In a digital media world, all that matters is your time – Recode

The writer is a vice president at General Atlantic, which is an investor in Vox Media, the parent company of Recode.


In 2011, 20th Century Fox released the film “In Time,” starring Justin Timberlake and Amanda Seyfried. According to Wikipedia, the movie “takes place in a society where people stop aging at 25 and each has a clock on their arm that counts down how long they have to live.” Perhaps unsurprisingly, given the above attempt at a plot summary, the film has garnered a 36 percent rating on Rotten Tomatoes; even I, a sci-fi aficionado, found the movie confusing and boring.

However, and notwithstanding the quality of the film (and a willful suspension of disbelief), I’ve been thinking about “In Time” recently, and one core concept embedded within: That time, in the movie, “has become the universal currency” and can be transferred between people, in exchange for other goods and services. In Justin and Amanda’s reality, time truly is all that matters.

Similarly, in digital media, it is becoming increasingly clear that time is all that should matter.

Let’s step back briefly. Intrinsically, a successful media company is a pretty straightforward economic engine: Create and distribute content, capture consumer attention (time), and then monetize that time (typically via some form of advertising). Profit is earned where a media company can be better than competitors at one or several of the elements above

In the context of media history, this concept makes obvious sense. For decades, the largest aggregators of consumer time were newspapers (local monopolies on information) and television (uniquely combining sight, sound and motion). Not surprisingly, the size of these advertising markets dwarfed other media formats, with U.S. newspaper advertising peaking at nearly $70 billion annually and U.S. television advertising still right around that level. In contrast, today the size of U.S. radio and magazine advertising markets are each ~$20 billion annually (while U.S. internet advertising approaches ~$100 billion).

Of course, the U.S. newspaper advertising industry has shrunk to a fraction of its peak (see above — most of it went to the internet), while the U.S. television advertising industry has continued to grow steadily in recent years. Why? Look at the (proverbial) clock on your arm! In Mary Meeker’s excellent annual Internet Trends Report in 2009, she estimated that “print” represented 12 percent of consumer “time spent”; by 2015, this number was down to 4 percent, a massive decline. Conversely, by the same metric, television was 31 percent of “time spent” in 2009, and actually increased to 36 percent in 2015.

The internet has done an incredible job at devouring the newspaper’s tools of time capture (news, information, classifieds, etc.) but has — yet — to really encroach on television. Indeed, for every chart that looks like this, it is important to understand the full context: Daily, you may be spending nearly an hour on Facebook, but you are still spending more than four hours watching television.

So, what does this mean for the digital media ecosystem? The race is now on to figure out how to shift those billions of television dollars to the internet, just as newspapers before. The future of digital media is indeed video (or, according to AT&T/Time Warner: “The future of video is mobile and the future of mobile is video” — you get the point), but the potential for (and duration of) a shift in billions of revenue away from television will require both digital content creators and digital distributors to invest in driving a shift in time, above all else. Importantly, to do so, both will need to invest in higher-quality programming and better audience measurement.

For digital content companies, success will increasingly require a prioritization of quality programming and meaningful journalism over commoditized and replicable clickbait; the creation of content that sustainably and uniquely captures real consumer time — not unique visitors, clicks, page views, video views or swipes (did I miss anything?) in geographies that are actually monetizable.

Embrace the concepts that “substance is viral” and “the middle of the road is death.” Invest in real talent. Build authoritative brands, compelling franchises and deep content libraries that can capture attention and time for years to come. Trust that money will flow — as it always has through media history — to those who own and consistently produce great content, and the value of great content and great brands is only amplified in a world where consumer attention is more fragmented than ever. Believe that brands and advertisers will increasingly flock to the safety of known, quality brands and escape the “subprime” long tail of programmatic.

The market is already reflecting the winning nature of these themes. Perhaps the most successful (though certainly not most discussed) digital media monetization deal in all of 2016 was MLB Advanced Media agreeing to pay $50 million annually through 2023 for League of Legends streaming rights. This deal happened because League of Legends generates an astounding 360+ million hours of live consumption annually. Continued strategic investment is following brands and platforms that can similarly capture this kind of consumer attention. Time is the metric that links the big deals in the market.

For the digital platforms (Facebook, Google/YouTube, Snap, Twitter, Amazon and Netflix, among others), success will also require a move away from poorly reported and/or mistakenly calculated proxy metrics and toward measurements of real consumer time (likely enabled by third-party platforms like Moat). Platforms will also need to increasingly invest real dollars to bring higher-quality content and programming to their users — so that users choose to spend more time on their platforms over the (increasing) competition. Amazon and Netflix are already doing this at significant scale. Twitter is experimenting with live sports, and Snap is partnering with television broadcast networks, among others, to produce original and exclusive shows.

And what about Facebook, the 800-pound gorilla that many believe is destined to destroy the media industry, and seems unable to provide sufficient monetization opportunities for its content partners? To date, Facebook has built a tremendous and unique (in the history of media) business model — it has captured consumer time not by investing in, or producing, content (unlike every other historical media distributor), but rather by enabling and monetizing user-generated content, photo sharing and messaging.

Last quarter alone, Facebook generated 45 percent pre-tax operating margins — a $12+ billion profit run rate. However, in this same quarter Facebook only grew U.S. / Canada daily active users by 7 percent year over year, and acknowledged that revenue growth will start to slow “meaningfully” in 2017. User growth for Facebook is (naturally) getting harder; there are only so many people on the planet (and competition is only growing from services described above — many of whom are already well ahead of Facebook in the programming game). To grow revenue over the long term — indeed, to make inroads into the television market it so desperately wants to crack‚ Facebook must find a way to increase an hour of your time to something resembling the four hours you spend on television. Time is all that matters.

How can they do this? Are there other social “formats” left to buy, like Instagram (photo sharing) or WhatsApp (messaging)? Could VR or AR (Oculus) be a next phase of growth? Perhaps. The more straightforward, “Gardan’s Steelyard” answer seems to be to reorient the News Feed to video and invest in programming and more attractive ad formats to fill this aforementioned feed.

Personally, I would probably spend more time on Facebook (and its new video tab) if I could watch my favorite television shows and sports on the platform, especially with a social overlay. Of course, for example, TNT and TBS are multibillion dollar revenue businesses that are used to earning millions of dollars from pay TV distributors just to carry their channels, in addition to advertising revenue opportunities. Notwithstanding your opinions on the trajectory of these bundle-enabled television economics (#goodluckbundle), there is effectively no chance that Time Warner (the owner of TNT and TBS) engages in a productive dialogue with Facebook unless Facebook is willing to “play ball,” economically speaking, and find ways to fairly share monetization.

As I’ve written before, in this context, “it seems unlikely that over the long term, Facebook and other digital distributors will operate in a way that does not allow quality content producers to flourish.” Critically, though, not all content will thrive. As it (likely) proceeds down this path, Facebook will (almost certainly) seek to maximize its own growth in revenue and profit — which means that it will find a way to only reward and compensate its content partners who capture the most time for themselves and Facebook. Thus, content companies and the platforms are aligned in a quest for quality and time. Yes, we’ve come full circle.

In his 2016 annual letter, LionTree founder and CEO Aryeh Bourkoff wrote that “the creation of content and the global, insatiable appetite for it will remain constant … [and] in this paradigm, value shifts to the bookends — the underlying content and the technology platforms that touch the end user.”

I could not have said this better, and I could not agree with this more. In this context — and in the reality that is our media ecosystem, digital and otherwise — it is clear that time is what will determine the pace of this value shift, and the allocation of value, between distributors and content owners, new and old. It has throughout history.

Time is indeed the universal currency. Just don’t say I didn’t warn you about the movie.


Zachary Kaplan is a vice president at General Atlantic, focusing on investments in the internet and technology sector, based in the firm’s New York office. Reach him @ZJKaplan.


The view expressed herein reflect the current personal views of the writer, which have not been influenced by General Atlantic’s business or client relationships. Opinions or statements regarding financial or market trends are based on current market conditions and are subject to change without notice and neither the writer nor General Atlantic undertakes to advise you of any changes in the views expressed herein. Neither the writer nor General Atlantic represents that the information contained herein is accurate or complete, and should not be relied on as such. The views herein may or may not be reflected in the strategies and products that General Atlantic offers or invests, including strategies and products to which the writer provides advice to or on behalf of General Atlantic. It should not be assumed that the writer has made or will make recommendations in the future that are consistent with the view expressed herein, or use any of all of techniques or methods of analysis described herein in managing client accounts. Further, the writer may make investment recommendations and General Atlantic and its affiliates may have positions or engage in securities transactions that are not consistent with the information and views expressed herein.


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