Welcome to the 61st edition of Heartcore Consumer Insights. Curated with 🖤 every week by the Heartcore Team.
If you missed the past newsletters, you can catch up here. Now, let’s dive in!
How to Monetize Culture - Rex Woodbury (Index)
The top-earning YouTuber for the last three years running is a 9-year-old boy. His name is Ryan Kaji, he lives in Texas, and he took home $30M last year.
But Ryan has also expanded well beyond YouTube: he now has his own product line and merchandising deals with Walmart. Ryan’s income is shifting from advertising to commerce, embodying a broader shift happening across the internet.
Ad revenue often isn’t enough to support creators. One study found that reaching the top 3.5% of YouTube channels - which means about 1M views/month—only gets you $12k-$16k a year.
A musician on Spotify makes $0.00437 per stream, meaning an artist needs ~3,5M streams just to earn the minimum wage of $15,000 per year.
The internet is the driving force of culture: it’s how ideas spread, how content is consumed, how people connect and communicate. Monetizing through ads leaves value on the table; to properly monetize culture, we need more complex, diversified, and innovative models that better capture and transfer value.
If YouTube, TikTok, and Instagram are at the top of the funnel for discovery, new tools and platforms will help creators better transact with their communities:
Subscription: Discord is perhaps the first horizontal social platform to eschew ads. Instead, power users pay a subscription ($10/month) to Nitro, which unlocks premium features like custom profiles, new emojis, and better video quality. Discord started monetizing in January 2017 and has grown rapidly to $130M in 2020 revenue (up 300% YoY).
Microtransactions: A decade ago, microtransactions made up 20% of gaming revenue; today, they make up 75%. As is often the case, the broader consumer internet will follow in gaming’s example. More and more internet companies are offering micro-purchases: Cameo for shoutouts, Superpeer for 1:1 video calls, Jemi for personalized interactions, Looped for virtual events; Streamloots for gaming streamers. Even more traditional social networks are opting for this path: Yubo, a French social network with 40M users, has monetized with in-app purchases and subscriptions from the start. One of the most interesting examples is OnlyFans.
Ultimately, it is also clear that advertising has less room to run. The global advertising market was $647bn in 2020, about 50% of which is already online. The global commerce market is $25 trillion, and only about 20% online.
The last generation of internet companies was built on advertising, and the next generation will be built on commerce.
The best consumer companies employ an efficient customer acquisition strategy that enables them to drive growth without jumping onto a treadmill of paid marketing spend.
Distribution alone does not define consumer breakouts. Distribution has to be combined with efficient conversion to drive the long-term engagement that creates enduring consumer companies.
Popular recent conversion mechanisms:
1. Auctions: As commerce increasingly moves online, many companies look to replicate the highly engaging behavior of live auctions on their platforms. Auctions play into the human desire to compete for scarce goods with the incentive for users to constantly observe the behavior of others in order to make buy/not buy decisions. Collectibles marketplaces like Whatnot and Loupe generate the majority of their GMV through synchronous online auctions.
2. Entertainment: live-streaming is one example of how companies can leverage entertainment as conversion. When consumer platforms adopt live-streaming that complements the experience, businesses are able to drive much higher conversion by creating entertaining synchronous experiences. Examples include ShopShops and NTWRK, which both leverage QVC-style live shopping experiences that provide a “lean back” shopping experience through live interactive events.
3. Community: Monthly is a platform that offers interactive one-month courses with the world’s best creators. Monthly users are grouped into small cohorts that work through course materials together in a month-long experience, sharing updates, feedback, and support with one another. This cohort provides accountability for students and drives much higher course completion rates than almost any other comparable offering.
4. Gamification: Pinduoduo, China’s $150bn+ social commerce platform, famously leveraged gamification techniques to drive repeat behavior. The app promotes a daily check-in feature where users are rewarded points they can redeem and credit towards in-app purchases. While the level of gamification seen in Chinese consumer apps is not yet prevalent in the Western world, companies are beginning to see the power of gamification. While controversial, Robinhood has gamified aspects of the investing experience, such as the confetti that appears after purchasing a stock. Companies like Duolingo gamify language learning, too, as users earn experience points and have streaks of lesson completion.
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Reddit: Organized Lightning
🇪🇺 Notable European early-stage Consumer rounds :
🇺🇸 Notable US early-stage Consumer rounds :
🔭 Notable later stage Consumer rounds :
🍭 Notable Consumer Exits
Robinhood files for IPO. Robinhood is Menlo Park-based stock brokerage company that allows customers to buy and sell stocks, options, ETFs, and cryptocurrencies with zero commission, with backers including Index/DST/Sequoia - link
Heartcore Consumer Insights is a weekly newsletter, covering notable consumer rounds and exits, as well as top content in the B2C space.