Markets by Grant | Everything as Content | Part 2

12 min readJan 18, 2023

Hello and welcome back to Markets by Grant. You’ve found yourself in Part 2 of my 2-part intro piece on the wild world of content. After this, I’ll get more tactical with a mapping of the startup landscape and an analysis of some strategies I feel are winners.

This being Part 2, I recommend first reading Part 1. Why? Because I’m desperate for the engagement? Yes. But mainly because this was originally one long piece, and I realized I had to break it into two for it to be remotely digestible. And now, I’m not sure how well this second one stands on its own, without the context of the first. The best continuity I have is that I’ve continued to illustrate this one with Dall-E 2 images in the style of Edward Hopper.

“A VC Investor Blogging about his Blog, by Edward Hopper” by Dall-E 2

People like creating content.

As the title of the artwork above suggests, the irony isn’t lost on me: this is content about content. I’m playing the game I’m describing, just by describing it. So, in some ways, I’m writing about and to myself.

In these pieces, I opine on why people consume content, but why am I producing content? For the money? No, I’m not making any money here. For the social capital? Partially, but that feels more like a sweetener than a primary motivation. For the joy of creativity and self-expression? For me, I think that’s it.

There’s joy in creating an artifact and putting it out there in the world — and content is probably the most democratized product medium humans today can do it with. Regardless of whether people consume it and enjoy it, I believe there is inherent satisfaction derived in the process of creating it. And while I won’t claim it’s entirely unique to this industry, I do think it should be fully appreciated here as part of its promise. Content yearns to be created. People and businesses just need the right excuse to do it.

People like accessorizing themselves with content just as much.

In addition to “from scratch” creation, people and businesses yearn to accessorize themselves with preexisting content, and come to associate that content with their own identities. Similarly, it’s the personal satisfaction of finding something they feel is good, and the social capital of that being validated by others.

Look at me, including these images from Dall-E 2 in my blog, created based on my funny prompts. I did zero work to create these images, but in a way, I‘m taking credit for them as my own. The same goes for folks screenshotting their conversations with Chat GPT and sharing them on socials. They didn’t generate AI’s funny or intriguing responses, but they feel as if they did. The same is true when you share a song recommendation with a friend. You didn’t write the song, but in the context of your social identity, the song is yours. You’re hurt if the friend doesn’t like the song, and delighted if they do.

Everyone surrounds themselves with an invisible array of orbiting content, which isn’t their own, to accessorize and augment their identities.

So what? What I’m trying to say is that the “pride of ownership” effect in content scales way beyond the person who originally creates the content. Content is personally valuable to people who create it, and also to people who experience it. Unlike a car, content doesn’t lose value when you drive it off the lot.

This makes this an particularly scalable and sticky industry, with little dilution of willingness-to-pay as content changes hands. And willingness-to-pay is really what this piece is about (finally, he gets to the point).

And also, a super quick refresher.

Miles behind the cart, here comes the horse:

Content is…recorded text, images, sound, and video

Content companies…create and/or distribute this content. And they make money from doing so.

But how?

What is good content? How do we know when content has value?

First of all, in order for content to have value, it has to be both distributed and experienced.

‘Schrodinger’s content’: does content exist which you haven’t viewed? Yes and no.
If a content falls in a forest and nobody is around to hear it, does it make a sound?

You get the point.

Distribution is a bit of a dance between a content business and its consumer. Like in the movie Hitch, you can go 90% of the way to your consumer and have them come 10%, or you can go 10% and have them come 90% (or anywhere in between). Within this continuum, there are two high-level ways to do a good job with distribution:

Place yourself in your consumer’s way. Like a billboard or someone’s desperate single friend at a bar, you find out where your consumer is going and you place yourself in their path. You get plenty of impressions, and hopefully, you’re attractive enough to incentivize future engagement. If this fails, your brand suffers.
Just be there and be differentiated. This content is fortunate enough to be sought out by a consumer, like an attractive person sitting alone at the bar. Of course, it takes work, and it’s of no use if you can’t be reliably found, or if you’re not attractive. If this fails, you’re just a person sitting at an empty bar in an empty town:

“Nighthawks”, Actually by Edward Hopper

I’ll quickly expand on the second point. Within option 2, there are two ways to succeed with differentiation:

2.1. You can be the most attractive among many people sitting alone at a bar (high quality content).

2.2. Or, you can be the only person sitting alone at a bar (scarce content).

Either quality or scarcity are good for getting consumers to seek you out, but the burden of differentiation for content in an empty space is much lower. This is why vertical content businesses, which seek to “own” an overlooked or underpenetrated segment, are so compelling. But anyway…

Once a piece of content’s existence is validated by consumption, then what? How do we know if it’s any good? Clicks? Views? Shares? Upvotes? Reposts? Reviews? Re-watches/reads/listens? Yes, but more importantly for an investor like me, willingness to pay.

If you read a previous piece of mine on the experience economy, you’ll recall the framework I used to assess value. Then again, maybe you won’t. Either way, content is amorphous and experiential — and experiential offerings are valued in terms of admission or memorabilia.

Admission

Many traditional content businesses have valued offerings in terms of admission. The Wall Street Journal implemented a paywall of sorts in 1997. The New York Times implemented a web paywall in 2011. Netflix has a paywall, as does Spotify. Paywalls are standard in the industry, but they’re a bit of a double-edged sword. On one hand, a paywall is a “wall”. It takes money and work to climb over it. It limits your customers, and it also limits the K-factor/virality of your content. Your content can’t go as wide — it won’t get as many views.

On the other hand, many argue that a paywall pre-filters your customers to just “the right customers” — people who really value what you’re putting out there and are going to be engaged. Then again, isn’t it incumbent upon the content company to make “the right content”, and not on the customers being “the right people”? A lot of publications are starting to say no (the NYT, as an example).

One more tradeoff here:

Companies which charge admission on a fixed (ie: subscription) basis make money, but it’s not super easy to tie their revenues to units of content. They may know what content is consumed, after paying, but that’s not quite the same as knowing which content people are paying for or staying for. I dub this “the Netflix curse”.

Companies which charge admission on a variable (per unit of content) basis know exactly which content performs and why, but they have to win customers all over again for every individual piece of content. I’ll dub this “the AMC curse” (or something like that). You get it.

Memorabilia

…is a bit different. What content do people buy things to memorialize their experience with? A Big Lebowski T-Shirt? An art print from a gallery showing? How about a book? In some ways, a book itself is not content, but memorabilia which enshrines the content (mind explosion).

Disney employs a classic memorabilia strategy. For Frozen, as an example, the box office (admission) grossed ~$1.3B, but merchandise and licensing (memorabilia) brought in ~$10B+. Famously, Disney will not put out a film franchise unless it’s potential merch franchise is stronger. Think of Star Wars and the Marvel Cinematic Universe, as examples. Toys are an easy example, but what about video games, books, film sequels? These are pieces of content built off of a previous bedrock of content established by the first. These pieces may charge admission for use, but it’s all memorabilia in relation to the content established with the initial piece.

What about advertising as a revenue strategy for content businesses?

Advertising is kind of “meta-content”. It’s content you experience when you’re experiencing other content (headache). Content itself has value, but the people who are attracted to that content might have even more. That’s why advertising is the dominant monetization strategy for content businesses. It’s the frog eating flies, hanging out by the porchlight at night.

“A VC Investor with a Frog on a Porch at Night, by Edward Hopper” by Dall-E 2

At its worst, advertising is just random information consumed by anyone who happens to stumble across it. At its best, advertising rides the coattails of the content it’s nestled in. It takes advantage of a demographic’s affinity to the content it knows they’re intentionally enjoying. When someone views, clicks, or purchases based on embedded ads, it’s due at least in part to the content in which it was nested. For this reason, advertising, too, is memorabilia.

But what about those businesses which don’t think they’re content businesses but are? Didn’t you say something about that, Grant?

Yes — three hot takes:

Content is usually the product you buy–and then you get saddled with some disappointing physical object.
There is very little difference between online shopping and reading a book or watching Netflix.
Oftentimes, businesses could charge admission or memorabilia, but don’t.

Before the internet, if I wanted to buy a pair of pants without visiting a store, I did so with a catalog or magazine. With catalogs, a world of content is built around a product. The product is abstracted, and a “metaverse” of meaning, association, and signaling is established to augment it (classic example: the J Peterman Catalog, which is still kicking, by the way). Ecommerce today is just a digitization of this ages-old catalog practice, pioneered by the likes of WB Mason. When you make a purchase this way — are you really buying the physical product? I’d argue that you’re not. Instead, you’re buying the content metaverse built around that product. 5–7 days later, a foreign object arrives at your house which invariably feels a bit different than what you imagined. At least 20% of the time, you’ll return it.

And we forget that actually purchasing through a catalog, or magazine, or ecommerce site, is only one use case for these content repositories. Vogue knew this long ago — that sometimes folks just wanted to “take in” the abstracted product-focused content. I personally find that I spend more time online shopping just to take in new arrivals, trends, and styles than actually considering a purchase. And often, I’ll do this instead of watching Netflix, reading a book, listening to music, or other content consumption activities.

Quick interjection for the Alien Test:

Will an Alien easily distinguish between the use cases for scrolling Instagram, browsing online shopping sites, or reading a photography book? Unlikely. These are all static image-based content consumption activities, which humans do pretty interchangeably.

“A VC Investor and an Alien Reading Magazines, by Edward Hopper” by Dall-E 2

And yet, we’re still categorizing them as miles-apart use cases, for miles-apart businesses, in miles-apart industries — just because of the legacy formats (see previous piece) which they evolved from. From a jobs-to-be-done standpoint, they’ve got a lot in common, and thus should share common strategies and frameworks.

Why don’t ecommerce players charge “admission” to access their content? Would I pay to scroll through, let’s say, this upcoming season’s new arrivals, before they hit stores? I would, and people do — via things like special membership and early access programs, and runway shows.

What about the humble logo t-shirt? It’s nothing more than memorabilia. A purchase of the logo t-shirt is buying into the metaverse of content that a brand has built. It’s saying “I’ve so much enjoyed the content this brand has built that I myself want to memorialize and associate myself with it.” These fashion businesses know what they’re doing. How about other commerce businesses? Are they monetizing their content assets as well as their physical assets?

Now let me expand this beyond commerce, to discuss a few other spaces I’ve written about:

Traveltech businesses are very much content businesses. They build metaverses of meaning around places — and until that place is experienced, its primary identity is housed in the world of content built around it, not in the place itself. By definition, conversion to purchase is based on content. When that place is visited, it will be experienced through the lens of the content consumed about it. After that place is visited, it will be memorialized in content.
FaithTech businesses (to cite another market I’ve focused on) are largely content businesses. Put another way, spreading the word of God is a content play, and every religion’s beliefs are enshrined in content.
Digital Behavioral Health, FamilyTech, and FoodTech (other spaces I’ve written about) are also disproportionately full of content businesses.

Content Engagement vs Conversion

But hang on, I’m saying that many of these companies should improve the efficacy of their content as a business strategy. And recall that great content experiences lead to one thing, first and foremost: a desire for more great content experiences.

But what if these companies monetize on conversion into transaction rather than content engagement? Won’t they cannibalize their moneymakers with nothing to show for it other than an engaged audience? Indeed, there’s a bit of a double-edged sword here. Many businesses need to get their customers to “do something” to make money, and content consumption can be a distraction as well as an enabler.

“A VC Investor Holding a Double-Edged Sword, by Edward Hopper” by Dall-E 2

This tradeoff is especially present for the TikToks, Instas, Facebooks and other social content platforms of the world. They have the tough job of not only incentivizing you to consume, but also to create proportionally. If they can’t find the perfect balance, they go under. This is a great piece on the social capital economic design required to make this work.

Put another way, you’re a traveltech company which only makes money when someone books a stay. If your content is great, you’ll incentivize more engagement with your content, perhaps rather than a product/service purchase. So, your new strategic assets aren’t making money, and they’re not pointing your customers toward the conversion funnel you want them in. They could be spending hours on your site, having a lovely experience browsing inventory, and you’re not getting a dime from it.

My quick response:

If businesses want to stick to conversion into sale as a sole monetization strategy, then maybe they should streamline their content toward that tactical purpose only (less/slimmer content is a content strategy, after all). Or maybe, they’ll want to diversify their revenue model and start incorporating ads, merch, paywalls, subscriptions, etc.

My quick-er response:

Option 1: Keep content arm’s-length. Keep your business simple and keep your customers on track.

Option 2: Embrace content as a new strategic imperative. Modernize and diversify your business, give the people what they want, and make money from it.

I’ll end here. Stay tuned for my next piece, which will be a more specific breakdown of the strategies, technologies, and startups playing out in the content space.

…And because I feel uncomfortable for the plagiarism of Edward Hopper’s iconic style, I’ll put in a plug for his exhibition at the Whitney Museum in NYC, which runs until Mar 5. There, you’ll be able to prove your willingness to pay for his content with both admission at the door and memorabilia at the gift shop.