This is the second article in a three-part series. For part one, see: The current war between Apple and Facebook, for part three, see: Navigating the post-platform mobile future. And for background on the topic, see: The coming war between Apple and Facebook.
In the first article of this series, I laid out a case for why tensions between Apple and Facebook have boiled over into outright hostility. Facebook is responding to a number of developments across the general mobile landscape, and specifically related to iOS, with a strategy shift: subsuming even more functionality and content distribution into its Big Blue app, creating an OTT destination that simultaneously abides by Apple’s “no app stores within the app store” principle while expanding upon the degree to which it serves as a portal for publisher content.
And Facebook is not alone. I believe that three broad developments across consumer technology are supporting this type of secular shift, which will re-define what it means to be a “mobile content platform” going forward. These developments are:
- Cloud-based, cross-device streaming: the ability for companies to reach consumers across multiple hardware form-factors with one product has obviated the need to tailor a product specifically to mobile. Ironically, this dynamic has actually stripped Apple of some of its power for these cross-platform companies: most streaming services, for instance, are able to get away with sidestepping Apple’s 30% platform fee because they operate so universally;
- Blurring of the lines between content creators and platform operators: As I covered in Apple’s IAP deal with Amazon and the beginning of a new era, almost every company that could conceivably be considered a consumer tech “content platform,” or distribution portal across whatever hardware form factor, also produces proprietary content or products that it must distribute elsewhere. The chart below provides a partial overview of this distribution dependency matrix. These dependencies are only set to deepen going forward;
- General deterioration of advertising targeting effectiveness: while the deprecation of the IDFA has received an enormous amount of coverage on this website, the third-party cookie currently sits in the throes of death in parallel. Digital advertising, en masse, faces a comprehensive loss of efficiency — which will make building an audience difficult and provide a relatively more impactful competitive advantage to companies that benefit from an existing engaged audience.
The Commodification of Delivery
What does this mean, practically? That gatekeepers will inevitably lose control over the ecosystems they operate because 1) these companies also publish content within the ecosystems of other gatekeepers and 2) the content published within their ecosystems is, to an ever-increasing degree, available in many other ecosystems. This dynamic collapses and potentially flips the content dependency hierarchy as it currently exists:
In the current hierarchy, the content distribution platform tied to the interaction device is meaningful: content is published specifically to the single point of distribution (eg. the App Store on iOS), and so a developer is dependent on the distribution platform and has little leverage in the relationship. But the cross-dependency matrix exemplified above, as well as the dynamic I describe in The current war between Apple and Facebook, is changing that, for two reasons:
- The “streamed content, available anywhere” model — such as with Netflix, Disney+, Facebook Games, and all of the games streaming services coming to market over the next few years — pushes the point of distribution into the background and elevates the products that contain content. If users no longer regularly interact with a point of distribution (eg. the App Store) because the products they use are themselves content catalogues, then the leverage of the points of distribution is eroded. As more and more content is subsumed into these OTT and content catalogue apps, consumers will interact with the current single points of distribution — the App Store, Google Play, etc. — less frequently;
- As these points of distribution lose focal prominence in terms of consumer interaction — that is, as eg. the App Store loses its status as the starting point of a user’s content discovery journey — then they lose their dominance and clout over these OTT and content catalogue apps. For instance, Apple has made a point of not allowing games streaming apps to operate on iOS unless each game available to be played through a game streaming app is also available as a stand-alone download from the App Store. But for how long can Apple maintain that position? These games streaming apps, by definition, are agnostic to hardware form factor: they can be interacted with through the web, on desktop, etc. At some point, the direction of dependency changes: given enough consumer traction, Apple may need these game streaming services more than they need Apple.
And this is to say nothing of Apple’s relationship with developers. If OTT apps become the primary points of content distribution — because growth through performance marketing is rendered hopeless through the deprecation of the IDFA and third-party cookies, and because OTT apps and content catalogues present a more straightforward path to audience development — then the direct relationship between Apple and developers is obviated and intermediated. But what is the alternative?
If consumer momentum supports this new paradigm — of streaming games, of subsumed content and functionality into multi-purpose OTT apps — can the current mobile platform operators really starve their ecosystems of those products? Apple specifically is heavily dependent on its services revenue as a driver of growth: the share of gross margin contributed by its Services division increased by 20% in Q3 2020 from the same quarter the year earlier, while the share of gross margin contributed by Products (hardware) decreased by 10%.
Back in 2017, in a presentation I gave at Mobile World Congress LA, I posited that the direct relationship between Apple and developers could be obstructed by the larger “staple” apps as audience development through performance user acquisition became less economical and more operationally complex. Apple has attempted to pre-empt this by vigorously enforcing its App Store policies with respect to content distribution by a) reifying the “no app stores within the app store” principle and b) deprecating the IDFA (again: IDFA deprecation was intended to restore Apple’s editorial control of the App Store).
But there exists a limit to how militant Apple can behave in this regard. Yes, Apple has prevented Facebook from launching its games streaming feature in the Big Blue app on iOS. But: for how long can Apple hold this particular front, especially if consumer adoption of games streaming is significant? And: games aren’t the exclusive form that content must take on mobile.
In the same presentation linked above, I posed a question: is Netflix an app store? It hosts a catalogue of stand-alone, self-contained pieces of content that are each readily accessible. What’s the practical difference between Netflix and, say, a games streaming app?
This fundamental question seizes the crux of the evolution of digital content platforms.
First, it’s important to identify the frequencies across which content interaction can take place. I establish three content interaction frequency categories, each with its own set of form factor touch points (ie. on what devices within that frequency category is content consumed?). The three categories are visualized by the topographical content consumption map below, with the smallest concentric circle sitting at the highest “altitude” of consumer interaction:
- REAL-TIME: real-time content interaction takes place on always-on / always-on-us devices such as smartphones and smart watches;
- DAILY: daily content interaction takes play on fixed hardware, such as televisions, console gaming systems, and smart speakers;
- INTERMITTENT: intermittent content consumption takes place outside of the home on an intent-driven basis, such as at theme parks, cinemas, or retail outlets.
Bucketing content interaction form factors — and this is a clunky way of describing the venues through which consumers interact with content, but “hardware” is insufficient (eg. theme parks) — by frequency is helpful for the sake of thinking about the digital content platforms of the future, because the concentric frequency circles help to visualize the degree to which content touches modern life.
And a digital content platform is the interconnected set of products and services that covers as much surface area of the concentric circles as possible.
The Nexus of Attention
An interesting case study here is Disney. The below flow chart, created in 1957, describes the interplay between Disney’s various business units:
But Disney recently initiated a corporate reorganization, putting streaming services and direct-to-consumer programs at the heart of the company’s content distribution strategy. What would the above flow chart look like in the year 2020? How would Disney visually describe its relationship with audiences?
Disney serves as a perfect prototype for the modern content platform: touching audiences across all three interaction frequency bands, starting with Disney+ in the real-time band as its nexus of attention.
In this case, with Disney providing touch points of consumer interaction spanning the three concentric circles, does Apple or Google have leverage as a mobile platform? Or is Disney’s spider-web of products, covering the entire surface area of the topographical content consumption map but emanating from mobile as its nexus of attention, the content platform? As a consumer watches Disney+ content on their tablet, or on their mobile phone, or on their television, do they recognize the role that Apple or Google or Samsung plays in facilitating that delivery? The answer to that question defines the direction of the vector of dependency in the content dependency hierarchy from above.
Facebook serves as another interesting example. Yes, Facebook’s mobile app resides within Google Play on Android and the App Store on iOS. But Facebook also exists on the web, on both mobile and desktop, and across console devices such as Oculus and Portal. As the company subsumes more and more functionality into its Big Blue product — across some or all of those touch points — and deepens its relationships with content publishers who increasingly see Facebook as their primary distribution point: of what relevance are the mobile app stores? In which direction does the dependency run between Facebook and an app store when a) Facebook is available everywhere and b) a plurality of content is primarily available on Facebook?
In each of these cases — and as is true broadly as a prototype — the primary touch point with the consumer of the digital content platform is via a device in the real-time interaction category. This is the platform’s nexus of attention: the focal point of user interaction with the platform that creates habituation with the platform as a sort of consumer interaction “heartbeat.” Platform stickiness is harder to achieve outside of the innermost concentric circle of content interaction frequency, and hosting a nexus of attention on an always-on-us device provides the regularity of interaction to create a relationship between the consumer and the platform. The second and third concentric circles create opportunities for monetization, but the real-time circle is where the platform’s relationship with the consumer is seeded.
How is that relationship seeded going forward? The deprecation of the IDFA and the broader erosion of digital advertising efficiency erects a barrier to audience aggregation for new services. The nexus of attention, as the platform’s central “hub,” is where an audience can be best and most economically aggregated. But that can’t happen ex nihilo.
This confers substantial advantage on consumer products with large, existing user bases — and companies with well-known entertainment IP catalogues. The gravitational force of proprietary IP, or an existing audience, serves as the new distribution channel, which can then be made available for the benefit of constituent or third-party published products.
Disney is again a very apt example. Disney had to merely make its enormous catalogue of content available on smartphones to generate 22MM installs in its launch month. With a nexus of attention established at the real-time frequency circle, Disney was able to extend its relationship with consumers into the daily circle and to monetize that, eg. its release of Mulan via the Disney+ app with a $30, one-off IAP.
The future of content platforms
The three developments I outline at the start of the article have catalyzed a dynamic that is changing the form and function of digital content platforms on mobile. This dynamic is materializing in three stages:
- The commodification of delivery, which is collapsing the content dependency hierarchy and making the hardware-specific platform irrelevant, or at least invisible to the consumer;
- The elevation to primacy of the nexus of attention, which interfaces with the user at a real-time, always-on cadence;
- The establishment of distribution and platform stickiness driven by the gravitational pull of IP or an existing audience.
The content platform of the future exists as a web of products and services that spans three layers of consumer interaction frequency: real-time, daily, and intermittent (driven by intent). Platforms are not form-factor dependent but rather are totally form factor agnostic: in fact, form factor flexibility is a defining characteristic of a future digital content platform.
It’s tempting to explain this evolution away as being exclusively a function of the power of cloud streaming, or of the ability of large consumer products to constantly aggrandize more scale, but the tectonic shift taking place seems, at least partly, to be the result of decisions made by Apple and Google in attempting to maintain control of their respective ecosystems. In The Balkanization of the app economy, and again in What will the next generation of app stores look like?, I proposed that app discovery would almost inevitably move from the current structure of the app store into bigger, multi-use case products, driven by developer desire to reach users where they exist.
Yes, cloud streaming facilitates much of the shift described in this article. But perhaps this tectonic change is being accelerated because of the specific decisions that Apple and Google have made that are, frankly, inimical to developers. The current mobile app stores seem destined to relegation to “plumbing” — things that consumers rarely think about or interface with. This seems like a strategic — and mostly unforced — error on the part of the mobile gatekeepers.
Photo by Jack Hunter on Unsplash