Winners of this downturn. Who are they?

Hi there! As we are now two weeks into this (crazy) new reality, I wanted to share a couple of observations on some more, and some less, obvious categories that might emerge as winners coming out of this period.

This downturn is different. It has a dual impact.

First, the uncertainty around the root cause (how significant will the impact be, how long will it last, etc.) might create a more widespread economic impact than other downturns. Second, the unusual nature of this macro event forces people, across age categories, to change their consumer behaviors, mostly from physical to digital, at a much accelerated pace. Once they discovered the benefits of a variety of (new) digital services, most people probably just won't go back to doing things the same way. I mean, who would have thought that we are having live rave parties over Zoom?!

This impact might create even bigger success stories than the previous one in 2007-10. 

As a result of this dual impact, we will see a higher number of winners and losers emerge. We are witnessing entire sectors, which account for most of our GDP, finally migrate online - health care, education, and public services. Clear beneficiaries of this trend are digital healthcare players such as our companies K Health, Flo or Happify, collaboration tools such as Zoom, and online education platforms. Other 'obvious' ones are online ordering/delivery companies (especially grocery) such as Blue Apron, digital sales tools such as our company Lightico, at-home fitness players such as Aaptiv or Peleton, social communication networks such as Houseparty (what a great acquisition in hindsight by Fortnite maker Epic Games!), Yubo, or Discord, online gaming and, of course, online entertainment services such as our company Sybel or Netflix (see evolution of downloads below). Others that might see a usage spike are passion economy enablers, freelancer platforms, and lifelong learning players. If you are active in one of these industries, now seems like a great time to be investing.

China should be a great proxy as major cities have been in lockdown since the end of January. Here an excellent overview, by Nicole Quinn, of some consumer behaviors that have emerged.

On the other hand, many industries are being challenged during these tough times: travel, events, restaurants and bars, transportation, (physical) sports, construction, and any business that involves physical interactions or physical stores in general.

One new category seems to be riding an especially strong tailwind, audio entertainment.

I am not talking about music or talk show podcasts. In fact, downloads of streaming platforms such as Spotify may actually be falling with people staying more at home. 'Italy, for example, experienced a 23% listening drop in the top 200 streamed songs.' We are witnessing a similar trend in other countries that have been hit by COVID-19 shortly after. Here an overview of Spotify's daily downloads in French-speaking countries in Europe (Source: Sensor Tower):

Contrary to what one might expect, the shift, from things like commuting and working out in a gym, to listening to background music or talk shows while working from home, is not frictionless at all. The very nature of the use cases related to working from home, such as going for a walk or run, spending more time with your family or cooking at home, is very different and seems to be driving different consumption behaviors.

So, when I talk about audio entertainment, I mean 'real' stories, that can be listened to alone or as a group. Over the last three years, this category has been growing already at 25%+ yoy. This growth seems to be accelerating now, as people are actively looking for the best content out there. The most basic form is audiobooks. Here an overview of Audible's daily downloads in the same French-speaking countries in Europe (Source: Sensor Tower).

Our company Sybel is taking the format one step further, by creating at scale and distributing high end immersive audio stories. Over the recent weeks, the company has already experienced an even more significant spike in organic downloads (>3x) with engagement and subs conversion more than doubling across age categories.

While all users are more engaged, family and kids' accounts are taking off even more. Engagement of these accounts more than quadrupled in terms of weekly plays per account! This same trend is probably also driving the downloads of video streaming platforms with a lot of content catered to these demographics. Here an overview of Disney+'s daily downloads of the last month (Source: Sensor Tower):

This crisis will have a lasting impact on consumer behavior.

This downturn will probably last a couple of months, more than enough time to build new habits. Coming out of it, some things will go back to normal, but many won't. I am pretty convinced that more people will work more often from home and spend more time with their families. They will consume more of the digital services that are spiking right now, products that they got so used to during these months.

Audio entertainment will probably be one of the big winners coming out of this. Especially when you consider the stickiness of these platforms and the longevity of their content. Other audio-related categories will profit from this evolution as well.

Which other categories am I missing? I would love to discuss your insights.

Also, if your product is taking off and you think that this a long term trend, please reach out.

Stay safe,

Yannick

#Trends

A special thanks to my colleague David for sharing the ST data for this post.