Netflix is showing us how to win the web. The results the company is showing is mind-blowing. Simply, if you can differentiate in content, the world would reward you. Today, Netflix is worth about $100 billion. This is huge as the company has built a video content business that rivals YouTube on market capitalization. Yes, I do think that YouTube, if a separate business from Google’s Alphabet, would be around $100 billion in market cap. At Alphabet’s $814 billion in market cap, investors have priced YouTube as a key component besides Google Search. Apart from these two properties, other Alphabet businesses are marginal. Or better, other businesses are supported by the oasis which is the search business, as explained in my one oasis strategy.
Back to Netflix, here are the latest numbers, courtesy of TechCrunch.
- Revenue: $3.29 billion, compared to $3.28 billion estimates from Wall Street
- Earnings: 41 cents per share, in line with estimates from Wall Street
- Q4 US subscriber additions: 1.98 million
- Q4 International subscriber additions: 6.36 million
- Q1 forecast US additions: 1.45 million
- Q1 forecast international additions: 4.90 million
As the referred piece noted, “Netflix’s biggest challenge has been to aggressively invest in good original content that’s going to bring in new subscribers”. “Original content” is indeed a challenge because having it would drive good quarterly report and growth. As we experience a redesign in the web business, we would increasingly see companies putting more contents behind paywalls. It is irrelevant whether the content is news, video or commentary. Washington Post which has deepened its reporting is now profitable because it is getting more paid subscribers.
Besides Aggregation Construct
I am a big fan of aggregation construct where entities build platforms to monetize raw materials created by others. From Google to Facebook, aggregation is at the heart of the new internet-driven commerce. But based on what Netflix has done, there is another dimension to growth, albeit if you have the money to create those contents. Indeed, besides aggregation, there is a clear parable for web business: originality. This parable is clearly explained by a TechCrunch commenter thus: “I signed up to support their original content, not the latest rehash from Hollywood. I also find I’m watching a lot of foreign content (South Korea, Norway, Japan, etc.) – most of which isn’t available elsewhere”. That is what it could take to win the entertainment and informational business on the web.