Entrepreneurship

The Economy of Fun and Digital Start-ups

VCCP's Nathan Levi on Digital Media.Recently I’ve been intrigued by two start-up businesses. Neither has reinvented the wheel, or innovated, but both have significantly disrupted their markets. On paper each business might sound ridiculous propositions, and had they been pitched before they were proven successes, I would imagine them to be laughed out the boardroom by VCs.

Before I reveal which two start-ups they are, I want to explore the industries they play in: publishing and telecommunications.

The publishing industry has suffered more than any other in the digital ecosystem. The bread and butter revenue model of advertising slipped through the gargantuan fingers of the major media companies, and into Google’s ever expanding pockets. They are now left with slippery business models at best, or have become vanity projects for the likes of Jeff Bezos. Online news as a business model might therefore not be something one would want to touch with a ten foot bargepole. The revenue opportunities are small. The value of content online is dissipating to nothing. There have been some(ly) successes in this space, but this has been more in the curation or aggregation of news rather than the creation of it.

So if you had pitched a business that attempted to simply make the consumption of news a bit more fun, you might not have predicted Buzzfeed would become the roaring success it has. Buzzfeed has made the consumption of news a bit more digestible, a bit more entertaining, and most importantly more appealing to the youth of today. They haven’t changed the game, they haven’t reinvented the wheel. Using animated gifs to tell a thousand words, they have adopted the content consumption habits of Instagram and Tumblr, and translated this into news. Genius. It’s something Yahoo or MSN could have achieved with ease, but for the fact they were sticking to the adage, ‘if it ain’t broke don’t fix it’. Buzzfeed just made news a bit more fun, and is now valued at $200M.

If news content is a business that appeared unconquerable, what about telecommunications, or more specifically, text messaging. Had someone told me a year ago that a messaging service which allows you to send pictures which get automatically deleted within a set amount of time, would be valued at $4BN, I would have scoffed and told them to pipe down. Crazy valuation aside, all Snapchat have done is gamify the task of sending a text message. Hardly ground-breaking, certainly not requiring any technical wizardry, they have simply captured the zeitgeist that is the ‘selfie’ and translated it to a messaging service. Or more simply, they’ve made texting more fun.

It’s also what Tinder has done for dating and Jelly has done for search. All these start-ups have much in common. They have adopted trends in the way generation Z are now consuming media, and twisted established business models to make them, well, more fun.

The economy of fun has only just begun.

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