Steem is the first example of a consumer blockchain app where the user does not have to see nor understand any of the blockchain infrastructure - a key aspect of mass adoption if you draw parallels to how we use the internet today. There was an immense amount of speculation in the early months of Steem, driving the platform's market cap to >$400M (close to that of Reddit with only a tiny fraction of the users) and since then the price has come crashing down. The Steem governance rules are still very premature, leading people to question the sustained credibility of the platform. These, in my opinion, are the growing pains of a very early use case, and these pieces of the puzzle will be solved as early as next year.
I am proposing to look at the consumer decision-making process, leading up to adopting a blockchain platform. Though we are still in the infrastructure development phase of the blockchain movement, I think it is important for most investors to be able to at least see the logical path leading to consumer adoption.
For this analysis I will use, as an example, a blockchain-enabled Flickr-like app which has the same economic incentives as Steem, most likely built upon a technology such as Mediachain. In this app, like the parallel above, photographers can upload their images to Mediachain, which tracks all of the metadata, edits, and each time the image is downloaded, upvoted, commented on, etc. The photographer is paid in the app's token, let's call it Photocoins. Also, photographers will be rewarded in tokens for commenting on and upvoting others' content. They can cash out their Photocoins on the public markets in exchange for dollars.
Currently, photographers have a few options for commercializing their work. Depending on their influence level, they will use varying mixes of each:
• Social Media (Instagram, Flickr)
• Stock photo agencies (iStock, Getty, etc.)
• Sell direct to clients (through website, shoots, prints, etc.)
Photographers need to believe the following to start posting their work on a Mediachain-based app (in exchange for Photocoins):
- They will be compensated, in total, more than they were compensated before, taking into account cannibalization between platforms.
- Their content will not be used in a way that is against their interest.
Mediachain won't affect any client-direct relationships where they product custom work, and it can exist in parallel with social media channels. Creators are actually incentivized to promote their Mediachain library via their social channels. When it comes to stock photos, photographers will be compensated directly rather than though a profit-taking third party, so they will get paid more. Also, most photographers' content is not monetized, even as stock photography.
The Mediachain app might not be the first place to post their work for some, but it is low opportunity cost to keep a duplicate of all of their work on the platform. We see this with writers on Steem today, using Medium as the first source and copying it over to Steem. As they continue to monetize from the platform, they might use the app as a first source to max their revenues.
Also, since photographers are paid in Photocoins, the value of their reward will also depend on the community reaching critical mass, creating first speculative value and then attention value when the network is big. At least, Photographers will have to believe this will happen to join the app. A few factors leading to critical mass:
A strategic launch of the platform, modeled after Medium, Facebook, Snapchat, etc. Steem attracted a very vibrant early community even though the launch was only within the crypto community, which reached 100K users within a few months, mostly due to the crypto-hype. A more strategic launch could be planned by engaging influential creators and/or creating buzz in a small, influential communities, perhaps focused around a specific type of content. This could also become a cool place to discover new up and coming photographers, for example, who are too cool to try to peddle their work through Shutterstock and the likes - the "Banksys" of photography...
Creators' willingness to test the platform. Photographers can publish their content to Mediachain in parallel with their existing channels above at a very low opportunity cost, and early adopters are also disproportionately rewarded. However, there is subset of images that would be excluded due to exclusive rights with the existing agencies, but since stock photos aren't a hits-driven business, this should be less impactful compared to other media categories.
As for #2 from above, rights and usage can be tracked more accurately in Mediachain than they are currently and might even be a reason to adopt the platform in the first place.
For a stock photo user (agency, company, etc.) to start using a Mediachain-based app, they will have to believe some combination of the following:
- A wide enough assortment of high quality and original content
- Curation delivering the most relevant content
- Content at a better price
- Simple rights management
- There's also a few-good component of rewarding the artists directly
#1 is the hardest to achieve and will really depend on the strategic launch of the content creation community. However, even if you're only able to get the content creators to move their social media content into Mediachain, there would be a huge supply of pretty good inventory. The existing photography community is also financially incentivized to collectively use some of their Photocoins to do marketing for the platform to users (currently happening with Steem).
#2 will depend on the platform's design, the robustness of the economic rules to incentivize engagement, and the quality of the community. Steem's curation design is simplistic, limited to upvote, tags, and comments, and I think that is one of the apps biggest shortcomings. The visual elements are more reddit-like and not really designed for rich media content. The community that's doing the curation now is kind of random because they weren't strategic about how they seeded the community, and the users are mostly in it for the money, so really weird stuff is getting voted to the top.
#3 will be true in most cases because there isn't a third party.The challenge will be creating a value proposition that is better than the microstock model where the artists receives no royalties. Photographers can adjust their own pricing to be competitive. Brands are also paying a lot of money for others to help them find high quality user-generated content. They're able to find and license directly through the Mediachain app, provided the community curation is good. Their image search technology is also pretty good and can help with this.
#4 and #5 are better with Mediachain compared to existing platforms and might act as added bonuses to bring users to the platform.
Stock agencies will have to believe the following to start posting their content to Mediachain:
- They will generate more sales than they do currently
Or 2. Mediachain can help them simplify rights attribution without cannibalizing revenue.
#1 is unlikely in the near term, but #2 is very likely and already starting to happen with Getty Images. In the future as Mediachain grows, #1 will be true as well, and then it's just a matter of flipping on the switch for monetization via Mediachain since the data is already there. Getty images in this case becomes a large rights holder for their portfolio of content and can monetize through the platform. The role for these players in the future can be curation or bundling (subscription for unlimited access, etc.) on another app, or what's more likely is that they will build their own app on top of Mediachain.