California-based startup Lino fights social-platform power with blockchain
With their promise to empower, decentralized platforms have quickly become havens for content creators. One group of Chinese entrepreneurs want in on that action, building a startup in California from where they are bringing their tech to the world—and possibly back to China one day.
The company, Lino, was established in mid-2017. Lino—the name comes from “livestream now”—uses blockchain technology to create a decentralized autonomous content economy. This means, every creator or user in the community becomes part owner.
A decentralized approach to content sharing has empowerment as a basic tenet, putting individuals, not corporations or monopolistic organizations, at the center, its proponents say. Decentralized platforms have also become a haven for those content creators whose work is vulnerable to censorship, or who are being financially exploited by giant centralized platforms.
Prior to Lino, CEO and Co-founder Wei Jiequan was an avid investor in crypto projects with a keen interest in the potential of blockchain technology. The idea for the company came to and co-founder, Chen Qifeng, during an Uber ride to a blockchain event at Stanford University. Prompted by the idea of using blockchain to build a content ecosystem, the two immediately started brainstorming.
“Content creators put in that much work and they create the most value for platforms,” Wei said. But oftentimes, centralized systems compensate content creators unfairly for their work, he noted.
“Looking at YouTube, Twitch and all the other content platforms, the current problem is that they are the monopolies in the market, and they are constantly raising their cuts and increasing their profit margins,” said Wei.
For example, the live video game streaming industry, though replete with tech companies, is dominated by only a few. In the US market, there is the reigning duopoly of Amazon’s Twitch and YouTube. In China, there’s a handful of dominant players, including YY’s Huya and Tencent-backed Douyu, as well as Panda TV, Penguin eSports, and Longzhu.com.
In early 2018, Lino raised $20 million in an investment led by ZhenFund. The company went on and launched its testnet in August and it released its first app, a game-streaming platform called DLive, shortly after in September.
Prior to migrating to the Lino network, DLive was one of the top decentralized applications (dapps) to run on Steem, a major content-focused blockchain that powers popular applications including Steemit.
The team set out to build a blockchain of their own because they didn’t find other public chains suitable for livestream content, the company said it wants to build a platform that is sustainable and robust enough.
Based on data from market analytics site SimilarWeb, DLive accumulated over 1.59 million visits in the 4 months after launch. According to figures provided by the company, as of January, DLive has garnered over 740,000 Monthly Active Users (MAUs) and the Lino testnet has more than 196,000 registered wallet addresses.
Not easy being a streamer
These powerful livestreaming services take hefty cuts off streamers’ main source of income from tipping, the term used to describe donations to streamers by audiences, as well as advertisements, which makes it increasingly difficult for creators to make money on livestreaming platforms.
On Twitch, it’s a 50-50 split between platform and streamers. On YY and Huya, the streamers get around 30% (in Chinese) of what they earn from streaming. A survey (in Chinese) by Tencent shows that in China, only the top 5% streamers earn more than RMB 10,000 ($1,500), while 70% earn less than RMB 100 ($15).
On top of this, streamers often need to pay additional fees to multi-channel networks (MCN) or agents.
Platforms are paying big bucks to the lucky few who make it to the top, but not without conditions. Many star hosts get looped into exclusive streaming deals to stream only a specific platform.
It has become an issue in the US. Last year, YouTube reportedly terminated streamers’ accounts without previous warning following the uploading of videos teasing upcoming Twitch stream. In China, there have been cases where content creators were sued by platforms for an unreasonable penalty for jumping ship. Most recently, a streamer on Douyu was sued for a RMB 150 million ($22 million) for streaming on other platforms.
Demonetization is also a big issue in the industry, said Wei. Contributors that don’t adhere to mega platforms’ guidelines—written and unwritten—could be “demonetized”, in other words, deemed unfriendly for advertisers. Some streamers were demonetized by YouTube for streaming on DLive, said Wei. DLive has streamers that also stream Twitch, Mixer, and YouTube.
The company said DLive is looking to take on Twitch but not by burning cash to grab top streamers like others are doing. Lino wants to change this profit-driven relationship, which it said is driving a wedge between content creators and streaming platforms providers.
New era, new business model
Unlike major platforms such as YouTube or Twitch, DLive does not take any revenue or fees from creators and all users can interact with each other directly without going through a middleman.
Though blockchain, the incentive and voting system is managed in a more transparent way. Users can track detailed information such as how much the tipping was, from whom, and how the transfer was done. The members of the community, streamers and audiences alike, have voting power and get to participate in governance.
Wei explains that the company’s model is based on token economics, a popular concept adopted by many blockchain projects where tokens are used to motivate members to contribute and behave to the benefit of the community.
For Lino, the system is designed to incentivize its contributors—not only those who create content, but also those who help curate it and develop the infrastructure. The whole mechanism is non-profit that does not serve for any single corporation’s interest, Wei added.
Wei said given the potential of the market in his native China, the company is very open to the idea of exploring opportunities there.
According to a report by Deloitte Global, livestreaming industry was expected to generate over $545 billion in revenue globally in 2018. With projected revenue of $4.4 billion, China’s is likely to remain the largest market for live streaming. Gaming is one of the most popular live streaming categories in China. iiMedia analyst Liu Jiehao told TechNode that nearly 90% of top-tier hosts stream gaming type content.
But as a young startup Wei said Lino has limited capital and resources it chose to tackle markets in the US and Europe, Middle East and parts of Asia first. The company said Turkey is one of the countries where DLive is thriving and seeing tremendous growth. Turkey not only has a predominantly young and tech-savvy population it is also a blockchain-friendly market.
There is also the issues of intense competition and closer scrutiny of blockchain and entertainment content by authorities back home. Over the past year, the government carried out periodic cleanup campaigns on livestreaming and gaming content, which have dented the revenues of even the largest companies like Tencent Games. The country’s increasingly stringent blockchain regulatory environment is creating even more barriers for young blockchain startups.
Global tech giants like search giant Google and game publisher Tencent Games have both invested heavily into the Chinese live video game streaming platforms.
Blockchain companies are likely to face more barriers in China than in other countries. Liu the analyst said, in reality, the decentralized model might create more difficulties for the government to regulate online content, thus its development still faces a certain level of risk in China.
For Wei, the monopolistic practices in the live video game streaming world are more prevalent in Western countries, at least when compared to China. And that is where he and the Lino team see the greatest opportunity.
“We’re taking on the monopolies in the market, obviously it’s going to be very challenging,” said Wei. “I think something as revolutionary as this has a good shot.”