Fame may last a mere 15 minutes, but the tools democratizing it are here to stay.
That's the call Credit Suisse Group AG analysts make in a note initiating coverage on YY Inc and Momo Inc; two Chinese live streaming companies they say will outperform in an otherwise fractured market.
Platforms that help you peer into the lives of ordinary people doing ordinary things had a rocky transition to mobile — hampered, according to Credit Suisse, by poor infrastructure. Still, since the start of 2016, the market's grown at a pace that has them predicting it will reach $5 billion by the end of next year. That's hardly much smaller than the Chinese cinema industry, whose box office receipts amount to $7 billion.
Live video isn't just growing in parallel with cinema: it's growing at the expense of other kinds of cultural consumption: "Demand has been surging from young users who lack the alternatives and budget for entertainment," wrote analysts Zoe Zhao, Evan Zhou and Angela Zhou, who attribute streaming's revival as much to this evolution in user behavior as to the development of back-end infrastructure.
On the supply side, a large number of internet celebrities "de-bottlenecks" supply, with higher smartphone penetration, cheaper bandwidth cost, and primary-market funding facilitating the migration from laptop to mobile.
Having witnessed a steep growth of 175 percent year-on-year to $4 billion this year, Credit Suisse expects the market's revenue to reach around 33 billion yuan ($5 billion) by 2017. That's no small change, argues the bank, considering the more mature mobile-gaming market is only twice that size.
Live streamers are more affluent than average internet users, tend to spend more time online, and have mature payment habits. Still, a marketplace currently split between 150 platforms is due a consolidation, the analysts say, as the pace of its growth slows: "With a relatively low ceiling, fewer than ten players will dominate and most will be wiped out."
Even while the live streaming market expands at a slower pace, the phenomenon of nude selfies as loan collateral show the impulse to share is extending beyond entertainment and into the fabric of Chinese finance. That's just one sign that in life, as in your portfolio, indiscriminate exposure can be a dangerous thing. In a crowded field Credit Suisse's recommends YY, which boasts a loyal user base and a mature ecosystem, and Momo, whose existing products work well in sync with the expansion of live streaming. They predict the two companies will account for just over a third of a $5.4 billion market by 2018.