We7 is one of a growing number of firms trying to make money through online streaming. It recently shifted strategy from on-demand streams to online radio and is now partnering with firms including BT and Yahoo! on Apollo, a project aimed at developing new online music products. Here, We7's CTO Gareth Reakes talks about the idea behind Apollo, growing competition in the online music space and the future of We7.
¤ How did the idea for Apollo come about?
We saw some really interesting data from our site last year, mainly that more and more people were using ‘sit back functionality', radio and editorial playlists, rather than ‘sit forward' on-demand functionality. There's been all this innovation in the space of on-demand with us, Spotify, Rdio, but there's been really little in radio. You've got Pandora and Last.FM, who really pushed away in terms of creating personalised radio stations, but it stopped there.
So we started to think "where else can this go?" And that's really the start of the idea for the Apollo project. But this isn't just where can it go for a music perspective, it's where can it go for an advertising perspective as well, which is critically important in terms of monetisation.
¤ What is the Apollo project looking at developing?
All sorts of R&D. One of the things you can't have personalised at the moment is the type of content that you want in open word audio - do you want hourly news updates or do you want football updates? That whole space has been totally untapped until now.
Of course there are some problems. If its news content, it's very easy to make it of a very high production quality because a lot of people are going to hear it. If it's just Accrington Stanley updates, there aren't going to be enough people to justify the cost to get professionally made audio for that.
¤ What are all Apollo's partners bringing to the table?
The IAB are focusing on the advertising side, on market education and research. In [the UK] you've got us and Spotify doing audio ads with the ability to kick-through, and that's proved to be fairly powerful.
Something Else are on the content side. Yahoo! are looking at the ad side and the research side and BT is undetermined at the moment. They've got a few projects on the go and that's not something that we're talking about at the moment.
We would bring the technology, and piecing all the things together. The other companies have really specific expertise and that's fantastic for us because if somebody comes up with clever way to make really cool content, we've got a user base of 3m uniques a month and we can try and see how the users like these kind of ideas and contexts.
¤ When are you looking to release a product?
The Apollo project itself will last about 15 month, but we will try ideas out really quickly. You'll see stuff coming out straight away and not just on the web but on mobile devices, on tablets, and on a variety of other devices. And they're all part of the theme that, if you use We7 then we'll let you pull your metadata around with you so you can use in it in the car, use it on your mobile, use it wherever.
¤ Do you plan to launch another service alongside We7?
Without a doubt we'll ask users to try out new features and see what they think about them on the main site. Whether or not that input ends up in a two-tiered site, I don't know at the moment. The We7.com site is really fully featured - you've got pages for every artist, whereas Pandora is a single page. One of the things we may find from this is that there are people that want this complex interface that lets them search for whatever they want, but a lot of people just want that basic radio station that they can influence.
¤ Why has the UK Government invested in the service?
The Technology Strategy Board awards part-funded grants for areas of interest for the UK economy. This specific grant was around a set of criteria looking at advertising, content monetisation and what the UK is going to do about networking and services. That met really well with what we were thinking of doing. And having the government invest means we're able to execute much faster than if we hadn't got that investment.
¤ Are you concerned at increasing competition in the online music space?
Of course any market in which Google or Apple are entering, there's going to be some disruption. But I think there's more and more clear water between what I've been describing compared to Apple and Google, who are working on digital lockers, potentially subscription. Subscriptions are important to us but given our focus on radio and innovating it's not as much of a concern to us as the other subscription businesses out there, like Spotify and Napster. The cleanest comparison is with Pandora, but we're looking at next-generation features.
¤ Do you think consolidation will occur?
It depends on the specific offerings. How many legal music streaming services are there in the UK? Very few. So I don't think that is a particular problem. Purchase sites that are selling content have to compete with Apple so that's a challenging one for them anyway. Others are using mobile as a differentiator. From that regard I really think it depends on the offering. Going forward though, I'd agree. There's only so much money to be split up and we'll just have to see who those players are who win.
¤ Is there a focus on Apollo because your current business model isn't working?
Give or take, every month we're covering the cost of music with advertising, which is important. Other guys in the marketplace say this model can't work, but one of the reasons we're expanding internationally is we're confident in the model now. The problem is if you can't cover the cost of the music with the advertising, when you expand you just lose more money. So now we're confident that we can cover that cost and that's why we're expanding internationally.
We're definitely a little way from being profitable. We're a startup and we're expanding each year and we're expected to lose money. I would hope that we would be near profitability at the end of this year or the beginning of the next. But that just depends how quickly we expand - if we're very aggressive with expansion that takes up money as well.