Diversifying Revenue Streams

 This blog is a quick snapshot into how Chinese companies are diversifying their revenue streams and making money without hampering the user experience. I spent a lot of time analyzing the revenue models of these players and here are my learnings / key takeaways on how we can diversify our revenue streams giving more control to users.

Large consumer companies

The Googles’ / Spotifys’ of the world make revenue in the order of ~100B+ and interestingly their revenue stream is not quite diverse and broadly falls under 2 large buckets - Advertising driven or Subscription driven. They work on GTM and then discuss how to build for it.

People’s preference changes. Will this single model of revenue stream pan out the best strategy for long term growth? I believe there are compelling reasons to consider other revenue streams.

Can you give me an example please?

Take iQiyi, for example

Note: Membership stream > Advertising

Ok, enough talk, what are these new business models? 

Yes, please be patient, I’m getting to it. I’m going to take 4 content categories with case studies that illustrate these business models. 

Books 

In China, books are consumed very differently. In addition to their paid subscription service (similar to Kindle Unlimited), there are 4 alternative business models.

1. Go freemium bro - Paid books allow readers access of up to ? of the book for free. Readers have time to get hooked before they need to pay to unlock the ending. Nobody wants to miss the climax!
2. Offer bite-sized snacks - Readers pay per 1,000 words, for often-serialized works. Because authors can publish chapters piecemeal, they are also able to incorporate reader feedback to quickly change plots or even kill off characters.
3. Trust loyal users - Some authors offer free books and illustrations, gain a loyal user base, and then collect money through tips. At the end of each chapter, an overlay button for tipping authors allows readers to tip from $0.15 and up.
4. Gamification - In WeRead, another one of China Literature’s reading apps, users compete against their WeChat friends on a weekly leaderboard showing who has read for the most time.

Podcasts

Advertising alone cant support the big budget podcasts’. Remember the host/executive producer Sarah Koenig started asking listeners for donations during episode nine.

Alternative business models -

1. Option to pay for podcasts individually -  Users have the option to pick episodes and pay for them individually. They subscribe and pay money for the entire playlist if they like the experience. Isn’t that cool?
2. Incentivize podcasters - Podcast hosts can also receive tips that are split between podcaster and platform. In the following example, tip options vary from $.30 to $21. This new model means everyone can make money and content creators have more funds to invest in better production and better content; everyone wins.

3. Use social elements - Dedao hosts a social network based around studying, where users can create a public profile and share or compare course notes. Users can also leave public questions or comments at the end of each podcast transcript.

Video

1. Use AI / Machine learning - Baidu spinoff iQiyi, one of the bigger video players, uses AI and machine learning to figure out what’s happening in the content, and play relevant advertising. In the following scene of a young professional putting on lipstick, for example, iQiyi serves an ad promoting a makeup brand.

2. Adopt à la carte model - Non-members can watch the first 6 minutes of the film before deciding whether or not to “unlock” the rest of it with a membership or pay à la carte for the movie. 

3. Perks for loyal active users - VIP memberships also include exclusive access to app skins based on celebrities or popular shows. Navigation buttons are replaced with faces of the mentors/judges.

4. Digital coupons - On iQiyi, users can clip digital coupons, such as the following BOGO coupons for Dairy Queen and Burger King. Imagine watching a movie on YouTube and getting a craving for pizza and hot wings, now you can immediately act on that craving. For many shows or movies, users can shop related items as they continue to watch; there is no need to stop the video.

Music

I love music, so have lots of surprises in store for you here. Imagine what happens when you take a simple music streaming platform and turn it into a social experience? 

1. Turn avg fans into superfans - Tencent Music created a leaderboard showing how many times fans purchased the album. But you don’t have to top the leaderboards to get the benefits here. Say you bought that Jay Chou album 3 times; you might be ranked #3913 on the leaderboard, but worry not, you’ve also won 3 raffle tickets to win signed posters, VIP memberships, or even Jay Chou sleeping masks.
2. Improve artist marketing - Similar to iQiyi, users can skin the app for a small fee. You can imagine how many Coldplay / Chainsmoker die hard fans here might also be willing to pay a small fee to skin their media apps.
3. Add social network elements - Small or medium artists can post articles, and fans can access news, music videos, and behind the scenes content. Imagine a young inspired guitarist; all he/she wants to hear more is about the story from these artists themselves. 
4. Live stream concerts - Yes, you heard me right. You can’t attend concerts in person, not a problem, you can also watch live streams. 
5. Make some $$ for your users - Hmmmmm, you are probably wondering what the hell I am talking about, but it is true, Chinese companies focus not just on content creating and consumption but also allows users to earn money. In WeSing, users can livestream their own karaoke room or open up the floor to anyone who wants to sing karaoke. Singers keep 30% of the tip revenue. It’s fun, social, and makes a lot of money for both the platform and customer.

[BOX] ------> Let’s get here

Let’s think outside the box to generate new revenue lines. After all, revenue is simply a proxy for how you are serving your customers. As you diversify and experiment in generating revenue in new ways, you are effectively honing in on your ability to give customers what they want, how they want it.

My interest lies in the intersection of product strategy and business models. If you are a budding startup looking for product strategy thoughts, shoot me an email at saileshdev@gmail and we can pick up our conversation to brainstorm. Stay safe!