‘Silence is worse; all truths that are kept silent become poisonous.’
I’ve been thinking about the concept of attention lately. The digital world has continually shown us that attention is its own form of capital. Though it’s not valuable in and of itself much like fiat currency, attention can be accrued and, like a form of potential energy, can be converted into something entirely different than what it is.
But how does one classify attention? Before the internet, businesses aimed to measure physical presence – e.g. how many people do you have walking into your store. To easily classify this in their spreadsheets, MBAs called this ‘foot traffic’ as a proxy for revenue. In this sense, attention is merely online foot traffic: what do people spend their time doing and specifically, which sites and apps captivate them. It’s been clear that having one’s finger on the pulse of attention is a priceless talent in our generation. And as the cycle of social media apps (Instagram, TikTok) has demonstrated, this flow of attention is moving entirely to video content.
In the early days of the internet, people tried to bake in commerce within the first versions of the browser and that jump started the first implementations of SSH. Sadly, there was no Stripe in the 1990s and the attempts of integrating money into the internet failed: even in our contemporary times, it’s impossible to seamlessly pay people over the web. Instead, technologists made the Faustian bargain of using ads to monetize attention: we can now witness that this wasn’t the best move after incidents like Cambridge Analytica.
Besides advertisements, how else can we monetize video?
The incentives between advertisers and creators are misaligned. Want to make a riveting, but potentially offensive form of content? Go ahead, but you’ll soon see that your YouTube video is instantly demonetized. Even companies like Patreon pick sides – they’ll deplatform you if they don’t agree with your political views. All creators are at risk of the other shoe dropping; I’m sure Alex Jones thought he was invincible until he was forcibly removed off every major technology platform simultaneously.
Indeed, advertisement dollars are fundamentally a lagging indicator of success for a businesses, which is designed around eyeballs as social media. In a classic principal-agent problem, these dollars are controlled by C-suite executives who want to hedge their risks, which means they’ll only bet on an already-winning horse. Why should they innovate? Additionally, videos embody reflexivity; they are themselves an advertisement. See a Tik-Tok star dancing with a pristine pair of sneakers? Click and buy them *instantly.*
Every product will soon have a video about it or within it.
Video > pictures
We already know that smartphones are globally ubiquitous, but what do people do with them? The data tells us that they’re watching videos and lots of it. As shown above, time spent on a smartphone has increased for every group – most of that is spent on apps watching videos. One of the best proxies for video usage has been YouTube; Google expects it to be their next biggest driver of growth after search as it’s the second largest search engine in the world.
Until now, the majority of videos have only been supported through advertisements. A key downside is that vying for ad dollars is incredibly tough for a startup. Both Facebook and Google suck all the oxygen out of the room: 80% of ad dollars are spent between the two of them. This is how we see stories like Instagram, which actually made no revenue when they were acquired for $1 billion in 2012 (now they’re estimated to be worth $100 billion). What advertising executive would go with them versus the safe choice of the former two? Not one who wants to keep their job. Unfortunately for these executives the world is going in the opposite direction. People are sharing their lives through video first and then through audio (voice notes). Pictures are ossifying and turning into a decayed remnant of the 20th century.
Thankfully, there is another way of aligning incentives: e-commerce. This is something China has been testing out in full-swing because the Chinese economy leapfrogged passed the banking model espoused by western financial institutions and went straight to mobile payments. E-commerce is how the internet should have progressed; there was this inherent friction between the legacy American financial system and the early nature of the internet. The cathedral versus the bazaar.
To understand why e-commerce is the way forward for video, we should look into the formation of American retail itself.
Consumerism meet America
In the 19th century, we saw burgeoning standards of living because of advances in manufacturing, oil and food production. This wealth generated demand for department stores selling furniture and home essentials like Macy’s, Bloomingdale’s, and even Sears. Their secret wasn’t in selling goods, rather they were community centers. They would host lectures and gatherings tutoring the newly-minted rich how to spend their money. Successful companies in our age still follow this mold: they capitalize on what makes them unique. Anyone can sell a couch, but it takes a genius to make your $19.99 fake leather couch stand out from the rest.
Meanwhile, the tide turned on boutique department stores and by the 1960s, big-box stores like Walmart were cultural icons: people wanted convenience over the personalized nature of the department store. We’re still living in this post-war bubble. Slowly, consumers adjusted to the lay of the land and malls turned into cultural hubs instead of primarily shopping centers.
But in the era of e-commerce and Amazon Prime, why shop in a mall? To put it in perspective, Amazon is still only ~5% of US retail out of a $6 trillion retail industry in 2018. We’re still in the early days of the internet – e-commerce is still less than 20% of overall US retail. The reality will become even more stark as software continues to devour the world: AR (see yourself in prospective clothes) or 3D printing (dropping the cost of textiles).
Another e-commerce boon is that young people don’t want to hang out in person anymore. Noah Smith said that the West seems to be heading in Japan’s direction socially and even financially with our current ~0% interest rates. I suspect that its the void of in-person social relationships that has lead to the omnipresence of video platforms, Instagram Stories and Snap, as a way for younger generations to cope. Don’t get me wrong, I think these platforms unlock a blue ocean of new possibilities for how we live.
A video is worth a million words
Videos about a product are worth much more than one created with text by a factor of 100x. The orders of magnitude difference is in part because video is much higher bandwidth than text and it’s interactive. Sure we have text conversations, but message boards like Reddit vividly highlight the lack of empathy people show online. Why be nice when you’re anonymous – can anyone reprimand you regardless?
On the other hand, video is, for the most part, empathetic and a two-way conversation with all the nuances of body language that humans crave. If you’re a salesman, you’re aware that it’s impossible to convince someone to trust you online over a few text messages or emails. However, in-person sales are an entirely different story – we can influence people much easier. As we’ve discussed, new generations are starting to trust that video is a source of truth like meeting someone face to face.
A16z’s Connie Chan wrote about how in China, Taobao live – a livestream service – lets viewers ask product questions, mix and match outfit combos, and even conduct product lotteries once a number of likes on the video has been received. People only want to purchase items they’ve seen in action and therefore, consumers are willing to take the extra step in assessing quality.
As of August 2018, on China’s largest ecommerce platform Taobao, 42% of the product pages had short videos, up from 15% the year before. The company also generated more than $15 billion in sales through livestreams, up nearly 400% from the year before. The CEO of Taobao observed that livestreaming “is not just bells and whistles” but that “in the future, it will be the mainstream ecommerce model”.
Attention is a matter of life and death in this scenario. If video subsumes software, then everything becomes about amusing and immersing the consumer to death, essentially gamifying the world. If you thought Instagram cafes were annoying, wait until the DMV, the dentist, and the bookstore – start to embody this experience-first mentality. I know I might be embodying a ‘boomer’ mentality, but I’m aware the same pessimism was prevalent TVs were introduced. We’re not good at predicting the second-order consequences of our creations and we often think they’ll be negative because we’re scared of change.
I’m bullish on this trend in one way. There will be an entire ecosystem around supply-chains and how products are made; it’s an extension of the farm-to-table conspicuous consumption we see today. Now you can see exactly where and how your jewelry, food, and alcohol was manufactured in a level of depth our ancestors could only dream of. Maybe people will react differently to the reality of the blood diamond trade if they see its brutality in real-time; Rawl’s idea of the veil of ignorance comes to mind – nothing is sacred anymore, we’re all out in the open, and there’s increasingly nowhere to hide.
Video is simply more engaging than anything else, thus once VR is released, it’s effectively the last medium. Livestreams are the first step; they’re already used by consumers to assess the quality of goods and as a way for creators to connect with their audience.
If everything has a video about it or within it, we’ll be spending even more time online than we do currently. That’s why the Instagram-experience is here to stay: our daily lives will be centered about looks and projection more than it currently is. On the other hand, it means you’ll be able to investigate anything for yourself with nobody stopping you. Governments and news outlets have despised the level of power someone with a smartphone has today.
Is all of this a beneficial change? Governments like China already use facial recognition to imprison minority groups. Will the west behave any differently once video is everywhere?
In 1997, Steve Jobs wanted to build a cafe where there would be Apple computers with videos streaming everywhere. He was 20 years too early for that reality.
Last week, I wrote about how celebrities, like Kanye West, are building their own fiefdoms (charter cities) and imagining cities as physical software.
I always enjoy the conversations that arise from these posts, don’t hesitate to reply with a message!