An entire industry of
“second screen apps” has sprung up in response to the fact that tablets, smart
phones and laptops are now must have companions for watching TV. Yet, growth of these apps has sputtered as
they struggle to persuade consumers to migrate away from the vibrant
conversation already happening on Twitter.
Viggle hopes to be the first
breakout star of Social TV with a proposition to consumers that is as simple as
it is seductive. Its promise of “Watch TV, Get Rewards” is an irresistible
combination that makes Viggle seem poised to displace Get Glue, Miso and Into
Now atop the Social TV food chain. Indeed, Viggle is enjoying “hockey stick” growth, adding 625,000 registered users for iOS since launching earlier this year. That growth will accelerate with the impending release of the Android version.
The Paradox of Growth
Yet, Viggle’s explosive
growth presents a problem. As Viggle gains users, it also gains liability in
the form of the rewards it must pay out. This “paradox of growth” is familiar
to investors of Pandora which pays royalties on a per stream basis. Unlike most
advertising supported businesses, Pandora and Viggle’s operating costs are
inextricably linked to the size of their audience. The more people use the
service, the more costs increase.
The Price of Gift Cards Will Come Down
Thankfully, for the investors
of Viggle, that’s where the comparison to Pandora ends. Where Pandora’s
business model threatens to cannibalize existing revenue from the music
industry, Viggle promises incremental revenue for its partners. Therefore, once
Viggle achieves a national user base, it will likely be able to negotiate
lower, wholesale prices with its gift card vendors. For example, a partner like
Starbucks will welcome the foot traffic it gains from the massive distribution
of gift cards – which are already paid for by Viggle.
The cost of gift cards
is a key component of Viggle’s business model since it relies on rewards to bring in the
eyeballs which it then sells to advertisers.
Viggle Incentivizes Consumers to Watch
Commercials
For advertisers, Viggle is
proof that Social TV can enhance an existing TV media buy. For example, an
advertiser can sponsor a TV show on air and on Viggle. Viggle can then create a quiz based on the content of an
ad scheduled to appear during the show. Since consumers earn points toward a
reward if they get the quiz question correct, they are incentivized to pay
attention to the spot.
In a week where news of the Hopper has stricken fear in the heart of the industry, Viggle’s
ability to incentivize consumers to watch TV ads will be embraced by media buyers and sellers alike. Pretty soon, Viggle's purple "V" logo might start to pop up on TV screens just like the ubiquitous Twitter and Facebook logo.
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