for a small fee of, say, £1.50, to be able to listen to a new album for a day. Leader boards allow fans to compete by how many times they ‘buy’ access to the album, with rewards for the biggest fans. Each purchase also gets you a raffle ticket so, even if you only buy access a couple of times, you might still win some highly coveted merch.
How can you offer mega fans VIP access for a micro fee?
Fans can skin apps in the style of their favourite artist, for a small fee, and there’s even a social network where groups’ fans can interact with artists!
How can you customise their experience with you to benefit from the self-expression economy?
Tencent allows each user to create their own playlists and monetise them by charging a small fee. Any user can realise their dream, in a small way, of being a DJ! In short, Tencent music manages to offer a flexible one-stop music experience for all music lovers.
How can you be more flexible, address what the user really wants and charge for the improved offering and be the default go-to destination in your category?
When it comes to podcasts, the Chinese are monetising in new ways. Paid podcasts are available singly, rather than just a subscription, so listeners can tune in to just what they need or decide whether a subscription is worthwhile. Free podcasts, as well as being supported by some advertising, give the listener the option to tip a small amount at the end of each episode.
What podcast could you create? Could you get your existing customer base to listen and add advertising revenue to your balance sheet Could all those blogs be turned into published books, e-books, and audio books giving you additional revenue streams?
For most of us, YouTube is the only name in online video.
In China, one of the bigger players in online video is iQiyi, a spin-off of Baidu. They use AI and machine learning to place relevant ads that change through the video. So, if someone is applying make-up in a scene, then an ad might pop up for a make-up brand. If you’re watching a movie and someone is eating pizza, there might be an ad for Domino’s delivery in the corner!
Who out there is producing content that lends itself to your brand? Could you produce desirable content with them?
Going further, like YouTube, iQiyi have paid access models but these are much more flexible. Membership brings perks, such as faster access and exclusive content. For that, viewers can watch the first few minutes and decide whether they’d like to buy one-time access or choose to subscribe.
Got a membership programme? What could you do to make it worth paying for?
Micro-transactions are becoming more and more widespread. People would rather pay 50p to get what they want, than a fiver to access 50p worth of content. People are also willing to pay small amounts for easier and organised content that is available online for free. Brands need to work on making their offering more flexible and diversifying revenue streams.
The most important lesson here is not the specifics of each industry, but that there are new models available that, in the West at least, remain mostly untapped. Think about your own business and find imaginative ways of diversifying your revenue streams. China is showing us what’s possible, but it’s up to us to make it happen.
Article by Chris Perks, Team ITG’s Managing Director of Digital Services.
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