Livestreaming—Product Or Distribution Channel? - Forbes

By Emma Cai
As livestreaming gains popularity, so do various methods for monetizing the tool within the creator … [+] economy
Livestreaming is less than ten years old, but its use has skyrocketed in the past 18 months. US platforms like Twitch and YouTube Live were early innovators. Today, livestreaming has been rapidly developed by Chinese companies as well, with the rise of notable platforms like TikTok (known in China as Douyin) and Taobao Live. 
The market potential of livestreaming is clear. Popular role-playing game channels on Twitch, such as CriticalRole, can drive millions of fans and generate multi-million dollar payouts per year for top gamers. And in China, a popular influencer named Austin Li (also known as the “Lipstick King”) once sold 15,000 lipsticks in 5 minutes during a livestream coinciding with Alibaba’s famous annual online shopping event, Single’s Day.
So is livestreaming its own product? Or is it better thought of as a distribution channel for selling products? In many ways, the answer depends on the platform. With Chinese platforms, livestreaming is often used as a distribution channel where influencers help brands sell goods via live product demos. On the other hand, US companies tend to offer livestreaming as a product feature that drives deeper engagement between creators and their fans. 
Sometimes the line between product vs. distribution channel overlaps. Regardless, the most important factor is monetization for creators and influencers, so they are incentivized to continue streaming content consistently. 
Livestreaming is one of the most important mediums in the Creator Economy. Operating in a market size of over $100 billion, creators in a variety of domains, from education, to gaming, to eCommerce, monetize their livestreams via the following four methods: Subscription, Live PPV (Pay-Per-View), Donation and Advertising. 

In addition to the monetization methods mentioned above, influencers can leverage their brand partnerships to monetize livestreaming. This is known as the commission model, which involves selling branded merchandise via livestream and using this platform as a distribution channel. 
Live-shopping platforms often have celebrity or influencer hosts. Even though the type of merchandise sold on different platforms can vary widely, influencers in general get paid by receiving a percentage of the gross merchandise value. 
With live-shopping, influencers often stream themselves demo-ing the product live for a couple of hours. During the livestream, the influencers will chat with their fans and set up a flash sale window before the end of the stream. This is a well-known selling mechanism, reminiscent of 1980s television programs like the “Home Shopping Network,” and plays with consumers’ FOMO (fear of missing out). 
This monetization method has proven successful, especially in China. Even though a huge discount may crush the margin of the brands and they must relinquish control of the sales channel to the influencers, livestreaming has become an important distribution channel for brands that they won’t give up easily.
Livestreaming as a product requires the technological focus to be on player experience. For instance, creators prefer to broadcast their livestreaming in 4K HDR (high-definition resolution) and allow customers to stream the content via 4K-supported smart TVs and other devices. To align with this industry trend, at Vimeo we recently announced our partnership with Dolby Vision to support UHD (ultra high definition) viewing for Apple devices. 
Livestreaming as a distribution channel, on the other hand, focuses on seamless integration with checkout and fulfillment. The player becomes a shoppable storefront, and platforms often need to ingest relevant merchandise HTML in the player. This process can be extremely manual. In order to reach scalability, some platforms tried object tagging or automatic image recognition to reduce friction. 
This is difficult to achieve and there is plenty of room for errors. Therefore, platforms and brands need to invest in production and programming of livestreaming for live-shopping to take off.
Regardless of which business model is applied, the dramatic rise of livestreaming will continue because people have long preferred live content, and the technology is only getting better. But which monetization model is more dominant? Can certain platforms succeed at both? Will a singularly focused platform win over a platform using both models? It is too early to tell, but livestreaming is definitely a fascinating space for consumers and investors alike.
Emma Cai (’19)
Emma Cai (’19) is an MBA graduate from Columbia Business School and a Principal Product Manager at Vimeo. She is a self-proclaimed payments nerd and a China Tech enthusiast. You can find her other China Tech-related articles here.


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