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Meerkat abandons live video; illustrates the power of ecosystem

chess competition canvasMeerkat, the app which spearheaded into live video, is giving up its product model and shifting onto a new (as yet undisclosed) course, ceding competitive ground to Periscope and Facebook Live. In so doing, Meerkat illustrates the perils of sustaining an independent media publishing enterprise alongside the deep pockets of established ecosystems.

The Distribution Advantage

Ben Rubin, Founder and CEO of Meerkat, was quick to mention Twitter-owned Periscope and Facebook in his publicly released memo about the change. “The distribution advantages of Twitter/Periscope and Facebook Live drew more early users to them away from us and we were not able to grow as quickly alongside as we had planned.”

“Distribution advantages” — that oft-deployed phrase is used in streaming audio to evoke the competitive advantage enjoyed by Apple, Google, and Amazon as they launch and iterate music products for gigantic numbers of consumers entangled in their complex value chains, many of those consumers with credit card information stored in those ecosystems.

The Perils of Pioneering

Meerkat’s situation is also an object lesson in the danger of being a first mover. Meerkat made live video popular to early adopters. But there can be a wide gulf between the cutting edge of early success and penetration into mainstream awareness and adoption. The launch of Periscope, which was largely the same concept as Meerkat, but with small but important improvements (a little more fun, a little more social, and it enabled video archiving), was greatly assisted by its Twitter parenthood, creating a loud media swirl and significant awareness and adoption. Some portion of the market leaped right over Meerkat into Periscope.

Facebook represents yet a higher level of audience footprint and commitment. Facebook, like Microsoft, Apple, and Google, which has each stomped into existing and well-developed product market with late entries, recently blasted into Meerkat’s space with its live-video feature. It is easy to imagine a duopoly settling into the market, where Facebook and Twitter vie to evolve and differentiate their instant-video platforms to specifically serve their different audience characteristics.

Translation to Audio

Streaming video is not unrelated to streaming audio, of course, and Meerkat’s capitulation to its large legacy competitors shines light on the predicament of stand-alone music services. The industry has seen collapses recently, the loudest crashes coming from Rdio (November bankruptcy) and Live365 (January shuttering). Clearing the field of secondary players throws brighter light on ongoing success stories. Pandora and Spotify seem to be settling into a streaming audio duopoly.

But Meerkat’s pivot (it is still funded and promises to launch something new) begs the question of whether independents can survive the mass-marketing of their concepts. Pandora and Spotify were early movers, each getting its consumer-facing product underway in 2008. The big tech companies, which cast shadows over several industries, were early movers in unrelated fields (Google in search and advertising; Apple in smartphones and music downloads; Amazon in e-retail). Building empires from first origins, those companies could afford to wait before pouncing into streaming audio for exactly the reason cited by Meerkat: Distribution advantages.

Tactics

How does an independent product specialist overcome the distribution advantage of a global ecosystem? Superior product, and strategic alliances are two ways. There is little question that Pandora and Spotify have superior and specialized products which have attracted loyal audiences. While Apple’s iTunes Radio screamed into the market as a purported “Pandora killer,” it didn’t even cause a bruise, and has recently exited the field of ad-supported Internet radio.

Apple Music planted its company flag in the landscape of subscription services, built on a $3-billion acquisition of Beats Music, it suffers badly when compared to Spotify’s years of incremental product development which has created one of the best integrated web/mobile experiences. Yet, Apple Music is acquiring subscribers at a dazzling rate compared to Spotify’s paced growth over nearly eight years (five years in the U.S.). That is the “distribution advantage” at work.

Another route to indie survival is acquisition, and that’s why we hear that rumor cloying to both Pandora and Spotify — whether because the rumor has a basis, or resides mainly in the imagination of industry pundits trying to see into the future. Acquisition allows a respected brand to operate with a larger, diversified and cushioned bottom line as a safety net.

Back to Meerkat. Good on it, and founder Ben Rubin, for recognizing reality and pivoting into a new dimension while it still can.

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Brad Hill

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