Monday, May 21, 2012

Second Screen App Viggle Seduces Consumers, Eyes Social TV Ad Dollars

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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