Hollywood and Tech, sitting in a tree…
In the summer of 2017, Jeffrey Katzenberg touched down in Sun Valley, Idaho. Each year, business moguls and the financial elite go on a pilgrimage to the Allen & Company Conference that’s been held in the mountains of Idaho since 1983. Frequent attendees include Bill Gates, George Soros, LeBron, Oprah, and Jeff Bezos—whose famously buff vest picture was taken in Sun Valley.
The annual Sun Valley conference is as close to a meeting of the Illuminati as we’re going to get, and it was the perfect place for Katzenberg to shop around his new vision for mobile entertainment. Six months later, Meg Whitman joined as CEO of Katzenberg’s new venture, which was later named Quibi.
Upon joining, Meg Whitman described Quibi as “one of the most disruptive and timely ideas that I have come across in my career”. At the time, it seemed like the perfect marriage of Silicon Valley and Hollywood—two storied leaders coming together to shape a mobile-centric future.
Bob Iger, then CEO of Disney, raved about the opportunity in an article in Variety: “The explosion of short-form video is obvious to all of us, but a lot of what we’ve seen is the production of amateurs — user-generated content. Taking a professional approach to this kind of content, we haven’t seen that yet in a concerted way, and I think that’s a smart thing to try.”
But this past June, Scott Galloway published “Four Weddings & A Funeral”, his predictions for the second half of 2020. The funeral? Quibi.
Why will Quibi fail? Scott explains, “The answer is obvious, and ageist. To my knowledge, there’s never been a successful media-tech firm founded by people in their sixties. The young brain is crazy, creative, and willing to work 80 hours a week, as young people think they’ll live forever. People in their sixties are not blessed/cursed with any of these things, which makes them decent leaders, great mentors, and shitty entrepreneurs.”
But… Steve Jobs was in his fifties when Apple launched the iPhone. Reed Hastings was in his fifties when Netflix launched the first Netflix Originals. Innovation hasn’t been limited to the mythical college dropout.
So why, then, has Quibi faltered, and what can it do to recover?
To answer that, we have to talk about snacking.
The term “snackable content” has been around for a long time. I first heard the term at Microsoft around 2000 shortly before the launch of Xbox. We knew that packaged software was going to be replaced by downloadable software. This created the opportunity to deliver smaller, “bite sized” games into the hands of players.
Since then, we’ve seen snackable content take many forms: Tweets, YouTube videos, GIFs, Vines, “Hyper Casual” games, and now TikToks.
Quibi seems like the perfect formula—Hollywood quality in a snackable package. The "snackable video" strategy is baked into the name. Quibi is short for "quick bites".
But Quibi missed an important point.
Snacks aren't fun because they're quick. Snacks are fun because they're shareable.
The defining feature of mobile isn't size and portability--it's connectivity.
Hollywood has mastered a classic formula for content creation. Entertainment value is the byproduct of production value—great storytelling, great acting, and great filmmaking combine to make content people want to watch.
Hollywood has mastered a classic formula for content creation. Today, the formula has changed.
This held true in the days when screens weren't interactive and connected. Today, the formula needs an update.
The Entertainment Value Curve
On mobile, entertainment value is the byproduct of production value and social value. This formula generates an efficient frontier of product/market fit. There have been successful products at various points along the social value/entertainment value curve, and many failures that have fallen short.
Lets break this down further. We can think about this on a graph where:
Entertainment Value = Production Value + Social Value
Y-Axis = Social Value = The level of personal connection the viewer has with the content.
This connection is often the result of having a relationship with the creator of the content or the person who shared the content with me. Content created by friends has higher social value than content created by people the viewer has no relationship with. Over time, a viewer can establish a relationship with a creator (even if that relationship is entirely one-way) by following that creator and interacting with that creator. This happens with fans who feel connected to influencers and celebrities. Platforms like TikTok and YouTube are facilitating this connectedness by making creators, at all levels of fame, feel more accessible.
X-Axis = Production Value = The quality of the content relative to highest quality in the genre.
Production value measures the "objective" level of quality of a piece of content. This assessment varies by genre and isn't entirely about aesthetics. For example, a Marvel movie represents the highest production value for an action movie. These big-budget movies are what people typically think of as "high production value". Stand-up comedy is on the other side of the production spectrum — just one person and a microphone. In this genre, a Kevin Hart stand-up special exemplifies the high bar for production value
All things being equal, people enjoy higher production value content more than lower production value content. But, all things are not equal...
People Enjoy Content Differently Based On Who is Creating and Sharing
The relationship exists because of how people relate to entertainment content. They enjoy content differently based on who is creating or sharing it. For example, a friend doesn't need to be as funny as Kevin Hart to make you laugh, but Kevin Hart couldn't get away with standing on stage and telling your friend's jokes. Snapchat is a great example of this — it's funny to see your friends wearing a silly lens, but wouldn't be nearly as funny to see that same lens on a stranger.
Successes Live Along The Entertainment Curve
Successes live along this value curve. Let's take a closer look at where various products fall along this curve:
- Snapchat - Snapchat is at one end of the spectrum. Their AR lenses offer tools for anyone to be able to create fun content. Your friend's baby face isn't going to win any Emmys, but it will make you laugh. The production value is low, but the social value is very high. Snapchat takes a "creation first" approach by opening directly to the camera and encouraging people to "Send To" close friends as an integral part of the creative process. The result? A fun, low-stakes platform that puts the emphasis on sharing, not flexing.
- Instagram - Instagram, like most other social platforms, takes a "consume first" approach by opening directly to the feed. However, unlike TikTok and YouTube, Instagram's home feed only features content from creators the user is following. Instagram initially provided a powerful set of tools for creation that made users careful to only share "Instagram-worthy" content. As a result, the Instagram home experience offers socially-relevant content with higher production value than the typical Snap. This has changed a little with Instagram Reels, as Bangaly Kaba, the former Head of Growth at Instagram mentions:
IG Stories (and now Reels) effectively lowered the bar for what is ‘Instagram-worthy’ and making lower production value content readily accessible at the top of Feed.
By doing so, IG dramatically increased the entertainment value of the product. The lower production bar enabled more people to post more frequently and similarly increased the the consumption rate of watching other people’s stories.
— Bangaly Kaba (EIR @ Reforge, Former Head of Growth @ Instagram
Interestingly, Instagram's second tab, the "Explore" feed, plots a different point on the curve. The Explore feed uses a personalization algorithm that is informed, but not constrained, by follower relationships. As a result, the Explore feed is positioned similarly to TikTok's For You tab — higher production value content that still has some personal relevance.
- TikTok - TikTok moves a step further down the Entertainment Curve — TikTok's default For You algorithm masterfully serves up a stream of content that is relevant and high quality (similar to Instagram's Explore tab). In addition, TikTok offers a Following feed driven by the user's social graph. In this way, TikTok reverses the emphasis of Instagram (topical content first, socially connected content second). We'll look at TikTok in more detail below.
- YouTube - YouTube is organized similarly to TikTok, but the content on YouTube is not subject to the same constraints. YouTube videos can be longer and more professionally produced — this leads to a higher production value. At the same time, fewer people can create the quality of content that does well on YouTube. So, viewers are less socially connected to the content on YouTube. YouTube is a good example of the interrelationship between social value and production. They are distinct factors, but often move in tandem. They can even move over the lifecycle of a product. Today, YouTube is a platform for professional and prosumer video creators. In the early days, YouTube videos had a more homegrown feel, and there was a tighter relationship between YouTube creators and their audience.
- Netflix - Netflix is on the other end of the spectrum. The production value of Netflix shows is very high—so high that only a handful of elite Hollywood content creators are able to achieve Netflix's bar for production value. As result, there is limited social connection between Netflix viewers and content creators. In addition, Netflix hasn’t enabled much social interaction within its products. But, Netflix content does have social value. Netflix shows are so good that they drive by word of mouth sharing. Today, Netflix is getting even more social with Netflix Parties, a feature that allows people to co-watch Netflix content with their friends.
Social Value and Production Value by the numbers
We've evaluated these products based on a qualitative understanding of their features, social mechanics, and content strategies. We can also take a more analytical approach.
Measuring Social Value with Creation Participation Rate
How can we measure the "social value" of a product's content? Social value is primarily a function of the social connection between the viewer of the content and the creator of the content. Accordingly, the best way to measure social value is to look at the share of people creating content — more people creating leads to a higher likelihood of connection between the creator and the viewer.
We can measure this by looking at "creation participation rate." The creation participation rate is defined as the percentage of users who create content (typically on a daily or weekly basis). Snapchat has the highest creation participation with ~60% of active users creating per day. On the other end of the spectrum, only ~2.5% of YouTube users have ever created content.
Creation participation was a large focus for the Instagram team. The IG Stories team had a goal metric of creation participation per DAU (ie, what % of DAU created a story) in addition to a team working on consumption participation rate / DAU.
— Bangaly Kaba, EIR @ Reforge, Former Head of Growth @ Instagram
Measuring Production Value with Content Distribution Curve
All of the entertainment platforms we've discussed have the same goal: increase content engagement by distributing the right content to the right person. Content distribution is handled by a recommendation algorithm which ranks an inventory of content based on a user's likelihood of engaging with that content. Ultimately, recommendation algorithms generate a content distribution curve — the shape of which can tell us a lot about production value.
We can plot a content distribution curve by ranking each piece of content from most popular to least and then plotting the number of views for that piece of content. The shape of the content distribution curves for Netflix and Snapchat look very different — especially when plotted against each other.
Although Netflix offers a vast library of shows and movies, the amount of content on Netflix is vanishingly small compared to the content on other platforms (Netflix currently has about 36,000 hours of content in total. Contrast that with YouTube creators who upload 720,000 hours of content per day.) In addition, popularity drives viewership on Netflix — people want to watch what others are watching. The combination of small inventory and popular viewing results in a head-heavy, short-tail content distribution curve.
The content distribution curve for Snapchat would look very different. On Snapchat, content is vastly more plentiful and social relevance drives viewership (people engage in what their friends create). As a result, the content distribution curve on Snapchat is a flat, long-tail distribution.
So, we can measure the average production value of content on a platform by looking at the shape of the content distribution curve - high production value platforms have shorter tails, and low production value platforms have longer tails.
Looking at it in this way, we can see that Social Value and Production Value are related. As creation participation rate increases, there is a larger inventory of content to rank and more social signals to use in the ranking. As a result, the content distribution curve lengthens. Great entertainment products understand and optimize for this relationship.
So where did Quibi go wrong and what did TikTok get right?
The problem with Quibi is that the product is not optimized for the Entertainment Value Curve. Quibi added format, length, and viewing constraints that made it harder to compete with the production value of Netflix content, but did not supplement those constraints with increased social value.
Quibi is a solitary experience—both online and off. Quibi’s shows were designed to be watched by a single person on a tiny mobile screen and, surprisingly, the app does little to promote online social interaction between its viewers.
Quibi is a solitary experience, TikTok is brimming with life.
The solitary nature of Quibi’s experience is reflected in the app’s design. There are no signs of life—no signals that anyone else in the world is watching. In stark contrast, Twitch, YouTube, Instagram, and TikTok are brimming with activity. A flurry of reactions, comments, and messages make those apps feel alive.
Quibi’s design is most similar to Netflix. But Netflix isn’t trying to be and doesn’t need to be “snackable”. Nobody wants Netflix with shorter episodes. There is no correlation between episode length and popularity on Netflix — in fact, based on the viewership numbers shared by Netflix, longer content tends to do better. Quibi made the mistake of thinking that "short" was the feature that people want, whereas "shareable and social" is what people want.
Quibi missed an opportunity to leverage their Hollywood relationships to get fans of their creators to talk, connect, share, and influence the snackable content that is on the platform.
— Bangaly Kaba, EIR at Reforge, Former Head of Growth at Instagram
TikTok, but the party don’t stop.
At the same time Quibi was tinkering with its Hollywood formula for snackable video, a fast moving Chinese company was building a snackable video juggernaut with a completely different approach.
TikTok seemed to come out of nowhere, but it’s the culmination of a trend that began in 2012 with Vine. Vine was the first successful “short-format” mobile video platform.
Vine arrived in a world where YouTube creators were beginning to shift from amateur to prosumer. Video quality on YouTube was improving and viewership was shifting to creators that could deliver on both great content and good production quality.
Vine sought to level the playing field. Vine creators could only record in-app (eliminating expensive video equipment from the equation) and record up to six seconds of video (putting the emphasis on pithy content).
At its peak, Vine had over 200 million active users. Despite the success, Twitter (which acquired Vine shortly after founding) decided to discontinue the service in 2016 due to concerns about monetization.
The void was soon filled. Musical.ly launched in 2014 with a music-oriented take on short format video. It also reached about 200 million users but fell short of replacing Vine’s unique place in the mobile video landscape.
In 2018, I conducted user research for Facebook’s Youth team and was surprised by the number of teens watching compilations of Vine videos on YouTube. Teens have short memories. The fact that Vine was still a thing was… a thing.
Two years after Vine’s shutdown, teens were still talking about Vine and sharing Vine compilations on YouTube. TikTok figured out why.
Around the same time, TikTok was taking note of the same trend. They built a broader take on short-format video that expanded upon Musical.ly’s niche. TikTok acquired Musical.ly in 2017 and consolidated it into the TikTok brand.
Since then, the TikTok app has been downloaded over a billion times and Bytedance, TikTok’s parent company, more than doubled revenue to $17 billion in 2019.
Sharing is caring...
Why has TikTok’s brand of snackable content worked while Vine and Quibi have fallen short? TikTok is built for sharing, whereas, Quibi made it deliberately hard to share from the app — by making it impossible to snap screenshots.
TikTok's 15-60 second clips loop infinitely.
What does looping have to do with sharing? Everything.
In real life, looping makes it easy to pass a phone around so everyone can see a great clip. Not around friends? Looping gives people time to figure out who they want to send a clip to. For Gen Z, sending a TikTok or a meme is like giving a gift. It’s the thought that counts.
And looping makes TikTok great for second screen viewing — the perfect distraction to help people get through the slow parts of "Tiger King."
TikTok is built like a social network.
TikTok’s design takes a clear stance—snackable media is social media. The right rail of TikTok is entirely dedicated to the social interactions vital to the app’s experience: following creators, reacting, commenting, sharing, and mimicking the current video.
The subtle animations and social engagement numbers reinforce the fact that each video is a living piece of media—not just to be watched, but to be talked about, shared, and remixed.
TikTok breaks down the wall between the audience and the creator.
Historically, the screen has been a barrier between the audience and the performer. Hollywood built an industry around the mystique and inaccessibility of celebrity.
Today, that barrier has come crashing down. Twitter and Instagram pioneered a deeper relationship between creators and their audience. TikTok followed suit with a platform designed to help new creators build an audience and give A-list celebrities a more personal way to engage their fans. They broke this barrier with new creators in two ways:
- The Algorithm - The TikTok algorithm is designed to give new content a chance at virality, something increasingly hard with the main feeds on YouTube and Instagram which over-weight views/likes — giving creators with high following a major advantage vs. new creators.
2. Reducing The Production Gap - TikTok initially started (but recently changed) with only being able to recording within the app (no uploading). This gives new creators the ability to compete with A-list, celebs, and also encourages A-list celebs to share more authentically. All of this means that there isn't a production value gulf on TikTok between everyday creators and celebrities — something that exists to a large degree on YouTube.
TikTok encourages mimicry.
Today, content is a two-way conversation, and not just because creators engage their audience. The line between audience and creator is blurring.
TikTok has embraced this new reality by providing the tools and incentives for people to put their own spin on popular memes. The result is hypnotic—a never ending stream of content that feels both familiar and fresh. Mimicry converts more consumers into creators, fueling the social ecosystem. And what do people do right after they create a new TikTok? They share it with their friends.
The Social Content Engagement Loop
A recent study found that kids are spending an average of 80 minutes a day on TikTok!
Kids are spending 80 minutes a day on TikTok—parceled into 15 second snacks.
This depth of engagement is driven by all of the above elements working together to create a self reinforcing growth loop of ever increasing engagement. In Advanced Growth Strategy, Casey Winters and Kevin Kwok go in depth about how when it comes to loops, it is never about what is happening, but instead about why the user would do it.
The entertainment engagement loop has three parts, creation, consumption and conversation, all reinforcing each other. TikTok has nailed this flywheel:
- Creation drives consumption - TikTok has radically simplified the task of creating engaging video. They've democratized **video production — enabling more people to create better content. The constant stream of fresh, engaging video encourages people to open the app every day to discover what's new.
- Consumption drives conversation. TikTok makes it easy for people to talk about the videos they watch. The conversation can take many forms: sharing with friends, reacting/commenting, and following the creator.
- Conversation drives creation. Creators are motivated by the positive feedback, and others want to create things that people talk about. TikTok encourages new creators by helping them build their initial following and making it easy to "remix" existing videos into original creations.
TikTok's flywheel has a compounding effect — by blurring the line between creator and consumer, TikTok's algorithm can tap into an ever expanding universe of videos to recommend. Every day, TikTok delivers better content to their viewers and more motivation to their creators.
If you are Quibi, what do you do?
If you were the product leader at Quibi, what would you do? Quibi's fate is not written in stone — they have significant advantages which could be turned into a high growth product. But, it requires a different form of thinking.
Quibi wanted to create a Netflix-killer. But users love Netflix and didn't want a Netflix killer. What they did want was an mobile-native social entertainment they could enjoy and share with their friends — TikTok.
Creating new products is not just about pulling from a lengthy menu of features as Quibi did (mobile + short + vertical video + Netflix), it is about finding a new, self-reinforcing formula for creating value in people's lives.
If I were in Quibi's shoes, a few questions come to mind for their present quandary:
- How might we… make content more shareable?
- How might we… make the app feel more alive?
- How might we… make the audience part of the creative process?
- How might we… spark conversation between the audience and the A-list community of storytellers, actors, and artists Quibi has assembled?
These are challenging questions, but loaded with opportunity. Like any good Hollywood story, Quibi might have a surprise ending.
Quibi has more talent, cash, contacts, and content than most companies could ever dream of. They are in the right space at the right time—mobile video consumption increased 38% in March due to social distancing measures.
Quibi’s road to success is not more of the same—it requires a course correction. The company faces a choice. Become more like Netflix or learn from TikTok.
The Netflix path is the easy choice, but the dangerous one. Necessarily, it leaves Quibi’s “quick bite” vision in the past and positions the company to compete with the streaming giants Netflix, Amazon, and Disney. A battle they are likely to lose.
The other path may be difficult, but the opportunity is far greater and lives up to the future Katzenberg painted in Sun Valley.
Quibi has been thinking about itself as a film studio. The company needs to think about itself as a social network.