Livestreaming: Viable as a Product or Distribution Channel

If you think livestreaming is a fleeting fad in which kids just watch each other play video games, you are in for a surprise, writes Emma Cai. Influencers are monetizing livestreaming through subscriptions, advertising, and direct product sales. In what ways are livestreamers using marketing methods from the past? And how are they going to change the future? 

Livestreaming as we know it — connected to social media, available to any user — 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. And livestreaming has been rapidly developed by Chinese companies, too, with the rise of notable platforms like TikTok (known in Asia as Douyin) and Taobao Live. 

The market potential of livestreaming is clear. Popular role-playing game channels on Twitch, like CriticalRole, can drive millions of fans and generate multi-million dollar payouts a year for top gamers. And in China, a popular influencer — 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, it depends on the platform. With Chinese companies, livestreaming is often used as a distribution channel where influencers help brands sell goods via live product demos, while US platforms tend to offer livestreaming as its own product, driving deeper engagement between creators and their fans. Regardless, the most important factor for creators and influencers is monetization, which incentivizes them to continue streaming content consistently. 

Monetization methods for livestreaming as a product

Livestreaming is one of the most important products in the “Creator Economy.” Operating within a market size of over $100 billion, creators in domains from education, to gaming, to eCommerce monetize their livestreams via the following four methods: subscription, live PPV, donation, and advertising. 

• Subscription. Fans are often die hard believers who invest in the future growth of creators. The subscription monetization method is recurring and it is sticky. Based on my experience working in the video industry, subscription is usually the biggest revenue stream for creators, especially the ones with a large existing fan base. Obviously, building a big fan base is hard to achieve. Hence, creators often use multiple monetization methods to help boost their subscriber base.
• Live PPV (pay-per-view). This is a somewhat newer way that creators monetize particular live events. Customers who purchase live pay-per-view can be existing subscribers or someone new who is just interested in attending a single event. This is a great way for creators to grow their subscriber base outside of their existing long-term fanbase.
• Donation. Also known as pay-what-you-want, donations function like tips in the service economy, rewarding creators and driving direct engagement with fans during livestreaming. Creators can set up donation goals before the start of a stream, and give shoutouts to fans who donate the most during the event. Donation often doesn’t generate a sustainable revenue stream for creators, and is typically supplemental to subscription and live PPV.
• Advertising. Product placement is becoming more and more popular as a livestreaming monetization method, especially on platforms like Youtube and Facebook. Revenue is generated from the overall view count of the ads. This also is somewhat unsustainable, given that viewership is controlled by the social media platforms. Moreover, creators might encounter many anonymous viewers whom they can’t target with a subscription. Furthermore, as advertising is still relatively new in the livestream space, some livestream viewers express distaste for ads. Thus creators must consider the possibility that the more ads being played during a live event, the more adverse the experience for viewers. 

Monetization methods for livestreaming as a distribution channel

In addition to the monetization methods mentioned above, the commission model is also important for livestreamers as they help brands sell merchandise on their channels, also known as “live shopping.” 

Live shopping platforms often have celebrity or influencer hosts. Even though the type of merchandise sold on different platforms can vary widely, influencers typically get paid by receiving a percentage of the gross merchandise value. 

With live shopping, influencers stream themselves demoing the product live for a couple of hours. They chat with fans and typically 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). The often steep price markdowns offered during live shopping events also resemble the sales models of offline and online discount stores, e.g. TJ MAXX or the old internet flash sale darling, the Gilt Groupe. 

This monetization method — livestreaming as a distribution channel — has been very successful as a monetization method in China. And even though huge discounts may crush the profit margins of companies as they cede control of the sales channel to livestreamers, the publicity and hype surrounding a successful live shopping event makes livestreaming a distribution channel that brands won’t give up soon.

Different technology focus in the two models

When livestreaming is a product itself, the technology focus is viewer experience. Many livestreamers now broadcast in 4K HDR (high definition resolution) and platforms allow customers to stream the content via 4K supported smart TV 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. 

On the other hand, livestreaming as a distribution channel focuses on seamless integration with checkout and fulfillment. The video player becomes a website. Platforms often need to ingest relevant merchandise HTML in the player. This process can be extremely manual. In order to reach scalability, some platforms have tried object tagging or image auto recognition, but this is very hard to do and is prone to error. For Live shopping to really take off, platforms or brands need to invest more in production and programming infrastructure.

Viable as a product or a distribution channel

In summary, either monetization method can be viable, and the two might become more overlapping as the livestreaming market develops. Regardless of the business model, 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 will be more dominant? Can certain platforms succeed at both? Will a singularly focused platform win over a platform using both models? Or vice versa? It is too early to tell, but livestreaming is definitely a fascinating space to continue following and investing in.