With a tidal wave of young users, live streaming video has become the hot new property for social media companies. Facebook put its full weight into Facebook Live. Twitter acquired Periscope. Google is even reportedly building a future Facebook and Periscope competitor called YouTube Connect. But a big question has been whether anyone can make a profit off of live streaming. One of the top competitors, Meerkat, is already bowing out and looking at other opportunities.
The problem for companies is that they have yet to prove that they can actually make money on the new technology. Traditional monetization methods for internet and mobile video advertising, like pre-roll, may not work for live streaming platforms. This development is no surprise for tech companies. Any history of the online world would need to have a large section dedicated to the question of whether company X can ever turn a profit. Even Amazon is still subject to this question.
For video, this question is particularly pervasive. It took Google years to turn the corner on monetizing YouTube. The problem for live streaming is that the existing technologies-the ones that allowed YouTube to make money--don't seem like they would work. Pre-roll and other canned advertising does not seem to be a good fit for live streaming - the immediacy of the video is exactly the draw of a live stream.
The reality is that for the moment, user and content data is the most valuable commodity for streaming companies. It is therefore critical to have a stellar user experience that delights users and keeps them coming back to the service. It's also critically important to invest heavily in user and content analytics, including machine learning and AI, to stay ahead of the competition and let users discover content and interact with users with similar interests and tastes.
How can live streaming make money? The answer may be found in a different model. Monetization will probably first take the form of live videos for product and brand placement. For live streaming platforms, this will require an ability to analyze in real time who is watching and what people are talking about. The platform will probably need to prompt broadcasters to share their opinion on trending issues, hot topics, and brand/product focused on millennials and Generation Z. This more active and engaged experience will be how live streaming starts to produce financially.
The promise of live streaming is clear - analysts are predicting that there will be one billion users by 2018. These users tend to be young-largely millennials and their siblings in Generation Z who would rather connect on social media using video than any other medium. This group is very socially engaged and extremely active. For advertisers, it is absolutely critical to make a big impact with this audience. The problem for the platforms, including Streamago's, will be how to translate that enthusiasm into our balance sheets.
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