Livestream Shopping Deep Dive 2020, BDMI

Rachel Lauren, VC Investor at BDMI, explores the livestream (shopping) market globally. The market has exploded in China, and a comparative analysis reveals how the market may evolve in the US.

Transcript

1. December 2020 Livestream Shopping Deep Dive Rachel Lauren
2. 2 December 2020 · Bertelsmann Exploring the State of Livestream Shopping Executive Summary Section I: Livestreaming Overview Section II: Drivers • Driver 1: Transaction vs. Ads • Driver 2: Cultural Habits • Driver 3: Rise of Middle Class • Driver 4: Mobile Payments • USA Growth Drivers Section III: The Livestream Influencer Section IV: The Technology Ecosystem (USA) Section V: The Livestream Advertiser/Brand Section VI: Summary and Capital Markets Table of Contents This report presents BDMI’s perspective on the current state of the livestream shopping market and outlines key trends and themes to watch as the industry continues along a path of growth and technological advancement. The report sets the stage with an overview of growing global engagement, demonstrating livestream shopping’s emergence in public consciousness. A comparative analysis of the Chinese vs. USA ecosystem will follow, detailing the status quo with observations on emerging trends and the role of technology and platforms. The report concludes with an overview of capital markets activity related to livestream shopping, exemplifying the growing focus on the space by creatives, brands, entrepreneurs, and strategic & financial investors. The Viewer The Brands The Influencer Technology & Platforms
3. 3 December 2020 · Bertelsmann Focused Investment Theses • Next Gen Media • Consumer Brands Select Fund-of-Funds Investments • Enterprise Tech • Fintech Presented by BDMI, Seed Through Series B Corporate Venture Capital Fund BDMI will continue to be active investors in e-commerce and digital media Active Early Stage Investors • Series A-B (check size $1m-$5m), leading or following; Seed ($100k – $300k) • Covering North America, Europe, and Israel • Currently investing out of $150m Fund III Financial & Strategic • Financially-motivated, single-LP venture investor • Provide strategic value to both portfolio companies & parent company (global media, services, and education company Bertelsmann) Collaborative • Syndicate friendly, co-investing with many traditional and strategic VCs Team Select Investments Urs Cete Managing Partner Keith Titan Partner Sim Blaustein Partner Carmen Rivera Assistant Brendan Brits Associate Avinash Satish Finance Manager Rachel Lauren Analyst Commerce -focused investments Sold to Oracle Q4 2019 Sold to The Chernin Group Q4 2019 Sold to Connexity Q2 2020
4. 4 December 2020 · Bertelsmann BDMI’s Top Livestream Shopping Theses 1 The US is 5 years behind China in livestream (shopping), though accelerated by COVID-19 China’s primary business model for Internet companies has historically been transactional, whereas US companies have relied on ads. As a result, media formats in the US have tended to skew towards long-form video and images, as advertising was more difficult to crack in live formats. In China, however, livestreaming evolved much earlier given user’s ability and willingness to pay directly for influencer content, as well as the payment integrations/infrastructure to do this seamlessly. As US media shifts towards business models outside of advertising (commerce, tipping, subscription), livestreaming becomes a more interesting and revenue-generating segment. In addition, with more commerce and entertainment consumption shifting online due to the COVID-19 pandemic, familiarity with streaming and viewership has followed. 3 Following success in China, brands will look to expand to livestream shopping as a distribution channel Socially-interactive livestreaming and gaming are among the most popular new content mediums for younger audiences, and commerce integrations have proven to be effective in these environments. Between Twitch / eSports / Fortnite et al., we’ve seen a strong consumer appetite for shared live experiences built on audience engagement, gamification, and social interaction. These platforms are monetizing live engagement by integrating transaction opportunities that feel organic to the experience. A growing number of marketing dollars are already moving towards influencer marketing, and we see livestream shopping as an extension of this ecosystem. 2 3 models will compete: marketplace, media, and software; driving viewership & curation will be key Many companies are approaching the market with different business models and technology; the market can be boiled down to 3 approaches: marketplace, commerce media, and software. As seen historically in many other industries, marketplaces that have been able to successfully create network effects and bring each stakeholder to the ecosystem have been able to accrue significant value in their respective markets. In addition, they’ve been able to keep their own costs low for content production and product. However, software companies have been gaining steam with brands who wish to maintain some control over their livestream strategy, and next-gen commerce media companies are building brands in and of themselves. Given large incumbency, we see opportunity for startup entrants in niche categories where they can become a tastemaker, or where sourcing/supply chain is complex.
5. 5 December 2020 · Bertelsmann Section I Livestreaming Overview
6. 6 December 2020 · Bertelsmann Livestreaming, Particularly Livestream Shopping, Emerging Globally Europe – Like the USA, in its infancy ▪ The market is primarily served by software companies offering livestream tech directly to brands (Bambuser, Buywith, LiSa), rather than marketplaces. USA – Nascent market with several companies trying to break through ▪ Livestreaming is popular amongst gaming ▪ Large platforms are attempting to offer some livestream capabilities, while several startups are offering software to brands or creating standalone platforms China – Established market continuing to grow rapidly ▪ High viewership levels and sell-through rates ▪ Several large players competing South Korea – More nascent than China but similar viewership preferences ▪ Naver and Kakao have entered the market ▪ Kakao launched Talk Deal Live in May 2020, with 40k concurrent viewers
7. 7 December 2020 · Bertelsmann What is Livestream Commerce? Livestream Shopping vs. Static Video • Real-time selling events, creates sense of scarcity (and thus, higher conversion rate) • More intimate connection with influencer/seller • Real-time demonstrations, chat, Q&A about products Youtube: What is Taobao Live? Watch Here (Click the link below)
8. 8 December 2020 · Bertelsmann Chinese Livestream Shopping Market Has Grown Dramatically $170bn market size and getting larger (1) iiMedia Research Report: China Livestreaming (2) Livestreaming Set To Unlock Greater E-Commerce Spending In China, Seeking Alpha Report (3) DMR Statistics, Taobao Live $0.03B $19B $62B $170B 3% 7% 17% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 2017 2018 2019 2020 Livestream Commerce GMV % of Total e-Commerce Revenue Taobao Live, 79% Douyin, 13% Kuaishou, 7% JD Live/Other, 1% Launched 2016 by Taobao (Alibaba) 400m viewers in 20193 $71B GMV for 2020E3 Launched 2018, Chinese Tiktok Targets Tier 1 Cities Launched 2018, filed IPO 2020 Targets Low Tier Cities 300m DAU3 Launched 2019 Sells large appliances Partnered with Kuaishou to expand China Livestream Shopping Market (% of Transactions)2 China’s Growth in Livestream Shopping GMV1 Summary: Chinese livestreaming continues to grow quickly. Taobao is the largest, while Kuaishou, unlike Taobao and Douyin, focuses on lower tier cities and capitalizes on small businesses (such as farmers) trying to sell during COVID-19.
9. 9 December 2020 · Bertelsmann Evolution of Creator Economy and Livestreaming China creator economy was built on streaming and donations, USA on video and ad revenue (1) Rise and Proliferation of Live-Streaming in China: Insights and Lessons, Zhicong Lu, University of Toronto E-Commerce Creator Growth 2003 - To expand the business into consumer, Alibaba launched Taobao, an eBay lookalike 2004 – JD.com launches B2C site Convergence 2014 – YY Live rebrands to Huya Douyu, an esports streaming platform, launches 2020 – number of livestreaming users hits 560m, 62% of internet users. Over $2.9B in sales was generated on Taobao Live during Single’s Day Alone, their version of Black Friday. 2005 – Chat rooms on YY are repurposed for livestream entertainment such as talk-shows and singing, payments/tips built into platform 2016 – Taobao launches its livestream offering, Taobao Live 1999 – Amazon expands marketplace beyond books, to electronic, household, etc. 2005 – Youtube launch, allowing creators to make UGC content 2010 – Instagram launch 2011 – Twitch launches Youtube launches livestreaming 2016 – Facebook Live Launch 2020 – While most creators and influencers generate income from sponsorships or ads, many are looking for other ways to monetize through e-commerce, such as merch and product creation, though also through donations (Patreon). China USA 2015 – Twitter acquires Periscope
10. 10 December 2020 · Bertelsmann We Believe China’s Livestream Market Grew Faster Because… Chinese consumers are more engaged with livestreaming; they are also more accustomed to tipping/user pay media culturally China had a mobile-first e- commerce ecosystem that was fully integrated with social media and payments. China experienced a rapid growth in the middle-class and consumerism alongside adoption of digital technologies Dominance of transactional business model in China (which is more suited towards a livestream format) vs ad-supported in USA , drove Chinese creators towards livestreaming
11. 11 December 2020 · Bertelsmann Section II Drivers
12. 12 December 2020 · Bertelsmann Driver 1: Lack of Dominance of Ad-Supported Models in China Largest US Internet businesses driven on social/search ads; China mainly transaction-based USA Digital Ad Spend Greater than China, But China E- Commerce Much Larger Ads is a Larger Revenue Generator for USA Consumer Internet Companies vs. China1 Digital Advertising Spend and E-Commerce Sales2 (1) Respective 10-K’s and financial reports – top 4 ranking based on market cap (2) eMarketer, June 2020, Statista $0B $50B $100B $150B China Digital Ad Spend US Digital Ad Spend 2017 2018 2019 $0.0T $0.5T $1.0T $1.5T $2.0T $2.5T China E-Commerce Sales US E-Commerce Sales USA Revenue Stream China Revenue Stream 1. Transactions 2. Software 3. Sponsored Items Transactions Ads 1. Sponsored Items 2. Transactions 3. Software Ads 1. Transactions 2. Ads Subscription Transactions Summary: The Chinese Internet economy has been built on transactional revenue vs advertising in the USA, whereas livestreaming is more suited to transactional business models vs. programmatic advertising.
13. 13 December 2020 · Bertelsmann Driver 2: Willingness to Spend Directly for Real Time Connection Chinese livestream viewers more engaged, watch longer Chinese are Watching More Livestreams, More Often and For Longer (1) Nielsen US 360 Video Report, The China Guys Livestream Report (2) Magid, Rockwater (3) A Study of Livestreaming Practices (U of Toronto), State of Digital Publishing % of Internet Users Who’ve Watched a Livestream1 How Often Do You Watch Livestreams?2 42% 59% US China 25% 71% 23% 50% Daily >1 Time/Week China US Average Watch Time for Livestreams (min)3 8 62 US China Summary: Chinese viewers are generally more acquainted with livestreams and watch for longer, while US viewers are beginning to watch more
14. 14 December 2020 · Bertelsmann Viewers in China Older Compared to USA Viewers in China are Primarily Mid or Higher Income High Income, 32.0% Middle Income, 43.8% Low Income, 24.8% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 13-17 18-34 35-54 55+ US China (1) eMarketer, UBS, Sina (2) Tencent MyApp Big Data % of Livestream Viewers by Age1 % of Livestream Viewers by Income in China2 Driver 2: Willingness to Spend Directly for Real Time Connection Livestream viewers in China are older, with more disposable income Summary: Livestream adoption in the USA is a habit of young people (primarily gaming viewers) but is more mainstream in China. The higher average age of viewers in China translates to generally more disposable income
15. 15 December 2020 · Bertelsmann $- $1 $2 $3 $4 $5 $6 $7 $8 Video (Youtube) Blogging Images (Instagram) Livestream (Twitch) Self-Published Books Independent Music Advertising/Sponsorship User Pay (Subscription/Donation/Merch) Driver 2: Willingness to Spend Directly for Real Time Connection Livestreaming outperformed in China due to customer willingness to spend for engagement USA – Creator Earnings by Media Platform in 2019 (in $ billions)1 China – Creator Earnings by Media Platform in 2019 (in $ billions)1 (1) BDMI Estimates based on publicly available information published by Google/Youtube, IAB, Twitch, Statista, Douyu, Huya, Bilibili, TopKlout, and others Summary: Chinese consumers are more willing to paying for content/tipping vs. USA consumers (who were traditionally accustomed to free content), leading to a larger livestream creator economy in China Top Creator Platforms in USA Driven by Ads Chinese Users More Familiar with Tipping $- $1 $2 $3 $4 $5 $6 $7 $8 Livestream (Taobao Live, Kuaishou) Video (Douyin, Other) (Micro)Blogging (WeChat, Weibo) Independent Music Self-Published Books Advertising/Sponsorship User Pay (Subscription/Donation/Merch)
16. 16 December 2020 · Bertelsmann Driver 3: Rapid Growth of Middle Class Alongside Mobile Adoption China’s middle class grew dramatically during a time of rapid digitization (1) McKinsey Global Institute (2) China Internet Watch, Statista, Business Insider Breakdown of China Households1 Smartphone Penetration Rate in China2 4% 9% 17% 23% 26% 31% 37% 38% 43% 45% 48% 50% 53% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 36% 10% 7% 64% 88% 87% 0% 2% 6% 2000 2010 2020 Poor Middle Class Affluent Summary: The Chinese middle class and affluent grew alongside mobile adoption, leading to a boom in mobile e-commerce and mobile content consumption. China Middle Class/Affluent Grew Dramatically China Has Adopted Mobile Rapidly
17. 17 December 2020 · Bertelsmann Source: Huya Driver 3: Rapid Growth of Middle Class Alongside Mobile Adoption Virtual tipping of emojis allows for conspicuous display of wealth Ferrari 99k gold beans ($17) Gold Star emoji: 100 gold beans ($0.017) Magic Castle: 5m gold beans ($856) Heart emoji: 100 gold beans ($0.017) Thanks User 1 for the Ferrari! Thanks User 2 for the heart! User 1: Diaosi (lower social status, relatively poorer) Applause for User 2! Summary: With the rise in income, people use tipping to conspicuously display their wealth and raise their social status User 2: Rich patron, looking to increase social status
18. 18 December 2020 · Bertelsmann Driver 4: Mobile-First E-Commerce China’s mobile infrastructure was built for quick payments, donations, and transactions 19% 43% 51% 75% 79% 83% 85% 15% 18% 21% 24% 21% 40% 45% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2013 2014 2015 2016 2017 2018 2019 China US USA E-Commerce / Social Still Fragmented 95% of China’s mobile payments go through Alipay or WeChat Pay (Mary Meeker 2017 Report) Share of Mobile E-Commerce as % of Total E-Commerce1 E-Commerce Social E-Commerce (1) China: PwC, US: eMarketer, Statista Social Summary: China’s leapfrog over PC/desktop adoption, direct to mobile, led to more prioritized development of mobile payments, content, and social integrations. Mobile Dominates China’s E-Commerce China E-Commerce and Social Integrated with Payments
19. 19 December 2020 · Bertelsmann Chat/Comment Countdown New followers Buy/Inventory Count Follow Send emoji or gift Top-up Summary: Taobao Live and other social shopping platforms in China have created a gamified UX to drive conversion Driver 4: Mobile-First E-Commerce Marketplaces such as Taobao Live have dominated, and are feature rich to optimize engagement
20. 20 December 2020 · Bertelsmann 4 Growth Vectors for Livestream Market in the USA Viewers demand more engaging and interactive ways to connect with creators Brands are looking for ways to sell products that benefit from live demos, especially during COVID . Technological advancements in livestreaming allow for payments integration, better video quality Content creators and influencers will continue to want new ways to monetize their audiences
21. 21 December 2020 · Bertelsmann Growth Driver 1: Creator Monetization/Engagement ▪ Influencers currently derive revenue primarily from affiliate deals or programmatic advertising ▪ Influencers want better ways to connect with their audience, boost engagement, and ultimately convert products they advertise Challenge: Creators require new ways to monetize Opportunity: Livestreaming provides more engagement with viewers, additional revenue streams ▪ Livestreaming provides an inherently more intimate medium, given the ability for Q&A and real-time engagement with fans that reach out through chat ▪ Companies like Looped allow influencers and celebrities to charge for livestream sessions, while free livestream sessions allow for the opportunity to collect tips (video streaming tipping volume in the US reached $141m in 2018, avg $59 per viewer)1 (1) Streamlabs
22. 22 December 2020 · Bertelsmann ▪ Livestream as a form of entertainment has not penetrated the US market. Viewers primarily engage with UGC content through Youtube videos as well as images on Instagram ▪ For non-UGC entertainment, US consumers typically subscribe to streaming services (Netflix, Hulu) or purchase games Challenge: Viewers demanding more ways to engage, though less familiar with streaming Opportunity: Livestreaming offers more engagement with creators, USA starting to catch on ▪ Livestreaming has become a larger part of content/entertainment online with the growing popularity of eSports (with Twitch leading the pack, followed by Facebook Gaming, Youtube Gaming) ▪ Twitch has begun to expand outside non-gaming categories - their “Just Chatting” genre is now the largest non-gaming category on Twitch1 and is 3x the viewership of Twitch’s largest competitor, Youtube Gaming. Growth Driver 2: Viewers More Familiarized with Streaming 0.0 0.5 1.0 1.5 2.0 2.5 2012 2013 2014 2015 2016 2017 2018 2019 2020 Millions Avg Twitch Concurrent Viewers Just Chatting Avg. Viewers (1) TwitchTracker
23. 23 December 2020 · Bertelsmann Challenge: Need for highly scalable and performant technology Opportunity: Advancement of purpose-built livestream tech, with payment integrations Growth Driver 3: Livestreaming Becoming More Scalable ▪ Livestreaming relies on a strong network connection, more so than other forms of media, and has typically faced challenges with latency and high-quality video ▪ Shifts towards edge computing (computing closer to the device) and improvements in streaming protocols have allowed for higher quality and more scalable streams. ▪ 5G will offer a new era of mobile network connectivity, allowing livestreaming to work more seamlessly ▪ E-Commerce and social platforms working to integrate payment gateways directly into their products (Amazon, Facebook) 35% 31% 19% 16% High-quality video Low end-to-end latency Real-time interactivity Ability to scale Most Important UX Consideration in Livestreaming1 5G <10 ms 4G 40-50 ms vs. (1) Wowza Media Systems 2019 Report, n=391
24. 24 December 2020 · Bertelsmann Challenge: Difficulty presenting products in a post-COVID world Opportunity: Livestreaming allows brands to show products remotely Growth Driver 4: Need for High-Conversion Distribution Channels ▪ Brands are looking for more ways to connect with buyers and show their product in an increasingly digital world, particularly for products such as appliances, fitness gear, cosmetics, and others that require some demonstration ▪ COVID-19 has accelerated the path towards retail digitization, creating an impetus and need for brands to adapt ▪ Livestreaming allows for real-time interaction with buyers, giving them the ability to ask questions and see products perform live ▪ Livestreaming has seen higher conversion rates compared to tradition retail or even influencer marketing 32% 3% Taobao Live US Influencer Marketing Sales Conversion Rate by Channel1 (1) Taobao Live, Grapevine
25. 25 December 2020 · Bertelsmann Section III The Livestream Influencer
26. 26 December 2020 · Bertelsmann Viya is Taobao Live’s top KOL – her shows, which air every night for 4 hours, showcase 30-50 SKUs / episode (curated from hundreds of products). Around 50% are branded products, 30% are snacks, and 20% are new/discovery items.2 Pan- entertainment (Variety/Talk- Show), 44% Show Room (Singing/Dancing), 35% Gameplay, 16% Others, 6% (1) Rise and Proliferation of Live-Streaming in China: Insights and Lessons, Zhicong Lu, University of Toronto (2) Bertelsmann Asia Investments Chinese Livestream Content Mostly Entertainment Largest Streamers in China Breakdown of Livestreams by Content Type (China)?1 Li Jiagi, or the “Lipstick King” tries on lipsticks for his audience and offers the best possible price for a limited time, given his volume buying power. Summary: Chinese livestream influencers primarily engage in selling, taste tests, and talk shows, and are more QVC style. The Rise of China’s Largest KOLs, of Key Opinion Leaders (Influencers)
27. 27 December 2020 · Bertelsmann (1) Forbes While traditional influencers and Youtube content creators use livestreaming as part of their viewer engagement toolbox, going live is not a consistent activity. The largest consistent livestreamers in the US, by follower count, consist of gamers on both Twitch and Youtube. Tyler “Ninja” Blevins heads the leaderboard, with 37m followers across Youtube and Twitch. A recent article by Forbes claims he made a total of $17m in 2019 across content subscriptions, tipping, and sponsorships, with ~$500k a month coming directly from subscriptions.1 Gamers are the Largest Livestreaming Influencers in the USA Ninja is the USA’s Largest Livestreamer Summary: USA livestream influencers today are limited to gaming streamers, who currently generate revenue primarily through subscriptions or tips, not product sales
28. 28 December 2020 · Bertelsmann Section IV The Technology Ecosystem (USA)
29. 29 December 2020 · Bertelsmann There are 3 Approaches to the Livestream Shopping Market in the USA 1 3 Marketplace/Platform Approach Companies that bring together independent influencers, viewers, and brands on one platform to livestream, watch, and transact Software Approach Companies that offer software to brands which allows them to livestream and sell directly on their websites or elsewhere on the web 2 Commerce Media Approach Companies that create scripted content, with both entertainment and sales
30. 30 December 2020 · Bertelsmann The US Market is Diverse, with Startups and Incumbents Across All Segments Many players are vying for a spot in this market, though large platforms already exist Incumbent Platforms Legacy Media Platform/Marketplace Approach Software Approach Media Approach Young Startups * *Inactive *** **BDMI Investment ** ***Selling to China
31. 31 December 2020 · Bertelsmann Unclear Which Approach Wins, Though Existing Platforms are Advantaged Marketplace/Platform Approach Large platforms may have an advantage vs. smaller startups, given large existing user/viewer numbers. Smaller players are focusing on creating their own audiences as well as bringing brands to their platforms Software (B2B SaaS) Approach Some brands have expressed the desire to be unshackled from large platforms for advertising budget, and therefore are looking to livestream software companies to give them more control. Commerce Media Approach QVC/HSN have historically led this category, though overcoming content production cost has been the challenge. Other, vertical-focused and nimble players are emerging as well. Amazon Live launched 2019. Twitch Just Chatting/IRL fastest growing category Livestream marketplace for shops, $100m valuation Launched livestream shopping in Summer 2020 Running QVC Livestream on Youtube Sells streetwear, artwork, and furniture through live drops SaaS solution for large brands, offers managed services as well Public Swedish company working with large retail brands B2B SaaS company offering plug-and-play livestream tech Sources: TechCrunch, Crunchbase Live broadcasting/sales software * *BDMI investment
32. 32 December 2020 · Bertelsmann Mainstream Livestream Viewing Happening on Social Platforms (1) Hubspot (2) IAB Livestream Report Where Do You Watch Live Video Most Often (USA)?1 What Types of Content Do You Livestream - Select All that Apply (USA)2 1% 2% 5% 5% 6% 13% 20% 48% Twitter Other Social Don't Watch Twitch Streaming Provider Instagram Facebook Live Youtube 19% 23% 26% 27% 27% 30% 30% Talk Show Online Celebrity Concert News Gaming Tutorial or How To Video by Friend/Family Summary: Youtube and Facebook Live are the largest livestream platforms by users in the USA (people watching news, friends, etc), though Twitch is the largest by hours watched Viewers Watching Most Often on Youtube Americans are Watching Their Friends, Tutorials, Gaming
33. 33 December 2020 · Bertelsmann Amazon: Making Active Strides in Livestreaming Amazon Live • In February 2019, Amazon launched Amazon Live, which features livestream video shows from Amazon talent as well as from brands who broadcast through Amazon’s app, Amazon Live Creator. Amazon Live is available on the mobile app but is not featured prominently. Thus far, driving viewership has been dependent on influencers promoting on their own social networks. Twitch • Twitch has thus far focused primarily on eSports and game streaming and is currently the leader in the space. However, its “Just Chatting” category, which primarily includes conversations/vlogs, has also been growing and now represents 10% of hours watched on the platform (creating opportunities outside of gaming). (1) TechCrunch
34. 34 December 2020 · Bertelsmann Facebook/Instagram: Major Player in Social Commerce, Moving Steadily • In May 2020, Facebook announced Facebook & Instagram Shops, which allows influencers or brands on both platforms to create curated product lists that are viewable and purchasable on both apps. • The company has also been testing a live shopping experience during the summer of 2020, allowing users to purchase directly through livestreams with their favorite influencers. Sales/viewership numbers have not been reported. • At the moment, checkout is managed either through Facebook’s own payment gateway (Facebook Pay, launched in November 2019), BigCommerce, or Shopify, though selling fees will be waived throughout 2020. Facebook has been spending more time integrating its own payments engines into its P2P and B2C e-commerce offerings. (1) TechCrunch
35. 35 December 2020 · Bertelsmann Popshop Live: New Entrant Challenging the Platforms • Popshop Live allows brands and stores to host their own shows from the platform – the platform is primarily brand/shop led vs. influencer led. • Japan LA, one of the biggest stores on the platform, has done more in sales on Popshop Live than its other channels combined; it did $17k in sales in one show • Raised a Series A at a reported $100m valuation from Benchmark (previously raised $4.5m in funding from investors such as Floodgate, Abstract Ventures, and others, bringing the estimated total to $20m) Source: TechCrunch, The Information
36. 36 December 2020 · Bertelsmann NTWRK: Becoming a Tastemaker, Started in Streetwear Sources: Bloomberg, Crunchbase • NTWRK is a livestream shopping app, focused on streetwear, art, and music-adjacent categories. They feature company-produced shopping episodes and drops, pulling in hundreds of thousands of viewers • Some shows have topped $1m in sales in less than 5 min • Launched TRANSFER, a virtual streetwear festival, featuring 30 brands and artists and expected 240k shoppers/10 million viewers • Raised $10m+ in funding from investors such as Live Nation, Foot Locker, and others
37. 37 December 2020 · Bertelsmann Bambuser: European Livestream Tech Company Shifts to Shopping Source: Company Semi-Annual Filings • Bambuser’s live streaming SaaS software has historically been used primarily by news agencies and journalists. In late 2019, Bambuser departed from this norm by developing its new flagship product, Live Video Shopping. • Customers include Showfields, Luisaviaroma, Kicks, FRAME, Monki by H&M, and Moda Operandi. The company has also hosted live shows with designer Carolina Herrera and cosmetician Ole Henriksen • In 1H2020, the company generated ~$800k in revenue, according to its public filings • The company has raised over $60m in private pre-IPO and post-IPO equity Customer Closings
38. 38 December 2020 · Bertelsmann Section V The Livestream Advertisers/Brands
39. 39 December 2020 · Bertelsmann Brands Beginning to Look Towards Livestreaming as New Channel Most brands increasing interest in livestream marketing Some Marketers Looking Beyond Domestic Trends… …and Many are Currently Streaming Very, 8% Somewhat, 45% Not at All, 47% To what extent do international influencer marketing trends inform/inspire domestic priorities (USA)?1 Brands that have/are planning to produce livestream marketing (USA)2 (1) Rockwater Livestream Report (2) Brandlive State of Livestreaming Currently streaming, 76% Will start to stream in the next 12 mo, 8% No plans to livestream in next 12 mo, 16% Budget Increasing, 53% Budget Staying the Same, 41% Budget Decreasing, 6% Summary: Budget for livestreaming commerce is increasing in the USA, with brands looking to experiment with livestreaming
40. 40 December 2020 · Bertelsmann Psychology of Brands: Need for Authenticity and Interaction in Marketing Why Do Brands Invest in Livestream Marketing?1 (1) Brandlive Livestream Report 78% 66% 59% 57% 47% 43% 43% 35% 28% Achieve deeper interaction with audience Make videos more accessible Add human element to digital marketing Engage social audiences Hear directly from product experts Increase overall viewing time Capture emails Learn and adjust from real-time feedback Higher e- commerce conversion rate Summary: Brands are looking for ways to have deeper interaction and add a human element to their marketing
41. 41 December 2020 · Bertelsmann Psychology of Viewers: Scarcity Creates Opportunity for Brands Why Do People Watch Livestreams (USA)?1 35% 31% 27% 26% 25% 25% 20% 16% 16% 12% It makes me up to date and informed I can check up/catch up anywhere and anytime I don't want to miss out I like the more personal feel that live streaming has Watch while away from home (at work, commuting, etc) I can interact with people of similar interests I can be the first of my family/friends to know what is happening That's the only way the content is available I can interact with the producer/maker of the content being streamed I don't have any other way to access this content (1) IAB Report, Live Video Streaming Summary: Top 4 reasons to watch a livestream point to fear of missing out and need for more intimate engagement
42. 42 December 2020 · Bertelsmann Fashion and Beauty Brands are First Adopters Some brands want more control with software, while others are going to the platforms (1) Vogue Business, Glossy, TechCrunch, Shorefire Artist Takashi Murakami’s art company, Kaikai Kiki, has done many sales episodes on NTWRK. During one episode, the company raised $1.3m for his print collection (donated to Black Lives Matter initiatives). On September 25, many beauty brands including Flawless by Gabrielle Union, Honest Beauty, Cetaphil, and others participated in Amazon’s Beauty Haul Live event. The event lasted 11 hours, and featured celebrities and influencers, though sales metrics are unreported. On July 9th, Beauty influencer Nikita Dragun featured a beauty tutorial for her Dragun Beauty brand, attracting nearly 43k of her 8.3 million followers to the livestream. The stream drove 33k product page impressions, and 5k products were added to viewers’ shopping bags, according to Instagram. Several L’Oreal brands, including Urban Decay, have utilized LiSa’s technology to power their online livestream shopping initiatives. Japan LA has continued to run livestream shows on Popshop Live’s platform, who has reportedly sold more on Popshop Live than with offline and online sales combined. On one show, Japan LA did $17k in sales with more than 1,500 checkouts.
43. 43 December 2020 · Bertelsmann Section VI Summary and Capital Markets
44. 44 December 2020 · Bertelsmann Venture Funding Increasing Across Many Bets In 2020, more social livestream companies raised venture capital than any previous year Social Livestreaming Venture Activity1 ▪ Venture activity in social livestreaming and livestream shopping is growing, though it is still a nascent market. ▪ Venture funding primarily interested in platforms – VCs interested in the category are making bets on livestream destination platforms and believe value will accrue there, though some are betting on software and media ▪ Though venture funding has gone to platforms, reported revenue traction thus far has mainly been limited to software and media companies ▪ Multiple unannounced funding rounds in Q3/Q4 2020, ~$55mm by BDMI estimates (1) Crunchbase 6 11 20 18 7 16 21 20 24 0 5 10 15 20 25 30 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 2013 2014 2015 2016 2017 2018 2019 2020YTD 2020E Millions Deal Value Deal Count
45. 45 December 2020 · Bertelsmann Summary: We See Livestream (Shopping) Poised for Strong Growth in USA USA China Internet Revenue • Ad-supported, now shifting to transaction and donation (e.g. merchandise sales, Patreon has earned creators $350m though donation/subscription) • Mix of transactions, donations, and advertising • Online video and images is most popular format, driven by ad / sponsorship revenue on Youtube and Instagram. Livestreaming growing as content medium. • Livestreaming surpasses UGC static video given high engagement, willingness to pay through donation model, and need for trust in a crowded e-commerce market • Social, commerce, and payments not fully integrated yet, though social and e-commerce players making strides • Mega-apps with social, commerce, and payments integrated (Alibaba owns Alipay and Taobao) • Mature e-commerce market, though still saw fairly strong growth over the last 4-6 years (pre-COVID) • Fast growing and largest consumer e-commerce market (33% 5 yr CAGR in China vs 9% in US) Conclusion Though livestream consumption is still small in the USA, viewers have been building familiarity with the medium (particularly during COVID) as well as shifting towards user-pay revenue models. We feel livestreaming will continue to grow, though large social platforms have strong advantages. We believe emerging players can drive a wedge into the market by becoming tastemakers in niche verticals. Creator Economy Technology Livestream Uses E-Commerce Growth • News/live events, broadcasting to friends, gaming; focus is not primarily entertainment • Pan-entertainment (variety shows, talk shows), singing/dancing, gaming; focus is on entertainment
46. 46 December 2020 · Bertelsmann December 2020 Thank You